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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
X Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended September 30, 1997.
Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ____ to ____ .
Commission File No. 0-18809
_______________________________________________________________
CE SOFTWARE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1614808
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
1801 Industrial Circle, West Des Moines, Iowa 50265
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 221-1801
________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
(Title of class)
Indicate by mark (X) 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
(Cover page continued)
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Indicate by mark (X) if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $7,056,072
Aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on November 30,
1997: $2,671,256
Number of shares outstanding of each of the registrant's classes of common stock
as of November 30, 1997:
Common Stock 1,095,900
Class B Common Stock 0
DOCUMENTS INCORPORATED BY REFERENCE:
List hereunder the following documents if incorporated by reference and the Part
of the 10-KSB into which the document is incorporated.
Portions of the registrant's Annual Report to Stockholders for the fiscal year
ended September 30, 1997, are incorporated herein by reference in Parts I, II,
and IV.
Portions of the Proxy Statement to be delivered to stockholders in connection
with the Annual Meeting of Stockholders to be held February 27, 1998, are
incorporated by reference into Part III.
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CE SOFTWARE HOLDINGS, INC.
1997 FORM 10-KSB ANNUAL REPORT
Table of Contents
Page
Trademarks/Definitions 1
PART I
Item 1. Business 2
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 12
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 7. Financial Statements 12
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 12
PART III
Item 9. Directors and Executive Officers of the Registrant 13
Item 10.Executive Compensation 13
Item 11.Security Ownership of Certain Beneficial Owners and
Management 13
Item 12.Certain Relationships and Related Transactions 13
PART IV
Item 13.Exhibits, Financial Statements, and Reports on Form 8-K 14
Signatures 17
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TRADEMARKS/DEFINITIONS
Arrange(tm), BackMatic(tm), ButtonAction(tm), CEToolbox(tm), Choosy(tm),
CursorWait(tm), DayVision(tm), DemoQuicKeys(tm), DialogKeys(tm), DisMounty(tm),
EnRoute(tm), Finder Events(tm), Grab Ease(tm), Grabber(tm), IconMover(tm),
MailManager(tm), MassCopier(tm), Medi:for(r), MenuDecision(tm), MenuWait(tm),
MobileVision(tm), Mounty(tm), Mousie(tm), My Time Manager(r), NameFinder(tm),
NameServer(tm), NetModemChoosy(tm), Network Scheduler(r), ns:Agent(tm),
NSDD(tm)M, Paste Ease(tm), Powercore(r), Printer Bridge(tm), ProcessSwap(tm),
ProKey(tm), QK Icons(tm), QK Install(tm), QM Server(tm), QM Administrator(tm),
QM-Connect Gateway(tm), QM Config(tm), QM-Data Collection Bridge(tm),
QM-Direct Bridge(tm), QM Forms(tm), QM-Internet(tm) Gateway,
QM-Link Gateway(tm), QM Menu(tm), QM-MHS Gateway(tm), QM-QM Bridge(tm),
QM Recorder(tm), QM Recorder II(tm), QM Remote(tm), QM Resources(tm),
QM-Script Gateway(tm), QM-Serial Gateway(tm), QM Server(tm), QM TimeOuts(tm),
QuickAccess(tm), QuicKeys(r), QuicKeys Icons(tm), QuickConference(tm),
QuickMail(tm), QuickMail(tm) Pro, QuickMailBar(tm), QuickMessenger(tm),
QuickSend(tm), QuickTimer(tm), Schedule/DOS(r), Scrap Ease(tm), Screen Ease(tm),
SpeakEase(tm), TeamVision(tm), Technical Assistance Assistant(tm),
The Time Traveler(r), TimeVision(r), TimeVision NS(tm), TypeEase(tm),
Vaccine(tm), WebArranger(r), WindowDecision(tm), and WindowWait(tm) are
trademarks or registered trademarks of CE Software, Inc., an Iowa corporation.
IBM(r) is a registered trademark of International Business Machines Corporation
("IBM"). Macintosh(r) and Apple(r) are registered trademarks, and
AppleScript(tm), AppleTalk(tm), AppleTalk Remote Access(tm), and Mac(tm) are
trademarks of Apple Computer, Inc. ("Apple"). MS-DOS(r) and Microsoft(r) are
registered trademarks and Windows(tm) is a trademark of Microsoft Corporation
("Microsoft"). Intercall(tm) is a trademark of Holmen and Ungman. QM-Link(tm)
and QM Postman(tm) are trademarks of Netstrategy Software, Inc. Novell (r) is a
registered trademark of Novell, Inc. Netscape Navigator(tm) is a trademark of
Netscape Communications, Inc., CalendarMaker(tm) is a trademark of PrairieSoft,
Inc., and WebWhacker(tm) is a trademark of The Forefront Group, Inc.
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PART I
Item 1: Business
General
CE Software Holdings, Inc., a Delaware corporation (the "Company"), develops
computer software products that enhance communications, connectivity, and
productivity for businesses and home-based personal computer users. The
Company's products include business E-mail software, collectively known as the
QuickMail product family and developed for use with both Microsoft's Windows and
Apple's Macintosh operating systems; personal productivity tools such as
QuicKeys and WebArranger; and a group calendaring and scheduling product
known as TimeVision NS.
The Company
Formed in 1988 as Anubis Corporation, the Company changed its name to CE
Software Holdings, Inc. in February 1990 after acquiring all the common stock of
CE Software, Inc., an Iowa corporation. The merger was accounted for as a
reverse acquisition. CE Software Holdings, Inc., exists primarily as a stock
holding company, and accordingly, the operations described in this document,
unless otherwise specified, are those of the subsidiary, CE Software, Inc.
The operating subsidiary, CE Software, Inc. (CE) was formed in January 1987 as
the successor to a business started in 1981 as the software development arm of a
retail computer store known as Computer Emporium. The three founders of CE
Software, Inc.: Richard A. Skeie, Donald M. Brown, and John S. Kirk remain
involved in the Company and still beneficially own approximately 33% of the
Company's outstanding common stock.
On June 30, 1997 the Company amended its Restated Certificate of
Incorporation to effect a one for five reverse stock split of the Company's
Common Stock. From and after the amendment, the Company has had
authorized to issue 2,000,000 shares of Common Stock, par value $.10. All of
the shares of Common Stock of the Company, par value $.02, either not issued,
or previously issued and outstanding, have been reclassified and changed into
shares of a par value of $.10, the number of which equals the quotient derived
from dividing the number of such shares by 5. The holders of interests of less
than one share of Common Stock that occurred as a result of the reverse split
were paid in money by the Company for the value of their fractional shares.
Early in the 1980's, the original business focused on developing accounting
software, games, and programming products for the Apple II computer. Shortly
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after the release of the Macintosh computer in 1984, CE released its first
Macintosh program. For several years, the bulk of CE's product development
and sales was for the Macintosh. Beginning in 1990, the Company also focused
on re-engineering existing Macintosh E-mail products for use with Microsoft's
Windows operating systems. In 1991, an upgrade extended the functionality of
QuickMail LAN, the company's flagship proprietary E-mail product, to users of
IBM and IBM-compatible computers. QuickMail LAN was upgraded again in
1993 to support Microsoft's Windows operating systems.
In fiscal 1997, CE re-engineered QuickMail LAN from a proprietary system to
one based on the Internet's open standards such as POP3 (Post Office Protocol
3). The new product, called QuickMail Office, accommodates a Windows 95,
Windows NT, or Mac OS E-mail server, whereas QuickMail LAN requires a
Macintosh server. QuickMail Office is a complete, client-server business E-mail
solution for small to mid-sided companies running Windows or Mac OS.
Products
CE's business and personal productivity software products have received awards
from professional groups, user groups, and industry trade publications both in
the United States and internationally.
For convenience's sake, CE's products can be divided into three district groups:
messaging, personal productivity applications, and group calendaring and
scheduling. The messaging group includes QuickMail Office, QuickMail Pro,
QuickMail LAN, the QM-Internet Gateway and the Intercall gateway. The
personal productivity group includes QuicKeys and WebArranger. Lastly, group
calendaring and scheduling consists of the TimeVision NS product.
Divided according to these three groups, the Company's approximate net
revenues are as follows:
Years Ended September 30,
1997 1996 1995
Messaging $5,553,000 7,979,000 8,882,000
Personal productivity 1,428,000 2,153,000 3,003,000
Calendaring and scheduling 75,000 306,000 1,034,000
$7,056,000 10,438,000 12,919,000
In fiscal 1997, sales of the QuickMail product family and of QuickKeys were
responsible for substantially all of the Company's revenues. CE believes that
the products in the messaging and personal productivity groups, as updated from
time to time, will continue to make a significant revenue contribution. Of
course, these products may be at risk of reduced sales if the Company is unable
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to produce competitive products or respond to changes in usage of such
products.
Messaging
QuickMail Office is an easy-to-use electronic mail package aimed at small to
mid-sized businesses. Originally released as an E-mail system for local area
networks (LAN) in 1988, QuickMail has recently been upgraded to offer full
support for industry messaging standards. QuickMail Office provides important
communications functionality such as sending and receiving of messages, remote
access to E-mail and connectivity to other office locations and E-mail systems.
CE also continues to sell and support QuickMail LAN, an E-mail package for
Macintosh-centric organizations. Gateway and bridge software that connects
QuickMail LAN with the Internet and with other applications are also available
from CE. These include the QM-QM Bridge, QM-Direct, QM-Link, QM-Script
and QM-Printer, which are included with the product, as well as a variety of
other gateways written by independent developers.
Since the release of QuickMail LAN in 1988, CE has focused on continuously
improving and updating the product. In 1989, the Company released a version
of QuickMail LAN that supported PCs on the QuickMail LAN network. In
September, 1991, the Company released version 2.5 of QuickMail LAN,
integrating E-mail software for both Macintoshes and PC's in the same box. In
version 2.5, PC users gained access to the QuickMail LAN network either
through the AppleTalk solution or through a file-based solution using a Novell
network. In March, 1993, CE shipped QuickMail LAN version 2.6, which
further extended the product's functionality by making the interface of the PC
client consistent with Microsoft Windows.
In July 1994, the Company completed a publisher/developer agreement with
Netstrategy Software, Inc. that allowed the publishing and marketing of the two
QuickMail-related products, QM Postman and QM-Link for ARA. QM
Postman is a mail distribution product that makes it easier to send E-mail to a
group of addresses, and QM-Link for ARA simplifies remote access to
QuickMail LAN accounts via AppleTalk Remote Access (ARA). These
products were discontinued in fiscal 1997 due to slow revenues and the new
direction of the E-mail industry.
In August 1994, the Company released QuickMail LAN 3.0, which included new
spell-checking features, an advanced mail management utility (MailManager) and
a powerful search engine used to find and display specific messages filed in
QuickMail LAN folders. QuickMail LAN 3.0 also included enhancements to the
server software designed to improve performance in high-traffic environments.
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In September 1995, the Company released QuickMail LAN 3.5, which added
new features such as stylized text, drag-and-drop, QuickConference, enhanced
security, and expanded server-based mail handling capabilities. Version 3.6
followed in March 1996, improving QuickMail LAN's performance on Power
Macintosh machines as well as the ease with which address books are
distributed.
In fiscal 1996, the Company released two new gateway products for QuickMail
LAN, the Intercall gateway and the QM-Internet Gateway. Intercall connects
QuickMail LAN to the Internet using the popular UNIX-to-UNIX Copy
Protocol (UUCP) standard of communication. The QM-Internet Gateway
connects QuickMail LAN to the Internet via Simple Mail Transfer Protocol
(SMTP). The Intercall gateway sells for $500, and the QM-Internet Gateway for
$2,500. Both gateways accommodate an unlimited number of users.
In November 1996, the Company released QuickMail Pro, an Internet E-mail
client for Windows and Macintosh. Originally available as a client-only
solution, QuickMail Pro became part of a complete, all-in-one-box business
E-mail solution with the addition of three E-mail servers to the product family.
The result was the debut of QuickMail Office in the spring of 1997.
QuickMail Office includes easy-to-use QuickMail Pro client software plus
powerful E-mail server software for Windows NT, Windows 95, and Mac OS.
Designed to bring the powerful features and ease-of-use associated with
QuickMail LAN forward to the future, QuickMail Office has been garnering
favorable reviews in the computer trade press.
Personal Applications
QuicKeys
QuicKeys, CE's automation utility for the Macintosh, was first introduced in
1987. QuicKeys automates any repetitive, multi-step function performed on a
Macintosh. Since its release, QuicKeys has been the leading desktop automation
package for the Macintosh computing environment and has won several awards
from key computer industry publications such as Macworld magazine.
CE released QuicKeys 3.0 in August 1993. Recognizing the changing
requirements of the software industry, this release built in close support for
two of the leading Apple Computer technology initiatives: Apple Events and
AppleScript. In addition, QuicKeys 3.0 was designed from the start to take
advantage of the audio/visual workstations then being offered by Apple
Computer. With the appropriate technology installed, shortcuts could be
triggered either by voice command or by the more traditional keyboard
interaction.
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QuicKeys 3.0 greatly simplified user interaction by combining many operating
components into one main user interface window. In 1993, QuicKeys 3.0 was
named Best Utility of the Year by the editors of MacUser magazine.
CE released QuicKeys 3.5 in August 1996. QuicKeys 3.5 allows users to create
customized toolbars and floating palettes for triggering shortcuts. Version 3.5
also supports batch processing, which performs the same QuicKeys sequence on
multiple files, as well as a new, tab-oriented interface with movable windows.
In the spring of 1997, CE released version 3.5.2, with native support for Power
Macintosh computers, and in November 1997, a software patch was made
available to insure complete compatibility between QuicKeys and Apple's Mac
OS 8. QuicKeys sells for a suggested retail price of $119.00
WebArranger
In October 1995, CE Software, Inc. acquired Arrange, a software technology
from Common Knowledge, Inc. A month later, CE announced WebArranger
version 1.0, a Web-enabled personal information management application that
combines extensive Internet tracking and capturing capabilities with the
flexibility of Arrange. The application works in conjunction with today's
popular Web browser technologies, including Netscape Navigator, to provide users
with a simple means of tracking and organizing Internet data.
Initially version 1.0 was distributed free to more than 20,000 users, via the
Internet. In February 1996, WebArranger 2.0 was released and sells for $40.00.
Version 2.0 included enhancements such as URL (Uniform Resource Locator)
Validator that automatically updates out-of-date Web addresses; Grabber
technology that retrieves information from the Web or any source with a single
keystroke; a download agent that automatically retries busy file transfer
protocol sites until a successful down load is logged; and WebWhacker, an
application that allows users to download and copy multiple Web pages or entire
Web sites.
CalendarMaker
CalendarMaker for Macintosh, an application that allows Macintosh users to
design and create their own calendars, was upgraded to version 4.0 in March
1993. First introduced in 1986, CalendarMaker has consistently provided an
easy-to-use, easy-to-learn calendaring capability for the small business,
school, or church environments. Version 4.0 supports advanced functions such as
unlimited calendar size, duplicating events by date or time period, and
full-color capabilities. Version 4.1, released in January 1994, added memory
management routines to improve performance.
In May 1997, CE Software sold CalendarMaker to PrairieSoft, Inc. for $25,000
cash plus a maximum of $75,000 in future royalty payments, based on a percentage
of sales over the next two years.
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Calendaring and Scheduling
In May 1994, CE Software, Inc., acquired the assets of Powercore, Inc. of
Manteno, Ill., including Network Scheduler. A version of the product for DOS
was originally released by Powercore in 1989, and versions for Windows
followed in 1990, 1991, and 1993.
In March 1995, ten months after acquiring Network Scheduler, CE released
TimeVision NS, a calendaring and scheduling application that allows groups of
people within a department or throughout a company to schedule meetings and
shared resources as well as track the completion of tasks. TimeVision NS also
allows users to send notification of meetings to others, even if they don't use
TimeVision NS, via several popular E-mail systems. Available for Windows and
DOS environments, TimeVision NS operates over almost any LAN.
TimeVision NS accommodates hundreds of users within a company, but due to
technical barriers within the product, its release into larger enterprises has
been restricted. The product is available in 5- and 25-user packages.
Suggested retail price for a 25-user pack is $1,995.00. As of the end of fiscal
1997, CE no longer actively promotes, sells, or supports TimeVision NS. The
Company and its subsidiary, CE Software, Inc., were plaintiffs in a legal
proceeding against Powercore, Inc., and its principals owners. See "Item 3:
Legal Proceedings".
Product Support
CE believes that customer technical support is an important part of its overall
performance. As of September 30, 1997, the Company had 12 full-time employees
involved in technical support services, available to all customers by
electronic mail, Worldwide Web site, commercial bulletin board services,
telephone, or fax. Certain customers are charged an annual maintenance fee for
upgrades and support. Support services include explaining how the customer's
computer works, how their other software works in relation to CE products,
solving problems with software operation, and suggesting solutions to business
and personal computing issues.
Distribution and Marketing
The Company's products are primarily marketed through independent
distributors in the United States, through numerous independent dealers and
distributors in other countries, directly to large corporate accounts under site
licensing agreements, and directly to end-users through direct marketing
campaigns.
Of the Company's total net revenues for fiscal 1997, approximately 18% are
through independent, domestic, nonexclusive distributors. Sales to one such
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distributor, Ingram Micro, accounted for nearly 14% of total net revenues.
Generally, domestic distributors purchase product at a 40% discount from list
prices.
Of the Company's total net revenues for fiscal 1997, approximately 29% are
through independent, international, distributors. Several of these distributors
are limited by contract to distribution within a specified geographic area. The
Company expects to continue emphasizing its international sales in upcoming
periods by providing additional translations of its products. It currently
provides translations of certain programs in Japanese, German, French and
several other languages. Sales to four such distributors, SRA in Japan,
Computers Unlimited in the United Kingdom, Prisma in West Germany, and Moreware
in Sweden, accounted for approximately 8%, 4%, 4%, and 3% of total net revenues,
respectively. International distributions generally requires a somewhat larger
discount, in return for various advertising, customer service, and customer
registration duties performed by them.
The Company is involved in direct marketing through its sales and marketing
staff of 17 persons. Much of this work involves ongoing contacts with the major
distributors and dealers, and working with major corporate accounts on site
licensing agreements and version protection agreements. Such agreements
accounted for approximately 11% of the Company's net revenues in fiscal 1997,
and typically involve front-end payment for the privilege of using a specified
number of copies of the programs on their premises and for the privilege of
automatically receiving upgrades as they become available.
The Company gives its distributors industry-standard rights of return for stock
balancing and for defective products, and replacement rights when products are
upgraded to new versions. A reserve for returns has been recorded and was
$35,800 and $31,100 at September 30, 1997 and 1996, respectively. Returns
exchanged for product upgrades and new version releases do not have a material
impact on the financial statements because of the Company's low cost to replace
such returns. Returns from end users, for any reason, have not been
significant.
Product Development
The personal computer software industry is undergoing rapid technological
change, requiring a continuous high level of enhancement of existing products
and development of new products. The Company is committed to the creation
of new products and intends to continue the enhancement of existing products.
The Company's future financial performance will depend in part on the
successful development, completion, and introduction of new software products,
and of enhanced versions of existing products, and customer acceptance of those
products. In the future, there is no assurance that the Company will not
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encounter difficulties that could delay or prevent the successful development
of, or marketing of, new products and/or enhancements of existing products.
There also can be no assurance that such products will yield positive results or
that such results can be obtained on a timely basis or without the expenditure
of substantial funds.
The majority of the Company's software products are developed internally,
although the Company has purchased and/or licensed software products from
independent authors and other software companies. As of September 30, 1997,
22 persons were engaged full time in product development. During fiscal years
1997, 1996, and 1995, the Company spent approximately $1,429,000,
$2,000,000, and $2,498,000, respectively, on product development and
enhancement activities, representing approximately 20%, 19%, and 19%,
respectively, of net revenues in each of these periods.
Competition
The personal computer software market is highly competitive and has been
subject to rapid change, which is expected to continue. The Company's
competitors include many independent software vendors that have financial,
marketing, and technological resources far in excess of those of the Company.
Certain of these include Microsoft, IBM (Lotus), Netscape Communications,
Inc., and Novell Corporation. A number of independent smaller firms have
created specialized products which also compete with the Company's products.
Certain of these include QUALCOMM, SoftArc, and Claris. In addition, certain
computer manufacturers may devote significant resources to creating software,
directly competitive with products of the Company, for inclusion with their
computers and computer systems without additional charge to consumers.
The Company's messaging, personal productivity, and calendaring and
scheduling products are marketed primarily through the retail channel. All of
these products face competing products offering many similar features. The
Company believes that the principal competitive factors in the market include
product features and functions, ease of understanding and operating the
software, product reliability, price/performance characteristics, name
recognition, and availability and quality of support and training services.
Price competition could become an increasing factor in the personal computer
software market, which could, in turn, be expected to increase pressures on
profit margins in the future.
Product Protection
The Company regards its software as proprietary and attempts to protect it with
copyrights, trade secret laws, and internal nondisclosure safeguards, as well as
restrictions on disclosure and transferability that are incorporated into its
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software license agreements. The Company licenses its software products to
customers rather than transferring title. Despite these restrictions, it may be
possible for competitors or users to copy aspects of the Company's products or
to obtain information which the Company regards as trade secrets. Computer
software generally can be patented only with difficulty, and existing copyright
laws afford only limited practical protection. Policing unauthorized use of
such a broadly disseminated product as computer software is difficult, and
software piracy can be expected to be a persistent problem for the packaged
software industry. These problems may be particularly acute in international
markets. However, because of the rapid pace of technological change in its
industry, such protections are less significant than factors such as knowledge,
ability, and experience of the Company's employees, frequent product
enhancement, and the timeliness and quality of Company support services.
Employees
As of September 30, 1997, the Company employed 65 full-time equivalent employees
(part-time employees in total working an aggregate of a 40-hour work
week make one full-time equivalent employee). The development staff of
22 includes mainly computer programmers and quality assurance engineers.
Other employees include 17 in domestic and international sales and marketing,
12 in customer technical support, 3 in production and shipping capacities, and
11 in general and administrative. None of the Company's employees are
represented by a union. The Company has experienced no work stoppages, and
the Company believes that its employee relations are good. Competition in the
recruiting of personnel in the computer industry is intense. The Company
believes that its future success will depend in significant part on its
continued ability to hire and retain qualified management, marketing, and
technical employees, and independent contractors, as needed.
Risk Factors
Statements made within this Form 10-KSB which are forward-looking
statements involve risks and uncertainties that could render actual results
materially different than those described herein. Risk factors that may impact
future results include, but are not limited to, the risk that product upgrades
may not be effected on a timely basis, the risk that such product upgrades may
not achieve market acceptance, the risk that competitors will develop similar
products and reach the market first, and the risk that the Company would not be
able to fund its working capital needs from cash flow, or be able to borrow
under its line of credit.
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Item 2: Properties
The Company's principal facility is a 22,000-square-foot office building which
the Company built in 1990 in West Des Moines, Iowa. In May 1994, the
Company borrowed $1,000,000 secured by a mortgage on this building. In
February 1995, the Company purchased the land adjacent to this building, giving
the Company an additional option for future expansion. The purchase price was
$225,000.
Since August of 1996, the Company has leased 1,700 square feet of office space
in a facility adjacent to the Company's principal facility. The current lease
will expire in August of 1998. The Company has the option to renew the lease
for 2 additional one-year terms. This space is currently subleased to a third
party.
Item 3: Legal Proceedings
The Company and its subsidiary, CE Software, Inc., were plaintiffs in a legal
proceeding against Powercore, Inc., and its principal owners. The complaint
alleged a breach of contract and fraud in connection with the sale of
Powercore's assets. The complaint was filed February 22, 1996, in the United
States District Court for the Northern District of Illinois, Eastern Division.
The proceeding was finalized on May 27, 1997, in an out of court settlement.
The terms of the settlement resulted in the return of 250,000 (pre-split) shares
of the Company's stock which had been held in escrow since 1994. Recovery of
the stock resulted in a reduction in stockholders' equity. There was no net
impact on the results of operations during the current period. See footnote 1
in "Notes to Consolidated Financial Statements" for further explanation of the
accounting treatment.
Item 4: Submission of Matters to a Vote of Security Holders
No matters were submitted to the stockholders in the fourth quarter of fiscal
1997.
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PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder
Matters
Incorporated by reference is data for shares of Class A common stock: market
prices per share, stock market, and number of stockholders in "Market for
Registrant's Common Equity and Related Stockholder Matters" on page 23 of the
Registrant's Annual Report to Stockholders for the fiscal year ended
September 30, 1997.
Item 6: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Incorporated by reference is "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 6 through 8 of the Registrant's
Annual Report to Stockholders for the fiscal year ended September 30, 1997.
Item 7: Financial Statements
Incorporated by reference are "Consolidated Financial Statements," "Notes to
Consolidated Financial Statements" and "Independent Auditors' Report"
appearing on pages 9 through 22 of the Registrant's Annual Report to
Stockholders for the fiscal year ended September 30, 1997.
Item 8: Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Not applicable.
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PART III
Item 9: Directors and Executive Officers of the Registrant
Information with respect to this Item may be found in the section captioned
"Nominees for Elections as Directors" appearing in the Proxy Statement to be
delivered to stockholders in connection with the Annual Meeting of Stockholders
to be held February 27, 1998. Such information is incorporated herein by
reference.
Information with respect to delinquent Form 4 filings may be found in the
section captioned "Security Ownership of Certain Beneficial Owners and
Management" appearing in the Proxy Statement to be delivered to stockholders in
connection with the Annual Meeting of Stockholders to be held February 27,
1998. Such information is incorporated herein by reference.
Item 10: Executive Compensation
Information with respect to this Item may be found in the section captioned
"Executive Compensation" appearing in the Proxy Statement to be delivered to
stockholders in connection with the Annual Meeting of Stockholders to be held
February 27, 1998. Such information is incorporated herein by reference.
Item 11: Security Ownership of Certain Beneficial Owners and
Management
Information with respect to this Item may be found in the section captioned
"Security Ownership of Certain Beneficial Owners and Management" appearing
in the Proxy Statement to be delivered to stockholders in connection with the
Annual Meeting of Stockholders to be held February 27, 1998. Such
information is incorporated herein by reference.
Item 12: Certain Relationships and Related Transactions
Information with respect to this Item may be found in the section captioned
"Executive Compensation" appearing in the Proxy Statement to be delivered to
stockholders in connection with the Annual Meeting of Stockholders to be held
February 27, 1998. Such information is incorporated herein by reference.
13
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PART IV
Item 13: Exhibits, Financial Statements, and Reports on Form 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements
The following consolidated financial statements of CE Software Holdings, Inc.,
and subsidiaries, and the Independent Auditors' Report issued thereon, appear on
pages 9 through 22 of the Registrant's Annual Report to Stockholders for the
fiscal year ended September 30, 1997, and are incorporated by reference in
Part II, Item 7:
Independent Auditors' Report.
Consolidated Balance Sheets, as of September 30, 1997 and 1996.
Consolidated Statements of Operations, for each of the years in the
three-year period ended September 30, 1997.
Consolidated Statements of Stockholders' Equity, for each of the years
in the three-year period ended September 30, 1997.
Consolidated Statements of Cash Flows, for each of the years in the
three-year period ended September 30, 1997.
Notes to Consolidated Financial Statements.
2. Exhibits........................................... Page 18
The following exhibits are filed as part of, or incorporated by reference into,
this Report:
3(a) I Certificate of Incorporation
3(b) I Amendment dated April 10, 1990, to Certificate of Incorporation
3(c) I Amendment dated April 19, 1990, to Certificate of Incorporation
3(d) I Bylaws
3(e) Amendment dated June 27, 1997, to the Restated Certificate of
Incorporation
4(a) I Form of Stock Certificate
4(b) I CE Software Holdings, Inc., 1990 Stock Option Plan
4(c) I Representative Form of Incentive Stock Option
4(d) II 1992 Stock Option Plan
4(e) II Nonemployee Directors Stock Option Plan
14
<PAGE>
10(a) I Agreement and Plan of Reorganization dated February 15, 1990,
between Anubis Corp., CE Software, Inc., Richard Skeie, Donald
Brown, and John Kirk on his own behalf and as custodian on
behalf of his minor children
10(b) I Profit Sharing Plan of CE Software, Inc.
10(c) I Form of CE Software, Inc., Noncompete-Nondisclosur
Agreement for Significant Employees
10(d) III Amended and restated Executive Employment Agreement with
Stanford H. Goodman, including Stock Purchase Agreement and
Non-Recourse Promissory Note
10(e) IV Asset Purchase Agreement
10(f) IV Registration Rights Agreement
10(g) IV Indemnity Agreement
10(h) IV Business Loan Agreement
10(i) V Amended Non-Recourse Promissory Note with Stanford H. Goodman
10(j) V First Amendment to Amended and Restated Executive
Employment Agreement with Stanford H. Goodman
10(k) VII Powercore, Inc., Lawsuit
10(l) VIII Settlement Agreement and General Release with Stanford H.
Goodman
10(m) VIII Unit Purchase and Debt Payment Agreement with 4-Sight plc
10(n) VIII Agreement to establish Net Target
10(o) Executive Employment Agreement with Christian F. Gurney,
including Stock Purchase Agreement and Non-Recourse
Promissory Note.
11 Statement Re: Computation of per share (loss) earnings
21 Subsidiaries of the Registrant
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule - for SEC filing only
Legend
I Incorporated into this Report by reference to the Registrant's
Registration Statement on Form S-18 which became effective
August 31, 1990, (Registration No. 33-36008C).
II Incorporated into this Report by reference to the Registrant's
Registration Statement on Form S-8 which became effective
November 6, 1992, (Registration # 33-54210).
III Incorporated into this Report by reference to the exhibits filed as
part of the Registrant's Form 10-KSB for the fiscal year ended
September 30, 1993.
IV Incorporated into this Report by reference to the exhibits filed as
part of the Registrant's Form 8-K filed on May 24, 1994.
15
<PAGE>
V Incorporated into this Report by reference to the exhibits filed as
part of the Registrant's Form 10-KSB for the fiscal year ended
September 30, 1994.
VI Incorporated into this Report by reference to the exhibits filed as part
of the Registrant's Form 10-KSB for the fiscal year ended September
30, 1995.
VII Incorporated into this Report by reference to the exhibits filed as
part of the Registrant's Form 10-QSB for the quarter ended
March 31, 1996.
VIII Incorporated into this Report by reference to the exhibits filed as part
of the Registrant's Form 10-KSB for the fiscal year ended September
30, 1996.
(b Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of fiscal 1997.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CE SOFTWARE HOLDINGS, INC.
(Registrant)
/s/ Richard A. Skeie
By___________________________
(Richard A. Skeie, President, and Director)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated below.
Signature Title Date
/s/ Richard A. Skeie 12/20/97
_________________________ President and Director ___________
(Richard A. Skeie)
/s/ Daniel E. McCann 12/20/97
_________________________ Chief Financial Officer ___________
(Daniel E. McCann)
/s/ John S. Kirk 12/20/97
_________________________ Secretary, Treasurer, ___________
(John S. Kirk) and Director
/s/ Christian F. Gurney 12/20/97
_________________________ Vice Presidet ___________
(Christian F. Gurney) and Director
17
<PAGE>
EXHIBIT INDEX
Exhibit Reference (*)
Number Description or Page #
3(a) Certificate of Incorporation I
3(b) Amendment dated April 10, 1990, to Certificate of Incorporation I
3(c) Amendment dated April 19, 1990, to Certificate of Incorporation I
3(d) Bylaws I
3(e) Amendment dated June 27, 1997, to the Restated Certificate of
Incorporation Page 20
4(a) Form of Stock Certificate I
4(b) CE Software Holdings, Inc., 1990 Stock Option Plan I
4(c) Representative Form of Incentive Stock Option I
4(d) 1992 Stock Option Plan II
4(e) Nonemployee Director Stock Option Plan II
10(a) Agreement and Plan of Reorganization dated February 15, 1990,
between Anubis Corp., CE Software, Inc., Richard Skeie, Donald
Brown, and John Kirk on his own behalf and as custodian on
behalf of his minor children I
10(b) Profit Sharing Plan of CE Software, Inc. I
10(c) Form of CE Software, Inc., Noncompete-Nondisclosure
Agreement for Significant Employees I
10(d) Amended and restated Executive Employment Agreement with
Stanford H. Goodman, including Stock Purchase Agreement and
Non-Recourse Promissory Note III
10(e) Asset Purchase Agreement with Powercore, Inc., dated May 9, 1994 IV
10(f) Registration Rights Agreement with Powercore, Inc.,
dated May 9, 1994 IV
10(g) Indemnity Agreement with Powercore, Inc., dated May 9, 1994 IV
10(h) Business Loan Agreement with Brenton Bank dated May 6, 1994 IV
10(i) Amended Non-Recourse Promissory Note with Stanford H.
Goodman dated July 20, 1994 V
10(j) First Amendment to Amended and Restated Executive Employee
Agreement with Stanford H. Goodman dated February 24,1995 VI
10(k) Powercore, Inc., Lawsuit VII
10(l) Settlement Agreement and General Release with Stanford H.
Goodman dated September 30, 1996 VIII
10(m) Unit Purchase and Debt Payment Agreement with 4-Sight Inc. dated
August 31, 1996 VIII
10(n) Agreement to establish Net Target dated September 30, 1996 VIII
* See legend on following page
18
<PAGE>
EXHIBIT INDEX
(continued)
Exhibit Reference
Number Description or Page #
10(o) Executive Employment Agreement with Christian F. Gurney including
Stock Purchase Agreement and Non-Recourse Promissory Note. Page 21
11 Statement Re: Computation of (loss) earnings per share Page 32
21 Subsidiaries of the Registrant Page 33
23 Consent of KPMG Peat Marwick LLP Page 34
27 Financial Data Schedule - for SEC filing only
Legend
I Incorporated into this Report by reference to the Registrant's
Registration Statement on Form S-18 which became effective
August 31, 1990, (Registration No. 33-36008C).
II Incorporated into this Report by reference to the Registrant's
Registration Statement on Form S-8 which became effective
November 6, 1992, (Registration # 33-54210).
III Incorporated into this Report by reference to the exhibits filed as
part of the Registrant's Form 10-KSB for the fiscal year ended
September 30, 1993.
IV Incorporated into this Report by reference to the exhibits filed as
part of the Registrant's Form 8-K filed on May 24, 1994.
V Incorporated into this Report by reference to the exhibits filed as
part of the Registrant's Form 10-KSB for the fiscal year ended
September 30, 1994.
VI Incorporated into this Report by reference to the exhibits filed as
part of the Registrant's Form 10-KSB for the fiscal year ended
September 30, 1995.
VII Incorporated into this Report by reference to the exhibits filed as
part of the Registrant's Form 10-QSB for the quarter ended
March 31, 1996.
VIII Incorporated into this Report by reference to the exhibits filed as
part of the Registrant's Form 10-KSB for the fiscal year ended
September 30, 1996.
19
<PAGE>
EXHIBIT 3(e)
CERTIFICATE OF AMEMDMENT OF
RESTATED CERTIFICATE OF INCORPORATION OF
CE SOFTWARE HOLDINGS, INC.
CE Software Holdings, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: That Section 4.1 of Article 4 of the Restated Certificate of
Incorporation shall be amended to read as follows:
"ARTICLE 4- CAPITAL STOCK
4.1 The aggregate number of shares the corporation has authority to issue
shall be 7,000,000 shares of which 2,000,000 shares of the par value of $.10
shall be designated as Common Stock, 3,000,000 shares of the par value of $.01
shall be designated as Class B Common Stock and 2,000,000 of the par value of
$.01 shall be designated as Preferred Stock. All of the shares of Common Stock
of the corporation of the par value of $.02 issued and outstanding, or held as
treasury shares, immediately prior to the time this amendment becomes effective
shall be and are by this means automatically reclassified and changed (without
any further act) into shares of the par value of $.10, the number of which shall
equal the quotient derived from dividing the number of such shares by 5. This
amendment shall become effective without increasing or decreasing the amount of
stated capital or paid-in surplus of the corporation, and shall constitute a 1
for 5 reverse stock split, provided that no fractional shares of less than one
share shall be issued. The holders of fractional share interests of less than
one share that occur as a result of the foregoing reclassification and change
shall be paid in money by the Corporation the value of their fractional shares."
SECOND: That the aforesaid amendment was duly adopted by written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
THIRD: That written notice of the taking of such corporate action without a
meeting by less than unanimous written consent was sent or given to all
stockholders at least 20 days prior to the effective date of the amendment.
FOURTH: That the effective date of the aforesaid amendment shall be
June 30, 1997.
CE Software Holdings, Inc. has caused this Certificate to be signed on
this 27th day of June, 1997 by its Secretary and authorized officer,
John S. Kirk, who acknowledges that the facts stated herein are true.
CE Software Holdings, Inc.
/s/ John S. Kirk
By__________________________
John S. Kirk, Secretary
20
<PAGE>
EXHIBIT 10(o)
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement"), dated this 11th day of
July, 1997, by and between CE SOFTWARE, INC., an Iowa corporation (hereinafter
called the "Company"), CE SOFTWARE HOLDINGS, INC., a Delaware corporation
(hereinafter called "CESH") and Christian F. Gurney (hereinafter called the
"Executive").
WHEREAS, the Company has employed the Executive since 1991 in various
capacities, has promoted Executive to the position of President, and the
Executive desires to commit himself to serve the Company on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements herein contained, the parties hereto adopt this
Executive's employment agreement in its entirety, and agree as follows:
1. Employment : Term. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to serve the Company, on the terms and
conditions hereinafter set forth. The Executive shall be employed by the
Company for a term ending September 30, 1997 (the last day of which shall be the
"Renewal Date"), which term shall be renewable, on an annual basis, as provided
below, for additional one-year terms, on the Renewal Date and on each
anniversary of the Renewal Date. The Executive employment shall be
automatically renewed as of the Renewal Dates through September 30, 1999, unless
a majority of the Board of Directors (exclusive of the Executive) takes other
action within the terms of this agreement to terminate the Executive employment
or to not renew the Executive Employment at a stated Renewal Date. In the
absence of any action by the Board of Directors of any action on non-renewal or
termination, the Executive employment shall continue unchanged until the next
Renewal Date and this Agreement shall remain in force. On and after the Renewal
Date of September 30, 2000 the Executive employment may be renewed given the
affirmative vote of a majority of the members of the Board of Directors of the
Company provided that the Executive shall not be entitled to vote thereon. At
least sixty days prior to the Renewal Date and each anniversary of the Renewal
Date (provided that the Employee is employed by the Company prior to such date),
the Company shall notify the Executive, in writing, if the Company desires not
to renew his employment hereunder for an additional one-year term. The
Executive shall notify the Company, in writing, within forty-five days prior to
any Renewal Date, whether he desires not to continue his employment for such
additional term. If, pursuant to such notices, the Executive's employment is
not renewed, the Executive shall continue his employment for the remainder of
the then current contract period, provided, however, the Executive may receive
severance pay as set forth hereunder if not offered renewal as set forth
hereunder, or if Executive rejects the renewal offer because it is at a
compensation level below that of the existing term.
2. Position and Duties. The Executive shall serve as the President of the
Company, and shall report to the Board of Directors. The Executive shall have
such powers and duties as may be prescribed from time to time by the Bylaws and
the Board of Directors, consistent with the office of President. The Executive
also agrees to serve, for no additional consideration, as Vice President of
CESH, as an officer of any affiliated company if so elected by its Board of
Directors, and as a director of the Company and CESH, and of any affiliated
company, if he is nominated by the Board and elected by the shareholders of such
entity. The Company and CESH will indemnify and hold harmless the Executive
from liability, damages and costs (including attorneys fee) arising from his
21
<PAGE>
Exhibit 10(o)
service to the Company in any capacity to the same extent they will indemnify
any of their officers and directors pursuant to the Company's Certificate of
Incorporation, Bylaws, and Iowa or Delaware law, respectively. During the term
of this Agreement, the Executive shall devote his entire business time,
attention and energies exclusively to the business and affairs of the Company
and its affiliates and use his best efforts, skills and abilities to promote the
interests of the Company and its affiliates provided, however, that the
Executive shall have the right to pursue passive investments which do not relate
to the business and/or affairs of the Company and which do not interfere with
his responsibilities to the Company as set forth herein.
3. Compensation and Benefits. During the term of the Executive's employment
hereunder, the Executive shall be entitled to receive the following compensation
and benefits:
(a) Salary. The Company shall pay to the Executive a base salary of $150,000
per annum payable semi-monthly, prorated to the date of this Agreement. Such
salary shall be subject to review by the Board of Directors on an annual basis
in event of a renewal of the term of employment hereunder, on a date no later
than sixty days prior to the commencement of the renewal term. Any decrease or
increase in the annual salary (and other compensation terms) payable to the
Executive shall be at the discretion of the Compensation Committee of the Board
of Directors of CESH and shall be based on the Executive's performance of his
duties under this Agreement and the Company's operating results to the date of
such review.
(b) Stock Purchase Plan. Contemporaneously with the execution of this
Agreement and with the approval of the Compensation Committee of the Board of
Directors of CESH and subject to approval of the shareholders of CESH if such is
required by law, regulation or the terms of any stock listing agreement, the
Executive will purchase up to $50,000 of common stock, $.10 par value, of CESH
pursuant to a separate stock purchase agreement which is Exhibit B hereto. Said
agreement will price the shares at the closing price of the stock on the date of
this Agreement. Among other terms, the shares will be purchased for cash to the
extent of the par value of the shares and the balance by the non-recourse
promissory note of Executive, and held in escrow until the note is fully paid.
An amount equal to 60% of any cash dividends or other cash distributions paid on
the shares, will be withheld and applied to the purchase price until the note is
paid. Executive may make any additional payments from other funds. The shares
may not be sold until note is paid in full, subject to normal securities
registration requirements, or exemption therefrom.
(c) Stock Options. As of the date of this Agreement, the Compensation
Committee of the Board of Directors of CESH has granted to the Executive options
to purchase 25,000 shares of common stock, pursuant to the Company's existing
stock option plans and form of nonqualified stock option agreement.
Executive understands that the number of options available under existing plans
may require shareholder approval of plan amendments, or of new plans, before the
total number of options may be granted under this contract; the board of
directors will recommend to the shareholders that any required approvals be
given.
(d) Expense Reimbursement. The Company shall promptly pay to the Executive
the reasonable expenses incurred by him in the performance of his duties
hereunder after
22
<PAGE>
Exhibit 10(o)
receipt of supporting documentation in respect of such expenses and otherwise in
accordance with the past practices of the Company relating to expenses and
guidelines established by the Board of Directors.
(e) Participation in Employee Plans. The Executive shall be entitled to
participate in or receive benefits offered to all employees of this Company
(e.g., group medical, dental, life, dependent life, and disability insurance,
profit-sharing, vacation, illness and holiday).
(f) Vacations. The Executive shall be entitled to vacation days, in
accordance with standard Company policy, in each year of his employment by the
Company to be taken at his discretion but at a time or times consistent with the
Company's best interests.
4. Termination for Disability, Extended Illness or Cause.
(a) Disability or Extended Illness. Disability shall include extended
illness. The Company may, but shall not be required to, terminate the
Executive's employment hereunder if the Executive becomes disabled. The
executive shall be deemed to be disabled as of the date on which a
determination, based on a written opinion provided by a medical doctor selected
by the Board of Directors, has been made by the Board of Directors (on which
determination the Executive shall not be entitled to vote), written notice of
which shall be forwarded to the Executive, that the Executive, by reason of his
health, has become unable to perform his normal duties hereunder, provided that
no such determination shall be made unless and until the Executive has been
unable to devote such portion of his business time and energies to the affairs
of the Company as the conduct of its business shall reasonably require for a
period of 90 consecutive days or for 120 days in any 180-day period. In the
event that the Executive's employment hereunder is terminated on account of
disability, the Termination Date shall be the date on which the Executive
receives the notice required to be sent to him pursuant to this subsection (a).
(b) Cause. Pursuant to resolution of the Board of Directors (on which
resolution the Executive shall not be entitled to vote), the Company shall
terminate the Executive's employment hereunder for Cause. For purpose of this
Agreement, the Company shall have "Cause" to terminate the Executive's
employment hereunder upon:
(i) the Executive's repeated failure after written notice thereof to
perform his duties hereunder or his habitual neglect of duty (other than for
reasons set forth in Section 4(a) hereof),
(ii) the commission by the Executive of any acts or omissions
constituting dishonesty, fraud or illegal acts, which are harmful to the
Company or its reputation,
(iii) the Executive's resignation prior to the end of an applicable term
of employment hereunder or the Executive's action to not renew as set forth in
Section 1, or
(iv) the breach by the Executive of any of the provisions of this
Agreement which the Executive is required to execute under Section 6 hereof.
In the event the Company shall elect to terminate the Executive's employment
hereunder for Cause or without Cause, the Termination Date shall be the date on
which written
23
<PAGE>
Exhibit 10(o)
notice from the Board of Directors is sent to the Executive. Such notice shall
set forth the reasons for such termination if applicable.
5. Compensation Upon Termination.
(a) Compensation During Disability or Extended Illness. During any period
that the Executive fails to perform his duties hereunder as a result of
incapacity due to disability or extended illness, the Executive shall continue
to receive his annual salary prorated to the Termination Date.
(b) Termination on Account of Death. If the Executive's employment shall be
terminated by reason of his death, the Company shall pay to such person as the
Executive shall have designated in a notice filed with the Company, or if no
such person shall have been designated, to his estate, an amount equal to his
unpaid but accrued and fully earned salary to the date of his death.
(c) Termination for Cause. If the Executive's employment is terminated for
Cause, the Company shall pay to the Executive an amount equal to his unpaid but
accrued and fully earned salary to the Termination Date.
(d) Termination without Cause. If the Executive's employment is terminated
without Cause whether at a Renewal Date or during any term, the Executive shall
receive six months Severance Pay from the Termination Date if within two years
from the date of this Agreement. If Termination Date is more than two years
after the date of this Agreement the Executive shall receive three months
Severance Pay from the Termination Date. Severance Pay shall be calculated from
the Termination Date without regard to the Renewal Date and in lieu of any
remaining regular compensation otherwise payable for an unexpired term.
(e) No Other Benefits. Nothing contained in this Section 5 shall be construed
as entitling the Executive to receive, from and after the termination of his
employment with the Company, any of the benefits which the Executive would
otherwise be entitled to receive under Section 3 hereof, other than the right to
receive payments in respect of salary and/or severance compensation, if
applicable, as provided for in this Section 5.
6. Confidentiality. As a condition to his employment hereunder, the
Executive has executed and delivered a letter in the form of Exhibit A attached
hereto.
7. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when mailed
via certified mail, return receipt requested, addressed, if to the Executive, at
his address set forth at the foot of this Agreement and if to the Company, at
its address set forth at the foot of this Agreement, attention: John S. Kirk,
Secretary, or to such other address as either party hereto shall notify the
other in writing in the manner prescribed in this Section 7. Notices may also
be accomplished by delivery in person with receipt to the applicable individual
recipient indicated above.
8. Prior Agreements. This Agreement and the exhibits attached hereto shall
cancel and supersede any and all prior agreements and undertakings between the
parties hereto, whether oral or written, respecting the employment of the
Executive by the
24
<PAGE>
Exhibit 10(o)
Company, except for stock options and other existing employee benefits which
have been previously awarded to or earned by the Executive.
9. Assignability and Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the heirs, executors, administrators and
legal representatives of the Executive, and shall inure to the benefit of and be
binding upon the Company and its successors and assigns, but the Executive may
not assign any of his obligations hereunder.
10. Complete Understanding. This Agreement, and the exhibits attached
hereto, constitute the complete understanding between the parties hereto with
respect to the employment of the Executive hereunder, and no statement,
representation, warranty or covenant has been made by either party with respect
hereto and thereto except as expressly set forth herein and therein. This
Agreement shall not be altered, modified, amended or terminated except by
written instrument signed by each of the parties hereto.
11. Severability. If any provision of this Agreement or any part hereof
is invalid, unlawful or incapable of being enforce by reason of any rule of law
or public policy, all other conditions and provisions of this Agreement which
can be given effect without such invalid, unlawful or unenforceable provision
shall, nevertheless, remain in full force and effect.
12. Warranty. The Executive represents and warrants that he is not a
party to any agreement, contract or understanding, whether relating to
employment or otherwise, which would in any way restrict or prohibit him from
undertaking or performing his obligations in accordance with the terms and
conditions of this Agreement.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Iowa.
IN WITNESS WHEREOF, the parties have executed this Agreement as the date and
year first above written.
CE SOFTWARE, INC. CHRISTIAN F. GURNEY
1801 Industrial Circle 4622 - 96th St.
West Des Moines, IA 50265 Des Moines, IA 50322
/s/ Curtis W. Lack /s/ Christian F. Gurney
by _____________________________ _______________________________
Curtis W. Lack, Secretary & Treasurer
CE SOFTWARE HOLDINGS, INC.
1801 Industrial Circle
West Des Moines, IA 50265
/s/ John S. Kirk
by _____________________________
John S. Kirk, Secretary & Treasurer
25
<PAGE>
Exhibit 10(o)
Exhibit A
Confidentiality Agreement
CONFIDENTIALITY AGREEMENT (the "Agreement") dated this July 11, 1997, by and
between CE SOFTWARE HOLDINGS, INC. (the "Company") and CHRISTIAN F. GURNEY
("Gurney").
Gurney agrees that during the term of this Agreement and for a period of three
years following the Termination Date, he:
a) Will use Company confidential information only within the scope of his
duties as an employee of the Company.
b) Will not disclosed confidential information to third parties not authorized
to receive it and then only in the best interest of the Company.
c) Will consider all specific software, algorithms, source code, computer
processing systems, products and techniques with which he becomes familiar as an
employee of Company to be confidential and the exclusive property of Company
which will not be converted or disclosed to anyone for any purpose whatsoever
except as approved by the Board of Directors. All records, files, memoranda,
reports, price lists, customer lists, drawings, plans, documents, equipment, and
the like, relating to the business of Company, which he shall use or prepare or
come into contact with, shall remain the sole property of Company.
For purposes of this Exhibit, confidential information of the Company shall
include the confidential information of the company, it's parent, CESH, and any
affiliated companies, whether such information has been learned by Gurney during
the term of this Agreement or during the period of employment by Gurney with the
Company prior to this Agreement.
CE SOFTWARE , INC. CHRISTIAN F. GURNEY
1801 Industrial Circle 4622 - 96th St.
West Des Moines, IA 50265 Des Moines, IA 50322
/s/ Curtis W. Lack /s/ Christain F. Gurney
by _____________________________ _______________________________
Curtis W. Lack, Secretary & Treasurer
26
<PAGE>
Exhibit 10(o)
Exhibit B
Stock Purchase Agreement
STOCK PURCHASE AGREEMENT (the "Agreement") dated this July 11, 1997, by and
between CE SOFTWARE HOLDINGS, INC. (the "Company") and CHRISTIAN F. GURNEY
("Gurney").
WITNESSETH:
WHEREAS, the Company wishes to sell, issue and transfer, and Gurney wishes to
purchase and acquire, for an aggregate consideration of $49,968.75, twenty
thousand five hundred shares (20,500 shares) (the "Executive Shares") of the
Company's Common Stock, par value $.10 per share (the "Common Stock"), subject
to and upon the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the premises and the mutually dependent
covenants and agreements herein contained, the parties hereto agree as follows:
1. The Company hereby sells, issues, transfers and delivers to Gurney the
Executive Shares against the simultaneous execution and delivery by Gurney to
the Company of the number of Executive Shares times $.10 in cash, representing
the par value of said shares, and a Promissory Note payable to the Company in
the amount of the product of the number of shares time the closing price of the
Common Stock as of the date of this Agreement in the form attached hereto and
made a part hereof (the "Purchase Note") as full payment thereof, all subject
to the terms and conditions hereof.
2. A. The parties acknowledge that this Agreement and the transactions
contemplated hereby are entered into in consideration of the employment of
Gurney by CE Software, Inc., the wholly owned operating subsidiary of the
Company, as its President, and of his duties as set forth in an Employment
Agreement executed contemporaneously with this Agreement. The parties further
acknowledge and agree that pursuant to the Company's National Market System
listing contract with the National Association of Securities Dealers Automated
Quotation System, this issuance of securities must be approved by the
shareholders of the Company. Therefore, the issuance of shares hereunder will
in all respects by subject to approval of the shareholders, which will be sought
at the next annual meeting or such earlier meeting as may otherwise be held, and
if such approval is not gained, the Company will repurchase the shares as if
Gurney were terminating his employment on that date.
B. The Company represents that the Executive Shares being issued, transferred
and delivered hereunder are a portion of the Company's authorized and unissued
Common Stock, that this transaction has been duly authorized and approved by all
requisite corporate action, and that the Executive Shares will upon receipt by
the Company of the cash payment and Purchase Note referenced herein be under
Delaware law deemed to be fully paid and non-assessable.
C. Gurney represents that he is purchasing and acquiring the Executive Shares
for his own account (and not for the account of any other person) for investment
purposes only and not for the purposes of resale.
27
<PAGE>
Exhibit 10(o)
D. Gurney represents that he is experienced in evaluating and making
investments of the type contemplated by this Agreement and is financially able
to bear the risks of such investment. Gurney is aware that the Company is
issuing and selling the Executive Shares in reliance upon the exemption from
registration provided in Section 4 (2) of the Securities Act of 1933, as amended
(the "1933 Act") and is relying on these representations, and agrees that the
Executive Shares may only be transferred if registered under the 1933 Act or
pursuant to an exemption therefrom. Gurney understands that Rule 144
promulgated under the 1933 Act is not generally available with respect to the
Executive Shares until one year after the Company has received payment in full
for the shares, and that compliance with an applicable exemption under the 1933
Act may be required for a sale or other disposition of the Executive Shares that
are not registered under the 1933 Act. Gurney agrees to the placement of the
following legend on certificates representing the Executive Shares:
THIS CERTIFICATE AND THE SHARES REPRESENTED THEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES AT OF 1933, AS AMENDED, AND ARE BEING HELD SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN STOCK PURCHASE AGREEMENT DATED JULY 11, 1997,
A COPY OF WHICH MAY BE EXAMINED AT THE OFFICES OF CE SOFTWARE HOLDINGS, INC.
WITH ITS PRINCIPAL OFFICE LOCATED AT 1801 INDUSTRIAL CIRCLE, WEST DES MOINES, IA
50265. SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE PLEDGED,
HYPOTHECATED OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF
1933, THE RULES AND REGULATIONS THEREUNDER AND THE TERMS AND CONDITIONS OF THE
AFORESAID AGREEMENT.
Gurney understands that so long as any legend may remain on the certificates
representing the Executive Shares, the Company may maintain appropriate "stop
transfer" orders with respect to such shares on its books and records and with
those to whom it may delegate registrar and transfer functions. Subject to the
approval of counsel for the Company, which approval shall no be unreasonably
withheld, Gurney shall be entitled to replacement certificates without the
legend(s) provided for in this subsection upon receipt by the Company from
Gurney of a favorable opinion from counsel to Gurney, reasonably satisfactory in
form and substance to the Company, that a proposed sale, pledge, exchange,
transfer or other disposition ("Transfer") of the Executive Shares is in
compliance with the 1933 Act and regulations promulgated thereunder, including
Rule 144. Gurney acknowledges that he is an affiliate of the Company and that
the volume restrictions of Rule 144 will continue to apply to any proposed
Transfer as long as he remains an affiliate of the Company, regardless of the
length of time the Executive Shares have been held. The Company agrees that any
stop transfer instructions and legend will be promptly removed upon the Transfer
of the Executive Shares in full compliance with the provisions of this
Agreement, the 1933 Act and applicable regulations.
Gurney further understands that as an officer or director of the Company or CESH
he is subject to Company and CESH restrictions which will affect his ability to
Transfer the Executive Shares.
3. In order to facilitate the transfer of all or a portion of the Executive
Shares to the Company as collateral security for the payment in full of the
Purchase Note when due, upon his receipt thereof, the Executive shall deposit
with the Company the certificates representing the Executive Shares in
negotiable form, accompanied by blank stock powers duly endorsed for transfer
and with all necessary stock transfer stamps (if any)
28
<PAGE>
Exhibit 10(o)
affixed. The Company shall hold such certificates for and on behalf of Gurney
until the Purchase Note shall have been paid in full. The Company shall upon
payment of principal and interest in full release the certificates and the stock
powers to Gurney and the Company shall no longer have any rights in respect
thereof. In the event that the Gurney fails to pay the entire unpaid principal
amount of the Purchase Note and interest thereon when due, then the Company
shall have the right to repurchase from Gurney that number of Executive Shares
which, when multiplied by the initial purchase price per share, is equal to the
unpaid portion of the Purchase Note. The repurchase price shall be offset
against the unpaid balanced due the Company under the Purchase Note.
4. In the event of a repurchase of the Executive Shares pursuant hereto, Gurney
hereby authorized the Company to complete, date and deliver to itself the stock
powers held by it pursuant to Section 3 above, together with certificates
representing those Executive Shares held on his behalf that are being
repurchased pursuant hereto, in order to effectuate the transactions set forth
in this Section 4, and Gurney shall have no further rights therein or thereto.
The repurchase price shall be offset against the unpaid balance due the Company
under the Purchase Note.
5. Any notice required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been given when mailed via certified mail,
return receipt requested, to the recipient at the address noted below, or to
such other address as either party hereto shall notify the other in writing in
the manner prescribed in this Section 5 (a notice to the Company shall be to
Attn: John S. Kirk, Secretary).
6. This Agreement shall inure to the benefit of and shall be binding upon the
heirs, executors, administrators and legal representatives of Gurney, and shall
inure to the benefit of and be binding upon the Company and its successors and
assigns, but Gurney may not assign any of his obligations hereunder.
7. This Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
CE SOFTWARE HOLDINGS, INC. CHRISTIAN F. GURNEY
1801 Industrial Circle 4622 - 96th St.
West Des Moines, IA 50265 Des Moines, IA 50322
/s/ John S. Kirk /s/ Christian F. Gurney
by _____________________________ _______________________________
John S. Kirk, Secretary & Treasurer
29
<PAGE>
Exhibit 10(o)
NON-RECOURSE PROMISSORY NOTE
$49,968.75 July 11, 1997
FOR VALUE RECEIVED, CHRISTIAN F. GURNEY ("Borrower"), promises to pay to the
order of CE SOFTWARE HOLDINGS, INC., a Delaware corporation with its principal
office at 1801 Industrial Circle, West Des Moines, IA 50265 ("Lender"), the
principal sum of forty-nine thousand nine hundred sixty-eight and 75/100 dollars
($49,968.75) ("Principal"), which will be due and payable on demand, but no
later than the earlier of the tenth (10th) anniversary of the date hereof or
one year after the Termination Date as set forth in Agreements, as herein after
defined. Interest on the unpaid balance of the Principal shall be payable on
the last day of each quarter of the Lender's fiscal year, commencing September
30, 1997 and shall accrue at the lowest applicable federal rate on each such day
as determined under Section 1274 of the Internal Revenue Code of 1986, as
amended, or any successor provision of such Code.
This Note is the Note referred to in, and is entitled to the benefits of, a
certain Stock Purchase Agreement, dated as of the date hereof, between Borrower
and Lender and a certain Executive Employment Agreement dated as of the date
hereof between and among Borrower, CE Software, Inc. and Lender (the
"Agreements"). Reference is made to the Agreements for additional terms of the
loan of the holder hereof and the right of Lender to repurchase from Borrower
certain shares of Common Stock of Lender which Borrower purchased from Lender on
the date hereof, and provisions requiring that 60% of any cash dividends and
distribution paid on the shares shall be withheld from Borrower and applied to
the Note until the Note is fully paid.
This Note may be prepaid, in whole or in part, at any time or from time to time,
without premium or penalty, subject however to the conditions and limitations
otherwise set forth in the Agreements.
Apart from dividend and distribution withholdings, all payments or prepayments
of principal shall be made by certified or bank check in United States dollars
to Lender at its address hereinbefore set forth, such bank as Lender shall have
previously designated to Borrower, or at the option of the holder, payment shall
be made in such manner and at such place in the United States of America as the
holder shall have designated to Borrower in writing.
Whenever any payment to be made hereunder shall be due on a Saturday, Sunday or
public holiday under the laws of the State of Iowa, such payment may be made on
the next succeeding business day.
Borrower hereby waives presentment, demand for payment (except for any initial
demand), notice of dishonor, protest and notice of protest of this Note.
Borrower agrees to pay all costs for collection when incurred, including
reasonable attorneys' fees. Borrower agrees to perform and comply with each of
the covenants, conditions, provisions and agreements of Borrower contained in
the Agreement and any instrument evidencing or securing the indebtedness
evidenced hereby. In the event that Borrower defaults in the performance of his
obligations and covenants under the provisions and conditions of this Note and
the Agreements, Lender shall be entitled to foreclose upon the collateral for
the entire amount of this Note. No personal recourse against the Borrower shall
be had by
30
<PAGE>
Exhibit 10(o)
Lender. No alteration, amendment or waiver of any provision of this Note, the
Agreements, or any agreement or instrument evidencing or providing security for
this Note, made by agreement of the holder hereof and any other person or party,
shall constitute a waiver of any other term hereof, or otherwise release or
discharge the liability of Borrower under this Note.
This Note is governed by and is to be construed in accordance with the laws of
the State of Delaware.
/s/ Christian F. Gurney
_____________________________
CHRISTIAN F. GURNEY
31
<PAGE>
EXHIBIT 11
CE SOFTWARE HOLDINGS, INC., AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE (LOSS) EARNINGS
(Not Covered by Auditors' Report)
<TABLE>
<CAPTION>
Primary Earnings per Share Information:
*1997 *1996 *1995
<S> <C> <C> <C>
Weighted average
number of shares
outstanding during
the year 1,104,736 1,148,216 1,147,903
Annualized additional
shares due to stock
options - 289 1,253
1,104,736 1,148,505 1,149,156
Net loss $(1,309,569) (1,398,567) (442,559)
Primary loss
per share $(1.19) (1.22) (.39)
Fully Diluted Earnings per Share
Information:
*1997 *1996 *1995
Weighted average
number of shares
outstanding during
the year 1,104,736 1,148,216 1,147,903
Annualized additional
shares due to stock
options - 603 1,631
1,104,736 1,148,819 1,149,534
Net loss $(1,309,569) (1,398,567) (442,559)
Fully diluted loss
per share $(1.19) (1.22) (.39)
</TABLE>
* All share amounts and per share earnings amounts have been restated to reflect
the effect of the 1 for 5 reverse stock split completed on June 30, 1997.
33
<PAGE>
EXHIBIT 21
CE SOFTWARE HOLDINGS, INC.
SUBSIDIARIES OF THE REGISTRANT
NAME STATE OF INCORPORATION
CE Software, Inc. . . . . . . . . . . . . . . . . . . . . .. . . . .Iowa
CE Distributing, Inc.. . . . . . . . . . . . . . . . . . . . . . . .Iowa
33
<PAGE>
Exhibit 23
The Board of Directors
CE Software Holdings, Inc.:
We consent to incorporation by reference in the registration statements (No's
33-54210 and 33-41037) on Form S-8 of CE Software Holdings, Inc. of our
report dated November 6, 1997, relating to the consolidated balance sheets of
CE Software Holdings, Inc. and subsidiaries as of September 30, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
September 30, 1997, which report appears in the September 30, 1997 Form 10-
KSB of CE Software Holdings, Inc.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Des Moines, Iowa
December 20, 1997
34
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,454,434
<SECURITIES> 490,957
<RECEIVABLES> 1,016,262
<ALLOWANCES> 91,800
<INVENTORY> 743,111
<CURRENT-ASSETS> 4,103,541
<PP&E> 4,627,697
<DEPRECIATION> 2,410,190
<TOTAL-ASSETS> 6,772,519
<CURRENT-LIABILITIES> 944,235
<BONDS> 834,253
0
109,590
<COMMON> 109,590
<OTHER-SE> 4,884,441
<TOTAL-LIABILITY-AND-EQUITY> 6,772,519
<SALES> 7,056,072
<TOTAL-REVENUES> 7,056,072
<CGS> 1,212,496
<TOTAL-COSTS> 1,212,496
<OTHER-EXPENSES> 7,069,673
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83,472
<INCOME-PRETAX> (1,309,569)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,309,569)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,309,569)
<EPS-PRIMARY> (1.19)
<EPS-DILUTED> (1.19)
