SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 1O-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
Commission File Number 0-17977
SUNRIVER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other Jurisdiction of Incorporation or Organization)
13-3469637
(I.R.S. Employer Identification No.)
9430 Research Blvd., Bldg. IV, Suite 200, Austin, TX
(Address of principal executive offices)
78759-6543
(Zip Code)
(512) 349-5800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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
--- ----
As of September 30, 1996, the Registrant had 47,858,145 shares of Common
Stock, $.01 par value per share, outstanding.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 1996
(unaudited) and December 31, 1995 3
Condensed Consolidated Statements of Operations (unaudited)
for the three and nine month periods ended September 30,
1996 and 1995 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the nine month periods ended September 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
<PAGE>
<TABLE>
<CAPTION>
SUNRIVER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
--------------- ---------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 821,506 $ 448,237
Trade accounts receivable (including $2,472,218 and $6,206,007 from related
parties at September 30, 1996 and December 31, 1995, respectively), net 17,096,237 18,768,338
Inventories 27,067,506 25,758,040
Deferred income taxes 3,404,604 3,102,152
Prepaid expenses and other current assets 374,204 1,571,617
--------------- ---------------
Total current assets 48,764,057 49,648,384
Property and equipment, net 12,478,208 12,114,000
Goodwill, net 9,774,929 10,607,714
Other assets 4,659,860 3,910,235
--------------- ---------------
$ 75,677,054 $ 76,280,333
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 13,229,457 $ 8,000,000
Current portion of long-term debt (including $168,559 due to a related
party at December 31, 1995) 15,443,975 6,630,531
Accounts payable 11,207,296 14,506,202
Accrued expenses 3,434,981 4,255,508
Deferred revenue 335,120 826,844
--------------- ---------------
Total current liabilities 43,650,829 34,219,085
Long-term liabilities:
Long-term debt, less current maturities (including $8,000,000 of
debt to a related party at September 30, 1996 and December 31, 1995) 8,186,033 22,624,625
Deferred income taxes 2,652,850 2,213,198
Other 810,234 831,775
--------------- ---------------
Total long-term liabilities 11,649,117 25,669,598
--------------- ---------------
Total liabilities 55,299,946 59,888,683
Commitments and contingencies
Mandatorily redeemable preferred stock of subsidiary 3,554,692 3,554,692
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued - -
Common stock, $0.01 par value, 60,000,000 shares authorized, 47,858,145 and
45,550,214 shares issued at September 30, 1996 and December 31, 1995,
respectively 478,581 455,502
Additional paid-in capital 30,275,846 23,769,379
Deferred compensation (701,600) -
Amortization of deferred compensation 73,083 -
Accumulated deficit (13,303,494) (11,387,923)
---------------- ---------------
Total stockholders' equity 16,822,416 12,836,958
---------------- ---------------
$ 75,677,054 $ 76,280,333
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
SUNRIVER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------------- ---------------------------------
1996 1995 1996 1995
---------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Sales (including sales to a related party of
$15,250,000, $31,735,000, $4,110,000
and $12,382,000, respectively) $101,595,043 $ 68,261,152 $ 29,748,976 $ 23,408,289
Cost of sales 78,274,379 49,121,709 22,087,113 17,502,774
---------------- ----------------- ---------------- ---------------
Gross margin 23,320,664 19,139,443 7,661,863 5,905,515
Operating expenses:
Sales and marketing 9,725,111 5,792,885 3,968,162 1,954,574
General and administrative 7,176,144 4,870,741 2,868,131 2,152,810
Research and development 5,373,082 4,952,235 1,412,336 1,690,957
---------------- ----------------- ---------------- ---------------
Total operating expenses 22,274,337 15,615,861 8,248,629 5,798,341
---------------- ----------------- ---------------- ---------------
Operating income (loss) 1,046,327 3,523,582 (586,766) 107,174
Other (income) expense:
Interest 3,294,249 971,467 1,127,124 325,730
Other 203,730 (335,873) (58,931) (385,052)
---------------- ----------------- ---------------- ---------------
Total other (income) expense 3,497,979 635,594 1,068,193 (59,322)
---------------- ----------------- ---------------- ---------------
Income (loss) before income taxes and
discontinued operations (2,451,652) 2,887,988 (1,654,959) 166,496
Income tax (benefit) expense (908,600) 1,152,525 (615,218) 69,975
---------------- ----------------- ---------------- --------------
Income (loss) before discontinued operations (1,543,052) 1,735,463 (1,039,741) 96,521
Income from discontinued operations - 1,034,054 - -
---------------- ----------------- ---------------- --------------
Net income (loss) (1,543,052) 2,769,517 (1,039,741) 96,521
Dividend on preferred stock of subsidiary 372,519 - 124,173 -
Accretion to preferred stock of subsidiary - 609,116 - 210,143
---------------- ----------------- ---------------- --------------
Earnings (loss) available for common
shareholders (1,915,571) 21,160,401 (1,163,914) (113,622)
================ ================= ================ ================
Weighted average common shares outstanding 46,703,292 41,989,433 47,598,134 43,424,391
================ ================= ================ ================
Earnings (loss) per common share before
extraordinary items:
Continuing operations $ (0.04) $ 0.03 $ (0.02) $ 0.00
Discontinued operations 0.00 0.02 0.00 0.00
---------------- ----------------- ---------------- ----------------
Earnings (loss) per common share $ (0.04) $ 0.05 $ (0.02) $ 0.00
================ ================= ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
SUNRIVER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
1996 1995
------------------ -----------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,543,052) $ 2,769,517
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Income from discontinued operations - (1,034,054)
Depreciation and amortization 2,919,237 2,204,611
Amortization of deferred compensation 73,083 -
Deferred revenues (491,724) (2,255,113)
Provision for doubtful accounts (276,191) 467,978
Provision for excess and obsolete inventory 992,857 47,099
Estimated value of compensatory warrants 160,800 -
Deferred taxes (27,309) -
Loss on sale of assets - 112,170
Changes in assets and liabilities:
Trade accounts receivable 1,948,292 (6,696,520)
Inventories (2,302,323) (253,820)
Other assets 16,320 (846,634)
Accounts payable and accrued expenses (3,872,604) 303,781
------------------ -----------------
Net cash used in operating activities (2,402,614) (5,180,985)
------------------ -----------------
Cash flows from investing activities:
Purchase of TradeWave, net of cash acquired - (100,000)
Capital expenditures (1,492,322) (365,866)
------------------ -----------------
Net cash used in investing activities (1,492,322) (465,866)
------------------ -----------------
Cash flows from financing activities:
Proceeds from issuance of common stock 4,468,896 694,094
Decrease in short-term debt, net (30,000) -
Proceeds from debt issuance 1,626,043 1,645,000
Purchase of treasury stock (1,305,000) -
Net change in revolving loan payable 5,200,000 3,211,965
Payment on long-term debt (5,600,757) -
Payments on capital leases (90,977) -
------------------ -----------------
Net cash provided by financing activities 4,268,205 5,551,059
------------------ -----------------
Net increase (decrease) in cash and cash equivalents 373,269 (95,792)
Cash and cash equivalents at beginning of period 448,237 111,081
------------------ -----------------
Cash and cash equivalents at end of period $ 821,506 15,289
================== =================
Non-cash transactions:
Accretion to preferred stock of subsidiary $ - $ 609,116
Dividend on preferred stock of subsidiary 372,519 -
Conversion of notes payable to common stock 1,500,000 694,094
Estimated value of compensatory warrants 114,825 -
Issuance of common stock for consulting services 898,365 -
Deferred compensation 701,600 -
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SUNRIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring accruals)
considered necessary for a fair presentation have been included. Certain
prior period amounts in these financial statements have been reclassified
to conform with current period presentation. Operating results for the
nine month period ended September 30, 1996 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1996.
For further information refer to the consolidated financial statements and
footnotes thereto in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
BACKGROUND
SunRiver Corporation (the "Company") has two operating subsidiaries,
Boundless Technologies, Inc., formerly SunRiver Data Systems, Inc.
("Boundless") and TradeWave Corporation ("TradeWave"). Boundless develops,
manufactures and markets hardware, firmware and software for corporate
computing environments including Windows, legacy, UNIX, Windows DOS, Java
and Internet/Intranet applications. Boundless' strategy is to offer a
complete family of products which include network computers and graphics,
text and Internet terminals. TradeWave markets, licenses and supports a
suite of software products and provides related services that enable a
business to design, build and deploy comprehensive public-key security
solutions for the conduct of enterprise-wide and business-to-business
communications and transactions over TCP/IP-based networks, including the
Internet and VANs, LANs and WANs.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
on a first-in first-out basis. The major components of inventories are as
follows:
September 30, December 31,
1996 1995
---------------- ----------------
Raw materials and purchased components $ 19,928,953 $ 13,280,390
Finished goods 6,404,587 11,901,819
Demonstration equipment 361,167 222,130
Service parts 372,799 353,701
---------------- ----------------
$ 27,067,506 $ 25,758,040
================ ================
FINANCINGS
The Company completed several offerings of securities under Regulation S of
the Securities Act of 1933 during the first quarter of 1996 and received
proceeds from the sale of stock and exercise of warrants and options during
the second and third quarter of 1996 as described below:
In January 1996, the Company received gross proceeds of $1,000,000 by
selling 594,243 shares of Common Stock for $1.68 per share. In connection
with this offering, the Company issued warrants to financial advisors to
purchase 50,000 shares of Common Stock at an exercise price of $2.69,
valued at $77,000 and exercisable through January 3, 1999. $500,000 of the
proceeds of this offering was used by TradeWave for working capital. The
balance of the proceeds of this offering was used by the Company to
repurchase 275,000 restricted shares of its Common Stock at $1.80 per
share.
In January 1996, the Company received gross proceeds of $500,000 by
selling convertible non-interest bearing notes which require the holders to
convert the notes by March 10, 1997 into a maximum of 312,500 shares of
Common Stock. In connection with this offering, the Company issued
warrants to financial advisors to purchase 50,000 shares of Common Stock at
an exercise price of $2.74 per share, valued at $85,000, exercisable
through January 26, 1999. The proceeds of this offering were used by the
Company to repurchase 273,333 restricted shares of its Common Stock at
$1.80 per share. These notes have been converted into 254,826 shares of
Common Stock.
<PAGE>
In January 1996, the Company received gross proceeds of $1,000,000 by
selling convertible non-interest bearing notes which require the holders to
convert the notes by March 10, 1997 into a maximum of 625,000 shares of
Common Stock. In connection with this offering, the Company issued
warrants to financial advisors to purchase 100,000 shares of Common Stock
at an exercise price of $2.69 per share, valued at $200,000, exercisable
through February 7, 1999. A portion of the proceeds of this offering,
$300,000, was used by the Company to repurchase 176,667 restricted shares
of its Common Stock at $1.80 per share. These notes have been converted
into 528,487 shares of Common Stock.
In the quarter ended June 30, 1996, warrants to purchase 404,307
shares of the Company's common stock were exercised at exercise prices from
$1.50 to $3.87, yielding proceeds of $1,248,310, and options to purchase
470,653 shares of the Company's common stock were exercised at exercise
prices from $1.35 to $2.56, yielding proceeds of $727,532. In accordance
with the amended credit agreement with Chase (see "Liquidity and Capital
Resources"), the Company used $600,642 to pay down the Chase term loan, and
the remainder of the proceeds can be used by the Company to fund the
working capital needs of TradeWave.
In the quarter ended September 30, 1996, options to purchase 93,287
shares of the Company's common stock were exercised at an exercise price
of $1.35, yielding proceeds of $125,938. In accordance with the amended
credit agreement with Chase (see "Liquidity and Capital Resources"), the
Company used $100,750 ($22,078 of which was paid at September 30, 1996) to
pay down the Chase term loan, and the remainder of the proceeds can be used
by the Company to fund the working capital needs of TradeWave. Also in
accordance with the Amended Credit Agreement with Chase (see "Liquidity and
Capital Resources") the Company sold 250,000 shares of common stock in the
public market yielding net proceeds of $907,053 (at prices ranging from
$3.375 to $3.875) to fund the working capital needs of TradeWave. In
accordance with Amendment No. 1 to the Asset Purchase Agreement between MCC
and TradeWave, the note payment of $250,000 due May 31, 1996 was paid by
delivering 60,000 shares valued at $5.00 per share in July 1996, which
represented 120% of the amount due. Subsequently MCC notified the Company
that the delivery of such shares did not satisfy the May 31, 1996 payment
obligation to MCC. The Company is disputing the claim.
A Registration Statement on Form S-1 filed with the Securities and
Exchange Commission was effective on July 8, 1996. The Company registered
for sale up to 2,500,000 shares of newly issued common stock and selling
stockholders registered for sale up to 11,944,210 shares of existing common
stock. As of the date of this Form 10-Q, the Company has sold 392,000 of
the 2,500,000 newly registered shares.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Through acquisition of technology and product lines and new product
development, the Company is seeking to become a leader in providing
computing access solutions in network-centric environments. In this
regard, the acquisition of TradeWave in April of 1995, the formation of the
GAI partnership in May of 1995, the acquisition of the VT and Dorio product
line from Digital Equipment Corporation ("Digital") in October of 1995 and
development efforts focusing on the network computing market are the major
factors that have caused the fluctuations in revenue and expenses when
comparing 1996 to 1995.
The Company's hardware products, manufactured and marketed by Boundless,
consist of graphics and text terminals in two categories. Data Systems
Group products are text terminals used primarily for data entry and point
of sale applications. The ADDS, VT and Dorio products are in this
category. Network Computer Group products are high resolution, high
performance, graphical, desktop workstations and network computers for use
in network-centric environments, and are capable of accessing and
displaying information from multiple host computers and multiple
applications. The Company's latest product introduced in the third
quarter, a part of this category, is a family of network computers which
offer customers easy and cost-effective access to current and emerging
computing environments, including the Windows, legacy, UNIX, DOS, Java and
Internet/Intranet applications.
The numbers and percentages contained in this Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations
are approximate.
THIRD QUARTER OF 1996 COMPARED WITH THIRD QUARTER OF 1995
Revenue - Revenue for the three months ended September 30, 1996 were
- -------
$29,700,000, as compared to $23,400,000 for the three months ended
September 30, 1995. The major components of the change are discussed
below.
Sales of the Company's Data Systems Group for the three months ended
September 30, 1996 increased $13,600,000, to $23,100,000. Sales of VT and
Dorio products increased $14,600,000. Sales of the Company's legacy text
terminals decreased $1,000,000 in the three months ending September 30,
1996 to $8,500,000. This change consists of a $1,500,000 drop in sales to
NCR due to the disruption caused by the break-up of AT&T and a $1,300,000
drop due to decreased channel activity in IBM product sales, offset by a
$1,800,000 increase in sales to smaller distributors and value added
resellers previously customers of NCR.
Sales of the Company's Network Computer Group for the three months ended
September 30, 1996 decreased $7,500,000, to $1,800,000. This decline was
anticipated and relates to the completion, during the first quarter of
1996, of specific projects undertaken by NCR. The Company has, however,
recently booked orders valued at $5,400,000 to expand the original
projects. Delivery of the product is expected to occur during the fourth
quarter of 1996 and the first quarter of 1997.
TradeWave revenue for the three months ended September 30, 1996 increased
$500,000, to $700,000. TradeWave's revenue is shifting from its
subcontracting work under a contract with the U.S. Department of Defense,
which expires in the last quarter of 1996, to sales of its VPI suite of
products. TradeWave is transitioning from a research and development
company to a commercial enterprise, and accordingly is deploying its
resources to support those products as they emerge.
Gross margin - Gross margin for the three months ended September 30, 1996
- ------------
was $7,700,000, 25.8% of revenue, as compared to $5,900,000, 25.2% of
revenue, for the three months ended September 30, 1995. The increase is
primarily due to product mix. In the Data Systems Group, gross margins
increased 1.1% to 23.5% for the three months ending September 30, 1996 due
to product mix. The Network Computer Group had a gross margin of 12% in
the third quarter of 1996 as compared to 21.2% in the third quarter 1995.
The low gross margin for the Network Computer Group was expected, as the
Company incurred production start-up costs for its new network computer
line. As production of this new product proceeds, the Company expects cost
reduction measures will be successful.
Sales and marketing - Sales and marketing expenses in the three months
- -------------------
ended September 30, 1996 increased $2,000,000, to $4,000,000, 13.3% of
revenue. The change was due to increased spending at TradeWave, and
increases in marketing and public relations activities at Boundless to
develop channel partners, launch the network computer product, expand
market presence and create recognition of its new name.
General and administrative - General and administrative expenses in the
- --------------------------
three months ended September 30, 1996 increased $700,000, to $2,900,000,
9.6% of revenue. The increase stems from TradeWave's transition from a
development company to a commercial enterprise and parent company overhead.
Resources formerly devoted to product development have been focused on
supporting the recently introduced VPI suite of products.
Research and development - Research and development expenses in the three
- ------------------------
months ended September 30, 1996 decreased $300,000, to $1,400,000, 4.7% of
revenue. The decrease is primarily a result of TradeWave's transition from
a development company to a commercial enterprise. Resources formerly
devoted to product development have been focused on supporting the recently
introduced VPI suite of products.
<PAGE>
Other expense - Interest expense (net of interest income) for the three
- -------------
months ended September 30, 1996 increased $800,000 to $1,100,000, 3.8% of
revenue. The increase is attributable to the Digital Acquisition, financed
in part by the Company through borrowing from The Chase Manhattan Bank
N.A., agent for the banking group ("Chase") (the "Chase Credit Line"),
(See "-Liquidity and Capital Resources").
Income tax expense - Income taxes are provided in accordance with the
- ------------------
liability method of accounting for income taxes pursuant to the Financial
Accounting Standards Board Statement No. 109. For the three months ended
September 30, 1996, the effective tax rate was 37%, compared to 42% for the
same period in 1995.
Net income - For the three months ended September 30, 1996, the net loss
- ----------
was $1,000,000, compared to net income of $100,000 for the same period in
1995. Operating income decreased from $100,000 for the three months ended
September 30, 1995 to an operating loss of $600,000 for the same period in
1996. The operating loss for the three months ended September 30, 1996 is
made up of income at Boundless of $1,400,000 (compared to $1,000,000 in the
same period in 1995) offset by a loss at TradeWave of $1,600,000 and
overhead unallocated corporate expenses of $400,000 at the parent Company.
Earnings available for common shareholders - Earnings available for common
- ------------------------------------------
shareholders declined from a loss of $100,000 for the three months ended
September 30, 1995, to a loss of $1,200,000 or $(0.02) per share for the
three months ended September 30, 1996. Earnings available for common
shareholders is net income less accretion to or dividends on mandatorily
redeemable preferred stock from net income.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1995
Revenue - Revenue for the nine months ended September 30, 1996 was
- -------
$101,600,000, as compared to $68,300,000 for the nine months ended
September 30, 1995. The major components of the change are discussed
below.
Sales of the Company's Data Systems Group for the nine months ended
September 30, 1996 increased $52,100,000 to $80,600,000. The main
contributor to the increase was sales of the VT and Dorio products acquired
in 1995.
Sales of the Company's Network Computer Group for the nine months ended
September 30, 1996 decreased $14,100,000, to $7,300,000. This decline was
anticipated and relates to the completion, during the first quarter of
1996, of specific projects undertaken by NCR. The Company has, however,
recently booked orders valued at $5,400,000 to expand the original
projects. Delivery of the product is expected to occur during the fourth
quarter of 1996 and the first quarter of 1997.
TradeWave revenue for the nine months ended September 30, 1996 increased
$900,000, to $1,900,000, when compared to the period from April 1, 1995
(inception) to September 30, 1995. TradeWave's revenue is shifting from
its subcontracting work under a contract with the U.S. Department of
Defense which expires in the last quarter of 1996, to sales of its VPI
suite of products. TradeWave is transitioning from a research and
development company to a commercial enterprise, and accordingly is
deploying its resources to support those products as they emerge.
The Company's most significant customers for the nine months ended
September 30, 1996 were NCR and Digital, accounting for 13% and 12.9%,
respectively, of the Company's sales for the period.
Gross margin - Gross margin for the nine months ended September 30, 1996
- ------------
was $23,300,000, 23% of revenue, as compared to gross margin for the nine
months ended September 30, 1995 of $19,100,000, 28% of revenue. As
previously disclosed, the shift in revenue mix to the Company's lower
margin Data Systems Group products has resulted in a decline of gross
margin. The Data Systems Group products comprised 79% of revenue at 20.8%
gross margin for the nine months ending September 30, 1996, compared to 42%
of revenue at a 23.1% gross margin for the nine months ending September 30,
1995. The lower gross margin for the Data Systems Group product line for
the first nine months of 1996 is attributable to costs associated with the
absorption of the VT and Dorio products, including higher shipping costs
than planned, increases in excess and obsolete inventory reserves,
warehousing costs for Europe, warranty costs and premiums paid to Digital
for manufacture of these products while the Company was preparing to
manufacture them. The Company has offset a portion of these costs by more
fully utilizing its production capacity, increasing its ability to take
advantage of volume purchase discounts and expanding its distribution
network and global reach. The Company expects gross margins to fluctuate
as several varying factors impact overall gross margins including sales
volume, shifts in product mix, pricing strategies, absorption of
manufacturing costs and new product introductions.
Sales and marketing - Sales and marketing expenses for the nine months
- -------------------
ended September 30, 1996 increased $3,900,000, to $9,700,000, 9.6% of
revenue. As previously discussed this increase is due to increased
spending at TradeWave, and increases in marketing and public relations
activities at Boundless to develop channel partners, launch the network
computer product, expand market presence and create recognition for its new
name.
General and administrative - General and administrative expenses for the
- --------------------------
nine months ended September 30, 1996 increased $2,300,000, to $7,200,000,
7.1% of revenue. The increase stems primarily from expenses associated
with TradeWave as well as amortization of goodwill associated with the
Company's acquisition of the VT and Dorio products and parent company
overhead.
<PAGE>
Research and development - Research and development for the nine months
- ------------------------
ended September 30, 1996 increased $400,000, to $5,400,000, 5.3% of
revenue. Expenses at Boundless decreased $500,000, while TradeWave's
expense increased $900,000. Research and development efforts are being
expended on a line of network and Internet access computers introduced by
Boundless and software products and services that enable businesses to
design, build and deploy comprehensive public-key security solutions for
the conduct of enterprise-wide and business-to-business communications and
transactions over TCP/IP-based networks, including the Internet, VANs, LANs
and WANs.
Other expense - Interest expense (net of interest income) for the nine
- -------------
months ended September 30, 1996 increased $2,300,000, to $3,300,000, 3.2%
of revenue. The increase is attributable to the Digital Acquisition,
financed in part by the Company through borrowing from Chase (See "-
Liquidity and Capital Resources").
Income tax expense - Income taxes are provided in accordance with the
- ------------------
liability method of accounting for income taxes pursuant to the Financial
Accounting Standards Board Statement No. 109. For the nine months ended
September 30, 1996, the effective tax rate was 37%, compared to 40% for the
same period in 1995.
Net income - For the nine months ended September 30, 1996, net loss was
- ----------
$1,500,000, compared to net income of $2,800,000 for the same period in
1995. Operating income decreased from $3,500,000 for the nine months ended
September 30, 1995 to $1,000,000 for 1996. The operating income for the
nine months ended September 30,1996 is made up of income at Boundless of
$5,700,000 (compared to $4,500,000 in the same period in 1995) offset by a
loss at TradeWave of $3,800,000 and overhead of $900,000 at the parent
Company.
Earnings available for common shareholders - Earnings available for common
- ------------------------------------------
shareholders declined from a profit of $2,200,000, $0.05 per share, for the
nine months ended September 30, 1995, to a loss of $1,900,000, $(0.04) per
share, for the nine months ended September 30, 1996. Earnings available
for common shareholders was calculated by deducting accretion to or
dividends on mandatorily redeemable preferred stock from net income.
The Company has not been adversely affected by inflation because
technological advances and competition within the microcomputer industry
have generally caused prices of components in products sold by the Company
to decline.
The reader is advised to consider the following brief summary of certain
risk factors affecting the Company and TradeWave. These and other risk
factors are more fully discussed in the Company's Prospectus dated July 8,
1996, which will be updated in the near future. The computer industry is
characterized by a rapid rate of product improvement, technological change
and product obsolescence. As a result of recent acquisitions, the Company
currently dependent upon the ability of display terminals to compete, in
terms of price and performance, with personal computers in the
client/server environment. The terminal market continues to decline and
margins are eroding. The Company's introduction of one of the first
network computers, low cost computers with no data storage capacity and
limited computing power, is a part of its strategy to provide a lower cost
alternative to personal computers. However, there can be no assurance that
the terminal/network computer strategy will be successful, or that
competitors with greater resources and/or superior products will not
adversely affect the success of the Company's strategy. TradeWave is
emerging from the development phase and recently launched its initial
product, Internet security software. TradeWave is dependent upon, among
other factors, the success of its first product, its ability to develop and
introduce new products and its ability to compete in the highly competitive
software market.
LIQUIDITY AND CAPITAL RESOURCES
From time to time the Company has requested and received waivers from Chase
with respect to breaches of covenants under the Chase Credit Line.
Discussions are ongoing with Chase with respect to waivers of breaches of
several covenants. As a result of the breaches by the Company of the
covenants, the Company is in technical default of the Chase Credit Line.
There can be no assurance that the Company will be successful in obtaining
these waivers. Until such time as the necessary waivers are received, the
total amount due to Chase is, and will be, classified as current debt on
the Balance Sheet. The Company has been informed that additional money may,
or may not, at the discretion of the banks, be advanced until these issues are
resolved. The banks have reserved their right to exercise any of their
rights and remedies at any time with respect to such defaults. Efforts are
underway to obtain other financing on more favorable terms to pay the
amounts due to Chase. There can be no assurance that these efforts will be
successful.
The Chase Credit Line consists of a $20,000,000 revolving line of credit
("Revolving Loan") and a $20,000,000 term loan ("Term Loan"). Borrowing
under the Revolving Loan is based on a borrowing base formula of up to 80%
of eligible receivables, plus 50% of delineated eligible inventory, plus
30% of non-delineated eligible inventory. Up to $7,500,000 is available
under the Revolving Loan for letters of credit. At December 31, 1995, the
Company owed Chase $28,000,000, of which $8,000,000 was owed under the
Revolving Loan and $20,000,000 was owed under the Term Loan. At September
30, 1996, the Company owed Chase $28,100,000, of which $13,200,000 was owed
under the Revolving Loan and $14,900,000 was owed under the Term Loan. As
of such date, the Company had $1,900,000 of availability remaining under
the Revolving Loan. As a result of the borrowing-base formula, the credit
available to the Company could be adversely restricted in the event the
Company's sales decline.
<PAGE>
Net cash deficit from operating activities during the nine months ended
September 30, 1996 amounted to $2,400,000. This was primarily attributable
to an increase of $2,300,000 in inventory and a decrease of $3,900,000 in
accounts payable and accrued expenses offset by a decrease in accounts
receivable of $1,900,000 and depreciation and amortization of $2,300,000.
Net cash used in investing activities for the nine months ended September
30, 1996 was $1,500,000 and related to the acquisition of capital assets.
Net cash provided from financing activities was $4,300,000 for the nine
months ended September 30, 1996 and was composed primarily of $5,200,000
drawn on the Revolving Loan to finance the working capital needs of
Boundless, $1,900,000 from the sale of stock, $1,200,000 from the exercise
of warrants, $1,500,000 from the sale and conversion of convertible notes
and $900,000 from the exercise of stock options, offset by payments on long-
term debt of $5,600,000 and $1,300,000 for purchase of treasury stock which
was immediately retired. Of the $2,000,000 proceeds received from the
exercise of warrants and options, $700,000 is due to Chase per the Third
Amendment to the Chase Credit Agreement dated July 9, 1996 and the
remainder can be used for funding TradeWave's working capital needs.
To date, TradeWave has been financed primarily through loans made to
TradeWave by the Company. As of September 30, 1996, the Company has
advanced $4,400,000 to TradeWave as intercompany transfers. The September
30, 1996 payment in the amount of $250,000 due to MCC under the Research
and Development Agreement was made on November 8, 1996. The Company is
disputing the claim. The Company's ability to fund TradeWave's capital in
the future is substantially restricted by the terms of the Chase Credit
Line, which, among other things, limits dividends and advances from
Boundless and provides specified percentages (currently 80%) of the net
proceeds received by the Company on the sale of its capital stock, must be
used by the Company to prepay the Chase Term Loan. The Company received
Chase's consent to the sale, by not later than December 31, 1996, of up to
833,333 shares of the Company's common stock to fund TradeWave's capital
requirements. As of the date of this Form 10-Q, the Company has sold
392,000 shares at prices ranging from $3.25 to $3.875 per share. There can
be no assurance that the company will be able to obtain Chase's consent to
provide additional funding to TradeWave beyond the limits imposed by the
Chase Credit Line or that it will be possible to sell the balance of the
allowed shares by December 31, 1996.
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This report contains forward-looking statements and information that are
based on management's beliefs as well as assumptions made by and
information currently available to management. When used in this document,
the words "anticipate," believe," "estimate," and "expect," and similar
expressions are intended to identify forward-looking statements. Such
statements reflect the Company's current views with respect to future
events and are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those anticipated, believed, estimated or expected. The Company does
not intend to update these forward-looking statements and information.
NEW ACCOUNTING STANDARDS
In October 1995, the FASB issued Statement 123, "Accounting for Stock-Based
Compensation" ("Statement 123"), which establishes fair value-based
accounting and reporting standards for all transactions in which a company
acquires goods or services by issuing its equity securities, including all
arrangements under which employees receive stock based compensation.
Statement 123 encourages, but does not require, employers to adopt fair
value accounting to recognize compensation expense for grants under stock-
based compensation plans. However, companies must comply with the
disclosure requirements set forth in Statement 123 which is effective for
fiscal years beginning after December 31, 1995. The Company expects to
adopt only the reporting standards of Statement 123.
In March 1995, the FASB issued Statement 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" ("Statement 121"), which addresses the accounting for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets to be held and used. It also addresses the accounting for
long-lived assets and certain identifiable intangibles to be disposed of.
Statement 121 has an effective date of January 1, 1996. The Company does
not expect application of Statement 121 to have a significant impact upon
the Company's financial statements.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Item 5 language to come from Joe Alperin
CHANGES IN MANAGEMENT AND THE BOARD OF DIRECTORS
Effective November 7, 1996, Leonard N. Mackenzie was elected Chairman of
the Board of Directors and Acting President and Chief Executive Officer of
the Company and Gary E. Wood was elected a director of the Company.
Biographical information regarding each of the three current
members of the Company's Board is set forth below.
<PAGE>
Mr. Mackenzie, age 59, has been since 1980 a Board member and was,
from 1980 to 1992, Chairman, President and Chief Executive Officer
of General Automation, Inc., a provider of computer system services,
products and components. He co-founded in 1987, and has been a
director since 1987 of, U.S. Gas Transportation, Inc., a privately-held
natural gas asset management company. Mr. Mackenzie also co-
founded in 1993, and has been a director of, Vinyard Engine
Systems, Inc., a privately-held developer of conversion technology for
alternative fuels.
Mr. Wood, age 52, has been serving since January 1, 1996 as President
of Texas Taxpayers and Research Association Research Foundation, a 500
member business sponsored organization that researches state fiscal policy.
From April 1988 to December 1995, he served as President of Texas Research
League.
Daniel Matheson, age 47, was appointed to the Company's Board in
August 1996. Since May 1993, he has been Executive Vice President and
General Counsel of Network System, Inc., a privately-held
telecommunications company and Chairman of the Board of The Capital
Network, Inc., a not-for-profit economic development agency. In addition,
Mr. Matheson is counsel to Locke Purnell Rain Harrell P.C. in Austin, Texas
and has worked in the general banking, corporate, securities and state
government (legislative and regulatory) areas for more than 20 years.
In addition, Stephen Maysonave was appointed as an advisor to the Company's
Board. On September 17, 1996, Mr. Maysonave became the voting trustee of a
majority of the outstanding shares of Series B Preferred Stock of SunRiver
Group, Inc. ("SunRiver Group"), the beneficial holder of a majority of the
outstanding shares of the Company's common stock. For additional
information, reference is made to Mr. Maysonave's Schedule 13D, dated
September 26, 1996. Amendment No. 3 to the Schedule 13D of SunRiver Group
filed October 30, 1996 disclosed that changes in management at the Company
had been requested by SunRiver Group and the existence of a one-year
financial advisory agreement between SunRiver Group and Mr. William Moore,
expiring October 31, 1997.
Effective November 1, 1996, the persons listed below (collectively,
the "Resigners") resigned from all management and Board positions which
they had with the Company and/or its subsidiaries. The resignations had
been requested by SunRiver Group.
Gerald Youngblood: Chairman of the Board and President of the Company
and a member of the Boards of Boundless and TradeWave;
Roger Hughes: Vice President-Finance and Chief Financial Officer of
the Company, Boundless and TradeWave;
John Osborne: a member of the Board and Vice President of Sales,
Marketing and Service of the Company, President and Chief Executive Officer
of Boundless and a member of the Board of TradeWave;
Roy Smith: Vice Chairman of the Board of TradeWave;
Ron Brittian: a member of the Board of the Company and Chairman of
the Board of TradeWave; and
Sam Smith: a member of the Boards of the Company and TradeWave.
In connection with the Resigners' resignations, the Company, Boundless and
TradeWave (collectively, the "Employer") jointly entered into with each of
Messrs. Youngblood, Hughes, Osborne and Roy Smith (each, an "Employee
Resigner") a Separation Agreement and General Release and with each of
Messrs. Brittian and Sam Smith a General Release Agreement (these six
agreements are collectively referred to as the "Separation and Release
Agreements"). The terms of the Separation and Release Agreements are
briefly summarized below.
The Employer agreed to continue to pay each Employee Resigner's salary
while he performs consulting services for the Employer until April 30,
1997, unless such services are terminated earlier by either the Employer or
Resigner, and to pay, as a severance payment, one-years' salary in twelve
monthly installments beginning after the consulting period ends. The
severance payments are in the following aggregate amounts: Gerald
Youngblood, $200,000; Roger Hughes, $180,000; John Osborne, $190,000; and
Roy Smith, $150,000.
Each Resigner's previously granted options to purchase common stock of the
Company and TradeWave became fully and immediately vested and exercisable
for three years, subject to each Resigner's agreement not to sell 50% of
his option shares until May 1, 1997. The amount and exercise prices of
these options are:
Gerald Youngblood: to purchase 450,000 shares of the Company's common
stock at exercise prices of $1.35 per share as to 300,000 shares and $2.56
per share as to 150,000 shares; to purchase 25,000 shares of TradeWave
common stock at an exercise price of $1.00 per share.
Roger Hughes: to purchase 250,000 shares of the Company's common
stock at an exercise price of $2.13 per share; to purchase 50,000 shares of
TradeWave common stock at an exercise price of $1.00 per share.
John Osborne: to purchase 200,000 shares of the Company's common
stock at an exercise price of $2.13 per share; to purchase 50,000 shares of
TradeWave common stock at an exercise price of $1.00 per share.
<PAGE>
Roy Smith: to purchase 14,510 shares of the Company's common stock at
an exercise price of $2.82 per share; to purchase 120,000 shares of
TradeWave common stock at exercise prices of $0.20 per share as to 60,000
shares and $1.00 per share as to 60,000 shares.
Ron Brittian: to purchase 75,000 shares of the Company's common stock
at an exercise price of $2.13 per share.
Sam Smith: to purchase 75,000 shares of the Company's common stock at
an exercise price of $1.35 per share.
The Employer also agreed to maintain for six years director and officer
liability insurance covering each Employee Resigner, provided full releases
to each Resigner and agreed to indemnify each Resigner pursuant to pre-
existing indemnification agreements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit 10(a): Form of Separation Agreement and General Release, dated as
of November 1, 1996, entered into by SunRiver Corporation,
Boundless Technologies, Inc. and TradeWave Corporation with
Gerald Youngblood, Roger Hughes, John Osborne and Roy Smith.
Exhibit 10(b): Form of General Release Agreement, dated as of November 1,
1996, entered into by SunRiver Corporation, Boundless
Technologies, Inc. and TradeWave Corporation with Ron Brittian
and Sam Smith.
Exhibit 10(c): Form of Employment Agreement, dated as of October 11, 1996,
entered into by SunRiver Corporation with Gerald Youngblood,
Roger Hughes and John Osborne.
Exhibit 10(d): Form of Indemnification Agreement, dated September 3, 1996,
except for Roy Smith's agreement which is dated September 18, 1996,
entered into by SunRiver Corporation with Gerald Youngblood,
Roger Hughes, John Osborne, Ron Brittian and Sam Smith and by
TradeWave Corporation with Gerald Youngblood, Roger Hughes, John
Osborne, Roy Smith, Ron Brittian and Sam Smith.
Exhibit 11: Computation of Per Share Earnings
Exhibit 27: Financial Data Schedule for the quarter ended September 30, 1996
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended September 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Dated: November 14, 1996
SunRiver Corporation
By: /s/ Leonard Mackenzie
_________________________________________
Leonard Mackenzie
President and Chief Executive Officer
By: /s/ Wayne Schroeder
_________________________________________
Wayne Schroeder
Chief Accounting Officer
<TABLE>
<CAPTION>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
SunRiver Corporation and Consolidated Subsidiary Companies
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------------- --------------------------------
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Primary earnings per common share:
Income from continuing operations $ (1,543,052) $ 1,735,463 $ (1,039,741) $ 96,521
Preferred stock dividend 372,519 - 124,173 -
Preferred stock accretion - 609,116 - 210,143
--------------- --------------- --------------- ---------------
Income before discontinued operations (1,915,571) 1,735,463 (1,163,914) 96,521
Discontinued operations - 1,034,054 - -
--------------- --------------- --------------- ---------------
Earnings available for common shareholders (1,915,571) 2,769,517 (1,163,914) 96,521
=============== =============== =============== ===============
Weighted average shares outstanding during the period 46,250,954 40,939,281 46,574,806 41,776,129
Common stock equivalents
--------------- --------------- --------------- ---------------
Weighted average common shares outstanding 46,250,954 41,989,433 46,574,806 43,424,391
=============== =============== =============== ===============
Income before discontinued operations (0.04) 0.03 (0.02) -
Discontinued operations - 0.02 - -
Primary earnings per common share $ (0.04) $ 0.05 $ (0.02) $ -
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 821,506
<SECURITIES> 0
<RECEIVABLES> 18,390,479
<ALLOWANCES> 1,294,242
<INVENTORY> 27,067,506
<CURRENT-ASSETS> 48,764,057
<PP&E> 16,062,346
<DEPRECIATION> 3,584,138
<TOTAL-ASSETS> 75,677,054
<CURRENT-LIABILITIES> 43,650,829
<BONDS> 8,186,033
3,554,692
0
<COMMON> 478,581
<OTHER-SE> 16,972,352
<TOTAL-LIABILITY-AND-EQUITY> 75,677,054
<SALES> 95,585,923
<TOTAL-REVENUES> 101,595,043
<CGS> 78,058,850
<TOTAL-COSTS> 78,274,379
<OTHER-EXPENSES> 25,772,316
<LOSS-PROVISION> (276,191)
<INTEREST-EXPENSE> 3,294,249
<INCOME-PRETAX> (2,451,652)
<INCOME-TAX> (908,600)
<INCOME-CONTINUING> (1,543,052)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,543,052)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
<PAGE>
Exhibit 10(a)
SEPARATION AGREEMENT AND GENERAL RELEASE
THIS SEPARATION AGREEMENT AND GENERAL RELEASE
(this "Agreement") is made and entered into as of November
1, 1996 ( the "Effective Date"), by and among [ ] a
resident of Travis County, Texas ("Employee"), and SUNRIVER
CORPORATION, a Delaware corporation ("SRC"), TradeWave
Corporation, a Delaware corporation ("TWC"), and Boundless
Technologies, Inc., a Delaware corporation ("BTI") (SRC, TWC, and BTI
are sometimes collectively referred to in this Agreement as the
"Company").
W I T N E S S E T H:
WHEREAS, Employee has been employed as an executive
officer of SRC and/or TWC and/or BTI; and
WHEREAS, Employee and SRC and/or TWC have entered
into a certain Employment Agreement (the "Employment
Agreement"), a copy of which is attached as Exhibit A to this
Agreement; and
WHEREAS, the Company (expressly including SRC and/or TWC,
as the employer of Employee pursuant to the Employment Agreement)
and Employee wish to end the employment relationship between
them and to terminate the Employment Agreement and to do so on
amicable and mutually agreeable terms; and
WHEREAS, Employee and SRC and/or TWC have entered into one
or more Stock Option Agreements (Incentive Stock Option) (whether
one or more, the "Stock Option Agreement"), a schedule of which
is attached as Exhibit B to this Agreement, pursuant to which SRC
and/or TWC have granted options to Employee (the "Options") to
purchase shares of common stock of SRC and/or TWC ("Common
Stock"), upon the terms and subject to the conditions contained
in the Stock Option Agreement; and
WHEREAS, Employee and the Company (expressly including SRC
and/or TWC, as the grantor of the Options to Employee pursuant to
the Stock Option Agreement) desire to accelerate the vesting of
the Options and to provide for the exercise of the Options as to
such shares during the three -year period following the Effective
Date; and
WHEREAS, Employee and the Company desire to settle any
open issues which may exist between them, including, but not
limited to, any open issues that arise out of Employee's
employment with the Company (expressly including SRC and/or TWC,
<PAGE>
as the employer of Employee pursuant to the Employment Agreement)
or his separation from such employment;
NOW, THEREFORE, in consideration of the premises and mutual
promises herein contained, and other consideration, the receipt
and sufficiency of which is hereby acknowledged, it is agreed as
follows:
1. TERMINATION OF EMPLOYMENT AGREEMENT; VOLUNTARY
RESIGNATION
A. The Employment Agreement is hereby terminated and,
except for provisions which by their terms are to survive the
termination of the Employment Agreement (expressly including
those included in Section 6 of the Employment Agreement, if the
Employment Agreement is between Employee and SRC, and Section 5
of the Employment Agreement, if the Employment Agreement is
between Employee and TWC, subject, however, to the modifications
to the non-competition covenant contained in the Employment
Agreement that are provided for in Section 6.B. of this
Agreement), is of no further force or effect.
B. Employee, concurrently with the Effective Date of this
Agreement, shall voluntarily resign from employment with the
Company (expressly including SRC and/or TWC, as the employer of
Employee pursuant to the Employment Agreement) by the delivery to
the Company of a letter of resignation in the form of Exhibit C
attached to this Agreement (the "Letter of Resignation"), and
shall thereafter be relieved of all day-to-day duties and
responsibilities as an employee of the Company (expressly
including SRC and/or TWC, as the employer of Employee pursuant to
the Employment Agreement). Employee's resignation shall include
all offices held by Employee in the Company and any Affiliates of
the Company for which Employee has been elected an officer.
C. Employee, concurrently with the Effective Date of this
Agreement, by the delivery to the Company of the Letter of
Resignation, shall voluntarily resign as a director of the
Company and of each Affiliate of the Company on whose board of
directors Employee serves (provided, that Gerald Youngblood does
not intend to, and will not be required to, resign from the board
of directors of SunRiver Group, Inc., a Delaware corporation).
D. Employee, concurrently with the Effective Date of this
Agreement, by the delivery to the Company of the Letter of
Resignation, shall voluntarily resign as a voting trustee under
the Voting Trust Agreement dated as of September 27, 1996, among
SRC, TWC, Donald Hackett, and Employee, if Employee is a party to
the Agreement.
<PAGE>
2. CONSIDERATION FROM THE COMPANY; CERTAIN AGREEMENTS
OF THE COMPANY
A. Upon Employee's execution of this Agreement
and submission of the Letter of Resignation as provided in
Section 1, the Company agrees to pay the amounts set forth as
"Separation Payments" (herein so called) on Exhibit D
attached to this Agreement, in the manner set forth on
Exhibit D. Employee understands and agrees that the Separation
Payments are all the payments that he will receive from the
Company and that he will not be entitled to receive any
further salary, bonuses, accrued but unused vacation, expense
reimbursement, or similar payments from the Company after the
effective date of Employee's resignation. Employee (i)
acknowledges that the Separation Payments may be less than,
and are in lieu of, the severance payments that would be
payable to Employee under certain circumstances pursuant to
the Employment Agreement, and (ii) understands and agrees that
the Separation Payments to be made by the Company are more than
he would be entitled to receive as a terminating/resigning
employee under the Company's normal policies and
procedures and represents sufficient consideration for the
releases contained in this Agreement and the promises of
confidentiality, non-competition, and non-solicitation provided
in the Employment Agreement and reaffirmed by Employee in this
Agreement.
B. As additional consideration to Employee, and
notwithstanding the terms of the Stock Option Agreement, the
Company (expressly including SRC and/or TWC, as the grantor of
the Options to Employee pursuant to the Stock Option Agreement)
hereby agrees to accelerate the vesting of the Options as to all
the shares of the Common Stock covered by the Stock Option
Agreement (the "Vested Option Shares"), with the effect that,
upon the Effective Date and for the period of three years
following the Effective Date, Employee shall be entitled to
purchase the Vested Option Shares in the manner, and for the
purchase price, contemplated by the Stock Option Agreement;
provided, that upon the exercise of the Options as to any or all
of the Vested Option Shares, Employee and SRC will enter into an
agreement, in form and substance acceptable to SRC and its
counsel, under the terms of which Employee will agree to a
partial lock-up of the Vested Option Shares for a period of six
months following the Effective Date, during which Employee will
agree that he will not sell more than 50% of the Vested Option
Shares.
C. The Company agrees to take all steps to cause
<PAGE>
Employee to be vested in the retirement and/or pension plans
of the Company to which Employee is entitled by virtue of
his employment.
D. The Company agrees to take all reasonable
steps to cause any and all life insurance policies
maintained by the Company on Employee's life to be transferred
and assigned to Employee; provided, that the Company makes no
representations or warranties to Employee with respect to the
assignability of any such life insurance policies; and
provided, further, that Employee (i) shall assume all
responsibility for the payment of premiums and the performance
of all other obligations of the owner of any such policies, and
(ii) shall execute and deliver to the Company and the issuers of
any such policies any and all such agreements or other documents
as may be requested by the Company and/or such issuers to
evidence the assumption of such responsibility and obligations.
E. The Company agrees to take all reasonable steps
and use its best efforts to maintain in force and effect, for a
period of not less than six years following the Effective Date,
director's and officer's liability insurance policies
identical to, or substantially similar to, the director's and
officer's liability insurance policies of the Company currently
in effect, naming Employee as an insured; provided, that the
Company makes no representations and warranties to Employee
with respect to its ability to obtain any such policies in the
future in the event the policies currently in existence
terminate or are canceled by the issuers thereof.
F. In the event Employee dies before all amounts
payable to Employee under the terms of this Section 2 are
paid, all unpaid amounts shall be paid to the personal
representative of Employee's estate in accordance with the terms
of this Agreement. The personal representative of Employee's
estate shall also have the right to exercise any of the
Options which have not been exercised by the date of
Employee's death, during the period of exercise provided in this
Agreement.
G. SRC, TWC, and BTI are intended to be joint
obligors under this Agreement, and each of SRC, TWC, and BTI
agrees that it is obligated to perform the agreements of the
Company set forth in this Section 2 as if it were the "Company"
named herein.
3. MUTUAL RELEASE
A. As a material inducement to the Company to enter into
<PAGE>
this Agreement, Employee hereby irrevocably and
unconditionally releases, acquits, and forever discharges the
Company and each of the Company's stockholders (other than
SunRiver Group, Inc.), predecessors, successors, assigns,
agents, directors, officers, employees, representatives,
attorneys, parent companies, divisions, subsidiaries, and
Affiliates (other than SunRiver Group, Inc.) (and agents,
directors, officers, employees, representatives, and attorneys
of such parent companies, divisions, subsidiaries, and
Affiliates), past or present, and all persons acting by,
through, under, or in concert with any of them, or any of
them, including without limitation, Jeffrey Moore, Matthew
Moore, Robert Shephard, John Trube, Gerald Youngblood, Jimmy
Hood, Daniel Matheson, and the law firms and lawyers of Locke
Purnell Rain Harrell, P.C. (including, but not limited to,
Daniel N. Matheson, Jane A. Matheson, and Curtis R. Ashmos),
Werbel & Carnelutti (including, but not limited to, Steve
Davis), and Fischbein Badillo Wagner Harding (including, but
not limited to, Joe Cannella) (all of the foregoing are
collectively called "Releasees"), from any and all charges,
complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action,
suits, rights, demands, costs, losses, debts, and expenses
(including attorneys' fees and costs actually incurred), of any
nature whatsoever, known or unknown, suspected or unsuspected,
including, but not limited to, any rights arising out of alleged
violations of any contract, express or implied, any covenant of
good faith and fair dealing, express or implied, any tort, any
legal restrictions on the Company's right to terminate,
discipline, or otherwise manage employees, or any federal, state,
or other governmental statute, regulation, or ordinance,
including, but without limitation, the Age Discrimination in
Employment Act, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Civil Rights Act of 1866, the
Americans With Disabilities Act, the Fair Labor Standards Act,
the Employee Retirement Income Security Act, the Consolidated
Omnibus Budget Reconciliation Act, the Occupational Safety and
Health Act, the Family and Medical Leave Act, the Texas
Commission on Human Rights Act, the Texas Payday Law, and the
Texas Workers' Compensation Act, which Employee now has or claims
to have, or which Employee at any time heretofore had, or claimed
to have, against each or any of the Releasees arising out of or
related to any matter, event, fact, act, omission, cause, or
thing which existed, arose, or occurred on or prior to the
execution of this Agreement. Without limiting the generality of
the foregoing, and except as expressly provided herein, Employee
expressly releases Releasees from any claim Employee may have, or
claim to have, with respect to capital stock, stock options,
stock warrants, or other equity securities that might have been
issued or granted to Employee in the future by the Company.
<PAGE>
B. As a material inducement to Employee to enter into this
Agreement, the Company hereby irrevocably and unconditionally
releases, acquits, and forever discharges Employee and each of
Employee's consultants and attorneys, including without
limitation, the law firms and lawyers of McCamish & Groce, P.C.
(including, but not limited to, John McCamish, Jr. and Harold
Socks), Andrews & Kurth, L.L.P. (including, but not limited to,
John Cabaniss and James Myers), and Richards, Layton & Finger
(including, but not limited to, Don Dreisbach and Tom Beck), from
any and all charges, complaints, claims, liabilities,
obligations, promises, agreements, controversies, damages,
actions, causes of action, suits, rights, demands, costs, losses,
debts, and expenses (including attorney's fees and costs actually
incurred), of any nature whatsoever, known or unknown, suspected
or unsuspected, including, but not limited to, any rights arising
out of alleged violations of any contract, express or implied,
any covenant of good faith and fair dealing, express or implied,
or any tort, which the Company, and/or its respective officers
and directors, now has, or claims to have, or which the Company
at any time heretofore had, or claimed to have, against Employee
or any other party released herein arising out of or related to
any matter, event, fact, act, omission, cause, or thing which
existed, arose, or occurred on or prior to the execution of this
Agreement.
C. Nothing contained in this Agreement is intended to limit, or
shall be construed as limiting, the right of the Company or
Employee to assert any claim against the other or against any
other person or entity, related to any action or omission that
occurs after the Effective Date, expressly including
any violation of any covenant or agreement contained in
this Agreement.
[Note: The following bracketed language appears only in Gerald
Youngblood's agreement: Nothing contained in this Agreement
is intended to limit, or shall be construed as limiting,
(a) the right of Gerald F. Youngblood to assert any claim
against William M. Moore, Jeffrey K. Moore, Matthew Moore,
SunRiver Group, Inc., or any other person or entity related to
the claims, items, issues, and asserted obligations set forth in
Exhibit F hereto (the "Youngblood Claims"), or (b) the right of
William M. Moore, Jeffrey K. Moore, Matthew Moore, SunRiver
Group, Inc., or any other person or entity to assert any claim
against Youngblood related to the Youngblood Claims or to Gerald
F. Youngblood's actions, omissions, conduct, activities,
decisions, or the performance of his alleged obligations and
duties as trustee on behalf of Jeffrey K. Moore and/or Matthew
Moore or as voting trustee under the one or more Voting Trust
<PAGE>
Agreements entered among certain holders of the capital stock of
SunRiver Group, Inc.]
D. In accordance with the terms of the Indemnification
Agreement (hereinafter defined), insofar as it is applicable in a
particular instance, and all applicable statutes, the Company
agrees to pay the reasonable legal fees and expenses incurred by
Employee in connection with any litigation or other legal
proceeding in which Employee is a named defendant or witness and
which relates to any claim or claims from which Employee has been
released by the Company pursuant to paragraph B. of this Section
3. Moreover, Employee shall be entitled to select counsel to
represent Employee in connection with Employee's defense of any
such claim or claims, provided that such counsel selected by
Employee must be acceptable to the Company in its reasonable
discretion.
E. Company acknowledges that Employee is or
may be entitled to indemnification under the circumstances
contemplated by a certain Indemnification Agreement (herein so
called) dated as of September 3, 1996, between Employee and TWC
and/or SRC, that the Indemnification Agreement remains in
effect, and that nothing contained in this Agreement is
intended to modify Employee's rights under the Indemnification
Agreement; provided that Employee acknowledges and agrees that
the Indemnification Agreement is limited in application to the
services of Employee as a director and/or an officer of TWC
and/or SRC. A copy of the Indemnification Agreement to which
Employee is a party is attached to this Agreement as Exhibit
E. In the event of any conflict between this Agreement and
the Indemnification Agreement, the terms of the latter will be
controlling.
4. NO ADMISSION OF LIABILITY
This Agreement shall not in any way be construed
as an admission by the Company or others released herein
of any liability whatsoever, or as an admission by the Company or
others released herein that they have acted wrongfully with
respect to Employee, or any other person, or that Employee, or
any other person, has any rights whatsoever against the Company
or others released herein. The Company and others released
herein specifically disclaim any liability to or wrongful acts
against Employee, or any other person, on the part of
themselves, their partners, their officers, their employees,
their attorneys, or their agents. It is understood and agreed
that this Agreement is made by the Company and others
released herein purely to compromise any disputed claims,
avoid litigation, and obtain a resolution of any open issues
between the parties.
<PAGE>
5. NO COMPLAINTS FILED
Employee represents that he has not heretofore filed any
charges or complaints against the Company with any federal,
state, or local governmental, judicial, or administrative
agencies. Employee further agrees that he will not file any
charges or complaints, or initiate any suit or action,
against the Company based on his employment with the Company
or the termination of such employment; provided, that nothing
contained in this Section 5 shall be deemed to prohibit any
charge or complaint filed by Employee after the Effective
Date for the purpose of enforcing the terms and conditions of
this Agreement, or the Indemnification Agreement, or of
asserting damages resulting from a breach of this Agreement or
the Indemnification Agreement by the Company.
6. CONFIDENTIALITY AND COMPETITION AND NON-DISPARAGEMENT
A. Employee acknowledges that he is bound by
certain confidentiality, noncompetition, nonsolicitation, and
similar covenants contained in the Employment Agreement.
Except as expressly set forth in paragraph B. of this Section
6, Employee hereby reaffirms each of such covenants and
agreements and hereby agrees to be bound by, adhere to, and
perform each of his obligations under each of such covenants
and agreements during the periods set forth in the Agreement.
B. The Employment Agreement sets forth certain
noncompetition covenants of Employee. As provided in paragraph
A. of this Section 6, Employee has reaffirmed such covenants;
however, the Company and Employee agree that, notwithstanding the
express language of the Employment Agreement, there shall be no
geographic limitation applicable to Employee's covenant of
noncompetition and the term Competing Business," as used in the
Employment Agreement hereafter shall mean (i) as to Gerald
Youngblood, John Osborne, and Roger Hughes, only the businesses
listed on Schedule I, and their respective successors and
assigns, and (ii) as to Roy Smith, only the businesses listed on
Schedule II, and their respective successors and assigns.
C. Employee and Company agree that each will not,
directly or indirectly, make any statement, oral or written, or
perform any act or omission which is or could be detrimental
in any material respect to the reputation or goodwill of each
other or of any Releasee or any consultant or attorney of
Employee released by the Company under paragraph B. of Section 3
of this Agreement.
<PAGE>
[Note: The following bracketed language appears only in Gerald
Youngblood's agreement: Except, as to Employee and Company,
statements, acts, or omissions related to the matters set forth
in Exhibit F, are not subject to the provisions of this
paragraph.]
7. CERTAIN REPRESENTATIONS AND WARRANTIES OF EMPLOYEE
As a material inducement to the Company to enter into this
Agreement, Employee hereby represents and warrants to the Company
as follows:
(i) Employee is not indebted to the Company for cash
advances (whether for expenses or other purposes) or
otherwise.
(ii) All proprietary information or data and other
property of the Company that was in the possession of
Employee has been delivered to the Company, and Employee has not
retained copies or duplicates of any such property that was
susceptible to being copied or duplicated (provided, that
Gerald Youngblood shall have three days following the Effective
Date to deliver property of the Company that is in his
possession and located at his residence in Austin, Texas).
(iii) The Employment Agreement, the Stock Option
Agreement, and the Indemnification Agreement are the only
agreements between Employee and the Company, and Employee
claims no contractual rights with respect to the Company that
are not embodied in the Employment Agreement, the Stock Option
Agreement, and the Indemnification Agreement.
8. RIGHT TO ELECT CONTINUED COVERAGE
Employee acknowledges receipt of a Group Health
Benefits Right of Continuation Notice, if applicable, by which
he may elect, within 60 days following the Effective Date,
continued coverage under the Company's medical plan. The Company
agrees to pay for such continued medical benefits coverage for
Employee for a period of up to 18 months following the
Effective Date; however, the Company's obligation to continue
paying for such coverage will terminate immediately and
automatically at such time as Employee accepts employment
with a third party, and Employee agrees to give the Company
prompt written notice of his acceptance of any such employment.
9. ENFORCEMENT OF AGREEMENT
In the event Employee successfully brings suit to
<PAGE>
enforce this Agreement, the Company agrees to pay to Employee an
amount equal to twice the amount of any unpaid Separation
Payments at the time of the resolution of such suit, plus
reasonable attorneys' fees and reasonable costs and expenses
related to such litigation, incurred by Employee in enforcing
the terms and conditions of this Agreement. Employee will be
deemed to have been successful in his claims if he
substantially prevails against the Company for any cause of
action asserted by Employee. The amounts set forth herein are
not intended as a penalty and are based on the uncertain nature
of litigation and the inherent inability to fully and accurately
assess damages which may result from any failure to comply with
the terms and conditions of this Agreement.
10. COOPERATION
A. During the period beginning on the Effective
Date, and ending on the earlier of (x) April 30, 1997 or (y) the
date on which the Company or Employee gives the other a
Consulting Cancellation Notice (hereinafter defined) (the
"Consulting Period"), Employee (i) will take all reasonable
steps to reasonably cooperate in the transfer of Employee's
duties to those persons designated by the Company and (ii) will
assist the Company in such manner, and at such time or times (on
a full-time or part-time basis), as may be requested by the
Company. During the Consulting Period, Employee agrees that he
will not begin permanent, fulltime employment with any person
or entity without the Company's consent (which will not be
unreasonably withheld). During the Consulting Period, Employee
will be compensated by the payment of consulting fees at
Employee's current salary level (but without bonus or any
other benefits) and the reimbursement of out-of-pocket expenses
approved by the Chairman of the Board or the President of
SRC (Roger Hughes will be entitled to reimbursement for his
living expenses on the same basis as in effect prior to the
Effective Date). The Company or Employee may terminate the
consulting arrangement contemplated by this paragraph and
thereby end the Consulting Period at any time after the
Effective Date by the delivery to the other of a written
notice of termination (a "Consulting Cancellation Notice"). Upon
the termination or expiration of the Consulting Period, whichever
occurs first, the Company will begin the payment to Employee of
Separation Payments in the manner provided on Exhibit D.
B. Employee further agrees that, without
subpoena, he will, at the Company's request and expense
(such expenses including, but not limited to, attorneys'
fees and expenses incurred by Employee), testify in any
judicial or administrative proceedings to which the Company is a
<PAGE>
party with respect to any matter involving the affairs of the
Company of which he has knowledge.
11. NON-DISCLOSURE
Subject to the requirements of state and federal laws, each
of Employee, TWC, SRC, and BTI agrees that he or it will keep the
terms, amount, and fact of this Agreement confidential, and he or
it will not disclose any information concerning this Agreement to
any third person, including, but not limited to, any past or
present employees of TWC, SRC, and BTI, except as may be
required by law and for disclosure to the several banks that are
lenders to the Company.
12. OWNERSHIP OF CLAIMS
Employee represents that he has not heretofore assigned or
transferred, or purported to assign or transfer, to any person or
entity, any claim or claims released herein or any portion
thereof, or interest therein.
13. SUCCESSORS
This Agreement shall be binding upon Employee and
the Company and upon their respective heirs, administrators,
representatives, executors, successors, and assigns, and
shall inure to the benefit of the parties and others released
herein, and each of them, and to their respective heirs,
administrators, representatives, executors, successors, and
assigns.
14. GOVERNING LAW
THIS AGREEMENT SHALL IN ALL RESPECTS BE INTERPRETED,
ENFORCED AND GOVERNED UNDER THE LAWS OF THE STATE OF TEXAS.
15. VENUE; SERVICE OF PROCESS
Any litigation arising out of or in connection with
this Agreement, whether initiated by Employee or the Company,
shall be brought in the district courts of Travis County, Texas,
or in the United States District Court for the Western District
of Texas. Employee, for himself and his successors and assigns,
hereby (a) irrevocably submits to the nonexclusive jurisdiction
of the state and federal courts of the State of Texas and agrees
and consents that service of process may be made upon him in
any legal proceeding arising out of or in connection with this
Agreement by service of process as provided by Texas Law, (b)
irrevocably waives, to the fullest extent permitted by law,
any objection which he may now or hereafter have to the laying
<PAGE>
of venue of any litigation arising out of or in connection with
this Agreement brought in the district courts of Travis County,
Texas, or in the United States District Court for the Western
District of Texas, Austin, Texas, (c) irrevocably waives any
claims that any litigation brought in any such court has
been brought in an inconvenient forum, (d) irrevocably
consents to the service of process out of any of the
aforementioned courts in any such litigation by the mailing
of copies thereof by certified mail, return receipt requested,
postage prepaid, to Employee at his address set forth herein,
and (e) irrevocably agrees that any legal proceeding against
the Company arising out of or in connection with this
Agreement shall be brought in the district courts of Travis
County, Texas, or in the United States District Court for the
Western District of Texas, Austin, Texas.
16. PROPER CONSTRUCTION
A. The language of all parts of this Agreement
shall in all cases be construed as a whole according to its
fair meaning, and not strictly for or against any of the parties.
B. The section headings used in this Agreement are
intended solely for convenience of reference and shall not in any
manner amplify, limit, modify, or otherwise be used in the
interpretation of any of the provisions hereof.
17. SEVERABILITY
The provisions of this Agreement are severable, and if any
part of it is found to be unenforceable, the other provisions
shall remain valid and enforceable.
18. COUNTERPARTS
This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, with
the same effect as if all parties had signed the same document.
All such counterparts shall be deemed an original, shall be
construed together, and shall constitute one and the same
instrument.
19. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement between the parties
hereto, and fully supersedes any and all prior agreements or
understandings between the parties hereto pertaining to the subject
matter hereof, except for provisions of the Employment Agreement that
are intended to survive the termination of the Employment Agreement.
No amendment or modification of this Agreement shall be valid
<PAGE>
unless in writing and signed by all parties, and approved by
resolution of the board of directors of SRC, TWC, or BTI, as the case
may be.
20. RIGHT TO CONSULT AN ATTORNEY AND PERIOD FOR
CONSIDERATION OF AGREEMENT
Employee is given a period of twenty-one days to review and
consider this Agreement before signing it. He may use as much of
this twenty-one day period as he wishes before signing and he is
encouraged to consult with an attorney before signing this
Agreement. Employee understands that whether or not to consult
with an attorney is his decision.
21. RIGHT TO REVOKE AGREEMENT
Employee may revoke this agreement within seven days after
signing it. Revocation can be made by delivering a written
notice of revocation to the Chairman of the Board of the Company.
For this revocation to be effective, written notice must be
received by the Chairman of the Board of the Company no later
than the close of business on the seventh day after Employee
signed this Agreement. If Employee revokes this Agreement, it
will not be effective or enforceable unless Employee
simultaneously tenders back to the Company any payments described
in Section 2 theretofore made to Employee.
22. FULL AND INDEPENDENT KNOWLEDGE
Employee represents and agrees that he is fully aware
of his right to discuss any and all aspects of this Agreement
with his attorney or with representatives of any federal, state,
or local agency, that he has been encouraged to do so, and
that he has availed himself of that right to the full extent,
if any, that he desired, that he has carefully read and fully
understands all of the provisions of this Agreement, and that
he is voluntarily entering into this Agreement.
23. NO RELEASE OF FUTURE CLAIMS
This Agreement does not waive or release any rights or
claims that Employee may have under the Age Discrimination in
Employment Act which are based upon acts or omissions that occur
after the date Employee signs this Agreement and are not
otherwise permitted or allowed by this Agreement.
24. EFFECTIVENESS OF AGREEMENT
Anything to the contrary contained in this Agreement to the
contrary notwithstanding, this Agreement will not become
<PAGE>
effective or binding on the Company unless and until the Company
receives the Letter of Resignation and similar letters of
resignation, acceptable to the Company, from each of the
following individuals: (i) Gerald Youngblood; (ii) Roger Hughes;
(iii) John Osborne; (iv) Roy Smith; (v) Sam Smith; and (vi) Ron
Brittian.
25. NOTICES AND RIGHT TO CURE
A. Any notice, communications, consent request, or demand
from one party to another must be in writing to be effective and
shall be deemed to have been given on the day actually delivered
personally or by facsimile, or if mailed, on the fourth business
day after it is enclosed in an envelope, addressed to the party
to be notified at the address indicated below, properly stamped,
sealed, and deposited in U.S. mail. Either party may change its
address or facsimile number for notices, at any time, by giving
the other party written notice of the new address and/or
facsimile number ten (10) days in advance of the date on which
the party changing said address desires same to be valid for the
purposes hereof. The address and facsimile number for each party
is as follows:
If to Employee:
As set forth on the signature page hereof.
If to Company:
c/o SunRiver Corporation
Attn.: President
Echelon IV, Suite 200
9430 Research Boulevard
Austin, Texas 78759-6543 Facsimile/ (512) 3495831
B. Notice of Default
If any party to this Agreement asserts that another party
has breached or is breaching this Agreement, the non-breaching
party shall provide written notice of the alleged breach by the
fastest available communication to the breaching party.
Thereafter, the breaching party will have a period of three (3)
business days to cure the breach.
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A
RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THE
FOREGOING AGREEMENT, THAT I UNDERSTAND ALL OF ITS TERMS, AND
THAT I AM ENTERING INTO IT VOLUNTARILY.
<PAGE>
I FURTHER ACKNOWLEDGE THAT I AM AWARE OF MY RIGHT TO REVIEW
AND CONSIDER THIS AGREEMENT AND TO CONSULT WITH AN ATTORNEY ABOUT
IT, AND STATE THAT BEFORE SIGNING THIS AGREEMENT, I EXERCISED
THESE RIGHTS TO THE FULL EXTENT THAT I DESIRED.
EMPLOYEE:
__________________________________
[ ]
Address for Notices:
__________________________________
__________________________________
__________________________________
__________________________________
Fax:_______________________________
STATE OF TEXAS
COUNTY OF TRAVIS
BEFORE ME, the undersigned Notary Public, on this day
personally appeared [ ] ("Employee"),
known to me to be the person who executed the foregoing
instrument, and acknowledged to me that he executed the same for
the purposes and consideration therein expressed.
GIVEN under my hand and seal of office, this ____
day of ________________, 1996.
__________________________________
Notary Public
__________________________________
(Printed or Stamped Name of Notary)
My Commission Expires:____________
SUNRIVER CORPORATION
By:______________________________ Its:________________________
TRADEWAVE CORPORATION
By:______________________________ Its:________________________
BOUNDLESS TECHNOLOGIES, INC.
By:______________________________ Its:________________________
<PAGE>
STATE OF TEXAS
COUNTY OF TRAVIS
BEFORE ME, the undersigned Notary Public, on this day
personally appeared, ___________________ of SunRiver
Corporation, a Delaware corporation, known to me to be the
person who executed the foregoing instrument, and acknowledged
to me that he executed the same for the purposes and
consideration therein expressed, on behalf of said corporation.
GIVEN under my hand and seal of office, this ____ day of
________________, 1996.
__________________________________
Notary Public
____________________________________
(Printed or Stamped Name of Notary)
My Commission Expires:_____________
<PAGE>
STATE OF TEXAS
COUNTY OF TRAVIS
BEFORE ME, the undersigned Notary Public, on this day
personally appeared, ___________________ of TradeWave
Corporation, a Delaware corporation, known to me to be the
person who executed the foregoing instrument, and acknowledged
to me that he executed the same for the purposes and
consideration therein expressed, on behalf of said corporation.
GIVEN under my hand and seal of office, this ____ day of
________________, 1996.
__________________________________
Notary Public
__________________________________
(Printed or Stamped Name of Notary)
My Commission Expires:____________
STATE OF TEXAS
COUNTY OF TRAVIS
BEFORE ME, the undersigned Notary Public, on this day
personally appeared, ___________________ of Boundless
Technologies, Inc., a Delaware corporation, known to me to be
the person who executed the foregoing instrument, and
acknowledged to me that he executed the same for the purposes
and consideration therein expressed, on behalf of said
corporation.
GIVEN under my hand and seal of office, this ____ day of
________________, 1996.
__________________________________
Notary Public
__________________________________
(Printed or Stamped Name of Notary)
My Commission Expires:____________
<PAGE>
SCHEDULE I
NCR
WYSE
HDS
IDEA
Tektronix
Maxspeed
NCD
Oracle (Network Computer Division)
SunMicrosystems (Network Computer Division)
IBM (Network Computer Division)
Digital Equipment Corporation (Network Computer Division)
Sony (Network Computer Division)
Apple (Network Computer Division)
Microsoft (Network Computer Division)
<PAGE>
SCHEDULE II
Netscape
Spry
Open Market
Connect
MEMCO
Security Dynamics
One Wave
Checkfree
Triteal
Oracle
Computer Associates
Sterling Corp.
Premenos
FTP Corp.
NetManage
Yahoo
Excite
Lycos
Infoseek
Magellan
Unibex
IBM (Global Network Division)
<PAGE>
EXHIBIT A
EMPLOYMENT AGREEMENT
<PAGE>
EXHIBIT B
SCHEDULE OF STOCK OPTIONS
SRC TRW
<PAGE>
EXHIBIT C
LETTER OF RESIGNATION
<PAGE>
EXHIBIT D
SEPARATION PAYMENTS
Separation payments payable to Employee, and the time(s)
such Separation Payments are due and payable, are as follows:
1. Salary, Vacation, Sick Leave, and Other
Regular Benefits.
A. Salary, vacation, sick leave, and other regular
benefits through the Effective Date, payable within
five business days after the Effective Date.
B. The sum of $[ ] (the "Total Sum") (less
applicable withholding) payable in 12 installments as
follows:
(i) An Initial Installment (herein so called) in the
amount which is 1/12th of the Total Sum (less applicable
withholding) payable within 10 business days following the
expiration or termination of the Consulting Period,
whichever occurs first; and
(ii) Eleven additional installments, each in the
amount which is 1/12th of the Total Sum (less
applicable withholding), on the 15th day of the calendar
month following the month in which the Initial
Installment is paid and on the 15th day of each calendar
month thereafter until the Total Sum has been paid in
full.
2. Expenses.
Reimbursement of all properly incurred and reimbursable
expenses of Employee incurred prior to the Effective
Date, payable within 30 days after submission of the
request for reimbursement.
<PAGE>
EXHIBIT E
INDEMNIFICATION AGREEMENT
<PAGE>
EXHIBIT F
(Note: This Exhibit F appears only in Gerald Youngblood's agreement.)
1. Youngblood's alleged ownership of one million
shares (the "Preferred Shares") of the Series B Preferred
Stock of SunRiver Group, Inc. or Voting Trust Certificate(s)
representing the Preferred Shares and the voting of the Preferred
Shares.
2. The return to and recovery by Youngblood of copies of
any and all records of the Voting Trust created under that
certain Voting Trust Agreement effective January 27, 1993, as
amended by the Amended and Restated Voting
Trust Agreement effective April 24, 1995, and the originals of
any and all other records and documents previously removed by
Jeffrey k. Moore from the files located in Youngblood's home.
3. The payment by Youngblood of $69,000 in January 1995
to Venture First II L.P. for the account of Gerald
Youngblood, Trustee, on behalf of Jeffrey K. Moore and Matthew
R. Moore in connection with the purchase theretofore made by
Youngblood, Trustee, of 1,500,000 shares of Series B Preferred
Stock of SunRiver Group, Inc.
4. The loan made in 1992 by Youngblood to William M. Moore
in the amount of $2,500 and the associated collateral or security
for the repayment of the loan.
5. Any and all stock option agreements and plans between
Youngblood and SunRiver Group, Inc. or its predecessors.
<PAGE>
Exhibit 10(b)
GENERAL RELEASE AGREEMENT
THIS GENERAL RELEASE AGREEMENT (this "Agreement") is made
and entered into as of November 1, 1996 ( the "Effective Date"),
by and among [ ], ("[ ]"), and SUNRIVER
CORPORATION, a Delaware corporation ("SRC"), TradeWave
Corporation, a Delaware corporation ("TWC"), and Boundless
Technologies, Inc., a Delaware corporation ("BTI") (SRC, TWC, and
BTI are sometimes collectively referred to in this Agreement as
the "Company").
W I T N E S S E T H:
WHEREAS, [ ] serves as a member of the Board of
Directors of both SRC and TWC; and
WHEREAS, SRC and [ ] have entered into a certain
Stock Option Agreement (Incentive Stock Option) dated as of April
23, 1996 (the "Stock Option Agreement"), a copy of which is
attached hereto as Exhibit A, pursuant to which SRC has granted
options to [ ] (the "Options") to purchase an aggregate of
[ ] shares of the common stock, ("Common Stock"), upon the
terms and subject to the conditions contained in the Stock Option
Agreement; and
WHEREAS, [ ] and SRC (expressly including SRC, as the
grantor of the Options to [ ] pursuant to the Stock Option
Agreement) desire to accelerate the vesting of the Options as to
[ ] shares of the Common Stock, to provide for the exercise of
the Options as to such shares during the three-year period
following the Effective Date; and
WHEREAS, [ ] and the Company desire to settle any
open issues which may exist between them, including, but not
limited to, any open issues that arise out of [ ]'s
service as director of SRC and TWC or his resignation as
director;
NOW, THEREFORE, in consideration of the premises and mutual
promises herein contained, and other consideration, the receipt
and sufficiency of which is hereby acknowledged, it is agreed as
follows:
1. VOLUNTARY RESIGNATION
[ ], concurrently with the Effective Date of this
Agreement, shall voluntarily resign as a director of SRC and TWC
by the delivery to the Company of a letter of resignation in the
<PAGE>
form of Exhibit B attached to this Agreement (the "Letter of
Resignation"), and shall thereafter be relieved of all day-to-day
duties and responsibilities as a director of SRC and TWC.
2. CONSIDERATION FROM THE COMPANY; CERTAIN AGREEMENTS OF
THE COMPANY
A. Upon [ ]'s execution of this Agreement
and submission of the Letter of Resignation as provided in
Section 1, the Company (expressly including SRC, as the
grantor of the Options to [ ]
pursuant to the Stock Option Agreement)hereby agrees to
accelerate the vesting of the Options as to [ ] shares of
the Common Stock covered by the Stock Option Agreement (the
"Vested Option Shares"), with the effect that, upon the
Effective Date and for the period of three years following
the Effective Date, [ ] shall be entitled to purchase
the Vested Option Shares in the manner, and for the purchase
price, contemplated by the Stock Option Agreement; provided,
that upon the exercise of the Options as to any or all of the
Vested Option Shares, [ ] and SRC will enter into an agreement
in form and substance acceptable to SRC and its counsel, under
the terms of which [ ] will agree to a partial lock-up
of the Vested Option Shares for a period of six months
following the Effective Date during which [ ] will agree
that he will not sell more than 50% of the Vested Option
Shares.
B. The Company agrees to take all reasonable steps to
maintain in force and effect, for a period of not less than six
years following the Effective Date, director's and officer's
liability insurance policies identical to, or substantially
similar to, the director's and officer's liability insurance
policies of the Company currently in effect, naming [ ] as an
insured; provided, that the Company makes no representations and
warranties to [ ] with respect to its ability to
obtain any such policies in the future in the event the policies
currently in existence terminate or are canceled by the issuers
thereof.
C. In the event [ ] dies before he exercises his
rights regarding the Vested Option Shares, the personal
representative of [ ]'s estate shall also have the right
to exercise any of the remaining Vested Options during the period
of exercise provided in this Agreement.
D. SRC, TWC, and BTI are intended to be joint obligors
under this Agreement, and each of SRC, TWC, and BTI agrees that
it is obligated to perform the agreements of the Company set
forth in this Section 2 as if it were the "Company" named herein.
<PAGE>
3. MUTUAL RELEASE
A. As a material inducement to the SRC, BTI, and TWC to
enter into this Agreement, [ ] hereby irrevocably and
unconditionally releases, acquits, and forever discharges SRC,
BTI, and TWC and each of their stockholders (other than SunRiver
Group, Inc.), predecessors, successors, assigns, agents,
directors, officers, employees, consultants, representatives,
attorneys, parent companies, divisions, subsidiaries, and
Affiliates (other than SunRiver Group, Inc.) (and agents,
directors, officers, employees, representatives, and attorneys of
such parent companies, divisions, subsidiaries, and Affiliates),
past or present, and all persons acting by, through, under, or in
concert with any of them, or any of them, including without
limitation, Jeffrey Moore, Matthew Moore,, Robert Shephard, John
Trube, Gerald Youngblood, Jimmy Hood, Daniel Matheson, and the
law firms of Locke Purnell Rain Harrell, P.C. (including, but not
limited to Daniel N. Matheson, Jane A. Matheson, and Curtis R.
Ashmos) Werbel & Carnelutti (including, but not limited to Steve
Davis), and Fischbein Badillo Wagner Harding (including, but not
limited to Joe Cannella) (all of the foregoing are collectively
called "Releasees"), from any and all charges, contracts,
complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action,
suits, rights, demands, costs, losses, debts, and expenses
(including attorneys' fees and costs actually incurred), of any
nature whatsoever, known or unknown, suspected or unsuspected,
including, but not limited to, any rights arising out of alleged
violations of any contract, express or implied, any covenant of
good faith and fair dealing, express or implied, any tort, or any
action relating to the governance of the Company which [ ]
now has or claims to have, or which [ ] at any time
heretofore had, or claimed to have, against each or any of the
Releasees arising out of or related to any matter, event, fact,
act, omission, cause, or thing which existed, arose, or occurred
on or prior to the execution of this Agreement. Without limiting
the generality of the foregoing, [ ] expressly releases
Releasees from any Claim [ ] may have, or claim to have,
with respect to capital stock, stock options, stock warrants, or
other equity securities that might have been issued or granted to
[ ] in the future by SRC.
B. As a material inducement to [ ] to enter into
this Agreement, SRC, BTI, and TWC each hereby irrevocably and
unconditionally releases, acquits, and forever discharge
[ ] and each of [ ]'s consultants and attorneys,
including without limitation, the law firms of McCamish & Groce
(including, but not limited to, John McCamish, Jr. and Harold
Socks) and Richards, Layton & Finger (including, but not limited
<PAGE>
to, Don Dreisbach and Tom Beck), from any and all charges,
complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action,
suits, rights, demands, costs, losses, debts, and expenses
(including attorney's fees and costs actually incurred), of any
nature whatsoever, known or unknown, suspected or unsuspected,
including, but not limited to, any rights arising out of alleged
violations of any contract, express or implied, any covenant of
good faith and fair dealing, express or implied, or any tort,
which SRC, BTI, and TWC now has, or claims to have, or which SRC,
BTI, and TWC at any time heretofore had, or claimed to have,
against [ ] or any other party released herein arising out
of or related to any matter, event, fact, act, omission, cause,
or thing which existed, arose, or occurred on or prior to the
execution of this Agreement.
C. Nothing contained in this Agreement is intended to
limit, or shall be construed as limiting, the right of the SRC,
BTI, or TWC or [ ] to assert any claim against the other or
against any other person or entity, related to any action or
omission that occurs after the Effective Date, expressly
including any violation of any covenant or agreement contained in
this Agreement.
D. In accordance with the terms of the Indemnification
Agreement (hereinafter defined), insofar as it is applicable in a
particular instance, and all applicable statutes, the Company
agrees to pay the reasonable legal fees and expenses incurred by
[ ] in connection with any litigation or other legal
proceeding in which [ ] is a named defendant or witness
and which relates to any claim or claims from which[ ]
has been released by the Company pursuant to paragraph B. of this
Section 3. Moreover, [ ] shall be entitled to select
counsel to represent [ ] in connection with [ ]'s defense of
any such claim or claims, provided that such counsel selected by
[ ] must be acceptable to the Company in its reasonable
discretion.
E. Company acknowledges that [ ] is or may be
entitled to indemnification under the circumstances contemplated
by a certain Indemnification Agreement (herein so called) dated
as of September 3, 1996, between [ ] and TWC and/or SRC,
that the Indemnification Agreement remains in effect, and that
nothing contained in this Agreement is intended to modify
[ ]'s rights under the Indemnification Agreement; provided that
[ ] acknowledges and agrees that the Indemnification Agreement
is limited in application to the services of [ ] as
a director of TWC and/or SRC. A copy of the Indemnification
Agreement to which [ ] is a party is attached to this
Agreement as Exhibit C. In the event of any conflict between
<PAGE>
this Agreement and the Indemnification Agreement, the terms of
the latter will be controlling.
4. NO ADMISSION OF LIABILITY
This Agreement shall not in any way be construed as an
admission by the Company, [ ], or others released herein
of any liability whatsoever, or as an admission by the Company,
[ ], or others released herein that they have acted
wrongfully with respect to [ ], the Company, or any other
person, or that [ ], or any other person, has any rights
whatsoever against the Company, [ ], or others released
herein. The Company, [ ], and others released herein
specifically disclaim any liability to or wrongful acts against
[ ], the Company, or any other person, on the part of
themselves, their partners, their officers, their employees,
their attorneys, or their agents. It is understood and agreed
that this Agreement is made by the Company, [ ], and
others released herein purely to compromise any disputed claims,
avoid litigation, and obtain a resolution of any open issues
between the parties.
5. NO COMPLAINTS FILED
[ ] and the Company represent that they have not
heretofore filed any charges or complaints against the other with
any federal, state, or local governmental, judicial, or
administrative agencies. Each further agrees that they will not
file any charges or complaints, or initiate any suit or action,
against the other or others released herein; provided, that
nothing contained in this Section 5 shall be deemed to prohibit
any charge or complaint filed after the Effective Date for the
purpose of enforcing the terms and conditions of this Agreement
or of asserting damages resulting from a breach of this
Agreement.
6. NO REPRESENTATIONS
[ ] and the Company each represent and acknowledge
that in executing this release they are not relying and have not
relied on any representation or statement by any person or entity
with regard to the subject matter.
7. COOPERATION
[ ] further agrees that, without subpoena, he will,
at the Company's request and expense (such expenses including,
but not limited to, attorneys' fees incurred by [ ]),testify
in any judicial or administrative proceedings to which the
<PAGE>
Company is a party with respect to any matter involving the
affairs of the Company of which he has knowledge.
8. CONFIDENTIALITY AND NON-DISPARAGEMENT
A. Subject to the requirements of state and federal
securities laws, [ ], TWC, SRC, and BTI agree that he or
it will keep the terms, amount, and fact of this Agreement
confidential, and he or it will not disclose any information
concerning this Agreement to any third person, including, but not
limited to, any past or present employees of TWC, SRC and BTI,
except as may be required by law and for disclosure to the
several banks that are lenders to the Company.
B. [ ] acknowledges that in the course of
performance of his obligations to SRC, BTI, and TWC, he has
obtained and/or been informed of certain trade secrets and
valuable, confidential information of SRC, BTI, and TWC
including, but not limited to, financial information, financial
statements, loan transactions, customer lists, product pricing,
promotional incentives, marketing strategies, and the terms of
this Agreement (collectively the "Confidential Information"),
which Confidential Information has been uniquely developed by
SRC, BTI, and TWC and may not be readily obtained by third
parties from outside sources. Therefore, as a material
inducement to SRC, BTI, and TWC to enter into this Agreement,
[ ] accordingly agrees as follows:
a. He will not, directly or indirectly, in any individual
or representative capacity whatsoever, make any statement,
oral or written, or perform any act or omission which is or
could be detrimental in any material respect to the
reputation or goodwill of SRC, BTI, TWC, or of any
Releasee.
b. He agrees that all Confidential Information
communicated to him by, or otherwise belonging to, SRC, BTI,
TWC, or their customers, whether before, during or after his
service as Director, shall at all times be held in strict
confidence and shall not be disclosed by [ ] without the prior
written consent of SRC, BTI, and TWC.
C. SRC, BTI, and TWC agree that they will not,
directly or indirectly, make any statement, oral or written, or
perform any act or omission which is or could be
detrimental in any material respect to the reputation or
goodwill of [ ].
<PAGE>
9. OWNERSHIP OF CLAIMS
[ ] represents that he has not heretofore assigned or
transferred, or purported to assign or transfer, to any person or
entity, any Claim or Claims released herein or any portion
thereof, or interest therein.
10. SUCCESSORS
This Agreement shall be binding upon [ ] and the
Company and upon their respective heirs, administrators,
representatives, executors, successors, and assigns, and shall
inure to the benefit of the parties and others released herein,
and each of them, and to their respective heirs, administrators,
representatives, executors, successors, and assigns.
11. GOVERNING LAW
THIS AGREEMENT SHALL IN ALL RESPECTS BE INTERPRETED,
ENFORCED AND GOVERNED UNDER THE LAWS OF THE STATE OF TEXAS.
12. VENUE; SERVICE OF PROCESS
Any litigation arising out of or in connection with this
Agreement, whether initiated by [ ] or the Company, shall
be brought in the district courts of Travis County, Texas, or in
the United States District Court for the Western District of
Texas. [ ], for himself and his successors and assigns,
hereby (a) irrevocably submits to the nonexclusive jurisdiction
of the state and federal courts of the State of Texas and agrees
and consents that service of process may be made upon him in any
legal proceeding arising out of or in connection with this
Agreement by service of process as provided by Texas Law, (b)
irrevocably waives, to the fullest extent permitted by law, any
objection which he may now or hereafter have to the laying of
venue of any litigation arising out of or in connection with this
Agreement brought in the district courts of Travis County, Texas,
or in the United States District Court for the Western District
of Texas, Austin, Texas, (c) irrevocably waives any claims that
any litigation brought in any such court has been brought in an
inconvenient forum, (d) irrevocably consents to the service of
process out of any of the aforementioned courts in any such
litigation by the mailing of copies thereof by certified mail,
return receipt requested, postage prepaid, to [ ] at his
address set forth herein, and (e) irrevocably agrees that any
legal proceeding against the Company arising out of or in
connection with this Agreement shall be brought in the district
courts of Travis County, Texas, or in the United States District
Court for the Western District of Texas, Austin, Texas. Nothing
herein shall affect the right of the Company to commence legal
proceedings or otherwise proceed against [ ] in any
<PAGE>
jurisdiction or to serve process in any manner permitted by
applicable law.
13. PROPER CONSTRUCTION
A. The language of all parts of this Agreement shall in
all cases be construed as a whole according to its fair meaning,
and not strictly for or against any of the parties.
B. The section headings used in this Agreement are
intended solely for convenience of reference and shall not in any
manner amplify, limit, modify, or otherwise be used in the
interpretation of any of the provisions hereof.
14. SEVERABILITY
The provisions of this Agreement are severable, and if any
part of it is found to be unenforceable, the other provisions
shall remain valid and enforceable.
15. COUNTERPARTS
This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, with
the same effect as if all parties had signed the same document.
All such counterparts shall be deemed an original, shall be
construed together, and shall constitute one and the same
instrument.
16. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement between the
parties hereto, and fully supersedes any and all prior agreements
or understandings between the parties hereto pertaining to the
subject matter hereof. No amendment or modification of this
Agreement shall be valid unless in writing and signed by all
parties, and approved by resolution of the board of directors of
SRC, TWC, and BTI as the case may be.
17. FULL AND INDEPENDENT KNOWLEDGE
[ ] represents and agrees that he is fully aware of
his right to discuss any and all aspects of this Agreement with
his attorney or with representatives of any federal, state, or
local agency, that he has been encouraged to do so, and that he
has availed himself of that right to the full extent, if any,
that he desired, that he has carefully read and fully understands
all of the provisions of this Agreement, and that he is
voluntarily entering into this Agreement.
<PAGE>
18. EFFECTIVENESS OF AGREEMENT
Anything to the contrary contained in this Agreement to the
contrary notwithstanding, this Agreement will not become
effective or binding on the Company unless and until the Company
receives the Letter of Resignation and similar letters of
resignation, acceptable to the Company, from each of the
following individuals: (i) Gerald Youngblood; (ii) Roger Hughes;
(iii) John Osborne; (iv) Roy Smith; and (v) [ ].
19. NOTICES AND RIGHT TO CURE
A. Any notice, communications, consent request, or demand
from one party to another must be in writing to be effective and
shall be deemed to have been given on the day actually delivered
personally or by facsimile, or if mailed, on the fourth business
day after it is enclosed in an envelope, addressed to the party
to be notified at the address indicated below, properly stamped,
sealed, and deposited in U. S. mail. Either party may change its
address or facsimile number for notices, at any time, by giving
the other party written notice of the new address and/or
facsimile number ten (10) days in advance of the date on which
the party changing said address desires same to be valid for the
purposes hereof. The address and facsimile number for each party
is as follows:
If to [ ]:
As set forth on the signature page hereof.
If to Company:
SunRiver Corporation
Attn.: President
Echelon IV, Suite 200
9430 Research Boulevard
Austin, Texas 78759-6543 Facsimile/ (512)349-5831
B. Notice of Default
If a party to the Agreement asserts that another party has
breached or is breaching the Agreement, the non-breaching party
shall provide written notice of the alleged breach to the
breaching party. Thereafter, the breaching party will have a
period of three (3) business days to cure the breach.
20. COOPERATION
A. During the period beginning on the Effective Date, and
ending on December 31, 1996, [ ] agrees to take all
<PAGE>
reasonable steps to reasonably cooperate in the transitioning of
duties to new board members and to share his knowledge regarding
the Company's affairs with those persons designated by the Board.
B. [ ] further agrees that, without subpoena, he
will at the Company's request and expense (such expense
including, but not limited to attorney's fees and expenses
incurred by [ ]), testify in any judicial or
administrative proceedings to which the Company is a party with
respect to any matter involving the affairs of the Company of
which he has knowledge.
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE
OF ALL KNOWN AND UNKNOWN CLAIMS.
I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THE FOREGOING
AGREEMENT, THAT I UNDERSTAND ALL OF ITS TERMS, AND THAT I AM
ENTERING INTO IT VOLUNTARILY.
I FURTHER ACKNOWLEDGE THAT I AM AWARE OF MY RIGHT TO REVIEW
AND CONSIDER THIS AGREEMENT AND TO CONSULT WITH AN ATTORNEY ABOUT
IT, AND STATE THAT BEFORE SIGNING THIS AGREEMENT, I EXERCISED
THESE RIGHTS TO THE FULL EXTENT THAT I DESIRED.
__________________________________
[ ]
Address for notices: _________________________
_________________________
_________________________
Facsimile: ________________
STATE OF TEXAS
COUNTY OF TRAVIS
BEFORE ME, the undersigned Notary Public, on this day
personally appeared [ ] ("[ ]"), known to me to be
the person who executed the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and
consideration therein expressed.
GIVEN under my hand and seal of office, this ____ day of
________________, 1996.
___________________________________
Notary Public
___________________________________
(Printed or Stamped Name of Notary)
My Commission Expires:____________
<PAGE>
SUNRIVER CORPORATION
By:
TRADEWAVE CORPORATION BOUNDLESS TECHNOLOGIES, INC.
By: By:
______________________________ _________________________
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE>
EXHIBIT B
LETTER OF RESIGNATION
EXHIBIT C
INDEMNIFICATION AGREEMENT
Exhibit 10(c)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of _____________, 1996, by
and among SUNRIVER CORPORATION, a Delaware corporation with
offices at (the "Company"), and ________________, an individual
having an address at _________________ (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ and retain the
experience, ability and exclusive services of Executive, and to
prevent any other competitive business from securing his
services, in utilizing his experience, background and know-how;
and
WHEREAS, the Executive desires to be so employed by the
Company upon the terms and conditions herein below set forth.
NOW, THEREFORE, in consideration of the mutual premises
herein set forth, and for other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto
mutually agree as follows:
Employment. The Company shall employ Executive on an
exclusive basis, and Executive hereby agrees to such exclusive
employment for a period of two (2) years, as the
________________________of the Company, commencing on
____________, 1996 and ending on ________________, 1998 (the
"Initial Term"); provided, however, that this Agreement may be
extended for successive one (1) year terms upon the mutual
agreement of the parties (the Initial Term, as same may be
extended, is hereinafter referred to as the "Term") and as may be
terminated as set forth in Section 4. In the event the Company
wishes to renew this Agreement upon the expiration of the Term
(or upon the expiration of any subsequent one (1) year extension
of this Agreement) the Company shall give Executive written
notice thereof (the "Extension Notice") no later than forty-five
(45) days prior to the expiration of the Term. Thereafter,
Executive shall notify the Company in writing of his desire to
continue to be employed by the Company no later than fifteen (15)
days after Executive's receipt of the Extension Notice.
Duties and Responsibilities of Executive. Executive
shall serve as the ______________________of the Company, or in
such other capacity as may be determined by the Company'[s Board
of Directors from time to time, and shall properly perform such
duties as may be assigned to him from time to time by the Board
of Directors of the Company. Executive shall also serve on any
committee to which he may be appointed by the Company's Board of
Directors. In performing his duties under this Agreement,
Executive will fully support and corporate with the Company's
efforts to develop its markets, expand its business, and operate
profitably and in conformity with business and strategic plans
adopted by the Company's Board of Directors from time to time.
Executive shall devote his full time and attention to the
performance of his duties hereunder unless otherwise authorized
by the Board of Directors. A change in the title or duties of
Executive shall not be deemed to be a constructive termination of
Executive's employment.
<PAGE>
3. Compensation of Executive.
3.1 Base Salary. Commencing upon the date hereof, the
Company shall pay to Executive a base salary of
____________________ Dollars ($________) per annum, subject to
adjustment as set forth in Sections 3.2 and 3.3 below (the "Base
Salary"). Such compensation shall be paid to Executive with the
same frequency as other executives of the Company are
compensated. Such Base Salary shall be subject to withholding
for the prescribed federal income tax, social security, Medicare,
and other items as required by law, and for other items
consistent with the Company's policy with respect to health
insurance and other benefit plans for similarly situated
Executives.
3.2 Salary Adjustments. The Board of Directors may
review and adjust Executive's Base Salary set forth in Section
3.1 above (and as same may have been previously adjusted in
accordance with the provisions hereof) in its sole discretion
from time to time. The Board of Directors will give
consideration to management's recommendations in considering
increases in Base Salary
3.3 Discretionary Bonus. In addition to Executive's
Base Salary, Executive shall be entitled to such bonus
compensation as Executive may be awarded, from time to time, by a
majority vote of the disinterested members of the Board of
Directors (or appropriate committee) of the Company.
3.4 Expenses. In addition to those expenses expressly
set forth herein, the Company shall pay or reimburse Executive
for all ordinary and necessary out-of-pocket expenses actually
incurred by Executive in connection with performing his duties
hereunder, consistent with the Company's policies then in effect.
3.5 Automobile. With respect to Executive's use of
his personal automobile in connection with the performance of his
duties hereunder, the Company shall, at the direction of
Executive, either reimburse Executive for, or directly pay the
reasonable costs of, the use of such automobile during the Term
of this Agreement up to $_________ per month, and all usual
expenditures in connection therewith; i.e., mileage, tolls,
parking, etc. In the alternative, the Company, at its
discretion, may furnish Executive with an automobile allowance in
an amount to be determined.
3.6 Benefits. Executive shall be entitled to
participate in the Company's pension, profit sharing, group
insurance, option plans, hospitalization, and group health and
benefit plans and all other benefits and plans as the Company
provides to its senior executives to the extent such plans are
established by the Company and to the extent that Executive is
eligible to participate in such plans. Such benefits shall be
subject to the terms of the applicable plan documents, summary
plan descriptions and/or employment policies and shall be subject
to modification, amendment or revocation in accordance with the
terms of such documents, policies and procedures.
<PAGE>
3.7 Stock Options. Executive shall also be entitled
to receive stock options to purchase a total of _____________
shares of the Company pursuant to the Company's stock option
plan. The purchase price for the shares shall be the fair market
value thereof as established by the Board of Directors in its
sole discretion.
3.8 Independent Consideration. Concurrently with the
execution of this Agreement, the Company is making a payment of
$1,000 to Executive as independent and additional consideration
for Executive's agreement to comply with the provisions of
Sections 6.4 and 6.5 of this Agreement.
Termination.
4.1 Termination Without Cause. Either the Company or
Executive may terminate this Agreement at any time, without Cause
(as that term is defined below), by giving the other thirty (30)
days prior written notice of termination. If Executive is
terminated without Cause, he shall be entitled to severance pay
in accordance with Section 4.5 hereof.
4.2 Death; Disability. This Agreement shall be
automatically terminated on the death of Executive or in the
event of the permanent disability of Executive if he is no longer
able, with reasonable accommodation, to perform the essential
functions of his position as president and chief executive
officer of the Company. In the event of Executive's disability,
this Agreement shall not terminate unless and until Executive has
been unable to perform the essential functions of his position
for a period of three (3) consecutive months as a result of his
disability.
4.3 Termination for Cause or Resignation. In the
event Executive is discharged for Cause (as that term is defined
below) or in the event Executive resigns, then upon such
occurrence, this Agreement shall be deemed terminated and the
Company shall be released from all obligations to Executive with
respect to this Agreement, including but not limited to
compensation to Executive, except for compensation and other
accounts due and payable to Executive for any period prior to
such date of termination or resignation.
4.4 Definition of Cause. As used herein, the term
"Cause" shall mean
(a) the commission of any act of fraud on the part of
Executive resulting or intending to result in personal gain or
enrichment at the expense of the Company;
(b) misappropriation, embezzlement, theft or willful
and material damage of or to any asset of the Company or the use
of the Company's funds or assets for any illegal purpose;
(c) a good faith determination by the Board of
Directors of the Company that Executive has violated this
Agreement or committed an act of dishonesty, breach of fiduciary
duty involving personal profit, action (or omission) aiding or
abetting a competitor, supplier, or customer of the Company or
its affiliates to the material disadvantage of the Company or its
<PAGE>
affiliates, or an act of gross negligence or willful misconduct
that has or is reasonably expected to have a material adverse
effect on the business or affairs of the Company; or
(d) the conviction of Executive of any felony, or the
commission of any criminal or illegal act on the part of
Executive which materially and adversely, whether directly or
indirectly, affects the name or goodwill of the Company.
4.5 Severance Pay. In the event of termination,
Executive shall be entitled to compensation (the "Severance Pay")
in accordance with the following:
(a) (i) In the event Executive resigns within ninety
days after a Change in Control (hereinafter defined) or (ii) if
this Agreement is terminated by the Company prior to the
expiration of the Term of this Agreement, and such termination is
not for Cause, then Executive shall be entitled to Severance Pay
in an amount equal to the amount of Base Salary (at his then
current Base Salary rate excluding any increases that would have
taken effect after the effective date of termination and any
bonus and noncash benefits) that the Executive would have earned
between the effective date of termination through the expiration
of the Term, but not less than what the Executive would have
earned over a period of eighteen (18) months, less applicable
payroll deductions (and any other deductions authorized in
writing by the Executive), payable installments at such time or
times as would have been paid to Executive had he remained
employed by the Company. The Company shall continue to provide
Executive with group life and medical insurance during such
twenty four month period. In the event of Executive's
termination as described in the first section of this Section
4.5(a), all of Executive's then unvested stock options shall be
vested in full and fully exercisable.
For the purposes of this Agreement, "Change in Control"
shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than persons currently
holding securities representing 25% or more of the combined
voting power of the outstanding securities of the Company,
becomes the "beneficial owner" (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, of securities of
the Company representing 25% or more of the combined voting power
of the outstanding securities of the Company, or (ii) during any
period of two consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or
nomination for election by the shareholders of the Company was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning
of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the shareholders of the Company
approve (A) a merger or consolidation of the Company with any
other entity (other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least 66% of the combined
voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation), (B) a plan of complete liquidation of the Company
or (C) an agreement or agreements for the sale or disposition, in
a single transaction or series of related transactions, by the
<PAGE>
Company of all or substantially all of the property and assets of
the Company, or (iv) either Ron Brittian or Sam Smith is removed
from the Board of Directors of the Company without cause or
resigns from the Board of Directors of the Company under duress
including, without limitation, threat of removal.
(b) If Executive's employment is terminated by reason
of a disability, Executive shall be entitled to Severance Pay in
an amount equal to the amount of monthly Base Salary (at his then
current Base Salary rate excluding any increases that would have
taken effect beyond the date of termination and any bonus and
noncash benefits) the Executive would have earned for the six (6)
month period subsequent to the effective date of termination,
payable at such time or times as would have been paid to
Executive had he remained employed by the Company.
(c) If (i) Executive voluntarily terminates his
employment, (ii) the Company terminates this Agreement for Cause,
or (iii) if Executive's employment is terminated by reason of his
death, Executive shall not be entitled to receive any additional
salary, bonus or benefits beyond those earned or accrued as of
the effective date of the termination of his employment.
4.6 Effect of Termination on Agreement. Any
termination of Executive's employment shall not release either
the Company or Executive from their respective obligations under
this Agreement that are required to be performed subsequent to
the date of such termination, including but not limited to those
obligations set forth under Sections 3 and 6.
4.7 Payments to Estate. If Executive should die
before all amounts payable to him pursuant to Section 4.5 have
been paid, such unpaid amounts shall be paid to the personal
representative of Executive's estate.
Vacation and Sick Leave. Executive shall be entitled
to paid vacation and sick leave in accordance with the Company's
policies as are applicable to all other executive employees.
Confidentiality and Noncompetition.
6.1 Confidential Information. During the period of
Executive's employment with the Company, and after the
termination thereof for any reason, Executive agrees that,
because of the valuable nature of the Confidential Information
(hereinafter defined), Executive shall use Executive's best
efforts to maintain and protect the secrecy of the Confidential
Information. Without in any manner limiting the generality of
the foregoing obligation, Executive agrees that Executive shall
not, directly or indirectly, undertake or attempt to undertake
any of the following activities:
(a) disclose any Confidential Information to any other
person or entity;
(b) use any Confidential Information for Executive's
own purposes;
<PAGE>
(c) make any copies, duplicates or reproductions of
any Confidential Information;
(d) authorize or permit any other person or entity to
use, copy, disclose, publish or distribute any Confidential
Information; or
(e) undertake or attempt to undertake any activity the
Company is prohibited from undertaking or attempting to undertake
by any of its present or future clients, customers, suppliers,
vendors, consultants, agents or contractors.
As used in this Agreement, the term "Confidential
Information" means any knowledge, information or property
relating to, or used or possessed by, the Company, and includes,
without limitation, the following: trade secrets; patents,
copyrights, software (including, without limitation, all
programs, specifications, applications, routines, subroutines,
techniques and ideas for formulae); concepts, data, drawings,
designs and documents; names of clients, customers, Executives,
agents, contractors, and suppliers; marketing information;
financial information and other business records; and all copies
of any of the foregoing, including notes, extracts, memoranda
prepared or suffered or directed to be prepared by Executive
based on any Confidential Information. Executive agrees that all
information possessed by him, or disclosed to him, or to which
Executive obtains access during the course of Executive's
employment with the Company shall be presumed to be Confidential
Information under the terms of this Agreement, and the burden of
proving otherwise shall rest with Executive.
6.2 Return of Confidential Information. Upon
termination of Executive's employment with the Company for any
reason, Executive agrees not to retain or remove from the
Company's premises any records, files or other documents or
copies thereof or any other Confidential Information whatsoever,
and Executive agrees to surrender same to the Company, wherever
it is located, immediately upon termination of Executive's
employment.
6.3 Assignment of Intellectual Property. During the
period of Executive's employment with the Company, all processes,
products, methods, improvements, discoveries, inventions, ideas,
creations, trade secrets, know-how, machines, programs, designs,
routines, subroutines, techniques, ideas for formulae, writings,
books and other works of authorship, business concepts, plans,
projections and other similar items, as well as all business
opportunities, conceived, designed, devised, developed, perfected
or made by the Executive, whether alone or in conjunction with
others, and related in any manner to the actual or anticipated
business of the Company or to actual or anticipated areas of
research and development (collectively, the "Intellectual
Property"), shall be promptly disclosed to and become the
property of the Company, and Executive hereby assigns, transfers
and conveys the Intellectual Property to the Company. Executive
further agrees to make and provide to the Company any documents,
instruments or other materials necessary or advisable to vest,
secure, evidence or maintain the Company's ownership of the
Intellectual Property, and patents, copyrights, trademarks and
similar foreign and domestic property rights with respect to the
Intellectual Property. The term "Intellectual Property" shall be
given the broadest interpretation possible and shall include any
Intellectual Property conceived, designed, devised, developed,
perfected, or made by the Executive during off-duty hours and
<PAGE>
away from the Company's premises, as well as to those conceived,
designed, devised, developed, perfected, or made in the regular
course of Executive's performance.
6.4 Noncompetition Agreement. Executive acknowledges
that the Company has provided and may provide additional special
training (including, without limitation, training relating to
programming, servicing or marketing of sophisticated computer
programs and services related to the Internet) to Executive to
enable Executive to perform Executive's duties as an Executive of
the Company. As a result, and as an ancillary covenant to the
terms and conditions set forth elsewhere in this Agreement,
including the covenants set forth in Sections 6.1 and 6.2, and in
consideration of the mutual promises set forth herein and other
good and valuable consideration received and to be received,
including the independent consideration described in Section 3.8,
the receipt and sufficiency of which are hereby acknowledged,
Executive agrees that, during the term of Executive's employment
and for a period (the "Restricted Period") of twelve (12) months
after the termination of the Executive's employment with the
Company, Executive shall not, in the Geographic Area (hereinafter
defined) (i) directly or indirectly own, engage in, consult with,
be employed by or be connected with any business or activity in
the same capacity which the Executive is engaged at the Company
with a third party which directly or indirectly competes with the
Company's business (a "Competing Business"), (ii) canvass any
business from any of the Company's current or former clients,
(iii); assist others to open or operate any Competing Business;
or (iv) solicit, recommend or induce Executives of the Company to
terminate their employment with the Company. As used in this
Agreement, the term Geographic Area means the United States of
America.
6.5 Nonsolicitation Agreement . During the Restricted
Period, Executive will not without the express prior written
approval of the Board of Directors of the Company (which shall
have no obligation to provide such approval) (i) directly or
indirectly, in one or a series of transactions, recruit, solicit
or otherwise induce or influence any proprietor, partner,
stockholder, lender, director, officer, Executive, sales agent,
joint venturer, investor, lessor, supplier, customer, agent,
representative or any other person which has a business
relationship with the Company to discontinue, reduce or modify
such employment, agency or business relationship with the
Company, or (ii) employ or seek to employ or cause any Competing
Business to employ or seek to employ any person or agent who is
then (or was at any time within six (6) months prior to the date
the Executive or the Competing Business employs or seeks to
employ such person) employed or retained by the Company.
Notwithstanding the foregoing, nothing herein shall prevent the
Executive from providing a letter of recommendation to an
Executive with respect to a future employment opportunity.
6.6 Reasonableness of Covenants. Executive has
carefully read this Section 6 and agrees and acknowledges that
the limitations as to time, geographical area and scope of
activity to be restrained are reasonable and do not impose a
greater restraint than is necessary to protect the goodwill and
business interests of the Company. Executive has agreed to the
foregoing covenants because (a) Executive recognizes that the
Company has a legitimate interest in protecting the
confidentiality of its business secrets (including the
<PAGE>
Confidential Information), (b) Executive agrees that such
noncompetition agreement is not oppressive to him nor injurious
to the public, (c) the Company has provided specialized and
valuable training and information to Executive, and (d) the
Company would not have entered into this Agreement without
Executive's agreement the covenants set forth in this Section 6.
Executive further understands and agrees that, if at some later
date, a court of competent jurisdiction determines the scope,
duration or geographic area of any covenant set forth in this
Section 6 to be over broad or unenforceable for any reason, these
covenants shall be reformed by the court, pursuant to Tex. Bus. &
Co. Code Ann. Section 15.50(2) (or any successor provision) and
enforced to the maximum extent permissible under Texas law.
7. Detrimental Statements. For so long as this Agreement
remains in effect and for a period of 18 months after the date
of termination or expiration of this Agreement (the "Applicable
Period for Detrimental Statements"), Executive will not,
knowingly or intentionally, directly or indirectly, in any
individual or representative capacity whatsoever make any
statement, oral or written, or perform any act or omission which
is or could be detrimental in any material respect to the
goodwill of Company, provided that any truthful statement made by
Executive in good faith shall not violate this Section 7. During
the Applicable Period for Detrimental Statements the Company will
not, and will make good faith efforts to ensure that Company's
directors, officers, and employees do not, knowingly or
intentionally, directly or indirectly, make any statement, oral
or written, or perform any act or omission which is or could be
detrimental in any material respect to the goodwill or reputation
of Executive, provided that any truthful statement make by
Company or Company's employees in good faith shall not violate
this Section 7.
8. Conflict of Interest. In keeping with Executive's
fiduciary duties to Company, Executive agrees that while employed
by Company he will not, acting alone or in conjunction with
others, directly or indirectly, become involved in a conflict of
interest or, upon discovery thereof, allow a conflict of interest
to continue. Moreover, Executive agrees that he will immediately
disclose to the Board of Directors or the President and Chief
Executive Officer of Company any facts which might involve any
reasonable possibility of a conflict of interest. It is agreed
that any direct or indirect interest in, connection with, or
benefit from any outside activities, where such interest might in
any way adversely affect company, involves a possible conflict of
interest. Circumstances in which a conflict of interest on the
part of Executive might arise, and which must be reported
immediately by Executive to the Board of Directors of Company,
include, but are not limited to, the following: (a) ownership of
a material interest in any supplier, contractor, subcontractor,
customer, or other entity with which company does business; (b)
acting in any capacity, including director, officer, partner,
consultant, employee, distributor, agent, or the like, for a
supplier, contractor, subcontractor, customer, or other entity
with which Company does business; (c) accepting, directly or
indirectly, payment, service, or loans from a supplier,
contractor, subcontractor, customer, or other entity with which
Company does business, including, but not limited to gifts,
trips, entertainment, or other favors of more than a nominal
value (which is deemed to be less than $1,000 for purposes of
this Agreement); (d) misuse of Company's information or
facilities to which Executive has access in a manner which will
be detrimental to Company's interest, such as utilization for
Executive's own benefit of know-how, inventions, or information
developed through Company's business activities; (e) disclosure
or other misuse of Confidential Information of any kind obtained
<PAGE>
through Executive's connection with Company; (f) the ownership,
directly or indirectly, of a material interest in an enterprise
in competition with Company, or acting as an owner, director,
principal, officer, partner, consultant, employee, agent,
servant, or otherwise of any enterprise which is in compassion
with the Company; and (g) appropriation of a Corporate
Opportunity, as defined in Section 9 of this Agreement.
9. Corporate Opportunities. Executive acknowledges that
during the course of his employment by Company he may be offered
or become aware of business or investment opportunities in which
Company may or might have an interest (a "Corporate Opportunity")
and that he has a duty to advise Company of any such Corporate
Opportunities before acting upon them. Accordingly, Executive
agrees (a) that he will disclose to Company's Board of Directors
any Corporate Opportunity offered to Executive or of which
Executive becomes aware and (b) that he will not act upon any
Corporate Opportunity for his own benefit or for the benefit of
any person or entity other than Company without first obtaining
the consent or approval (a "Corporate Opportunity Consent") of
Company's Board of Directors (whose consent or approval may be
granted or denied solely at the discretion of Company's Board of
Directors); provided, however, that the failure of Company's
Board of Directors to affirmatively approve the requested
Corporate Opportunity Consent within 20 days after Executive's
written disclosure of the Corporate Opportunity will be deemed to
constitute the granting by Company of the requested Corporate
Opportunity Consent. Upon receipt of a Corporate Opportunity
Consent (whether as a result of the affirmative action of
Company's Board of Directors or as a result of the failure of
Company's Board of Directors to affirmatively approve the request
within the 20-day period described in the preceding sentence),
Executive may act upon the Corporate Opportunity for his own
benefit or for the benefit of others so long as such action does
not inhibit his ability to perform his duties under this
Agreement or otherwise represent a conflict of interest in
contravention of the agreements contained in Section 8 or a
competitive activity in contravention of the agreements contained
in paragraph 6.4.
10. Miscellaneous.
10.1. Assignment. Neither Executive nor the
Company may assign or delegate any of their rights or duties
under this Agreement without the express written consent of the
other.
10.2 Injunctive Relief. Executive acknowledges that
the services to be rendered under the provisions of this
Agreement are of a special, unique and extraordinary character
and that it would be difficult or impossible to replace such
services. Accordingly, Executive agrees that any breach or
threatened breach by him of the covenants contained in Section 6
of this Agreement may cause irreparable harm to the Company for
which monetary damages may not be adequate and accordingly, any
such breach or threatened breach of Section 6 of this Agreement
shall entitle Company, in addition to all other legal remedies
available to it at law or in equity, to seek a temporary or
permanent injunction to enjoin such breach or threatened breach.
Such injunction shall be available without the posting of any
bond or other security, and the Executive hereby consents to the
issuance of such injunction.
<PAGE>
10.3 Binding Effect. This Agreement shall inure to the
benefit of, be binding upon and enforceable against, the parties
hereto and their respective successors, heirs, beneficiaries and
permitted assigns.
10.4 Headings. The headings contained in this
Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this
Agreement.
10.5 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given when
personally delivered, sent by registered or certified mail,
return receipt requested, postage prepaid, or by private
overnight mail service (e.g. Federal Express) to the party at the
address set forth above or to such other address as either party
or the Company may hereafter give notice of in accordance with
the provisions hereof. Notices shall be deemed given on the
sooner of the date actually received or the third business day
after sending.
10.6 Waiver. The waiver by either party of a breach of
any provision of this Agreement shall not operate or be construed
as a continuing waiver of any subsequent breach by either party.
No waiver by either party of any provision or condition to be
performed shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or any prior or
subsequent time. No waiver by either party of any provisions or
condition to be performed shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or any prior
or subsequent time.
10.7 Governing Law; Jurisdiction and Venue. Regardless
of the place of performance, this Agreement shall be governed by
and construed in accordance with the laws of the State of Texas
without giving effect to such State's conflicts of laws
provisions.
10.8 Arbitration. Any controversy or claim arising out
of or relating to this Agreement, or the breach thereof, shall be
settled by binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in
Austin, Texas, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction
thereof, and shall not be appealable. Judicial proceedings may
be commenced only to enforce this arbitration agreement or to
enforce the results of arbitration; provided that such
prohibition shall not apply in the event that a court ordered
injunction is an appropriate remedy for a breach of this
Agreement.
10.9 Severability. If, for any reason, any provision
of this Agreement is held invalid, such invalidity shall not
affect any other provision of this Agreement not held so invalid,
and each such other provision shall to the full extent consistent
with law continue in full force and effect. If any provision of
this Agreement shall be held invalid in part, such invalidity
shall in no way affect the rest of such provision not held so
invalid, and the rest of such provision, together with all other
provisions of this Agreement, shall to the full extent consistent
with law continue in full force and effect.
<PAGE>
10.10 Counterparts. This Agreement may be executed
simultaneously in one or more original or facsimile counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one of the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth above.
COMPANY: SUNRIVER CORPORATION
By:___________________________________
Name:_________________________________
Title:__________________________________
EXECUTIVE:
_____________________________________
Exhibit 10(d)
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this _____ day of
____________, 1996 ("Agreement"), by and between
____________________ a Delaware corporation (hereinafter
"_____________" or "Company"), and __________________
("Indemnitee"):
WHEREAS, highly competent persons are becoming more
reluctant to serve publicly-held corporations as directors or in
other capacities unless they are provided with adequate
protection through insurance or adequate indemnification against
inordinate risks of claims and actions against them arising out
of their service to and activities on behalf of the corporation;
and
WHEREAS, the current impracticability of obtaining adequate
insurance and the uncertainties relating to indemnification have
increased the difficulty of attracting and retaining such
persons;
WHEREAS, the Board of Directors of the Company has
determined that the inability to attract and retain such persons
is detrimental to the best interests of the Company's
stockholders an that the Company should act to assure such
persons that there will be increased certainty of such protection
in the future; and
WHEREAS, it is reasonable, prudent and necessary for the
Company contractually to obligate itself to indemnify such
persons to the fullest extent permitted by applicable law so that
they will serve or continue to serve the Company free from undue
concern that they will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve
and to take on additional service for or on behalf of the Company
on the condition that he be so indemnified;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the
covenants contained herein, the Company and Indemnitee do hereby
covenant and agree as follows:
Section 1. Services by Indemnitee. Indemnitee agrees to
serve as a director and/or officer of the Company or any of its
subsidiaries or affiliates. Indemnitee may at any time and for
any reason resign from such position (subject to any other
contractual obligation or any obligation imposed by operation of
law), in which event the Company shall have no obligation under
this Agreement to continue Indemnitee in such position.
Section 2. Indemnification - General. The Company shall,
as provided herein and to the fullest extent______________ would
be permitted by Delaware law, as in effect from time to time
indemnify Indemnitee against all Expenses, liabilities and losses
(including but not limited to judgments and damage awards
containing both actual and punitive damages) penalties, fines,
arbitration awards, and amounts reasonably paid or to be paid in
any settlement suffered or incurred by the Indemnitee in
connection with any Proceeding. Indemnitee shall receive the
benefit of any modification of the Delaware General Corporate Law
that expands or broadens Indemnitee's rights to indemnification.
The right to indemnification conferred herein shall be a
contract right, shall continue in favor of Indemnitee whether or
not he ceases to be an officer or director of ____________, and
shall inure to the benefit of his heirs, executors and
administrators and shall include the right to be promptly paid or
to have paid on Indemnitee's behalf Expenses incurred in
connection with the prosecution, defense, or investigation of any
Proceeding in advance of its final disposition; provided,
however, that the payment of Expenses in advance of the final
disposition of a Proceeding shall be made only upon delivery to
Company of an undertaking, by or on behalf of Indemnitee, to
repay all amounts so advanced if it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by
Company, the form of such undertaking being attached hereto as
Exhibit A and by this reference incorporated herein. Expenses
shall be advanced or paid to Indemnitee within ten days after the
Company receives a statement from Indemnitee requesting
advancement or payment of any Expenses and reasonably evidencing
the Expenses incurred by or on behalf of Indemnitee.
<PAGE>
Section 3. Prohibited Modifications. No action by
TradeWave whether by amendment to or repeal of the
indemnification provisions contained in the certificate of
incorporation or bylaws of ____________, or otherwise, shall
diminish or adversely affect any right or protection granted
Indemnitee pursuant to the provisions of this Agreement. No
supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto.
Section 4. Claims. If a claim for indemnification or for
payment or advancement of Expense arising under this Agreement is
not paid in full by Company within thirty (30) days after a
written claim or request for payment or advancement has been
received by Company, Indemnitee may, at any time thereafter,
bring suit against Company to recover the unpaid amount of the
claim, and if successful in whole or in part, the Indemnitee
shall in addition to any claim recovery, be entitled to be paid
all cost and expense of such suit (including attorney's fees,
costs of court, expert fees, travel costs and all other
expenses). In any such action, the Company shall have the burden
of proving that Indemnitee is not entitled to the requested
indemnification or payment or advancement of expenses.
Section 5. Contract Rights Not Exclusive. The contract
rights conferred by this Agreement shall be in addition to and
not exclusive of, and shall not be deemed to affect, any other
right which the Indemnitee may have or hereafter acquire under
any statute or the provisions of the certificate of incorporation
of ____________, the provisions of the bylaws of ___________, any
agreement, any policy of directors and officers liability
insurance, any vote of stockholders or disinterested directors of
____________ or otherwise.
Section 6. Claims Procedures and Choice of Counsel.
Indemnitee shall advise the Company, in writing of the
institution of any Proceeding which is or may be subject to this
Agreement within ten (10) days of Indemnitee's receiving notice
of any such Proceeding. The Indemnitee hereby agrees that
concurrently with notifying the Company of any claim in respect
of which indemnification may be sought hereunder, he will seek
indemnification under any arrangement (including without
limitation any directors' or officers' indemnification
arrangement or insurance policy, whether provided by charter or
bylaw provision, contract or otherwise) provided to him by
___________, or any affiliate, predecessor, or successor of the
foregoing (such entities, the "Other Indemnifying Parties").
Following a refusal by the Other Indemnifying Parties to
indemnify the Indemnitee in connection with a Proceeding, the
Company shall be entitled to assume the defense thereof at its
expense with counsel chosen by it and reasonably satisfactory to
the Indemnitee; provided, however, that the Indemnitee may at his
own expense retain separate counsel to participate in such
defense. Notwithstanding the foregoing, such Indemnitee shall
have the right to employ separate counsel at the Company's
expense and to control his own defense of such action or
Proceeding if, in the reasonable opinion of counsel to the
Company, a conflict or potential conflict exists between the
Company and Indemnitee that would make such separate
representation advisable; provided, however, that in no event
shall the Company be required to pay fees and expenses under this
indemnity for more than one firm of attorneys to represent
Indemnitee in any jurisdiction in any one legal action or group
of related legal actions, unless both civil and criminal
proceedings or investigations are involved. Indemnitee agrees
that he will not, without the prior written consent of the
<PAGE>
Company, settle or compromise or consent to the entry of any
judgment in any Proceeding relating to any matter for which
Indemnitee may claim indemnity rights. The amount of any
recovery actually received by the Indemnitee from the Other
Indemnifying Parties shall reduce, dollar-for-dollar, any
liability of the Company to the Indemnitee under the
indemnification provisions of this Agreement. To the extent that
the Company has paid any amounts to or on behalf of the
Indemnitee pursuant to this Agreement, the Company shall be
subrogated to the rights of the Indemnitee against the Other
Indemnifying Parties and the Indemnitee shall reasonably assist
the Company in pursuing any recovery incident to such
subrogation.
Section 7. Indemnification for Expenses of a Witness.
Notwithstanding any other provisions of this Agreement, to the
extent that Indemnitee is, by reason of his Corporate Status, a
witness in any Proceeding to which Indemnitee is not a party, he
shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
Section 8. Indemnitee Coverage and Policy Maintenance. To
the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers,
employees, or agents of the Company or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise which such person serves at the request of the
Company, Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of
the coverage available for any such director, officer, employee
or agent under such policy or policies. The Company agrees to
utilize its best efforts to maintain Director and Officer
liability insurance coverage to cover Indemnitee at all times.
Section 9. Duration of Agreement. This Agreement shall
continue until and terminate upon the later of: (a) 10 years
after the date that Indemnitee shall have ceased to serve as a
director, officer, employee, or agent of the Company or of any
other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which Indemnitee served at the
request for the Company; or (b) the final termination of any
Proceeding then pending in respect of which Indemnitee is granted
rights of indemnification or advancement of expenses hereunder.
This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of
Indemnitee and his heirs, executors an administrators.
<PAGE>
Section 10. Severability. If any provision or provisions
of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this
Agreement (including without Limitation, each portion of any
Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall not in any way be affected or
impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without Limitation, each
portion of any Section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is
not itself invalid, illegal or unenforceable) shall be construed
so as to give effect to the intent manifested thereby.
11. Definitions. a. "Corporate Status" describes the
status of a person who is or was a director, officer, employee or
agent of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise
which such person is or was serving at the request for the
Company.
b. "Expenses" shall include all reasonable
attorneys' fees, retainers, court costs. transcript costs, fees
of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery
service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, or
preparing to be a witness in a Proceeding.
c. "Proceeding" includes any action, suit,
arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding,
whether civil, criminal, administrative or investigative, except
one (1) initiated by an Indemnitee pursuant to Section 4 of this
Agreement to enforce his rights under this Agreement or (ii)
pending on or before the Effective Date.
Section 13. Identical Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall for all
purposes be deemed to be an original but all of which together
shall constitute one and the same Agreement. Only one such
counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this
Agreement.
<PAGE>
Section 14. Notices. All notices, requests, demands and
other communications hereunder shall be in writing and shall be
deemed to have been duly given if (I) delivered by hand and
receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed:
1. To the Company:
________________________________
________________________________
________________________________
________________________________
2. To_________________, Indemnitee:
________________________________
________________________________
________________________________
________________________________
or to such other addresses as may have been furnished to
Indemnitee by the Company or to the Company by Indemnitee, as the
case may be,
Section 15. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of Delaware.
Section 16. Miscellaneous. Use of the masculine pronoun
shall be deemed to include usage of the feminine pronoun where
appropriate.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
COMPANY:
______________________________
By:_____________________________
Name:__________________________
Title:____________________________
________________________________
_____________________,
Indemnitee
Name:__________________________
<PAGE>
Exhibit "A"
UNDERTAKING AGREEMENT
AGREEMENT dated the ______ day of _________________, 19___,
by and between _____________, a Delaware corporation (such
company, together with its successors and assigns, if any, being
referred to herein as the "Company"), and, (the "lndemnitee"),
an officer of ________________________.
WHEREAS, the lndemnitee [is named as a party defendant in a
Proceeding specified in Exhibit I hereto and, in addition] [may
be named as a party defendant in future Proceedings which arise
in connection with or as a result of the Indemnitee's
relationship to or employment with _____________] (a
"Proceeding"):
WHEREAS, the Company and the Indemnitee have entered into an
Indemnification
Agreement dated the ______ day of ___________________, 19___ (the
"Agreement"):
WHEREAS, the Indemnitee desires that the Company pay any and
all Expenses (as defined) and costs (including, but not limited
to, attorneys' fees and stenographic, travel and court costs)
actually and reasonably incurred by the lndemnitee or on the
Indemnitee's behalf in defending or investigating each
Litigation, in accordance with the provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the parties
hereto agree as follows:
1. As to payments made by the Company to the lndemnitee in
respect of each Proceeding, the Indemnitee in respect of each
Proceeding hereby undertakes and agrees to repay to the Company
any and all amounts so paid promptly, and in any event within
thirty (30) days, after the final disposition, including any
appeals, of such Proceedings provided, however, that such
repayment shall not be required if it shall be determined in
accordance with the Agreement or otherwise that the lndemnitee is
entitled to be indemnified by the Company pursuant to the
provisions of the Agreement.
2. This Agreement shall not affect in any manner any
rights which the lndemnitee may have against TradeWave or against
any other person to seek indemnification for, or reimbursement
of, any expenses and costs (including attorneys' fees) referred
to herein or indemnification for, or reimbursement of, any
judgment which may be rendered in any Proceeding.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date set forth above.
_________________________________
By:________________________________
Name:______________________________
Title:_____________________________
lndemnitee:________________________
