<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 10-SB
AMENDMENT NO. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
CAPRI CORP.
(Name of Small Business Issuer in Its Charter)
MINNESOTA 41-1704533
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2301 WEST 22ND STREET, SUITE 203, OAK BROOK, ILLINOIS 60523
(Address of Principal Executive Offices) (Zip Code)
(630) 645-0145
Issuer's Telephone Number
Securities to be registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
<PAGE> 2
PART I
The Issuer has elected to follow Form 10-SB, Disclosure Alternative 2.
ITEM 6. DESCRIPTION OF BUSINESS.
GENERAL. Capri Corp. is engaged in developing computer software that
records, organizes and provides access to real-time, integrated manufacturing
information for use by printed circuit board (PCB) manufacturers. The software
provides access to information at the manufacturing plant level as it is
created, such as engineering information, production scheduling, quality control
reports and levels and types of inventory being produced. Licenses to use the
software are marketed and sold under the trademarks Paradigm(R) and Paradeim(R).
In addition, the Company provides technical support and user training and
distributes certain hardware and third party software.
Capri Corp. carries on all of its business through its predecessor
entity and wholly-owned operating subsidiary, Cimnet Systems, Inc., formed in
1988, ("Cimnet") and Cimnet's subsidiaries, all of which are wholly-owned.
Cimnet's subsidiaries are Cimnet Informationssysteme GmbH, a German limited
liability corporation, Cimnet Systems I Private Limited, an India private
limited company and Cimnet Systems Asia Pacific Limited, a corporation formed
under the laws of Hong Kong. In this Registration Statement, the term "Company"
is used to refer collectively to Capri Corp., Cimnet and Cimnet's subsidiaries.
Capri Corp.'s common stock is currently quoted on the electronic "Pink
Sheets" of the National Quotation Bureau and, upon the effectiveness of this
Registration Statement, Capri Corp. intends to apply to have its common stock
quoted on the NASD OTC Bulletin Board, where it was quoted prior to October,
1999.
The Company's principal executive offices are located at 2301 West 22nd
Street, Suite 203, Oak Brook, Illinois 60523, its telephone number is (630)
645-0145 and its website address is www.cimnetsys.com.
In 1988, the founders of the Company recognized the following:
- The market conditions within the manufacturing software
marketplace were creating an opportunity for highly specialized
information systems designed for the PCB industry;
- The increasing need for manufacturing organizations to become more
efficient due to increasing global competition;
- The increasing use of client/server platforms as opposed to
mini/mainframe operating systems; and
- The increasing access to information processing due to the
decreased cost of computing power.
1
<PAGE> 3
The Company sought to capitalize on these conditions by offering
Paradigm(R), one of the first information systems designed to be used on a
manufacturer's own personal computer network. Paradigm(R) records and provides
access to real time information on manufacturing activities that are plant
specific. Traditional personal computer networked information systems have
operated at the enterprise level, as opposed to the specific plant level, and
were designed to concentrate on supply chain management, finance and automation
of management's business processes. These traditional "horizontal" information
systems are often referred to as "enterprise resource planning" systems, or
"ERP" systems, to reflect their more generic and less manufacturer-specific
functionality. Alternatively, Paradigm(R), which the Company refers to as a
"specialized" enterprise resource planning system, or "S/ERP", concentrates on
the integration of information for a specific type of manufacturer, presently
manufacturers of printed circuit boards. The manufacture of printed circuit
boards, which involves the embedding of conducting metal in patterns on an
insulated board with semiconductors to create electric circuits, requires
engineering to a customer's specific order requirements. Paradigm(R)
incorporates software technologies along with manufacturing concepts such as
"Total Quality Management" and "Just In Time" production scheduling and
inventory control which fit how PCB manufacturers operate their manufacturing
facilities to serve their customers. The Paradigm(R) system includes features
such as automation of the engineering design process, statistical process
control, plant maintenance, and real-time scheduling, which reduce manufacturing
cycle times, reduce the level of inventories that need to be carried by the
manufacturer, improve purchasing efficiency and allow for the more effective
deployment of personnel and productive assets through access to current,
specific and relevant information in the manufacturing process. The Company
believes that this set of features and functionalities has provided the Company
with a significant competitive advantage over other system suppliers.
The Company is investigating additional marketing initiatives to
support growth and long term viability. Strategies currently under consideration
include diversification outside of the PCB industry and improving market share
within the PCB industry, both geographically and through new product offerings.
PRODUCTS AND SERVICES. The Company believes its software product,
Paradigm,(R) provides a fully integrated set of superior capabilities that
improves speed, cost, efficiency and flexibility in the manufacturing of printed
circuit boards. Some of the critical success factors in the PCB manufacturing
industry, such as reducing manufacturing cycle time, eliminating manufacturing
waste and inefficiency, tightening manufacturing process controls, and achieving
superior customer responsiveness, can be greatly improved by the real time
information gathering, organizing and access capabilities built into
Paradigm(R).
The components of the Company's offerings are:
- Software
- Installation, Training, and Consultation
- Software Maintenance
- Custom Programming Services
- Hardware and Network Services
2
<PAGE> 4
Software. Paradigm(R) supports state-of-the-art manufacturing
concepts such as "Just in Time" and "Activity Based Management". The Company
believes Paradigm(R) is the most advanced engineering, production, planning, and
material control software ever developed for the PCB manufacturing industry. The
full Paradigm(R) system is comprised of the following set of 20 integrated
programs, called "modules", which provide the following functions:
- Data Control - Sales Forecasting
- Sales Control - Lot/Serial Tracking
- Material Control - JIT ("Just-In-Time")
- Production Control Delivery Performance
- Master Scheduling - Cycle-Time Performance
- Financial Control - Plant Maintenance
- Intelligent Engineering - Statistical Process Control
- Report Generation - EDI (Electronic Data
- Executive Information System Interchange) Interface
- Bar Coding and Data Collection - RFQ (Request For Quotation)
Interface
- Shop Floor Monitor
- System Administration
These modules are priced individually and licensed for a specific
number of authorized users. Typical software license fees for a small
installation (10 users) are approximately $100,000 while a large installation
(100 users) may exceed $500,000.
The Company has recently introduced Paradigm(R) LT - an entry-level
system designed for smaller and emerging PCB manufacturing companies. This new
product offers some of the basic core functionality at a lower cost to companies
that in the past have been unable to consider installing the full Paradigm(R)
system at their facilities. The Paradigm(R) LT product is limited to a maximum
of 15 users with an average list price of $50,000.
In connection with the licensing of Paradigm(R), the Company is also an
authorized reseller of complementary software products such as Oracle
Corporation's Oracle(R) 7 Workgroup Server (TM) and Oracle(R) 7 Server
Enterprise Edition (TM), Cognos(R)'s Impromptu(R) and Powerplay(R), Pervasive
Software, Inc.'s PSQL(R), NextPage, LC's Folio Views(R) and certain of
Computerwise(R), Inc.'s bar code data collection products. The revenues derived
from these activities do not represent a material portion of the Company's
revenues.
The Company devotes significant resources to enhancing Paradigm(R) by
developing and expanding modules for its customers. During the fiscal years
ended June 30, 1999 and June 30, 1998, the Company invested approximately
$739,000 and $524,000, respectively, in research and development activities, of
which approximately $380,000 and $227,000, respectively, were charged to
expense. The remaining balances of $359,000 and $297,000, respectively, were
capitalized and will be charged to expense in future periods.
3
<PAGE> 5
Installation, Training and Consultation. These services are
provided as separate billable services for assisting customers with the
implementation of the Paradigm(R) system. Additionally, the Company offers
education covering manufacturing concepts and methodologies as well as technical
issues. Training and consultation is typically provided at the customer location
to provide hands-on assistance. Typical revenues for these services range from
$10,000 for a small installation to more than $50,000 for a large installation.
The Company believes the potential for generating additional revenues in this
area is significant.
Software Maintenance. Software maintenance is offered on a
contractual basis to each customer licensing the Paradigm(R) software. The
software maintenance entitles the customer to support and software enhancements.
The annual maintenance fee is typically 15% of the software license fee.
Custom Programming Services. Although the Company primarily
offers a standard product to its customers, special custom programming services
are available for developing interfaces to other systems. With an Asian
operation based in India, the Company will have access to highly talented
programmers at a much lower cost, creating an opportunity to expand its custom
programming services.
COMPETITION. Although the Company competes with other companies
producing software written specifically for the PCB industry, the Company
believes that its products are more comprehensive and its sales of software to
the PCB manufacturing industry are significantly greater than any of these
specialized competitors. In addition, the Company also competes with software
programs of general manufacturing application and certain non-integrated
programs which have been developed internally by PCB manufacturers.
Capital barriers to entry into competition with Paradigm(R) and other
computer software programs being developed by the Company are low. In addition,
many program development companies are larger and better financed than the
Company. There is no barrier to such companies producing programs which would
compete directly with those of the Company.
REVENUE AND WORKING CAPITAL. The Company's revenues fluctuate from
quarter to quarter throughout any fiscal year and between fiscal years. These
quarterly fluctuations are the result of two principal factors:
- Because of the relatively small number of installations each year
and the large amount of revenue derived from each installation,
each new Paradigm(R) software license agreement has a significant
impact on the Company's reported revenue. Given the long lead
times inherent in the process of acquiring a complex information
system such as Paradigm(R) and the technical and commercial terms
contained in a license agreement, the Company has little ability
to influence the actual timing of a customer's execution of a
license agreement.
- Many of the license agreements for Paradigm(R) entered into by the
Company carry terms and conditions which require the Company to
recognize revenue over an extended period and only after certain
conditions are met.
4
<PAGE> 6
The Company's principal assets are cash and accounts receivable, which
are in turn used to fund payroll and growth. During the fiscal year ended June
30, 1999, and continuing into the current fiscal year, the Company has invested
heavily in its professional staff, equipment and infrastructure while
aggressively pursuing its commitment to a global growth strategy. During the
current fiscal year, the Company has established subsidiaries in India and Hong
Kong in order to provide a more focused approach to customer service in the
Pacific Rim countries. Additionally, the Company has formed strategic sales
representative alliances with companies in Taiwan and Europe to expand its sales
coverage in those areas. It is expected that these sales representative
alliances will generally function as commission sales agents. All revenues and
commission expense will be recorded according to the specific conditions of the
respective license agreement and sales representative agreement relative to the
sale of each license. The Company is currently negotiating a Japanese
distributorship relationship, the terms of which have yet to be agreed upon. The
Company expects to recognize revenues, which will be limited to the amount the
Company can charge the distributor under the terms of a distributor agreement
currently under consideration, when the distributor finalizes a sale with its
customer.
The Company typically receives payment for its software licenses and
services in contracted installments during the course of a Paradigm(R) system
installation. The Company's continuing penetration of the larger user market,
while providing proportionally larger revenue per license agreement than that of
its historical smaller user customer base, requires a longer implementation
cycle. Customer information requirements are becoming more complex and the
information systems, which Paradigm(R) must interface with, tend to be
increasingly more sophisticated. This increases both the cost and complexity of
any software customization and the corresponding system implementation
timeframe. The accounts receivable cycle is naturally extended as a result of
the these factors. The Company collects revenues for maintenance services on a
quarterly basis. These revenues are based on a percentage of the software
license fee, and therefore provide a relatively stable and recurring revenue and
cash flow stream.
The Company has historically invested its excess cash in short-term
cash equivalents of less than three months through its bank. In the current
fiscal year, the Company has begun investing its excess cash in short-term
government bonds and high-grade commercial paper. These investments, while still
considered cash equivalents for reporting purposes, enable the Company to spread
and reduce investment risk while maximizing yield.
The Company entered into a revolving credit agreement with American
National Bank and Trust Company of Chicago, dated October 30, 1999, which
provides an open line of credit of up to five hundred thousand dollars
($500,000). This line of credit, which expires on October 30, 2000, provides for
interest at one percent over the published prime rate of the bank on funds used,
and is secured by the assets of the Company and it's domestic subsidiary. As of
February 18, 2000 the Company had made no draws on this line of credit.
EMPLOYEES AND LABOR RELATIONS. As of June 30, 1999, the Company had 33
employees. The Company believes that this staffing will be sufficient to manage
the Company and carry out its current base of business. Staffing will need to be
increased to meet future operational requirements. The employees are not members
of any collective bargaining unit. The Company believes that relations with its
employees are good. There were no work stoppages in the fiscal year ended June
30, 1999 and none are expected in the fiscal year ending June 30, 2000.
5
<PAGE> 7
CUSTOMERS. Current customers of the Company include six of the ten
largest PCB producers in the world today.
MARKETING. The Company's fundamental marketing strategy has been to
focus on printed circuit board manufacturers, a specific vertical segment within
the manufacturing industry. The Company competes within the global manufacturing
software market by providing goods and services that have specific capabilities
for the printed circuit board manufacturing industry. The Company believes that
this approach has allowed it to gain market leadership in this targeted process
flow manufacturing niche by providing products and services which meet the
specific needs of these manufacturers.
In order to gain market share and visibility within the PCB
manufacturing industry the Company continues to attend numerous trade shows in
North America, Europe, and Asia. Combined with a targeted ad campaign and
selected mailings, the Company has been successful in selling its products to
many PCB manufacturing companies around the world.
The Company has entered into agreements with sales representatives to
market licenses for its products in Belgium, China, France, Germany, Hong Kong,
Italy, Korea, Malaysia, Netherlands, Portugal, Scandinavia, Singapore, South
Korea, Spain, Switzerland, Thailand and the United Kingdom. These companies
operate as contracted sales representatives for the Company and perform specific
services within defined territories on a commission basis. Sales revenues and
commission expenses are recognized by the Company when the Company enters into a
license agreement with a customer that a representative has identified and
qualified as a potential licensee of the Company's products. The remaining
markets are being pursued mainly through direct sales efforts.
The Company and certain of its customers have created an active
Paradigm(R) Users Group which discusses product enhancements, future releases
and new features. The users group conducts regularly scheduled conference calls
and holds an annual meeting. The Company believes that the existence of such a
users group creates increased customer goodwill and also serves as an important
source for product critiques and suggestions for future product enhancements.
Having successfully installed Paradigm(R) at nearly 100 different
locations, the Company believes it is the leading information systems supplier
to the PCB manufacturing market. Future marketing plans within the PCB
manufacturing market involve the following:
- Marketing services to large PCB producers who have grown through
acquisitions.
- Addressing the large concentrations of PCB companies in Taiwan,
Japan, and the emerging markets in China.
6
<PAGE> 8
FOREIGN OPERATIONS. The Company conducts its foreign operations
primarily through its subsidiaries. The Company's foreign sales efforts are
augmented by certain strategic alliances with local companies in key market
areas. These companies operate as commissioned sales representatives for the
Company and perform specific services within defined territories.
In the summer of 1991, the Company formed a wholly owned subsidiary,
Cimnet Informationssysteme GmbH in Munich, Germany, to address the requirements
of the European PCB market. Today, the Paradigm(R) system has been fully
translated into German. Currently, Cimnet Informationssysteme GmbH is staffed
with a highly technical, multi-lingual staff capable of installing, training,
and supporting the Company's European customers.
On July 3, 1999, the Company formed an Asian sales and support office
based in Bangalore, India, incorporated as Cimnet Systems India Private Limited.
This office will be the base for future growth within the Pacific Rim. In
addition to providing a direct presence in the Asian market, India offers a
highly talented workforce at a lower cost. Future plans include the potential of
expanding product development capabilities into India by taking advantage of
this lower cost labor supply.
In November, 1999, the Company formed a wholly owned subsidiary in Hong
Kong, to provide a local presence in the important PCB manufacturing community
in the Far East. Through hiring skilled local programming and other technical
personnel, the Company plans to provide local technical and installation support
to its customers. In addition, the Company has established sales representative
relationships to serve the Far East marketplace and is negotiating a
distributorship arrangement to serve the Japanese market, as described under
"Revenue and Working Capital." Paradigm(R) is currently being translated into
Chinese and Japanese.
PATENTS, TRADEMARKS AND LICENSES. The Company's performance and its
ability to compete are dependent, to a significant degree, on its proprietary
products. The Company relies on a combination of copyright, trade secret and
trademark laws, with parallel contractual provisions incorporated into the
software license agreements in place with all customers, as well as proprietary
rights assignment, confidentiality, non-disclosure, and non-compete agreements
executed by employees and consultants as a means of establishing and protecting
its proprietary interests. Paradigm(R), the registered U.S. trademark of Cimnet,
was granted to Cimnet on January 26, 1993. In Germany, the software carries the
registered trademark of Paradeim(R).
In connection with the licensing of Paradigm(R), the Company is also an
authorized reseller of complementary software products such as Oracle
Corporation's Oracle(R) 7 Workgroup Server (TM) and Oracle(R) 7 Server
Enterprise Edition (TM), Cognos(R)'s Impromptu(R) and Powerplay(R), Pervasive
Software, Inc.'s PSQL(R), NextPage, LC's Folio Views(R) and certain of
Computerwise(R), Inc.'s bar code data collection products. No officer, director
or employee of the Company or any of its operating subsidiaries holds any
license or trademark that is critical to the operation of the Company.
RISK FACTORS. The Common Stock of the Company involves a high degree of
risk and is intended for long term investment. The following specific risk
factors should be read in light of the more complete discussion elsewhere in
this Registration Statement.
7
<PAGE> 9
Dependence on One Product. The Company is currently
marketing/licensing only one product, Paradigm(R). In addition to fees collected
from licensing Paradigm(R), the Company also collects fees for support and
maintenance, enhancement, and implementation of the software and training. There
is no assurance that it will be able to successively develop or market any
additional products or that it will be able to continue to successfully market
its current product.
Competition. The business of developing, marketing and
licensing computer software programs is fiercely competitive and entry barriers
into this business are relatively minimal. The vast majority of current and
potential competitors of the Company are better capitalized, have greater name
recognition, and are better staffed than the Company.
No Dividends. The Company intends to retain all working
capital for the growth of the Company and, as a result, has not, and does not
intend to, pay any dividends within the foreseeable future.
Dependence on Current Management. The Company depends upon the
current management for the development and marketing of computer software
programs. In particular, the loss of Mehul J. Dave or P. Balasubramanian would
seriously hamper the operations and continued viability of the Company.
Financial Position of the Company. The Company will have a
continuing need for working capital in the future for the development of new
computer software programs; however, the management of the Company has no
definitive plans at this time for obtaining such working capital.
ITEM 7. DESCRIPTION OF PROPERTY.
The Company is headquartered in approximately 5300 square feet of
leased space at 2301 West 22nd Street, Suite 203, Oak Brook, Illinois. The
Company is currently negotiating the lease of approximately 9000 square feet of
office space in Downers Grove, Illinois where the Company plans to relocate its
headquarters during the second calendar quarter of 2000. The Company also leases
office space in Munich, Germany, Bangalore, India and Hong Kong.
ITEM 8. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES.
Below are the names, ages, positions with the Company and business
experience for the last five years of the executive officers and directors of
Capri Corp.
8
<PAGE> 10
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
Mehul J. Dave President and Chairman of the Board of Directors 44
P. Balasubramanian Executive Vice President, Secretary, Treasurer and 43
Director
David L. Harris Vice President (Cimnet) 57
Robert W. Heller Director 53
Thomas Mueller Director 58
Jason W. Levin Director 41
</TABLE>
MEHUL J. DAVE, Director, Chairman of the Board and President of the
Company, from 1992 to present and President and Chief Executive Officer of
Cimnet from 1988 to present. Mr. Dave holds a Masters Degree in Environmental
Systems from Governors State University, a Bachelors Degree in Mechanical
Engineering from Illinois Institute of Technology, and has completed coursework
towards a Ph.D. in Space Physics at the University of Michigan. Mr. Dave is
responsible for the overall operation of the Company including product
development, marketing and sales, financing and accounting and administration.
P. BALASUBRAMANIAN, Director, Executive Vice President, Secretary and
Treasurer of Company, from 1992 to present; Vice President of Software
Engineering of Cimnet, from 1988 to present. Mr. Balasubramanian holds a Masters
Degree in Computer Science from Illinois Institute of Technology and a Bachelors
Degree in Mechanical Engineering from Annamalai University. Mr. Balasubramanian
is responsible for the development staff of software engineers of Cimnet.
DAVID L. HARRIS, Vice President-Marketing, Sales and Services of
Cimnet. Mr. Harris has been employed by the Company since 1998. From 1997 to
1998, Mr. Harris was a principal and owner of DLH & Associates, a consulting
firm to the semiconductor, PWB and capital equipment industries. From 1995 to
1997, Mr. Harris was Vice President- Sales, Marketing and Services of Semitool,
Inc, a seller of capital equipment to the semiconductor industry, and from 1983
to 1995, Mr. Harris was a General Manager in WR Grace's photopolymer systems
business. Mr. Harris holds a Bachelor's Degree in Marketing and Economics from
the University of Maryland and a Certificate in Business Management from MIT's
Greater Boston Executive Program.
ROBERT W. HELLER, Director of the Company, September, 1996 to present.
Mr. Heller is currently an independent consultant. From 1998 to 1999, Mr. Heller
was Vice President of Operations at Fieldworks, Inc. From 1996 to 1997, Mr.
Heller was Chief Executive Officer of MiTech R&D Inc., and was Chief Executive
Officer of Advance Circuits Inc. from 1994 to 1995. Mr. Heller holds a Masters
Degree in Industrial Engineering from North Dakota State University and a
Bachelors Degree in Industrial Administration from Purdue University.
9
<PAGE> 11
THOMAS MUELLER, Director of the Company, 1997 to present. Mr. Mueller
has been Vice President of Finance since 1995 of Help/Systems, a manufacturer of
operations automation software for the IBM AS/400 computer. Mr. Mueller is a
Certified Public Accountant and a member of the American Institute of Certified
Public Accountants and Minnesota Society of Certified Public Accountants. Mr.
Mueller holds a Bachelors Degree in Accounting from the University of Minnesota.
JASON W. LEVIN, Director of the Company, 1997 to present. Mr. Levin has
been a partner in the law firm of Piper Marbury Rudnick & Wolfe, counsel to the
Company, from 1998 to present and a partner in the law firm of Fagel & Haber,
from 1989 to 1998. Mr. Levin is a director of Strube Celery and Vegetable
Company, a corporation engaged in the wholesale distribution of fresh fruits and
vegetables in the Midwestern United States, and a member of the Board of
Managers of the Logan Square Club of the Boys and Girls Club of Chicago. Mr.
Levin holds a Bachelor of Science Degree in Finance and a Juris Doctor degree
from Indiana University.
Each of the Company's directors were appointed to serve as directors on
May 6, 1999, and each will hold office until the next annual meeting of
shareholders. No director has resigned since May 6, 1999 and no director has
declined to stand for re-election in 2000. Each of the Company's executive
officers were elected on May 6, 1999, and each will hold office until the next
annual board of directors meeting. The term of office of each director expires
at each annual meeting of shareholders and upon the election and qualification
of his successor. Except for Messrs. Dave, Balasubramanian, and Harris, who are
subject to contracts of employment with the Company, there are no arrangements
with any director or officer regarding any election or appointment to any office
of the Company.
There are no family relationship between any director or executive
officer of the Company. No director, executive officer or significant employee
of the Company, during the prior five years, (i) has filed a petition under the
Bankruptcy Act or any State insolvency law or has had the same filed against
him, or has had a receiver, fiscal agent or similar officer appointed by a court
for the business or property of such person, or any partnership in which he was
a general partner at or within two years before the time of such filing, or any
corporation or business association of which he was an executive officer at or
within two years before the time of such filing; or (ii) has been convicted in a
criminal proceeding.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS.
The following table sets forth (i) the aggregate remuneration of each
of the three highest paid persons who are officers or directors of the Company
during the Company's last fiscal year (the "Named Parties") and (ii) the
aggregate remuneration of all officers and directors of the Company as a group.
10
<PAGE> 12
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR CAPACITIES IN WHICH AGGREGATE
IDENTITY OF GROUP REMUNERATION WAS RECEIVED REMUNERATION
- --------------------- ------------------------- ------------
<S> <C> <C>
Mehul J. Dave President $242,022
P. Balasubramanian Secretary/Treasurer $177,767
David L. Harris Vice President (Cimnet) $ 57,936
All Officers and
Directors as a
Group (6) $479,725
</TABLE>
The above table includes all cash remuneration and is presented on an
accrual basis. The Company also pays certain automobile expenses and life
insurance premiums for Messrs. Dave and Balasubramanian. Each of Messrs. Dave,
Balasubramanian and Harris has an employment agreement with the Company which
provides for a variable annual salary and bonus. All outside directors, except
Mr. Levin, receive $1,000 for each regular Board of Directors meeting attended
and $400 for each special Board of Directors Meeting attended.
ITEM 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS.
(a) The following table sets forth information as to the record
ownership of the Company's Common Stock by the (i) Named Parties, (ii) the
officers and directors as a group and (iii) each person who owns more than 10%
or more of Capri Corp.'s Common Stock.
<TABLE>
<CAPTION>
NAME OF OWNER(1) AMOUNT OWNED PERCENT OF CLASS
- ------------- ------------ ----------------
<S> <C> <C>
Mehul J. Dave 4,745,000 38.6
P. Balasubramanian 1,375,000 11.2
All Officers and
Directors as a
Group (6) 6,582,000 53.6
</TABLE>
(1) The address of each of Messrs. Dave and Balasubramanian is 2301
West 22nd Street, Suite 203, Oak Brook, Illinois.
(b) The following table sets forth information as to options, warrants
and other rights to purchase Common Stock held by the Named Parties:
<TABLE>
<CAPTION>
AMOUNT OF COMMON
STOCK SUBJECT TO OPTIONS, EXERCISE PRICE
NAME OF OWNER WARRANTS OR RIGHTS PER SHARE
- ------------- ------------------------ --------------
<S> <C> <C>
Mehul J. Dave 100,000 $0.044
P. Balasubramanian 150,000 $0.044
David L. Harris 300,000(1) $0.600
</TABLE>
(1) 75,000 currently exercisable. The remaining 225,000 options vest
in 3 equal annual installments.
11
<PAGE> 13
ITEM 11. INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
Jason W. Levin, a director of the Company, is a partner in the law firm
of Piper Marbury Rudnick & Wolfe, counsel to the Company. With the exception of
Mr. Levin's indirect interest, during the last two years, the Company has not
engaged in any material transaction, and there is no presently proposed
transaction, in which any director, officer or principal security holder of the
Company, any nominee for election as a director of the Company, any director or
officer of any subsidiary of the Company, or any relative or spouse of any of
the foregoing, had or is anticipated to have a direct or indirect material
interest.
ITEM 12. SECURITIES BEING REGISTERED.
Common Stock is the only class of shares of the Company currently
authorized. The following sets forth certain material terms of the Common Stock.
VOTING RIGHTS. The holder of a share of Common Stock is entitled to one
vote for all purposes. Cumulative voting is not permitted in the election of
directors. Accordingly, the holders of more than 50% of all of the outstanding
shares of Common Stock may elect all of the directors. Significant corporate
transactions such as amendments to the Certificate of Incorporation, mergers,
sale of assets and dissolution or liquidation of the Company requires the
approval by the affirmative vote of the holders of at least a majority the
outstanding shares of Common Stock. Other matters to be voted upon by the
holders of Common Stock normally require the affirmative vote of a majority of
the shares present at the particular shareholders meeting.
DIVIDEND RIGHTS. The holder of a share of Common Stock is entitled to
participate pro rata in dividends paid by the Company, which may be declared,
from time to time, by the Board of Directors out of funds of the Company legally
available for the payment of dividends. The declaration in the future of any
cash or stock dividends will be at the discretion of the Board of Directors and
will depend upon the earnings, capital requirements, and financial position of
the Company, general economic conditions, and other pertinent factors. There is
no assurance that any dividends will be paid in the near future as the Company
has no present plans to pay dividends. Receipt of dividends may also be subject
to claims of any preferred stock issued by Capri Corp. Capri Corp. is presently
not authorized to issue preferred stock and has no present plans to obtain such
authorization.
12
<PAGE> 14
LIQUIDATION RIGHTS. Each share of Common Stock shares pro rata with
each other share of Common Stock in any distribution in any liquidation of the
Company. Such rights will be subject to the prior claims of creditors of the
Company.
PREEMPTIVE RIGHTS, CONVERSION RIGHTS, REDEMPTION PROVISIONS, SINKING
FUND PROVISION AND LIABILITY TO FURTHER CALLS AND ASSESSMENTS. There are no
preemptive or conversion rights, redemption provisions, or sinking fund
provisions relating to the Common Stock. All currently outstanding shares of
Common Stock are fully paid and nonassessable. The rights of holders of the
existing class of Common Stock may in the future become subject to prior and
superior rights and preferences in the event the Board of Directors establishes
one or more classes or series of capital stock of the Company. The Board of
Directors has no present plan to establish any such class or series.
13
<PAGE> 15
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS.
Since October 8, 1999, the Common Stock has been quoted on the
electronic "pink sheets" of the National Quotation Bureau under the symbol
"CAPI". From September 20, 1991 through October 7, 1999, the common stock was
quoted on the NASD OTC Bulletin Board, also under the symbol "CAPI". The
following table provides the quarterly high and low bids per share of Common
Stock reported on the pink sheets or the OTC Bulletin Board, as applicable. The
following quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions. No
distributions have been declared on the Common Stock. The Company has a June 30
fiscal year end.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1998
- -----------
First Quarter $.31 $.23
Second Quarter .31 .24
Third Quarter .27 .13
Fourth Quarter .31 .15
HIGH LOW
---- ---
FISCAL 1999
- -----------
First Quarter $.19 $.13
Second Quarter .40 .16
Third Quarter .70 .40
Fourth Quarter .69 .50
HIGH LOW
---- ---
FISCAL 2000
- -----------
First Quarter $.94 $.49
Second Quarter .50 .25
Third Quarter (through February 17, 2000) 1.75 .90
</TABLE>
As of October 31, 1999, the Company's transfer agent reported 316
record holders of the Common Stock.
ITEM 2. LEGAL PROCEEDINGS.
In September, 1999, the Company's wholly-owned subsidiary, Cimnet
Systems, Inc., received a letter on behalf of Cimnet, Inc., alleging Cimnet's
use of its tradename, Cimnet Systems, Inc., appeared to present a source of harm
to Cimnet, Inc. While Cimnet is still investigating the allegation of Cimnet,
Inc., Cimnet believes it has superior rights in its tradename, Cimnet Systems,
Inc., to those rights, if any, of Cimnet, Inc. To the Company's knowledge, no
legal process has been instituted by Cimnet, Inc. against Cimnet with respect to
this matter.
14
<PAGE> 16
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three year period, the following unregistered sales of
Common Stock were made by the Company. The following table sets forth the
individuals, the date purchased, and the number of shares. All transactions were
for exercised stock options. The Company relied on the exemptions provided by
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act")
and Rule 701 promulgated under the Securities Act in making these unregistered
sales.
<TABLE>
<CAPTION>
DATE OF NUMBER EXERCISE PRICE PER
NAME EXERCISE OF SHARES PER SHARE
---- -------- --------- ------------------
<S> <C> <C> <C>
John Kim July, 1996 150,000 $0.04
Harish Padukone January, 1997 20,000 $0.04
Bryce Crapse August, 1997 30,000 $0.35
Harish Padukone January, 1999 10,000 $0.04
</TABLE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 302A.521 of the Minnesota Statutes permits indemnification of
officers and directors of domestic or foreign corporations under certain
circumstances and subject to certain limitations. Capri Corp.'s Certificate of
Incorporation and Bylaws contain provisions for indemnification of the Company's
directors, officers, and employees consistent with the provisions of Section
302A.521 of the Minnesota Statutes.
15
<PAGE> 17
PART F/S
The following financial statements of the Company are included herein:
AUDITED ANNUAL FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1999
AND 1998
(a) Independent Auditor's Report
(b) Consolidated Balance Sheets
(c) Consolidated Statements of Operations
(d) Consolidated Statements of Stockholders' Equity
(e) Consolidated Statements of Cash Flows
(f) Notes to Consolidated Financial Statements
UNAUDITED INTERIM FINANCIAL STATEMENTS
(a) Consolidated Balance Sheet for the Six Months ended December 31,
1999
(b) Consolidated Statements of Income for the Three Months and Six
Months ended December 31, 1999 and 1998
(c) Consolidated Statements of Stockholders' Equity for the Six Months
ended December 31, 1999 and 1998
(d) Consolidated Statements of Cash Flows for the Three and Six Months
ended December 31, 1999 and 1998
16
<PAGE> 18
Independent Auditor's Report
To the Board of Directors of
Capri Corp.
Oak Brook, Illinois
We have audited the consolidated balance sheets of Capri Corp. and Subsidiary as
of June 30, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Capri Corp. and
Subsidiary as of June 30, 1999 and 1998, and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Klesman, Halper & Co., P.C.
August 20, 1999
<PAGE> 19
Capri Corp. and Subsidiary
Consolidated Balance Sheets
June 30, 1999 and 1998
<TABLE>
<CAPTION>
Assets
1999 1998
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,769,628 $ 1,225,667
Trade receivables, net of allowance
for doubtful accounts of $192,639
in 1999 and $123,244 in 1998 2,083,508 1,770,384
Other current assets 33,671 28,031
----------- -----------
Total current assets 3,886,807 3,024,082
Fixed assets, net 293,415 270,019
Unamortized software development costs 638,288 442,000
Other assets 98,000 --
----------- -----------
Total assets $ 4,916,510 $ 3,736,101
=========== ===========
Liabilities and stockholders' equity
Liabilities:
Current liabilities:
Accounts payable $ 8,339 $ 59,271
Accrued expenses 458,964 214,002
Customer advances and deferred sales 204,000 229,056
Other current liabilities 516,469 385,581
----------- -----------
Total current liabilities 1,187,772 887,910
Non-current liabilities:
Deferred income taxes 207,534 154,877
----------- -----------
Total liabilities 1,395,306 1,042,787
----------- -----------
Stockholders' equity:
Common stock 122,853 122,753
Additional paid-in capital 1,197,538 1,197,238
Retained earnings 2,269,577 1,425,376
Foreign currency translation (68,764) (52,053)
----------- -----------
Total stockholders' equity 3,521,204 2,693,314
----------- -----------
Total liabilities and
stockholders' equity $ 4,916,510 $ 3,736,101
=========== ===========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
<PAGE> 20
Capri Corp. and Subsidiary
Consolidated Statements of Operations
Years Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Sales revenue:
Hardware $ 198,240 $ 144,245
Software 3,050,175 1,409,078
Software maintenance 1,314,761 1,083,741
Other 816,897 359,145
----------- -----------
Total sales revenue 5,380,073 2,996,209
Cost of sales 1,940,882 1,190,867
----------- -----------
Gross profit 3,439,191 1,805,342
Selling and marketing expenses 695,433 532,974
General and administrative expenses 1,419,370 846,091
----------- -----------
Operating income 1,324,388 426,277
----------- -----------
Other income (expense):
Interest income 81,194 66,658
Other income (expense) (19,439) 7,292
----------- -----------
Total other income (expense) 61,755 73,950
----------- -----------
Income before income taxes 1,386,143 500,227
Income taxes 541,942 208,051
----------- -----------
Net income $ 844,201 $ 292,176
=========== ===========
Earnings per share:
Basic $ 0.07 $ 0.02
=========== ===========
Diluted $ 0.06 $ 0.02
=========== ===========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
<PAGE> 21
Capri Corp. and Subsidiary
Consolidated Statements of Stockholders' Equity
Years Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Stock
----------------------- Additional Foreign
Common Paid-In Retained Currency
Shares Amount Capital Earnings Translation
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1997 12,225,257 $ 122,253 $1,186,438 $1,133,200 $ (40,379)
Net income -- -- -- 292,176 --
Translation adjustment resulting from
exchange rate changes and
intercompany transactions -- -- -- -- (11,674)
Common stock issued 50,000 500 10,800 -- --
---------- ---------- ---------- ---------- ----------
Balance, June 30, 1998 12,275,257 122,753 1,197,238 1,425,376 (52,053)
Net income -- -- -- 844,201 --
Translation adjustment resulting from
exchange rate changes and
intercompany transactions -- -- -- -- (16,711)
Common stock issued 10,000 100 300 -- --
---------- ---------- ---------- ---------- ----------
Balance, June 30, 1999 12,285,257 $ 122,853 $1,197,538 $2,269,577 $ (68,764)
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
<PAGE> 22
Capri Corp. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 844,201 $ 292,176
----------- -----------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 294,682 213,121
Provision for bad debts 123,869 159,198
Loss on sale or disposal of equipment 4,626 1,298
Foreign currency translation
adjustment (15,932) (11,071)
(Increase) decrease in:
Receivables (436,993) (842,594)
Unamortized software development
costs (409,000) (347,000)
Other current assets (10,640) (19,174)
Other assets (60,000) --
Increase (decrease) in:
Accounts payable (50,932) (49,480)
Deferred sales (25,056) 103,556
Accrued expenses 244,962 42,381
Other current liabilities 6,201 3,703
Accrued and deferred income
taxes payable 176,942 70,154
----------- -----------
Total adjustments (157,271) (675,908)
----------- -----------
Net cash provided by (used in)
operating activities 686,930 (383,732)
----------- -----------
Cash flows from investing activities:
Advance to India company (33,000) --
Purchase of fixed assets (110,369) (87,877)
----------- -----------
Net cash used in investing
activities (143,369) (87,877)
----------- -----------
Cash flows from financing activities:
Issuance of common stock 400 11,300
----------- -----------
Net cash provided by financing
activities 400 11,300
----------- -----------
Net increase (decrease) in cash
and cash equivalents 543,961 (460,309)
Cash and cash equivalents, beginning
of year 1,225,667 1,685,976
----------- -----------
Cash and cash equivalents, end of
year $ 1,769,628 $ 1,225,667
=========== ===========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
<PAGE> 23
Capri Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended June 30, 1999 and 1998
Note 1. Summary of significant accounting policies
Principles of consolidation
The consolidated financial statements include the accounts of Capri
Corp. (the "Company") and its subsidiary, after eliminating material
intercompany balances and transactions. The subsidiary consists of
Cimnet Systems, Inc. and its wholly-owned foreign subsidiary, Cimnet
Informationssysteme GmbH, a German corporation.
Basis of accounting
The Company recognizes income and expense on the accrual basis for
financial reporting purposes.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from the estimates.
Industry operations
The Company's subsidiaries are in the business of developing computer
software and then selling the license rights for the use of its
software product. In addition, the subsidiaries distribute computer
hardware and provide technical support and training for their software
product. The computer software is primarily designed for companies
engaged in the manufacture of printed circuit boards. The subsidiaries
grant credit to their customers who are located throughout the world.
Cash and cash equivalents
For purposes of the consolidated balance sheets and consolidated
statements of cash flows, the Company considers demand deposits and
Eurodollar overnight and time deposits with maturities of three months
or less to be cash and cash equivalents.
At June 30, 1999, cash and cash equivalent deposits exceeded federally
insured limits by approximately $1,500,000. In addition, approximately
$118,000 of the balance of cash and cash equivalents is held in foreign
bank accounts.
Trade receivables
An allowance for doubtful accounts is established, through a provision
charged to expense, when management believes that the collectibility of
an account receivable is unlikely.
<PAGE> 24
Capri Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended June 30, 1999 and 1998
Note 1. Summary of significant accounting policies (continued)
Software development costs
The Company accounts for its software development costs in accordance
with Statement of Financial Accounting Standards (SFAS) No. 86,
"Accounting for the cost of computer software to be sold, leased, or
marketed". Initial costs are charged to operations as research and
development until such time as the Company has established
technological feasibility of the computer software product. Thereafter,
the Company capitalizes certain payroll costs, payroll related costs,
outside contracted services and costs to obtain certain third-party
licenses associated with the development of the software program.
Amortization of capitalized costs starts when the product is available
for general release to the public. The Company's policy is to amortize
capitalized costs by the greater of (a) the ratio that the current
gross revenue for a product bear to the total of current and
anticipated future gross revenue for that product, or (b) the
straight-line method over the remaining estimated economic life of the
product including the period being reported upon. Unamortized software
costs are carried at the lower of book value or the new realizable
value, as determined by management.
Fixed assets, net
Fixed assets are stated at cost less an allowance for depreciation,
which is computed using the double-declining balance and straight-line
methods for equipment, and the straight-line method for purchased
computer software, over the estimated useful lives of the assets as
indicated in the following tabulation:
Years
-----
Office equipment 5
Computer hardware 5
Computer software 3-4
Office furniture and fixtures 7
Revenue recognition
Revenue is recognized when it is earned, net of any discounts granted
to the customer.
The Company recognizes revenue from its software using the provisions
of the American Institute of Certified Public Accountants (AICPA)
Statement of Position (SOP) 97-2, "Software Revenue Recognition".
Revenue from software sales is recognized when all of the following
elements are met: pervasive evidence of an arrangement exists, delivery
of the software has occurred, the fee is fixed or determinable and
collectibility is probable. In the event a customer is granted a right
to return the software, recognition of revenue is deferred until such
time as the right to return expires.
<PAGE> 25
Capri Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended June 30, 1999 and 1998
Note 1. Summary of significant accounting policies (continued)
Software maintenance is provided to the customer through an open-end
contract, for as long as the customer pays for the maintenance.
Maintenance is usually billed to the customer quarterly in the amount
of a percentage of the original, undiscounted software price. Revenue
from software maintenance is recognized on a straight-line basis over
the period it covers.
Revenue from the sale of hardware and other services are recognized at
the time of delivery of the product or service. When the arrangement
with the customer includes other services such as installation,
implementation, training or customization, the Company allocates a
portion of the purchase price to these services, based on the fair
values of the services, and defers recognition of that portion of the
contract until such time as the services are rendered.
Income taxes
Income taxes are provided for the tax effects of the transactions
reported in the consolidated financial statements, and consist of taxes
currently due plus deferred taxes related to differences between
financial and income tax reporting. The deferred tax assets and
liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled.
Foreign currency translation
Assets and liabilities of the foreign subsidiary are translated at the
current exchange rate, and income statement items are translated at the
average exchange rate. Resulting translation adjustments are recorded
as a separate component of stockholders' equity.
Note 2. Unamortized software development costs
Changes in the unamortized software development costs for the years
ended June 30, 1999 and 1998 follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Balance, beginning of year $442,000 $236,328
Current year:
Total expenses 789,723 574,499
Less - research and development
costs 380,723 227,499
-------- --------
Net costs capitalized 409,000 347,000
-------- --------
Total amortizable cost available 851,000 583,328
Less - current year amortization 212,712 141,328
-------- --------
Balance, end of year $638,288 $442,000
======== ========
</TABLE>
<PAGE> 26
Capri Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended June 30, 1999 and 1998
Note 2. Unamortized software development costs (continued)
In management's opinion, the net realizable value of future sales
exceeds the carrying value of the unamortized software development
costs, therefore, no adjustment to the carrying value is required.
Should the estimates of future gross revenues, the remaining estimated
economic life of the product, or both be reduced significantly in the
near term, the carrying amount of the capitalized software cost would
be reduced accordingly.
Note 3. Fixed assets, net
Fixed assets at June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Office equipment $ 80,437 $ 74,946
Computer hardware and software 355,197 481,278
Office furniture and fixtures 110,018 110,018
--------- ---------
545,652 666,242
Accumulated depreciation (252,237) (396,223)
--------- ---------
$ 293,415 $ 270,019
========= =========
</TABLE>
Depreciation and amortization expense was $81,970 and $71,793 for the
years ended June 30, 1999 and 1998, respectively.
Note 4. Income taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Income tax expense (benefit):
Current:
Federal $ 374,214 $ (62,001)
State 86,768 (11,033)
Foreign (5,390) --
Deferred:
Federal 69,870 232,264
State 16,480 48,821
--------- ---------
$ 541,942 $ 208,051
========= =========
</TABLE>
A reconciliation of income taxes calculated using the Federal statutory
income tax rate of 34% to the income taxes as reported on the
consolidated statements of operations follows:
<PAGE> 27
Capri Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended June 30, 1999 and 1998
Note 4. Income taxes (continued)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Income tax expense at the
Federal statutory rate $471,288 $170,077
State income tax, net of
Federal benefit 68,144 26,079
Other, net 2,510 11,895
-------- --------
$541,942 $208,051
======== ========
</TABLE>
The components of the Company's net deferred tax liabilities at June
30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Cash basis adjustments $ 286,321 $ 214,800
----------- -----------
Deferred tax liabilities:
Cash basis adjustments (991,719) (843,026)
Depreciation (38,589) (29,412)
----------- -----------
Total deferred tax
liabilities (1,030,308) (872,438)
----------- -----------
Total net deferred
tax liabilities $ (743,987) $ (657,638)
=========== ===========
</TABLE>
Note 5. Stockholders' equity
The Company's certificate of incorporation authorizes 20,000,000 shares
of common stock and 10,000,000 shares of undesignated stock, each with
a par value of $.01. As of June 30, 1999 and 1998, there were
12,285,257 and 12,275,257 shares of common stock issued, respectively.
There were no shares of undesignated stock issued as of June 30, 1999
and 1998.
Note 6. Operating leases
The Company has entered into operating leases for its office
facilities, and these leases are scheduled to expire in the coming
fiscal year. Total rental expense for the operating leases was $110,821
and $98,215 for the years ended June 30, 1999 and 1998, respectively.
There is approximately $78,000 of minimum rental payments remaining in
the next fiscal year under these operating leases.
<PAGE> 28
Capri Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended June 30, 1999 and 1998
Note 7. Profit sharing plan
Cimnet Systems, Inc. has a qualified profit sharing retirement plan
with a 401(k) deferred compensation provision for all of its eligible
US employees. The 401(k) portion of the Plan calls for employer
contributions of 50% of the amounts contributed by the employee,
limited to 3% of each eligible employee's wages. The Plan also provides
for discretionary employer profit sharing contributions as determined
annually by the Company's Board of Directors. Contributions charged to
operations for the Plan amounted to approximately $41,000 for 1999 and
$36,000 for 1998.
Note 8. Other cash flow information
Income taxes paid during the years ended June 30, 1999 and 1998 were
$365,000 and $137,851, respectively. There were no cash payments for
interest during 1999 or 1998.
Note 9. Common stock option plan
The Company adopted incentive and nonqualified stock option plans for
certain directors and employees beginning on October 1, 1995. The
incentive stock option plan is intended to qualify under Section 422 of
the Internal Revenue Code. Under the terms of the Plan, options to
purchase common stock are granted at prices not less than the estimated
fair market value at the date of the grant and are exercisable during
specified future periods.
A summary of the stock option plan transactions is as follows:
<TABLE>
<CAPTION>
Price per share
-----------------------
Number of Weighted
shares Range average
--------- ---------- ----------
<S> <C> <C> <C>
Balance, June 30, 1997 639,000 $0.04-0.35 $ 0.1236
Granted 46,000 0.35 0.3500
Exercised (50,000) 0.04-0.35 0.2260
Cancelled or expired -- -- --
------- ---------- ----------
Balance, June 30, 1998 635,000 0.04-0.35 0.1319
Granted 135,834 0.35-0.60 0.3699
Exercised (10,000) 0.04 0.0400
Cancelled or expired -- -- --
-------
Balance, June 30, 1999 760,834 0.04-0.60 0.1761
=======
</TABLE>
<PAGE> 29
Capri Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended June 30, 1999 and 1998
Note 9. Common stock option plan (continued)
The following table summarizes information about the stock options
outstanding at June 30, 1999:
<TABLE>
<CAPTION>
Outstanding options Exercisable options
----------------------------- -------------------
Remaining Weighted Weighted
Range of Number life average Number average
exercise prices of shares (in years) price of shares price
- --------------- --------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
$0.040 - 0.044 430,000 1.25 $ 0.04 430,000 $ 0.04
0.080 10,000 1.50 0.08 10,000 0.08
0.350 - 0.400 312,500 3.04 0.35 193,500 0.35
0.600 8,334 4.80 0.06 8,334 0.06
</TABLE>
The Company follows Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" to account for the stock
option plan. Accordingly, compensation costs are not recorded in the
financial statements when stock options are granted to employees since
the exercise price of the options are not less than the estimated fair
market value of the stock when the options are granted.
An alternative method of accounting for stock options is Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation". Under SFAS 123, employee stock options are
valued at the grant date using the Black-Scholes valuation model and
the value of the stock options are recognized ratably over the vesting
period as compensation cost. Pro forma information follows to reflect
the effect this method would have on net income and earnings per share
had SFAS 123 been adopted. The values of stock options granted in both
years were estimated using the assumptions of an expected life of five,
no dividends, volatility of .30 and a discounted interest rate of 8.0%.
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net income:
As reported $ 844,201 $ 292,176
Pro forma $ 838,523 $ 290,256
Basic earnings per share:
As reported $ 0.07 $ 0.02
Pro forma $ 0.07 $ 0.02
Diluted earnings per shares:
As reported $ 0.06 $ 0.02
Pro forma $ 0.06 $ 0.02
</TABLE>
The weighted average fair value of options granted during 1999 and 1998
was approximately $0.05 and $0.02 per share, respectively.
<PAGE> 30
Capri Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended June 30, 1999 and 1998
Note 10. Available line of credit
At June 30, 1999, the Company had $150,000 of credit available under a
line of credit arrangement. Any amounts drawn against this line of
credit would require monthly payments of interest on the unpaid balance
at a rate of one percent over the bank's prime lending rate. The line
of credit is collateralized by the cash and cash equivalents of Cimnet
Systems, Inc., the Company's subsidiary, and is due on demand.
Note 11. Earnings per share
A reconcilation of net income and shares outstanding relating to the
calculation of basic and diluted earnings per share follows:
<TABLE>
<CAPTION>
Per-share
Income Shares amount
---------- ---------- ---------
<S> <C> <C> <C>
For the year ended June 30, 1999:
Basic earnings per share $ 844,201 12,279,449 $0.07
=====
Effect of Dilutive Securities:
Stock option plan -- 766,642
---------- ----------
Diluted earnings per share $ 844,201 13,046,091 $0.06
========== ========== =====
For the year ended June 30, 1998:
Basic earnings per share $ 292,176 12,257,065 $0.02
=====
Effect of Dilutive Securities:
Stock option plan -- 653,192
---------- ----------
Diluted earnings per share $ 292,176 12,910,257 $0.02
========== ========== =====
</TABLE>
Note 12. Operating segments and enterprise-wide information
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 131, "Disclosures about Segments of an Enterprise and
Related Information". The Company's chief operating decision-makers
recognize that all revenue sources are dependent on the sale of its
software product, Paradigm(R). Accordingly, the Company considers it
has only one business segment.
<PAGE> 31
Capri Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended June 30, 1999 and 1998
Note 12. Operating segments and enterprise-wide information (continued)
The Company does however operate in multiple, geographic areas. Net
revenue, by geographic areas follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
U.S. $2,815,162 $1,494,345
Europe 690,512 326,235
Asia 1,222,669 903,411
Other countries 651,730 272,218
---------- ----------
$5,380,073 $2,996,209
========== ==========
</TABLE>
For the year ended June 30, 1999, sales to a major customer amounting
to more that 10% of total sales was $883,000. The accounts receivable
balance for the major customer was $308,000 as of June 30, 1999. During
1998, sales to major customers were $380,000 and accounts receivable
balances to major customers were $513,000 as of June 30, 1998.
Note 13. Subsequent event
On July 3, 1999, the Company's subsidiary acquired all the common stock
of a company with operations similar to the Company's subsidiary and
located in Bangalore, India. The purchase price of the company's common
stock is immaterial to the consolidated financial statements. During
the year ended June 30, 1999, in anticipation of this acquisition, the
Company's subsidiary provided working capital to the India operation
totaling $33,050.
The Company's subsidiary purchased services from this company during
the year ended June 30, 1999 in the amount of approximately $40,000.
This amount has been reflected in cost of goods sold in the
accompanying statement of operations.
<PAGE> 32
Capri Corporation and Subsidiary
Consolidated Balance Sheet
December 31, 1999
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,288,887
Accounts receivable, net 2,757,318
Other current assets 80,915
-----------
Total current assets 4,127,120
Unamortized software costs 725,288
Fixed assets, net 381,676
Other assets 77,072
-----------
Total assets $ 5,311,156
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current Liabilities:
Accounts payable and accrued expenses $ 346,365
Deferred sales 74,805
Accrued and deferred income taxes 666,602
-----------
Total current liabilities 1,087,772
Non-current liabilities:
Accrued and deferred income taxes 169,587
-----------
Total liabilities 1,257,359
-----------
Stockholders' equity:
Common stock 122,853
Additional paid in capital 1,197,538
Retained earnings 2,815,763
Accumulated other comprehensive income:
Foreign currency translation adjustments (82,357)
-----------
Total stockholders' equity 4,053,797
-----------
Total liabilities and
stockholders' equity $ 5,311,156
===========
</TABLE>
<PAGE> 33
Capri Corporation and Subsidiary
Consolidated Statements of Operations
For the Three Months and Six Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- --------------------------
1999 1998 1999 1998
------------------------- --------------------------
<S> <C> <C> <C> <C>
REVENUE:
Software sales $ 1,330,726 $ 903,960 $ 1,712,849 $ 1,690,799
Software maintenance 426,533 308,273 797,352 601,546
Other 316,781 317,483 695,634 557,733
----------- ----------- ----------- -----------
Total revenues 2,074,040 1,529,716 3,205,835 2,850,078
COST OF REVENUES 470,859 456,094 908,410 830,741
----------- ----------- ----------- -----------
Gross profit 1,603,181 1,073,622 2,297,425 2,019,337
OTHER OPERATING COST:
Research and development 144,516 94,015 232,142 178,989
Selling and marketing 234,209 140,929 452,562 276,602
General and administrative 421,595 407,147 741,084 680,054
----------- ----------- ----------- -----------
Operating income 802,861 431,531 871,637 883,692
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 15,192 24,133 35,943 42,196
Other income/expense 1,622 (329) 1,584 (541)
----------- ----------- ----------- -----------
Total income (expense) 16,814 23,804 37,527 41,655
----------- ----------- ----------- -----------
Net income before income taxes 819,675 455,335 909,164 925,347
INCOME TAX EXPENSE 345,978 157,627 362,978 337,627
----------- ----------- ----------- -----------
Net income $ 473,697 $ 297,708 $ 546,186 $ 587,720
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.03 $ 0.03 $ 0.04 $ 0.05
=========== =========== =========== ===========
Diluted $ 0.03 $ 0.03 $ 0.04 $ 0.05
=========== =========== =========== ===========
</TABLE>
<PAGE> 34
CAPRI CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
For the Six Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TRANSLATION
TOTAL STOCK CAPITAL EARNINGS ADJUSTMENTS
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1999 $ 3,521,204 $ 122,853 $ 1,197,538 $ 2,269,577 $ (68,764)
Comprehensive income:
Net income 546,186 -- -- 546,186 --
Other comprehensive income:
Foreign currency translation adjustment (13,593) -- -- -- (13,593)
----------- ----------- ----------- ----------- -----------
Total comprehensive income 532,593 -- -- 546,186 (13,593)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 $ 4,053,797 $ 122,853 $ 1,197,538 $ 2,815,763 $ (82,357)
=========== =========== =========== =========== ===========
Balance, July 1, 1998 $ 2,693,314 $ 122,753 $ 1,197,238 $ 1,425,376 $ (52,053)
Comprehensive income:
Net income 587,720 -- -- 587,720 --
Other comprehensive income:
Foreign currency translation adjustment 28,356 -- -- -- 28,356
----------- ----------- ----------- ----------- -----------
Total comprehensive income 616,076 -- -- 587,720 28,356
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 $ 3,309,390 $ 122,753 $ 1,197,238 $ 2,013,096 $ (23,697)
=========== =========== =========== =========== ===========
</TABLE>
<PAGE> 35
CAPRI CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
For Three Months and Six Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 473,697 $ 297,708 $ 546,186 $ 587,720
----------- ----------- ----------- -----------
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 55,715 52,145 105,153 99,290
Provision for bad debt 6,000 6,000 12,000 12,000
Foreign currency translation
adjustment (25,268) (2,606) (13,593) 28,356
(Increase) decrease in:
Accounts receivables (782,543) (291,424) (685,810) (216,022)
Unamortized software
development costs (75,000) (70,000) (150,000) (140,000)
Other current assets (45,188) (19,333) (47,244) (42,405)
Other assets 20,928 -- 20,928 --
Increase (decrease) in:
Accounts payable and accrued expenses (16,198) 157,653 (130,842) 307,961
Deferred sales (12,414) -- (129,195) (229,056)
Accrued and deferred income
taxes payable 220,090 73,999 122,090 255,791
----------- ----------- ----------- -----------
Total adjustments (653,878) (93,566) (896,513) 75,915
----------- ----------- ----------- -----------
Net cash provided by
(used in) operating activities (180,181) 204,142 (350,327) 663,635
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (59,682) (42,080) (130,414) (72,510)
----------- ----------- ----------- -----------
Net cash used in investing activities (59,682) (42,080) (130,414) (72,510)
----------- ----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents (239,863) 162,062 (480,741) 591,125
CASH AND CASH EQUIVALENTS:
Beginning of period 1,528,750 1,654,730 1,769,628 1,225,667
----------- ----------- ----------- -----------
End of period $ 1,288,887 $ 1,816,792 $ 1,288,887 $ 1,816,792
=========== =========== =========== ===========
</TABLE>
<PAGE> 36
PART III
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Articles of Incorporation of Capri Corp. [Incorporated
by reference to Exhibit (2)(a) to the Company's Form
1-A (SEC File No. 24-C-4467)]
2.2 Bylaws of Capri Corp. [Incorporated by reference to
Exhibit (2)(b) to the Company's Form 1-A (SEC File No.
24-C-4467)]
3.1 Specimen Certificate for Common Stock [Incorporated by
reference to Exhibit (3) to the Company's Form 1-A
(SEC File No. 24-C-4467)]
6.1 Stock Option Plan of Capri Corp.*
6.2 Mehul J. Dave Employment Agreement*
6.3 P. Balasubramanian Employment Agreement*
6.4 David L. Harris Employment Agreement*
6.5 Promissory Note (Secured) by and among American
National Bank and Trust of Chicago, Capri Corp. and
Cimnet dated October 30, 1999*
10.1 Consent of Klesman, Halper & Co., P.C.*
21.1 Subsidiaries of the Registrant*
27.1 Financial Data Schedule*
- --------------
* Filed herewith.
<PAGE> 37
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this Amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
CAPRI CORP.
(Registrant)
Date: February 22, 2000 By: /s/ Mehul J. Dave
---------------------------------
Mehul J. Dave
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 1
EXHIBIT 6.1
CAPRI CORP.
1995 STOCK OPTION PLAN
1. PURPOSE OF THIS PLAN.
The Capri Corp., 1995 Stock Option Plan (the "Plan") is intended to
advance the interests of Capri Corp. (the "Company"), its shareholders, and its
subsidiaries by encouraging and enabling selected employees and non-employees of
the Company or its subsidiaries who render services that contribute to, or in
the judgment of the Administrator have a potential to contribute to, the
profitability and stockholder value of the Company to acquire and retain a
proprietary interest in the Company by ownership of its stock. The Board of
Directors believes that the greatest benefit to the Company will be obtained by
the Administrator of the Plan being able to have the greatest flexibility to
tailor each grant and requirements of stock options to the circumstances of each
recipient of each award. Consequently, grants of options may qualify as
"Incentive Stock Options" under the provisions of Sections 421 and 422 of the
Internal Revenue Code of 1986, as amended (the "Code") and some may not. The
vesting periods, exercise price, and other provisions applicable to the options
granted under this Plan may vary between recipients and may vary between options
granted to any one recipient.
2. ADMINISTRATION OF THIS PLAN.
This Plan will be administered by the President of the Company, or by
an officer of the Company named by the President of the Company, as the
Administrator. Subject to the express provisions of this Plan, the Administrator
will have plenary authority, in his discretion, to determine the individuals who
satisfy the requirements set forth in Section 4, to whom, and the time or times
at which, options are granted, the option exercise price, and the number of
shares to be subject to each option. In making those determinations the
Administrator may take into account the nature of the services rendered by the
respective individuals, their present, past, and potential contributions to the
Company's success and such other factors as the Administrator, in his
discretion, considers relevant. Subject to the express provisions of this Plan,
the Administrator will also have plenary authority to interpret this Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to determine
the terms and provisions of the respective stock option agreements (which need
not be the same in stock options granted to different Recipients at the same
time and need not be the same in stock options granted to the same Recipient at
different times) and to make all other determinations necessary or advisable for
the administration of this Plan. The Administrator's determinations on the
matters referred to in this Section 2 will be conclusive.
3. STOCK SUBJECT TO THIS PLAN.
Two million (2,000,000) shares of the authorized but unissued common
stock ("Common Stock") of the Company have been allocated to this Plan and will
be reserved for issue upon the exercise of options granted under this Plan. If
the number of shares of the Common Stock is adjusted
<PAGE> 2
upon the occurrence of any event described in Section 5.6 or 6 of this Plan then
the number of shares of Common Stock allocated to this Plan may be similarly
adjusted. The Administrator may, in his discretion, use shares purchased on the
market for the purposes of this Plan, in lieu of authorized but unissued shares.
If any option granted expires or terminates for any reason without having been
exercised in full, the unpurchased shares subject to that option will again be
available for grant and for all other purposes under this Plan.
4. ELIGIBILITY FOR GRANT OF OPTIONS PURSUANT TO THE PLAN.
All employees and non-employees of the Company and its subsidiaries who
render services to the Company and its subsidiaries are eligible for grant of
stock options. The President of the Company, even though the Administrator of
this Plan, may receive stock option grants. In the case of the president, the
Board of Directors will determine the number of shares, option exercise price,
and other terms of each stock option grant. Selection of persons to receive
grants of stock options and the types of options granted is at the discretion of
the Administrator. A person to whom a stock option is granted is referred to in
this Plan as a "Recipient". In making any determination as to eligible persons
to whom options will be granted and the number of Shares to be covered by such
options, the Administrator may, in his discretion, take into account the
person's functions, responsibilities, value of services to the Company or its
subsidiaries in the past and potential contributions to the profitability and
sound growth of the Company or it subsidiaries in the future, the likelihood
that the granting of an option will induce an employee who might otherwise leave
the Company or its subsidiaries to continue his or her employment, and such
other factors as the Administrator considers appropriate to accomplish the
purpose of this Plan. Incentive Stock Options may only be granted to employees.
5. TERMS AND CONDITIONS OF OPTIONS.
Each option granted under this Plan will be evidenced by an agreement
executed by the Administrator on behalf of the Company and the person to whom a
stock option grant is made (a "Recipient") and will contain such terms and be in
such form as the Administrator may from time to time approve, subject to the
following general limitations and conditions:
5.1 OPTION PRICE. The option exercise price per share with respect to
each option will be at the discretion of the Administrator, subject to the
requirements of Section 5.1 (a) of this Plan. The option exercise price per
share may be at a percentage of the fair market value of a share of Common Stock
at the date of grant, or may be at a specified dollar amount. If the option
exercise price per share with respect to an option is stated at some percentage
of the fair market value of a share of Common Stock, the fair market value will
be as determined by the Administrator and such determination will be binding
upon the Company and the person to whom the option is granted. The Administrator
may, but is not obligated to, consider the following in his determination of the
fair market value of a share of Common Stock of the Company: (i) if the Common
Stock is listed on a national securities exchange or the NMS or quoted on the
NASDAQ, the closing price on the day before the date of the grant, (ii) if the
Common Stock is not so listed or quoted, the basis of the mean
2
<PAGE> 3
between the bid and asked quotations (as reported by a recognized stock
quotation service or broker which makes a market in the Company's Common Stock)
for a share of Common Stock for the period of time prior to the date of the
grant that the Administrator believes to be a representative sample so as to
establish the fair market value of the Common Stock free of abnormal market
influences.
(a) INCENTIVE STOCK OPTION PRICE. If the stock option granted
is termed an Incentive Stock Option in accordance with the provisions
of the Code, the option exercise price will be not less than the fair
market value of the Common Stock at the time the option is granted, or
in the case of an option granted to an employee that at the time that
the option is granted owns stock of the Company possessing more than
10% of the total combined voting power of all classes of stock of the
Company ("10% Holder"), the option exercise price will be not less than
110% of the fair market value of the Common Stock at the time the
option is granted.
(b) NON-INCENTIVE STOCK OPTION PRICE. If the stock option is
not an Incentive Stock Option, the option exercise price will be as
determined by the Administrator.
5.2 PAYMENT OF STOCK OPTION EXERCISE PRICE. The option exercise price
may be paid in cash, certified personal check, cashier's check, promissory note,
or by delivery of shares of Common Stock having a fair market value equal to the
option exercise price (including surrender of shares subject to the option that
have a fair market value at the time of exercise equal to the option exercise
price). The option exercise price must be paid in full prior to delivery of the
shares for which the option is exercised.
5.3 PERIOD OF EXERCISE. Each option may be exercised at such time as
set forth in each individual option grant, but in the case of an Incentive Stock
Option may not be exercised after the first to occur of. (a) the last day of
employment, (b) expiration of 10 years after the date of grant or in the case of
an Incentive Stock Option granted to a 10% Holder, not after 5 years after the
date of grant, or (c) in any calender year if other Incentive Stock Options
granted to that Recipient are exercisable that could result in the Recipient
receiving Common Stock in excess of $100,000. Within such limits, options will
be exercisable at such time or times, and subject to such restrictions and
conditions, as the Administrator, in each instance, approves or specifies,
including a limit on the number of shares as to which any option may be
exercised during any period of time, all or any of which need not be uniform for
all persons to which options are granted. In no event may any stock option be
exercised after the last day of employment with the Company or its subsidiaries.
5.4 NONTRANSFERABILITY OF OPTION. No option may be transferred or
assigned by any person to whom an option is granted under this Plan and may only
be exercised by such person during his life. No option may be pledged or
hypothecated in any way and no option may be subject to execution, attachment,
or similar process, except with the express consent of the Administrator.
5.5 RETENTION OF SHARES AFTER EXERCISE. Each Recipient as a condition
to the receipt of a stock option grant must agree in the stock option grant
agreement to retain ownership of the
3
<PAGE> 4
Common Stock purchased upon exercise of a stock option for the period of time
set forth in the stock option grant agreement. If a Recipient attempts to
transfer any shares of Common Stock acquired upon such exercise prior to the
expiration of the time set forth in the stock option grant agreement. the
Company may purchase such shares for a purchase price equal to the option
exercise price for such shares so attempted to be transferred. Certificates
issued on the exercise of a stock option may contain one or more legends
restricting transfer of the certificates and the shares of Common Stock
represented thereby.
5.6 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Notwithstanding any
other provisions of this Plan, the option agreements may contain such provisions
as the Administrator may determine to be appropriate for the adjustment of the
number of and class of shares subject to each outstanding option and the option
exercise prices in the event of changes in the outstanding Common Stock of the
Company by reason of stock dividends, recapitalization, mergers, consolidations,
split ups, combinations, or exchanges of shares and the like. The number of
outstanding shares of Common Stock of the Company, the aggregate number and
class of shares available under this Plan. and the maximum number of shares as
to which options may be granted to any individual upon any such change will be
made by the Administrator, whose determination will be conclusive. The
Administrator may determine that no adjustment in either the number and class of
shares subject to each outstanding option or the option exercise price is
appropriate.
6. ADJUSTMENTS UPON REORGANIZATION.
If the Company is a party to any statutory merger, statutory
consolidation, sale of all, or substantially all, of its assets, or sale,
pursuant to an agreement with the Company, of securities of the Company pursuant
to which the Company is or becomes a wholly owned subsidiary of another company
and if (a) there is as part of such a reorganization an agreement which
specifically provides for the change, conversion, or exchange of options granted
under this Plan or of shares of Common Stock of the Company subject to options
granted under this Plan, then the Administrator will adjust the shares subject
to outstanding and unexercised options or convert the options granted under this
Plan to options to purchase shares as set forth in such agreement in a manner
not inconsistent with the provisions of such agreement; or (b) there is no plan
or agreement respecting such a reorganization or if such agreement does not
specifically provide for the change, conversion, or exchange of options granted
under this Plan, or for the shares subject to options granted under this Plan,
the options under this Plan will terminate as of the date of such reorganization
and the Administrator will give holders of options granted under this Plan
notice of such reorganization and the opportunity to exercise all options
granted pursuant to this Plan prior to such reorganization to the extent that
the Administrator is reasonably able to do so.
7. VESTING OF SHAREHOLDER RIGHTS.
No Recipient will have any rights as a shareholder of the Company
solely by reason of having been granted an option until the option is exercised
and the shares as to which the option is exercised are entered on the records of
the Company as being issued and outstanding.
4
<PAGE> 5
8. RESTRICTION ON ISSUING SHARES.
The exercise of each option granted under this Plan will be subject to
the condition that if at any time the Administrator determines in his discretion
that the satisfaction of withholding tax or other withholding liabilities, or
that the listing, registration, or qualification of any shares otherwise
deliverable upon any exercise of any option granted pursuant to this Plan under
any state or federal law, or that the consent or approval of any regulatory body
is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then in such
event, such exercise will not be effective unless such withholding, listing,
registration, qualification, consent, or approval is effected or obtained free
of any conditions not acceptable to the Administrator.
9. USE OF PROCEEDS.
The proceeds received by the Company from the sale of Common Stock
pursuant to the exercise of options granted under this Plan will be added to the
Company's general funds and be used for general corporate purposes.
10. ADOPTION, AMENDMENT, AND TERMINATION.
This Plan will be effective upon approval by the shareholders of the
Company. The Board of Directors may at any time terminate this Plan, or make
such modifications of the Plan as it deems advisable to conform to changes in
the law or in any other respect which the Board of Directors considers to be in
the best interests of the Company, except that the Board of Directors may not
change the provisions relating to the option exercise price or relating to the
period of exercise of any option granted under this Plan. No termination or
amendment of this Plan may, without the consent of the person to whom any option
is theretofore granted, adversely affect the rights of such person under such
option. Unless this Plan is earlier terminated by action of the Board of
Directors, this Plan will terminate on the eleventh anniversary of its adoption
by the Board.
5
<PAGE> 1
EXHIBIT 6.2
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of July 1, 1997,
by and between Capri Corp., a Minnesota corporation ("Capri"), and Mehul J.
Dave, a resident of the State of Illinois ("Officer").
Capri currently owns all of the issued and outstanding shares of
capital stock of Cimnet Systems, Inc., an Illinois corporation ("Cimnet").
Cimnet is currently engaged in the business of designing, licensing,
implementing and maintaining custom software, and designing, configuring and
selling computer systems, for manufacturing businesses throughout the world (the
"Business"). Officer is currently employed by Capri as its President and Chief
Executive Officer as an "at will" employee. Officer is also currently employed
by Cimnet as its President and Chief Executive Officer, pursuant to that certain
Contract of Employment dated July 25, 1989, by and between Cimnet and Officer
(the "Cimnet Agreement"). Contemporaneously with the execution of this
Employment Agreement Cimnet and Officer shall terminate those certain provisions
of the Cimnet Agreement specified in this Employment Agreement. Capri desires to
employ Officer, and Officer desires to be employed Capri, pursuant to and in
accordance with the terms and conditions set forth in this Employment Agreement.
In consideration of the foregoing, the mutual covenants, agreements and
obligations set forth in this Employment Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, Capri and Officer hereby agree as set forth in this
Employment Agreement.
1. EMPLOYMENT. Capri hereby employs Officer, and Officer hereby agrees
to be employed by Capri, pursuant to and in accordance with the terms and
conditions set forth in this Employment Agreement and with the understanding
that Officer will comply with Capri's rules and regulations as now in effect and
as hereafter amended or adopted from time to time.
2. DUTIES. During the "Term" (hereinafter defined), Officer shall have
the title and the duties and obligations of President and Chief Executive
Officer of Capri, President and Chief Executive Officer of Cimnet and such
additional titles, duties and obligations of Capri, Cimnet and any parent,
subsidiary or affiliated corporation of Capri or Cimnet (collectively and
individually, "Company") as the Board of Directors of Capri may, from time to
time, assign to Officer. Officer will devote his full time, attention, energy,
expertise and best efforts to fully and timely perform his duties and
obligations as required under this Employment Agreement.
3. COMPENSATION. During the Term, Capri shall pay Officer the
compensation set forth on Schedule A attached hereto, which Schedule A may be
amended from time to time in accordance with Section 19.3 hereof.
<PAGE> 2
3.1 All compensation and benefits payable to Officer pursuant
to the terms of this Employment Agreement will be paid in accordance
with each Company's regular payroll practices, in effect from time to
time.
3.2 All compensation and benefits payable to Officer pursuant
to the term of this Employment Agreement will be subject to normal
employee withholding and all other applicable tax deductions as
required by law, including, without limitation, social security and
federal, state and local withholding taxes.
3.3 Officer's compensation and performance under this
Employment Agreement shall be reviewed on an annual basis by the Board
of Directors of each Company.
3.4 As an executive employee of each Company, Officer
acknowledges and agrees that he is exempt from and not entitled to
receive overtime in the event he works in excess of eight (8) hours per
day or forty (40) hours per week, except as required by law.
4. ADDITIONAL EMPLOYMENT BENEFITS. During the Term,
4.1 Officer will be entitled to participate in Company's
employee benefit plans and programs in effect from time to time,
including, without limitation, pension and/or profit sharing plans,
medical reimbursement plans and group life, health, disability and
other insurance programs, if any, as determined by the Board of
Directors to avoid inequitable compensation among each Company and as
applicable to Officer as an executive officer of each Company;
provided, however, each Company shall be under no obligation to adopt
or maintain any fringe benefit program, whether or not such fringe
benefit program is in existence as of the date hereof or Officer is
eligible to participate therein; and
4.2 Officer will receive such paid vacation time and sick
leave as he is entitled in accordance with Capri's policies in effect
from time to time.
5. EXPENSES.
5.1 Upon presentation of such supporting documentation as may
be reasonably satisfactory to the respective Company, the respective
Company will pay or reimburse Officer for all reasonable and necessary
travel, entertainment and other business expenses incurred by Officer
in the performance of his employment duties during the Term.
5.2 If a federal, state or local income tax deduction is
disallowed to the respective Company for any part of an expense payment
or reimbursement made by the respective Company to or on behalf of
Officer, upon written request, Officer will repay to the respective
Company, in the sole discretion of the respective Company, either: (i)
the amount of such disallowed expense payment or reimbursement; or (ii)
the amount of taxes incurred by the respective Company in connection
with such expense payment or reimbursement.
2
<PAGE> 3
5.3 If there is a dispute between the respective Company and
Officer as to the nature of any expense or whether any such expense is
reasonable and necessary, the decision of the Board of Directors of the
respective Company shall be binding and controlling.
6. TERM/TERMINATION. The initial term of Officer's employment with
Capri under this Employment Agreement and each and every other Company will
commence as of the date hereof and, unless sooner terminated as hereinafter
provided, will terminate at the close of business of Capri on June 30, 2002 (the
"Initial Term").
6.1 Thereafter, the Initial Term will automatically be
extended for successive and consecutive renewal terms of one year each
(a "Renewal Term") [the Initial Term, together with any and all Renewal
Terms, are sometimes collectively referred to as the "Term"]; provided,
however:
A. Officer may elect to terminate the Term at any
time by giving the Board of Directors of Capri not less than
one hundred twenty (120) days prior written notice thereof,
and such notice shall be effective for each Company; and
B. Capri may terminate the Term for every Company
without "Cause" (hereinafter defined) at any time by giving
Officer not less than one hundred twenty (120) days prior
written notice thereof, and such notice shall be effective for
each Company.
6.2 Notwithstanding the foregoing, Capri may terminate the
Term, upon notice to Officer, upon the occurrence of any one or more of
the following (collectively and individually "Cause"):
A. The commission by Officer of fraud,
misappropriation of funds, embezzlement, or an intentional
dishonest act which causes injury to any Company, or which
causes injury to any client of any Company, whether or not in
connection with the performance of his duties and obligations
under this Employment Agreement;
B. Officer's conviction of a crime which constitutes
a felony in the State of Illinois, regardless of whether such
crime involves any Company, or the clients of any Company; or
C. The performance by Officer of any of his duties
and obligations under this Employment Agreement while under
the continuing and habitual influence of alcohol or illegal
drugs.
6.3 The Term will immediately terminate upon the occurrence of
any of the following:
3
<PAGE> 4
A. The effective date of a written agreement of
termination entered into between Capri and Officer;
B. The death of Officer; or
C. The effective date of the "Disability"
(hereinafter defined) of Officer.
6.4 For purposes of this Employment Agreement, Officer will be
deemed to be suffering from a "Disability" when, in the written opinion
of an actively practicing physician reasonably acceptable to Capri and
Officer (or his legal representative), due to physical, mental or
emotional injury or illness, Officer is unable and either does not or,
in the opinion of such physician, will not be able to perform his
duties and obligations pursuant to this Employment Agreement for a
continuous period of twelve (12) months.
7. TERMINATION COMPENSATION.
7.1 Upon the termination of the Term for any reason
whatsoever, Capri shall pay Officer that amount of Officer's then
salary, "Bonus" (as defined on Schedule A) pro-rated to the date of
termination within ninety (90) days of the close of Capri's fiscal
year, and other benefits which have accrued through the effective date
of the termination of the Term.
7.2 If Company terminates the Term other than for Cause or if
Capri and Officer mutually agree to terminate the Term pursuant to
Section 6.3A, in addition to the compensation payable by Capri to
Officer pursuant to Section 7.1 above, Capri shall pay Officer a
severance benefit in an amount equal to two (2) times Officer's then
current annual salary ("Severance Benefit"), payable in thirty-six (36)
equal monthly installments commencing on the first day of the first
month immediately following the effective date of the termination of
the Term, and continuing on the first day of each of the next
thirty-five (35) consecutive calendar months hereafter.
7.3 If Officer voluntarily terminates the Term pursuant to
Section 6.1A, in addition to the compensation payable by Capri to
Officer pursuant to Section 7.1 above, Capri shall pay Officer a
severance benefit in an amount equal to one-half (1/2) of the Severance
Benefit, payable in thirty-six (36) equal monthly installments
commencing on the first day of the first month immediately following
the effective date of the termination of the Term, and continuing on
the first day of each of the next thirty-five (35)consecutive calendar
months thereafter.
7.4 If Capri terminates the Term for Cause, Capri shall only
pay Officer the compensation described in Section 7.1 and shall not be
obligated or liable in any way, or under any circumstance, to pay
Officer any other compensation or benefit whatsoever.
7.5 If the Term is terminated pursuant to Section 6.3B or
Section 6.3C, in addition to the compensation payable by Capri to
Officer pursuant to Section 7.1 above, Capri shall
4
<PAGE> 5
pay Officer or Officer's estate or personal representative, as the case
may be, a termination benefit in an amount equal to the Severance
Benefit, payable in twelve (12) equal monthly installments commencing
on the first day of the first month immediately following the effective
date of the termination of the Term, and continuing on the first day of
each of the next eleven (11) consecutive calendar months thereafter.
7.6 Capri may, in its sole discretion and upon notice to
Officer, offset and recoup against any payment which Capri is obligated
to make to Officer pursuant to this Section 7 any money owed by Officer
to Capri, whether as a result of a loan or advance to Officer or
otherwise.
7.7 Notwithstanding the foregoing, Officer acknowledges and
agrees that Capri's obligation to make payments pursuant to this
Section 7 shall immediately cease, and Capri shall have no further
liability whatsoever with respect thereto, upon the breach by Officer
of any of his covenants, agreements or obligations set forth in
Sections 8, 9, 10, 11 or 12 of this Employment Agreement.
8. NON DISCLOSURE.
8.1 During Officer's prior employment with Cimnet and during
the Term, Officer, by virtue of his positions with Capri, Cimnet and
Cimnet Infonnationssysteme GmbH, has created, had contact with and
received, and will continue to create, have contact with and receive,
confidential information and/or trade secrets of each Company,
including, without limitation, "Client" (hereinafter defined) lists,
"Prospects" (hereinafter defined) lists, price lists, advertising,
promotion or marketing plans, business plans, methods of doing
business, concepts, ideas, software programs, source code, trade
secrets, market or other research or any program, product or service
which was developed by Company or which Company provides or intends to
provide to its Clients or markets to its Clients or Prospects
(collectively, "Confidential Information").
8.2 During the Term and for the "Restricted Period" (as
hereinafter defined) following the termination of the Term for any
reason whatsoever, Officer will not, either directly or indirectly, for
his own benefit or for the benefit of any other person or entity, use,
divulge, disclose or communicate to any other person or entity, any of
the Confidential Information in any manner whatsoever, except in the
course of and during the performance of his duties and obligations
under this Employment Agreement, unless the applicable Company
otherwise consents to the disclosure or use of any of the Confidential
Information in writing prior to such disclosure or use.
8.3 With respect to each particular item of Confidential
Information, the "Restricted Period" shall mean: (i) thirty six (36)
months, if the item of Confidential Information at issue does not
constitute a trade secret, or (ii) indefinitely, if such item of
5
<PAGE> 6
Confidential Information constitutes a trade secret, until such item of
Confidential Information ceases to be a trade secret, but not less than
thirty six (36) months.
8.4 Notwithstanding the foregoing, Confidential Information
does not include information: (i) in the public domain (ii) received by
Officer outside of his employment with any Company from a person or
entity not under an obligation of confidentiality to the applicable
Company, directly or indirectly, or (iii) that later becomes public,
unless such information is made public by Officer in breach of this
Employment Agreement or by any other person or entity, directly or
indirectly, under an obligation of confidentiality to the applicable
Company.
8.5 Upon the effective date of the termination of the Term,
Officer will immediately return to Capri all original and all copies of
Confidential Information, and all notes, analyses, memoranda or any
other documents or writings incorporating or referring to any of the
Confidential Information, and all disks, software, hard drives,
computer memory or other electronic or magnetic storage containing any
Confidential Information, whether in his possession or under his
control, and will certify in writing to Capri that, except on behalf of
Company in the course of the performance of his duties and obligations
under this Employment Agreement he has not retained, disseminated,
disclosed or delivered to any person or entity any original or copy, in
any form, electronically, magnetically or otherwise, of any of the
Confidential Information or any notes, analyses, memoranda or other
documents or writings, disks, software, hard drives, computer memory or
other magnetic or electronic storage incorporating or referring to any
of the Confidential Information.
9. NON-COMPETITION. To protect each Company's proprietary interest in
the Confidential Information and in their respective Clients and Prospects,
during the Term and for a period of thirty-six (36) months following the
effective date of the termination of the Term for any reason whatsoever, Officer
will not, directly or indirectly, individually or in combination or association
with any other person or entity, whether as an officer, director, shareholder,
manager, member, partner, joint venture, solo proprietor, employee, agent,
independent contractor, consultant, advisor or otherwise, whether or not for
pecuniary benefit, except on behalf of the applicable Company in the course of
the performance of his duties and obligations under this Employment Agreement,
engage in or own (in whole or in part), manage, operate or otherwise carry on
any business which competes with or is substantially similar to the Business or
any then business of any Company in the world (the "Territory"). Nothing
contained in this Section 9 shall prohibit Officer from beneficially owning,
either directly or indirectly, five percent (5%) or less of the stock or
ownership interest of a company which engages in the Business if such stock or
ownership interest is publicly traded on a national exchange or
over-the-counter.
Officer recognizes and acknowledges that the businesses and markets of
each Company are, in the aggregate, national and international in scope, and
that the restrictive covenants of Officer set forth in this Section 9 are
necessary in order to protect and maintain the proprietary interests and other
legitimate business interests of each Company and are reasonable in all
respects. Officer further
6
<PAGE> 7
acknowledges and agrees that the products and services of the Business can be
marketed, sold and distributed to Clients and Prospects worldwide, and have been
and are presently being marketed throughout the world. Consequently, Officer
acknowledges and agrees that it is not possible to limit the geographic scope of
the non-competition covenant set forth in this Section 9 to particular cities,
counties or other geographic subdivisions of any jurisdiction.
10. NON-SOLICITATION OF CLIENTS AND PROSPECTS. To protect each
Company's proprietary interest in the Confidential Information and in their
respective Clients and Prospects, during the Term and for a period of thirty-six
(36) months following the effective date of the termination of the Term for any
reason whatsoever, Officer will not, directly or indirectly, individually or in
combination or association with any other person or entity, whether as an
officer, director, shareholder, manager, member, partner, joint venturer, sole
proprietor, employee, agent, independent contractor, consultant, advisor or
otherwise, whether or not for pecuniary benefit, except on behalf of the
applicable Company in the course of the performance of his duties and
obligations under this Employment Agreement, solicit, or assist or encourage any
other person or entity to solicit, any Client or any Prospect, for the purpose
of:
10.1 selling such Client products sold, or services rendered,
in conjunction with the operation of the Business or any product or
service that can or may be used in substitution for or replacement of
the products and/or services designed, licensed, implemented,
maintained, marketed and/or sold by any Company,
10.2 terminating, altering or modifying such Client's business
relationship with the applicable Company,
10.3 altering or modifying the terms or reducing the volume of
business which such Client transacts with the applicable Company, or
10.4 negatively influencing such Prospect's decision as to
whether to purchase any products or services from Capri or the terms of
such intended business transaction or relationship.
11. NON-SOLICITATION OF EMPLOYEES, INDEPENDENT CONTRACTORS AND AGENTS.
To further protect each Company's proprietary interest in the Confidential
Information and in their respective relationships with their employees,
independent contractors and agents, during the Term and for a period of
thirty-six (36) months following the effective date of the termination of the
Term for any reason whatsoever, Officer will not, directly or indirectly,
individually or in combination or association with any other person or entity,
whether as an officer, director, shareholder, manager, member, partner, joint
venturer, sole proprietor, employee, agent, independent contractor, consultant,
advisor or otherwise, whether or not for pecuniary benefit, except on behalf of
the applicable Company in the course of the performance of his duties and
obligations under this Employment Agreement contact, encourage or solicit any
then employee, independent contractor or agent of any
7
<PAGE> 8
Company to terminate or modify his, her or its respective employment, engagement
or business relationship with such Company or hire or retain any other person or
entity.
12. INTELLECTUAL PROPERTY.
12.1 Capri and Officer each acknowledge and agree that, during
the Term, Officer may create, design and develop work for some or all
of the Companies or for Clients or Prospects (collectively, "Work") and
that all such Work that is reduced to fixed form or otherwise capable
of copyright protection shall be deemed to be "work made for hire", as
that term is defined in the United States Copyright Act, as amended,
and shall be the sole and exclusive property of the respective Company.
If any of the Work is not deemed or does not qualify as work made for
hire, Officer hereby assigns, transfers and conveys to the applicable
Company all of Officer's right, title and interest in and to such Work,
including any and all United States and foreign design rights,
copyrights, mask work rights, exhibition rights, registration rights
and other proprietary rights thereto, and any and all renewals thereof.
Officer will execute and deliver such documents as the applicable
Company may request in order to evidence such respective Company's
ownership of the Work, and to register or perfect such respective
Company's ownership of the Work.
12.2 Officer is employed by Capri and, in connection with such
employment, may create, design and develop Work for some or all of the
Companies, Clients and/or Prospects. Therefore, Officer agrees that all
discoveries and inventions conceived, created or devised in whole or in
part by Officer, alone or with others, during the term of officers
employment with Capri (individually, an "Invention" and collectively,
"Inventions") which (A) directly relate in any manner, or are directly
useful to, the Business or any other business then conducted by any
Company, (B) are developed, created or discovered as a part of
Officer's employment with Capri or while Officer is performing services
for any Company, (C) are developed, created or discovered, in whole or
in part, through the use of the employees, independent contractors,
facilities, equipment, trade secrets or other resources of any Company,
or (D) arise out of tests, research or work carried out or being
carried out by any Company, shall be the sole and exclusive property of
the respective Company. Officer assigns and transfers to the respective
Company all of Officer's right, title and interest in and to all
Inventions, including all of Officer's right, title and interest in and
to any patents, patent applications, patent rights, patent claims and
allowances, copyrights, design rights, and all applications and
registrations thereof for the Inventions anywhere in the world, Officer
agrees to promptly disclose all Inventions to the respective Company.
Officer further agrees to execute and deliver to the respective Company
all documents that such Company requests in order to register any
patent copyright, or other intellectual property rights such Company
may have to any Invention, or to vest ownership of any such Invention
in such Company, at the respective Company's sole cost and expense.
Officer further agrees that both during and after the effective date of
the termination of Officer's employment with Capri, Officer will not
use or disclose any information regarding any Invention, except in
accordance with the provisions contained in this Employment Agreement.
8
<PAGE> 9
12.3 Capri and Officer agree that the terms of Section 12.2
above shall not apply to any Invention invented and developed by
Officer without the use of any of any Company's equipment supplies,
facilities, personnel or intellectual property rights, and which is
invented and developed entirely on Officer's own time, unless the
Invention (A) is directly useful in, or directly relates in any manner
to, the Business or any other business then conducted by any Company,
or (B) arises out of tests, research or work carried out or being
carried out by any Company.
12.4 Officer acknowledges that Officer has received from Capri
a copy of the Illinois Employee Patent Act and by this Employment
Agreement all notices required in connection with the Illinois Employee
Patent Act.
13. SURVIVAL. All of Officer's covenants, agreements and obligations
contained in Sections 8, 9, 10, 11, 12 and 14 will be revived continuously
during the Term and will survive the termination of the Term for any reason
whatsoever.
14. INJUNCTIVE RELIEF. Officer hereby agrees that it is impossible to
measure in money the damages which will be sustained by Capri or its successors
or assigns, if Officer breaches or defaults in the full and timely performance
of any of his covenants, agreements or obligations set forth in Sections 8, 9,
10, 11 or 12 of this Employment Agreement. Accordingly, Officer agrees that if
he breaches or defaults in the full and timely performance of any of his
covenants, duties and obligations set forth in Sections 8, 9, 10, 11 or 12 of
this Employment Agreement, then, in addition to any and all other rights and
remedies available to Capri or any Company, at law, in equity or otherwise,
Capri or any Company will be entitled to the immediate entry of injunctive
relief without notice to Officer or the requirement of posting any bond or
security therefor, including, without limitation, the entry of an order of
specific performance, a temporary restraining order, preliminary and permanent
injunction, and in connection therewith, Officer hereby waives and will not
raise or suggest the claim or defense that Capri or any Company has an adequate
remedy at law or is not being irreparably injured.
15. DEFAULT. If Capri or Officer shall breach or default in the fall or
timely performance of any of its or his respective covenants, agreements or
obligations set forth in this Employment Agreement, the defaulting party shall
be liable for, and shall promptly pay to the non-defaulting party upon written
demand, all of the costs and expenses, together with interest thereon at the
rate of nine percent (9%) per annum, which the non-defaulting party incurs as a
result of or arising from such breach or default, including, without limitation,
reasonable attorneys' fees and court costs. Capri and Officer each acknowledge
and agree that all of their respective rights and remedies set forth in this
Employment Agreement are cumulative and are in addition to all other rights and
remedies, at law, in equity or otherwise.
16. WAIVER OF BREACH. The waiver by either party of the other party's
breach of any provision of this Employment Agreement will be effective only if
in writing and signed by both parties
9
<PAGE> 10
and will be limited to the breach described therein; no such waiver will be or
be deemed a waiver of any other, similar, prior, continuing or subsequent
breach.
17. ASSIGNMENT. Officer acknowledges that the services to be rendered
by him pursuant to this Employment Agreement are unique and personal and that he
may not assign any of his rights or delegate any of his covenants, agreements,
duties or obligations hereunder. Any attempted assignment, transfer, pledge or
hypothecation or other disposition of this Employment Agreement, or of such
rights, covenants, duties or obligations by Officer, will be null and void and
of no force or effect whatsoever. Capri, on behalf of itself or any other
Company, may assign this Employment Agreement upon written notice to Officer.
18. NOTICES. Any and all notices, demands, consents, waivers,
directions, designations or other communications required or desired to be given
in connection with this Employment Agreement will be given in writing and will
be deemed effective upon personal delivery, or on the third day after mailing if
sent by certified mail, postage prepaid, return receipt requested, and addressed
to the following:
If to Capri or any Capri Corp.
other Company, then to: 2301 West 22nd Street, Suite 203
Oak Brook, Illinois 60523
U.S.A.
with a copy to: Jason W. Levin
Fagel & Haber
140 South Dearborn Street
14th Floor
Chicago, IL 60603
If to Officer, then to: Mehul J. Dave
3718 Sterling Road
Downers Grove, IL 60515
U.S.A.
or to such other person, entity or address as Capri or Officer may respectively
designate in like manner from time to time.
19. CONSTRUCTION. This Employment Agreement will be governed by,
construed in accordance with and interpreted under and consistent with the laws
and decisions of the State of Illinois, including, without limitation, the
Illinois Trade Secrets Act, as such laws apply to agreements entered into and
fully performed within the State of Illinois.
10
<PAGE> 11
19.1 If any provision contained in this Employment Agreement
is held to be invalid or unenforceable by a court of competent
jurisdiction, such provision will be severed herefrom and such
invalidity or unenforceability will not affect any other provision of
this Employment Agreement, the balance of which will remain in and have
its intended full force and effect; provided, however, if such invalid
or unenforceable provision may be modified so as to be valid and
enforceable as a matter of law, such provision will be deemed to have
been modified so as to be valid and enforceable to the maximum extent
permitted by law.
19.2 If the duration, scope or territories of any of Officer's
covenants, agreements or obligations set forth in Sections 9, 10 or 11
is held to be excessive, unreasonable, invalid or unenforceable by a
court of competent jurisdiction, such duration or scope will be
modified so as to be reasonable, valid and enforceable to the maximum
extent permitted by law as determined by such court of competent
jurisdiction.
19.3 Except as provided in Section 6, this Employment
Agreement may not be amended, changed, modified, discharged or
terminated, except by a writing executed by Capri and Officer;
provided, however, except for any proposed reduction in compensation,
bonus or any benefit payable to Officer, Capri may unilaterally amend,
change or modify Schedule A, from time to time, upon thirty (30) days
prior written notice to Officer.
19.4 This Employment Agreement, together with Schedule A,
constitute the entire agreement and understanding between Capri and
Officer with respect to the subject matter hereof, and supersede any
and all prior and contemporaneous agreements and understandings,
whether verbal or written, with respect thereto; provided, however, the
provisions of the Cimnet Agreement relating to the protection of
confidential information and ownership of intellectual property shall
survive and merge into the terms and conditions of this Employment
Agreement, and in the event of a conflict or inconsistency between the
terms of such provisions in the Cimnet Agreement and the terms and
conditions of this Employment Agreement the terms and conditions of
this Employment Agreement shall control.
19.5 The rights, covenants, duties and obligations of Capri
and Officer under this Employment Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
if applicable, legal representatives, successors, permitted assigns.
19.6 This Employment Agreement may be executed in multiple
counterparts; each such executed counterpart will be considered an
original and no other counterpart need be produced for any purpose
whatsoever.
19.7 The numbers, headings, titles or designations of the
various Sections are not a part of this Employment Agreement, but are
for convenience of reference only, and do not and will not be used to
define, limit or construe the contents of the Sections.
11
<PAGE> 12
19.8 The recitals set forth at the beginning of this
Employment Agreement are incorporated into the body of this Employment
Agreement and make an integral pie hereof, as if set forth herein.
19.9 The Schedule referred to in this Employment Agreement is
attached hereto, made a part hereof and is incorporated herein by this
reference.
19.10 For purposes of this Employment Agreement, the term
"Client" shall mean any person or entity who is or was a client of any
Company within the one (1) year period immediately preceding the
effective date of the termination of the Term, and the term "Prospect"
shall mean any prospect or prospective client whom any Company or its
respective employees, independent contractors or agents contacted or
solicited with the one (1) year period immediately preceding the
effective date of the termination of the Term.
IN WITNESS WHEREOF, Capri and Officer have executed this Employment
Agreement as of the date first set forth above.
Capri Corp.
By:/s/ P. Balasubramanian /s/ Mehul J. Dave
------------------------------------- ----------------------
P. Balasubramanian, Mehuld J. Dave
Executive Vice President
12
<PAGE> 13
SCHEDULE A TO EMPLOYMENT AGREEMENT
BETWEEN CAPRI CORP. AND MEHUL J. DAVE
DATED JULY 1, 1997
COMPENSATION
A. SALARY. Capri shall pay Officer a salary which would equal on an
annualized basis of $157,200.00 per year that he is employed by Capri or any
Company pursuant to this Employment Agreement, and pro rata for any portion of
any year based upon the above annualized rate.
B. INCENTIVE BONUS. In addition to the salary set forth in Section A
above, Capri shall pay Officer an incentive bonus with respect to each fiscal
year of Capri and its subsidiaries (the "Fiscal Year") commencing in the Fiscal
Year this Employment Agreement is entered into, and for each subsequent Fiscal
Year during Officer's employment with the Company during which the Company, on a
consolidated basis, has "Net Income" (hereinafter defined). The incentive bonus
shall be paid within ninety days (90) days of the close of the Fiscal Year in
which such incentive bonus is earned. If the Fiscal Year changes at any time,
appropriate adjustments in the incentive bonus shall be made. Officer's
incentive bonus pursuant to this Schedule A shall be referred to herein as the
"Incentive Bonus". The Incentive Bonus for each Fiscal Year shall be calculated
as follows:
Net Income Incentive Bonus
---------- ---------------
250,000 5,000
500,000 15,000
750,000 35,000
1,000,000 50,000
1,500,000 75,000
2,000,000 100,000
2,500,000 150,000
3,000,000 200,000
Capri shall have its regularly retained independent auditor calculate the Net
Income as of the last day of each Fiscal Year and Officer's Incentive Bonus
shall be based on those calculations. For the purposes of this Schedule A to the
Employment Agreement:
(1) "Net Income" shall mean income of the Company, on a
consolidated basis, determined in accordance with generally accepted
accounting principles consistently applied; provided, however, that Net
Income shall not include income from extraordinary items, as determined
pursuant to generally accepted accounting principles.
13
<PAGE> 14
(2) In case of any dispute between Capri and Officer as to the
amount of the Net Income, the determination thereof by the independent
auditor of Capri shall be binding and conclusive.
By:/s/ P. Balasubramanian /s/ Mehul J. Dave
------------------------------------- ----------------------
P. Balasubramanian, Mehul J. Dave
Executive Vice President
14
<PAGE> 1
EXHIBIT 6.3
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of July 1, 1997,
by and between Capri Corp., a Minnesota corporation ("Capri"), and P.
Balasubramanian, a resident of the State of Illinois ("Officer").
Capri currently owns all of the issued and outstanding shares of
capital stock of Cimnet Systems, Inc., an Illinois corporation ("Cimnet").
Cimnet is currently engaged in the business of designing, licensing,
implementing and maintaining custom software, and designing, configuring and
selling computer systems, for manufacturing businesses throughout the world (the
"Business"). Officer is currently employed by Capri as its Executive Vice
President and Secretary as an "at will" employee. Officer is also currently
employed by Cimnet as its Executive Vice President, pursuant to that certain
Contract of Employment dated July 25, 1989, by and between Cimnet and Officer
(the "Cimnet Agreement"). Contemporaneously with the execution of this
Employment Agreement Cimnet and Officer shall terminate those certain provisions
of the Cimnet Agreement specified in this Employment Agreement. Capri desires to
employ Officer, and Officer desires to be employed Capri, pursuant to and in
accordance with the terms and conditions set forth in this Employment Agreement.
In consideration of the foregoing, the mutual covenants, agreements and
obligations set forth in this Employment Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, Capri and Officer hereby agree as set forth in this
Employment Agreement.
1. EMPLOYMENT. Capri hereby employs Officer, and Officer hereby agrees
to be employed by Capri, pursuant to and in accordance with the terms and
conditions set forth in this Employment Agreement and with the understanding
that Officer will comply with Capri's rules and regulations as now in effect and
as hereafter amended or adopted from time to time.
2. DUTIES. During the "Term" (hereinafter defined), Officer shall have
the title and the duties and obligations of Executive Vice President of Capri,
Executive Vice President and Secretary of Cimnet and such additional titles,
duties and obligations of Capri, Cimnet and any parent, subsidiary or affiliated
corporation of Capri or Cimnet (collectively and individually, "Company") as the
Board of Directors of Capri may, from time to time, assign to Officer, Officer
will devote his full time, attention, energy, expertise and best efforts to
fully and timely perform his duties and obligations as required under this
Employment Agreement.
3. COMPENSATION. During the Term, Capri shall pay Officer the
compensation set forth on Schedule A attached hereto, which Schedule A may be
amended from time to time in accordance with Section 19.3 hereof.
1
<PAGE> 2
3.1 All compensation and benefits payable to Officer pursuant
to the terms of this Employment Agreement will be paid in accordance
with each Company's regular payroll practices, in effect from time to
time.
3.2 All compensation and benefits payable to Officer pursuant
to the term of this Employment Agreement will be subject to normal
employee withholding and all other applicable tax deductions as
required by law, including, without limitation, social security and
federal, state and local withholding taxes.
3.3 Officer's compensation and performance under this
Employment Agreement shall be reviewed on an annual basis by the Board
of Directors of each Company.
3.4 As an executive employee of each Company, Officer
acknowledges and agrees that he is exempt from and not entitled to
receive overtime in the event he works in excess of eight (8) hours per
day or forty (40) hours per week, except as required by law.
4. ADDITIONAL EMPLOYMENT BENEFITS. During the Term,
4.1 Officer will be entitled to participate in Company's
employee benefit plans and programs in effect from time to time,
including, without limitation, pension and/or profit sharing plans,
medical reimbursement plans and group life, health, disability and
other insurance programs, if any, as determined by the Board of
Directors to avoid inequitable compensation among each Company and as
applicable to Officer as an executive officer of each Company;
provided, however, each Company shall be under no obligation to adopt
or maintain any fringe benefit program, whether or not such fringe
benefit program is in existence as of the date hereof or Officer is
eligible to participate therein; and
4.2 Officer will receive such paid vacation time and sick
leave as he is entitled in accordance with Capri's policies in effect
from time to time.
5. EXPENSES.
5.1 Upon presentation of such supporting documentation as may
be reasonably satisfactory to the respective Company, the respective
Company will pay or reimburse Officer for all reasonable and necessary
travel, entertainment and other business expenses incurred by Officer
in the performance of his employment duties during the Term.
5.2 If a federal, state or local income tax deduction is
disallowed to the respective Company for any part of an expense payment
or reimbursement made by the respective Company to or on behalf of
Officer, upon written request, Officer will repay to the respective
Company, in the sole discretion of the respective Company, either: (i)
the amount of such disallowed expense payment or reimbursement; or (ii)
the amount of taxes incurred by the respective Company in connection
with such expense payment or reimbursement.
2
<PAGE> 3
5.3 If there is a dispute between the respective Company and
Officer as to the nature of any expense or whether any such expense is
reasonable and necessary, the decision of the Board of Directors of the
respective Company shall be binding and controlling.
6. TERM/TERMINATION. The initial term of Officer's employment with
Capri under this Employment Agreement and each and every other Company will
commence as of the date hereof and, unless sooner terminated as hereinafter
provided, will terminate at the close of business of Capri on June 30, 2002 (the
"Initial Term").
6.1 Thereafter, the Initial Term will automatically be
extended for successive and consecutive renewal terms of one year each
(a "Renewal Term") [the Initial Term, together with any and all Renewal
Terms, are sometimes collectively referred to as the "Term"]; provided,
however:
A. Officer may elect to terminate the Term at any
time by giving the Board of Directors of Capri not less than
one hundred twenty (120) days prior written notice thereof,
and such notice shall be effective for each Company;
B. Capri may terminate the Term for every Company
without "Cause" (hereinafter defined) at any time by giving
Officer not less than one hundred twenty (120) days prior
written notice thereof, and such notice shall be effective for
each Company.
6.2 Notwithstanding the foregoing, Capri may terminate the
Term, upon notice to Officer, upon the occurrence of any one or more of
the following (collectively and individually "Cause"):
A. The commission by Officer of fraud,
misappropriation of funds, embezzlement, or an intentional
dishonest act which causes injury to any Company, or which
causes injury to any client of any Company, whether or not in
connection with the performance of his duties and obligations
under this Employment Agreement;
B. Officer's conviction of a crime which constitutes
a felony in the State of Illinois, regardless of whether such
crime involves any Company, or the clients of any Company; or
C. The performance by Officer of any of his duties
and obligations under this Employment Agreement while under
the continuing and habitual influence of alcohol or illegal
drugs.
3
<PAGE> 4
6.3 The Term will immediately terminate upon the occurrence of
any of the following:
A. The effective date of a written agreement of
termination entered into between Capri and Officer;
B. The death of Officer; or
C. The effective date of the "Disability"
(hereinafter defined) of Officer.
6.4 For purposes of this Employment Agreement, Officer will be
deemed to be suffering from a "Disability" when, in the written opinion
of an actively practicing physician reasonably acceptable to Capri and
Officer (or his legal representative), due to physical, mental or
emotional injury or illness, Officer is unable and either does not or,
in the opinion of such physician, will not be able to perform his
duties and obligations pursuant to this Employment Agreement for a
continuous period of twelve (12) months.
7. TERMINATION COMPENSATION.
7.1 Upon the termination of the Term for any reason
whatsoever, Capri shall pay Officer that amount of Officer's then
salary, "Bonus" (as defined on Schedule A) pro-rated to the date of
termination within ninety (90) days of the close of the close of
Capri's fiscal year, and other benefits which have accrued through the
effective date of the termination of the Term,
7.2 If Company terminates the Term other than for Cause or if
Capri and Officer mutually agree to terminate the Term pursuant to
Section 6.3A, in addition to the compensation payable by Capri to
Officer pursuant to Section 7.1 above, Capri shall pay Officer a
severance benefit in an amount equal to two (2) times Officer's then
current annual salary ("Severance Benefit"), payable in thirty-six (36)
equal monthly installments commencing on the first day of the first
month immediately following the effective date of the termination of
the Term, and continuing on the first day of each of the next
thirty-five (35) consecutive calendar months hereafter.
7.3 If Officer voluntarily terminates the Term pursuant to
Section 6.1A, in addition to the compensation payable by Capri to
Officer pursuant to Section 7.1 above, Capri shall pay Officer a
severance benefit in an amount equal to one-half (1/2) of the Severance
Benefit, payable in thirty-six (36) equal monthly installments
commencing on the first day of the first month immediately following
the effective date of the termination of the Term, and continuing on
the first day of each of the next thirty-five (35) consecutive calendar
months thereafter.
4
<PAGE> 5
7.4 If Capri terminates the Term for Cause, Capri shall only
pay Officer the compensation described in Section 7.1 and shall not be
obligated or liable in any way, or under any circumstance, to pay
Officer any other compensation or benefit whatsoever.
7.5 If the Term is terminated pursuant to Section 6.3B or
Section 6.3C, in addition to the compensation payable by Capri to
Officer pursuant to Section 7.1 above, Capri shall pay Officer or
Officer's estate or personal representative, as the case may be, a
termination benefit in an amount equal to the Severance Benefit,
payable in twelve (12) equal monthly installments commencing on the
first day of the first month immediately following the effective date
of the termination of the Term, and continuing on the first day of each
of the next eleven (11) consecutive calendar months thereafter.
7.6 Capri may, in its sole discretion and upon notice to
Officer, offset and recoup against any payment which Capri is obligated
to make to Officer pursuant to this Section 7 any money owed by Officer
to Capri, whether as a result of a loan or advance to Officer or
otherwise.
7.7 Notwithstanding the foregoing, Officer acknowledges and
agrees that Capri's obligation to make payments pursuant to this
Section 7 shall immediately cease, and Capri shall have no further
liability whatsoever with respect thereto, upon the breach by Officer
of any of his covenants, agreements or obligations set forth in
Sections 8, 9, 10, 11 or 12 of this Employment Agreement.
8. NON-DISCLOSURE.
8.1 During Officer's prior employment with Cimnet and during
the Term, Officer, by virtue of his positions with Capri, Cimnet and
Cimnet Infonnationssysteme GmbH, has created, had contact with and
received, and will continue to create, have contact with and receive,
confidential information and/or trade secrets of each Company,
including, without limitation, "Client" (hereinafter defined) lists,
"Prospects" (hereinafter defined) lists, price lists, advertising,
promotion or marketing plans, business plans, methods of doing
business, concepts, ideas, software programs, source code, trade
secrets, market or other research or any program, product or service
which was developed by Company or which Company provides or intends to
provide to its Clients or markets to its Clients or Prospects
(collectively, "Confidential Information").
8.2 During the Term and for the "Restricted Period" (as
hereinafter defined) following the termination of the Term for any
reason whatsoever, Officer will not, either directly or indirectly, for
his own benefit or for the benefit of any other person or entity, use,
divulge, disclose or communicate to any other person or entity, any of
the Confidential Information in any manner whatsoever, except in the
course of and during the performance of his duties and obligations
under this Employment Agreement, unless the applicable
5
<PAGE> 6
Company otherwise consents to the disclosure or use of any of the
Confidential Information in writing prior to such disclosure or use.
8.3 With respect to each particular item of Confidential
Information, the "Restricted Period" shall mean: (i) thirty six (36)
months, if the item of Confidential Information at issue does not
constitute a trade secret, or (ii) indefinitely, if such item of
Confidential Information constitutes a trade secret, until such item of
Confidential Information ceases to be a trade secret, but not less than
thirty six (36) months.
8.4 Notwithstanding the foregoing, Confidential Information
does not include information: (i) in the public domain, (ii) received
by Officer outside of his employment with any Company from a person or
entity not under an obligation of confidentiality to the applicable
Company, directly or indirectly, or (iii) that later becomes public,
unless such information is made public by Officer in breach of this
Employment Agreement or by any other person or entity, directly or
indirectly, under an obligation of confidentiality to the applicable
Company.
8.5 Upon the effective date of the termination of the Term,
Officer will immediately return to Capri all original and all copies of
Confidential Information, and all notes, analyses, memoranda or any
other documents or writings incorporating or referring to any of the
Confidential Information, and all disks, software, hard drives,
computer memory or other electronic or magnetic storage containing any
Confidential Information, whether in his possession or under his
control, and will certify in writing to Capri that, except on behalf of
Company in the course of the performance of his duties and obligations
under this Employment Agreement he has not retained, disseminated,
disclosed or delivered to any person or entity any original or copy, in
any form, electronically, magnetically or otherwise, of any of the
Confidential Information or any notes, analyses, memoranda or other
documents or writings, disks, software, hard drives, computer memory or
other magnetic or electronic storage incorporating or referring to any
of the Confidential Information.
9. NON-COMPETITION. To protect each Company's proprietary interest in
the Confidential Information and in their respective Clients and Prospects,
during the Term and for a period of thirty-six (36) months following the
effective date of the termination of the Term for any reason whatsoever, Officer
will not, directly or indirectly, individually or in combination or association
with any other person or entity, whether as an officer, director, shareholder,
manager, member, partner, joint venture, solo proprietor, employee, agent,
independent contractor, consultant, advisor or otherwise, whether or not for
pecuniary benefit, except on behalf of the applicable Company in the course of
the performance of his duties and obligations under this Employment Agreement,
engage in or own (in whole or in part), manage, operate or otherwise carry on
any business which competes with or is substantially similar to the Business or
any then business of any Company in the world (the "Territory"). Nothing
contained in this Section 9 shall prohibit Officer from beneficially owning,
either directly or indirectly, five percent (5%) or less of the stock or
6
<PAGE> 7
ownership interest of a company which engages in the Business if such stock or
ownership interest is publicly traded on a national exchange or
over-the-counter.
Officer recognizes and acknowledges that the businesses and markets of
each Company are, in the aggregate, national and international in scope, and
that the restrictive covenants of Officer set forth in this Section 9 are
necessary in order to protect and maintain the proprietary interests and other
legitimate business interests of each Company and are reasonable in all
respects. Officer further acknowledges and agrees that the products and services
of the Business can be marketed, sold and distributed to Clients and Prospects
worldwide, and have been and are presently being marketed throughout the world.
Consequently, Officer acknowledges and agrees that it is not possible to limit
the geographic scope of the non-competition covenant set forth in this Section 9
to particular cities, counties or other geographic subdivisions of any
jurisdiction.
10. NON-SOLICITATION OF CLIENTS AND PROSPECTS. To protect each
Company's proprietary interest in the Confidential Information and in their
respective Clients and Prospects, during the Tem and for a period of thirty-six
(36) months following the effective date of the termination of the Term for any
reason whatsoever, Officer will not, directly or indirectly, individually or in
combination or association with any other person or entity, whether as an
officer, director, shareholder, manager, member, partner, joint venturer, sole
proprietor, employee, agent, independent contractor, consultant advisor or
otherwise, whether or not for pecuniary benefit, except on behalf of the
applicable Company in the course of the performance of his duties and
obligations under this Employment Agreement, solicit, or assist or encourage any
other person or entity to solicit, any Client or any Prospect, for the purpose
of:
10.1 selling such Client products sold, or services rendered,
in conjunction with the operation of the Business or any product or
service that can or may be used in substitution for or replacement of
the products and/or services designed, licensed, implemented,
maintained, marketed and/or sold by any Company,
10.2 terminating, altering or modifying such Client's business
relationship with the applicable Company,
10.3 altering or modifying the terms or reducing the volume of
business which such Client transacts with the applicable Company, or
10.4 negatively influencing such Prospect's decision as to
whether to purchase any products or services from Capri or the terms of
such intended business transaction or relationship.
11. NON-SOLICITATION OF EMPLOYEES, INDEPENDENT CONTRACTORS AND AGENTS.
To further protect each Company's proprietary interest in the Confidential
Information and in their respective relationships with their employees,
independent contractors and agents, during the Term and for a period of
thirty-six (36) months following the effective date of the termination of the
Term for any
7
<PAGE> 8
reason whatsoever, Officer will not, directly or indirectly, individually or in
combination or association with any other person or entity, whether as an
officer, director, shareholder, manager, member, partner, joint venturer, sole
proprietor, employee, agent, independent contractor, consultant, advisor or
otherwise, whether or not for pecuniary benefit, except on behalf of the
applicable Company in the course of the performance of his duties and
obligations under this Employment Agreement contact, encourage or solicit any
then employee, independent contractor or agent of any Company to terminate or
modify his, her or its respective employment, engagement or business
relationship with such Company or hire or retain any other person or entity.
12. INTELLECTUAL PROPERTY.
12.1 Capri and Officer each acknowledge and agree that, during
the Term, Officer may create, design and develop work for some or all
of the Companies or for Clients or Prospects (collectively, "Work") and
that all such Work that is reduced to fixed form or otherwise capable
of copyright protection shall be deemed to be "work made for hire", as
that term is defined in the United States Copyright Act, as amended,
and shall be the sole and exclusive property of the respective Company.
If any of the Work is not deemed or does not qualify as work made for
hire, Officer hereby assigns, transfers and conveys to the applicable
Company all of Officer's right, title and interest in and to such Work,
including any and all United States and foreign design rights,
copyrights, mask work rights, exhibition rights, registration rights
and other proprietary rights thereto, and any and all renewals thereof.
Officer will execute and deliver such documents as the applicable
Company may request in order to evidence such respective Company's
ownership of the Work, and to register or perfect such respective
Company's ownership of the Work.
12.2 Officer is employed by Capri and, in connection with such
employment, may create, design and develop Work for some or all of the
Companies, Clients and/or Prospects. Therefore, Officer agrees that all
discoveries and inventions conceived, created or devised in whole or in
part by Officer, alone or with others, during the term of Officer's
employment with Capri (individually, an "Invention" and collectively,
"Inventions") which (A) directly relate in any manner, or are directly
useful to, the Business or any other business then conducted by any
Company, (B) are developed, created or discovered as a part of
Officer's employment with Capri or while Officer is performing services
for any Company, (C) are developed, created or discovered, in whole or
in part, through the use of the employees, independent contractors,
facilities, equipment, trade secrets or other resources of any Company,
or (D) arise out of tests, research or work carried out or being
carried out by any Company, shall be the sole and exclusive property of
the respective Company. Officer assigns and transfers to the respective
Company all of Officer's right, title and interest in and to all
Inventions, including all of Officer's right, title and interest in and
to any patents, patent applications, patent rights, patent claims and
allowances, copyrights, design rights, and all applications and
registrations thereof for the Inventions anywhere in the world, Officer
agrees to promptly disclose all Inventions to the respective Company.
Officer further agrees to execute and deliver to the respective Company
all documents that such Company requests in
8
<PAGE> 9
order to register any patent copyright, or other intellectual property
rights such Company may have to any Invention, or to vest ownership of
any such Invention in such Company, at the respective Company's sole
cost and expense. Officer further agrees that both during and after the
effective date of the termination of Officer's employment with Capri,
Officer will not use or disclose any information regarding any
Invention, except in accordance with the provisions contained in this
Employment Agreement.
12.3 Capri and Officer agree that the terms of Section 12.2
above shall not apply to any Invention invented and developed by
Officer without the use of any of any Company's equipment supplies,
facilities, personnel or intellectual property rights, and which is
invented and developed entirely or Officer's own time, unless the
Invention (A) is directly useful in, or directly relates in any manner
to, the Business or any other business then conducted by any Company,
or (B) arises out of tests, research or work carried out or being
carried out by any Company,
12.4 Officer acknowledges that Officer has received from Capri
a copy of the Illinois Employee Patent Act and by this Employment
Agreement all notices required in connection with the Illinois Employee
Patent Act.
13. SURVIVAL. All of Officer's covenants, agreements and
obligations contained in Sections 8, 9, 10, 11, 12 and 14 will be
revived continuously during the Term and will survive the termination
of the Term for any reason whatsoever.
14. INJUNCTIVE RELIEF. Officer hereby agrees that it is impossible to
measure in money the damages which will be sustained by Capri or its successors
or assigns, if Officer breaches or defaults in the full and timely performance
of any of his covenants, agreements or obligations set forth in Sections 8, 9,
10, 11 or 12 of this Employment Agreement. Accordingly, Officer agrees that if
he breaches or defaults in the full and timely performance of any of his
covenants, duties and obligations set forth in Sections 8, 9, 10, 11 or 12 of
this Employment Agreement, then, in addition to any and all other rights and
remedies available to Capri or any Company, at law, in equity or otherwise,
Capri or any Company will be entitled to the immediate entry of injunctive
relief without notice to Officer or the requirement of posting any bond or
security therefor, including, without limitation, the entry of an order of
specific performance, a temporary restraining order, preliminary and permanent
injunction, and in connection therewith, Officer hereby waives and will not
raise or suggest the claim or defense that Capri or any Company has an adequate
remedy at law or is not being irreparably injured.
15. DEFAULT. If Capri or Officer shall breach or default in the fall or
timely performance of any of its or his respective covenants, agreements or
obligations set forth in this Employment Agreement, the defaulting party shall
be liable for, and shall promptly pay to the non-defaulting party upon written
demand, all of the costs and expenses, together with interest thereon at the
rate of nine percent (9%) per annum, which the non-defaulting party incurs as a
result of or arising from such breach or default, including, without limitation,
reasonable attorneys' fees and court costs. Capri and
9
<PAGE> 10
Officer each acknowledge and agree that all of their respective rights and
remedies set forth in this Employment Agreement are cumulative and are in
addition to all other rights and remedies, at law, in equity or otherwise.
16. WAIVER OF BREACH. The waiver by either party of the other party's
breach of any provision of this Employment Agreement will be effective only if
in writing and signed by both parties and will be limited to the breach
described therein; no such waiver will be or be deemed a waiver of any other,
similar, prior, continuing or subsequent breach.
17. ASSIGNMENT. Officer acknowledges that the services to be rendered
by him pursuant to this Employment Agreement are unique and personal and that he
may not assign any of his rights or delegate any of his covenants, agreements,
duties or obligations hereunder. Any attempted assignment, transfer, pledge or
hypothecation or other disposition of this Employment Agreement, or of such
rights, covenants, duties or obligations by Officer, will be null and void and
of no force or effect whatsoever. Capri, on behalf of itself or any other
Company, may assign this Employment Agreement upon written notice to Officer.
18. NOTICES. Any and all notices, demands, consents, waivers,
directions, designations or other communications required or desired to be given
in connection with this Employment Agreement will be given in writing and will
be deemed effective upon personal delivery, or on the third day after mailing if
sent by certified mail, postage prepaid, return receipt requested, and addressed
to the following:
18.1 If to Capri or any other Company, then to:
Capri Corp.
2301 West 22nd Street, Suite 203
Oak Brook, Illinois 60523
U.S.A.
With a copy to:
Jason W. Levin
Fagel & Haber
140 South Dearborn Street, 14th Floor
Chicago, IL 60603
18.2 If to Officer, then to:
P. Balasubramanian
1767 Auburn Ave.
Naperville, IL 60565
U.S.A.
10
<PAGE> 11
or to such other person, entity or address as Capri or Officer may respectively
designate in like manner from time to time.
19. CONSTRUCTION. This Employment Agreement will be governed by,
construed in accordance with and interpreted under and consistent with the laws
and decisions of the State of Illinois, including, without limitation, the
Illinois Trade Secrets Act, as such laws apply to agreements entered into and
fully performed within the State of Illinois.
19.1 If any provision contained in this Employment Agreement
is held to be invalid or unenforceable by a court of competent
jurisdiction, such provision will be severed herefrom and such
invalidity or unenforceability will not affect any other provision of
this Employment Agreement, the balance of which will remain in and have
its intended full force and effect; provided, however, if such invalid
or unenforceable provision may be modified so as to be valid and
enforceable as a matter of law, such provision will be deemed to have
been modified so as to be valid and enforceable to the maximum extent
permitted by law.
19.2 If the duration, scope or territories of any of Officer's
covenants, agreements or obligations set forth in Sections 9, 10 or 11
is held to be excessive, unreasonable, invalid or unenforceable by a
court of competent jurisdiction, such duration or scope will be
modified so as to be reasonable, valid and enforceable to the maximum
extent permitted by law as determined by such court of competent
jurisdiction.
19.3 Except as provided in Section 6, this Employment
Agreement may not be amended, changed, modified, discharged or
terminated, except by a writing executed by Capri and Officer;
provided, however, except for any proposed reduction in compensation,
bonus or any benefit payable to Officer, Capri may unilaterally amend,
change or modify Schedule A. from time to time, upon thirty (30) days
prior written notice to Officer.
19.4 This Employment Agreement, together with Schedule A,
constitute the entire agreement and understanding between Capri and
Officer with respect to the subject matter hereof, and supersede any
and all prior and contemporaneous agreements and understandings,
whether verbal or written, with respect thereto; provided, however, the
provisions of the Cimnet Agreement relating to the protection of
confidential information and ownership of intellectual property shall
survive and merge into the terms and conditions of this Employment
Agreement, and in the event of a conflict or inconsistency between the
terms of such provisions in the Cimnet Agreement and the terms and
conditions of this Employment Agreement the terms and conditions of
this Employment Agreement shall control.
19.5 The rights, covenants, duties and obligations of Capri
and Officer under this Employment Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
if applicable, legal representatives, successors, permitted assigns.
11
<PAGE> 12
19.6 This Employment Agreement may be executed in multiple
counterparts; each such executed counterpart will be considered an
original and no other counterpart need be produced for any purpose
whatsoever.
19.7 The numbers, headings, titles or designations of the
various Sections are not a part of this Employment Agreement, but are
for convenience of reference only, and do not and will not be used to
define, limit or construe the contents of the Sections.
19.8 The recitals set forth at the beginning of this
Employment Agreement are incorporated into the body of this Employment
Agreement and make an integral part hereof, as if set forth herein.
19.9 The Schedule referred to in this Employment Agreement is
attached hereto, made a part hereof and is incorporated herein by this
reference,
19.10 For purposes of this Employment Agreement, the term
"Client" shall mean any person or entity who is or was a client of any
Company within the one (1) year period immediately preceding the
effective date of the termination of the Term, and the term "Prospect"
shall mean any prospect or prospective client whom any Company or its
respective employees, independent contractors or agents contacted or
solicited with the one (1) year period immediately preceding the
effective date of the termination of the Term.
IN WITNESS WHEREOF, Capri and Officer have executed this Employment
Agreement as of the date first set forth above.
CAPRI CORP.
By: /s/ Mehul J. Dave By:/s/ P. Balasubramanian
-------------------------------- ----------------------------------
Mehul J. Dave, President P. Balasubramanian
12
<PAGE> 13
SCHEDULE A TO EMPLOYMENT AGREEMENT
BETWEEN CAPRI CORP. AND P. BALASUBRAMANIAN
DATED JULY 1, 1999
COMPENSATION
A. SALARY. Capri shall pay Officer a salary which would equal on an
annualized basis of $145,945.00 per year that he is employed by Capri or any
Company pursuant to this Employment Agreement, and pro rata for any portion of
any year based upon the above annualized rate.
B. INCENTIVE BONUS. In addition to the salary set forth in Section A
above, Capri shall pay Officer an incentive bonus with respect to each fiscal
year of Capri and its subsidiaries (the "Fiscal Year") commencing in the Fiscal
Year this Employment Agreement is entered into, and for each subsequent Fiscal
Year during Officer's employment with the Company during which the Company, on a
consolidated basis, has "Net Income" (hereinafter defined). The incentive bonus
shall be paid within ninety days (90) days of the close of the Fiscal Year in
which such incentive bonus is earned. If the Fiscal Year changes at any time,
appropriate adjustments in the incentive bonus shall be made. Officer's
incentive bonus pursuant to this Schedule A shall be referred to herein as the
"Incentive Bonus". The Incentive Bonus for each Fiscal Year shall be calculated
as follows:
Net Income Incentive Bonus
---------- ---------------
250,000 3,500
500,000 10,500
750,000 25,000
1,000,000 35,000
1,500,000 52,500
2,000,000 70,000
2,500,000 105,000
3,000,000 140,000
Capri shall have its regularly retained independent auditor calculate the Net
Income as of the last day of each Fiscal Year and Officer's Incentive Bonus
shall be based on those calculations. For the purposes of this Schedule A to the
Employment Agreement:
(1) "Net Income" shall mean income of the Company, on a
consolidated basis, determined in accordance with generally accepted
accounting principles consistently applied; provided, however, that Net
Income shall not include income from extraordinary items, as determined
pursuant to generally accepted accounting principles.
13
<PAGE> 14
(2) In case of any dispute between Capri and Officer as to the
amount of the Net Income, the determination thereof by the independent
auditor of Capri shall be binding and conclusive.
Capri Corp.
By: /s/ Mehul J. Dave /s/ P. Balasubramanian
-------------------------------- ----------------------------
Mehul J. Dave, President P. Balasubramanian
14
<PAGE> 1
EXHIBIT 6.4
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of 12/14 1998 by and
between ("Employee") and Cimnet Systems, Inc., an Illinois corporation (the
"Company");
Company is engaged in the business of creating and licensing computer
programs and related services. Employee is presently employed by Company as an
at-will employee. Employee and Company wish to set forth their agreements with
respect to the employment of Employee by Company from the date of this Agreement
forward.
In consideration of the foregoing, the agreements set forth below,
Company's continued employment of Employee, One Hundred Dollars ($100.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Company and Employee agree as follows:
1. EMPLOYMENT. Company employs Employee and Employee accepts employment
with Company on the terms and conditions set forth in this Agreement, and in
compliance with Company's rules and regulations as now in effect or as amended
or adopted from time to time.
2. DUTIES. During the term of Employee's employment with Company,
Employee shall have the title and the responsibilities and duties set forth on
Schedule A attached hereto, and such additional duties and responsibilities as
may be assigned to Employee by the officers of Company or by Employee's
supervisors.
3. COMPENSATION. During the term of Employee's employment with Company,
Company shall pay Employee the compensation set forth on Schedule A attached
hereto. No compensation or benefits of any kind shall be due Employee other than
as set forth on Schedule A. All compensation and benefits shall be subject to
all applicable taxes, including withholding tax.
4. TERM/TERMINATION. The term of this Agreement shall begin on the date
first written above and shall continue until terminated by either Employee or
Company, with or without cause, upon the terminating party giving the other
party ninety (90) days prior written notice of termination. Notwithstanding the
foregoing, Company may terminate this Agreement and Employee's employment
immediately upon written notice sent to Employee for any one of the following:
(a) Employee's intentional or continuous dereliction of Employee's duties under
this Agreement; (b) an act of dishonesty against Company or a client of Company
by Employee; (c) the performance by Employee of employment duties under the
influence of alcohol or illegal drugs; (d) the breach by Employee of any of the
terms or conditions of this Agreement; or (e) the death or permanent disability
of Employee.
In the event of the termination of this Agreement, for any reason,
Company shall only be obligated to pay Employee compensation and benefits, if
any, up to and including the actual date of
<PAGE> 2
such termination. Company may offset and recoup against any compensation owed to
Employee any money owed by Employee to Company.
5. NON-DISCLOSURE. Employee acknowledges and agrees that during
Employee's employment with Company, Employee has and will continue to create,
have contact with, and receive confidential information and/or trade secrets of
Company, including, but not limited to, existing or proposed computer programs,
source code, algorithms, instruction manuals, software tools, marketing
research, information regarding the business operations of Company and/or its
clients, financial and pricing information, customer lists, and training and
implementation methods and processes (collectively "Confidential Information").
During Employee's employment with Company, and for the "Restricted Period" (as
hereinafter defined) following the termination of Employee's employment with
Company, for any reason, Employee will not, either directly or indirectly, for
Employee's own benefit or for the benefit of any third party, use, divulge,
disclose, or communicate to any third party, any of the Confidential Information
in any manner whatsoever, except in the course of and during the performance of
Employee's duties and responsibilities under this Agreement, unless Company
otherwise consents to the disclosure or use of any of the Confidential
Information in writing prior to such disclosure or use. With respect to each
particular item of Confidential Information, the "Restricted Period" shall mean:
(a) eighteen (18) months, if the item of Confidential Information at issue does
not constitute a "trade secret" as defined in the Illinois Trade Secrets Act, or
(b) indefinitely, if the item of Confidential Information at issue constitutes a
"trade secret" as defined in the Illinois Trade Secrets Act, until such item of
Confidential Information at issue ceases to be a "trade secret" as defined in
the Illinois Trade Secrets Act, but not less than eighteen (18) months.
Notwithstanding the foregoing, Confidential Information does not include
information (i) in the public domain, (ii) received by Employee outside of
Employee's employment with Company from a party not under an obligation of
confidentiality to Company, directly or indirectly, or (iii) that later becomes
public, unless such information is made public by Employee in breach of this
Agreement or by any other party directly or indirectly under an obligation of
confidentiality to Company. All files, records, documents, drawings,
specifications, and similar items relating to the business of the Company, and
any copies, reproductions, or recordings thereof, whether prepared by Employee
or otherwise coming into the Employee's possession, shall remain the exclusive
property of Company and shall be returned to Company by Employee upon the
termination of this Agreement and Employee's employment with Company.
6. NON-SOLICITATION OF CLIENTS. To protect Company's proprietary
interest in the Confidential Information and in Company's current and
prospective clients, during the term of this Agreement and for a period of
eighteen (18) months following the termination of this Agreement and Employee's
employment with Company, for any reason, Employee will not, individually, or in
association or in combination with any other person or entity, directly or
indirectly, as proprietor or owner, or officer, director or shareholder of any
corporation, or as an employee, agent, independent contractor, consultant,
advisor, joint venturer, partner or otherwise, whether or not for monetary
benefit, except on behalf of Company, solicit, sell to, provide services to, or
assist the solicitation of, sale to, or providing to, or encourage, induce or
entice any other person or entity to solicit, sell to or provide services to,
any person or entity who is or was a customer or client of Company (or whom
2
<PAGE> 3
the Company is or was soliciting to become a customer or client of Company)
during the term of Employee's employment with Company, for the purpose of
providing such customer or client with the same or substantially the same
products and/or services as Company provided or sought to provide such customer
or client.
7. NON-SOLICITATION OF EMPLOYEES. To further protect the Company's
proprietary interest in its Confidential Information and in Company's
relationships with its employees and contractors, for a period of eighteen (18)
months following the termination of Employee's employment with Company, for any
reason, Employee will not, individually or in association or in combination with
any other person or entity, directly or indirectly, encourage, induce or entice
any employee or independent contractor of Company to terminate such person's or
entity's employment with or retention by Company.
8. INTELLECTUAL PROPERTY.
(a) WORK MADE FOR HIRE. Company and Employee acknowledge and
agree that Employee, during the course of Employee's employment with
Company, has and will create, design, develop, write, document, program
and/or derive work for Company or for clients or prospective clients of
Company (collectively, "Work") and that all such Work shall be deemed
to be "work made for hire", as that term is defined in the United
States Copyright Act, as amended. In the event that any of the Work is
not deemed or does not qualify as work made for hire, Employee hereby
assigns, transfers and conveys to the Company all of Employee's right,
title and interest in and to such Work, in whole or in part, as it is
reduced to fixed form, including any and all United States and foreign
design rights, copyrights, exhibition rights and other proprietary
rights thereto, and any and all renewals thereof. Employee will execute
and deliver such documents as Company may request in order to evidence
Company's ownership of the Work, and to register or perfect Company's
ownership of the Work.
(b) INVENTIONS.
(i) Employee is employed by Company for the purpose
of designing, developing, creating, deriving, programming,
and/or marketing computer programs and/or providing
implementation, training and support services for the
foregoing. Therefore, Employee agrees that all discoveries and
inventions conceived, created, or devised in whole or in part
by Employee, alone or with others, during the term of
Employee's employment with Company which (1) directly relate
in any manner, or are directly useful to, the business
conducted by Company, (2) are developed, created or discovered
as a part of Employee's employment with Company or while
Employee is performing services for Company, (3) are
developed, created or discovered, in whole or in part, through
the use of the employees, independent contractors, facilities,
equipment, trade secrets or other resources of Company, or (4)
arise out of tests, research or work carried out or being
carried out by Company, shall be the sole and exclusive
property of Company. Employee assigns and transfers to Company
all of
3
<PAGE> 4
Employee's right, title and interest in and to all Inventions,
including all of Employee's right, title and interest in and
to any patents, patent applications, patent rights, patent
claims and allowances, copyrights, design rights, and all
applications and registrations thereof for the Inventions
anywhere in the world. Employee agrees to promptly disclose
all Inventions to Company. Employee further agrees to execute
and deliver to Company all documents that Company requests in
order to register any patent, copyright, or other intellectual
property rights Company may have to any Invention, or to vest
ownership of any such Invention in Company, at Company's sole
cost and expense. Employee further agrees that during and
after termination of Employee's employment with Company
Employee will not use or disclose any information regarding
any Invention except in accordance with the provisions
contained in this Agreement.
(ii) Company and Employee agree that the terms of
Section (b)(i) above shall not apply to any Invention invented
and developed by Employee without the use of any of Company's
equipment, supplies, facilities, personnel or intellectual
property rights, and which is invented and developed entirely
or Employee's own time, unless the Invention (i) is directly
useful in, or directly relates in any manner to, the business
conducted by Company, or (ii) arises out of tests, research or
work carried out or being carried out by Company.
(iii) Employee acknowledges that Employee has
received from Company a copy of the Illinois Employee Patent
Act and by this Agreement all notices required in connection
with the Illinois Employee Patent Act.
9. MISCELLANEOUS.
(a) WAIVER. No waiver of any kind by Company of any past,
present or future conduct of Employee shall be valid unless it is made
in writing executed and delivered by Company.
(b) BINDING EFFECT; ASSIGNABILITY: ENTIRE AGREEMENT. This
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, assigns and personal
representatives. This Agreement may not be assigned, or any duties
delegated, in whole or in part, by Employee without the prior written
consent of Company. Company may assign this Agreement. This Agreement
constitutes the entire agreement between Employee and Company as it
relates to Employee's employment by Company, and supersedes any other
agreement, either oral or written.
(c) REMEDIES. Employee acknowledges that it is impossible to
measure in money the damages which will accrue to Company by reason of
Employee's failure to perform any of the obligations under this
Agreement. Therefore, if the Company shall institute any action or
proceeding to specifically enforce the provisions hereof by injunctive
or other form of
4
<PAGE> 5
equitable relief, Employee hereby waives the claim or defense that
Company has an adequate remedy at law or that Company has not or is not
being irreparably harmed, and Employee shall not urge in any such
action or proceeding the claim or defense that such remedy at law
exists. All rights and remedies hereunder shall be cumulative and no
right or remedy of Company or Employee shall be deemed the exclusive
right or remedy of Company or Employee. If Company institutes any act
or proceeding to enforce the terms of this Agreement, Employee shall
reimburse Company for all costs and expenses incurred, including
reasonable attorneys' fees.
(d) GOVERNING LAW. This Agreement shall be governed by and
interpreted and construed in accordance with the laws of the State of
Illinois, as such laws apply to agreements entered into and fully
performed within the State of Illinois.
(e) SEVERABILITY. If any provision contained in this Agreement
is held to be invalid or unenforceable by a court of competent
jurisdiction, such provision will be severed herefrom and such
invalidity or unenforceability will not affect any other provision of
this Agreement, the balance of which will remain in and have its
intended full force and effect; provided, however, if and to the extent
such invalid or unenforceable provision may be modified so as to be
valid and enforceable as a matter of law, such provision will be deemed
to have been modified so as to be valid and enforceable to the maximum
extent permitted by law.
(f) AMENDMENT. No amendment of this Agreement shall be
effective unless in writing and signed by an authorized officer of
Company and by Employee.
(g) RECITALS. The recitals hereto are incorporated into the
body of this Agreement and made an integral part hereof, as if set
forth herein.
(h) SURVIVAL OF COVENANTS. The covenants and agreements of
Employee in Sections 5, 6, 7, and 8 above and this Section 9 shall
survive the termination of this Agreement for any reason.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day first above written.
EMPLOYEE: COMPANY:
CIMNET SYSTEMS, INC.
/s/ David L. Harris
- ---------------------------
By:/s/ P. Balasubramanian
-------------------------
(Print Name) Title: Vice President
David L. Harris -------------------------
12/15/98
(Print Address)
8669 E. Davenport Dr.
Scottsdale, AZ 85260
(Social Security Number)
###-##-####
6
<PAGE> 7
SCHEDULE A TO EMPLOYMENT AGREEMENT
BETWEEN CAPRI CORP. AND DAVID HARRIS
DATED NOVEMBER 1, 1999
COMPENSATION
A. SALARY. Capri shall pay Officer a salary which would equal on an
annualized basis of $120,000.00 per year that he is employed by Capri or any
Company pursuant to this Employment Agreement, and pro rata for any portion of
any year based upon the above annualized rate.
B. INCENTIVE BONUS. In addition to the salary set forth in Section A
above, Capri shall pay Officer an incentive bonus with respect to each fiscal
year of Capri and its subsidiaries (the "Fiscal Year") commencing in the Fiscal
Year this Employment Agreement is entered into, and for each subsequent Fiscal
Year during Officer's employment with the Company during which the Company, on a
consolidated basis, has "Pre-tax Income" (hereinafter defined). The incentive
bonus shall be paid within ninety days (90) days of the close of the Fiscal Year
in which such incentive bonus is earned. If the Fiscal Year changes at any time,
appropriate adjustments in the incentive bonus shall be made. Officer's
incentive bonus pursuant to this Schedule A shall be referred to herein as the
"Incentive Bonus". The Incentive Bonus for each Fiscal Year shall be calculated
as follows:
Pre-Tax Income Incentive Bonus
-------------- ---------------
500,000 0
750,000 5,000
1,250,000 10,000
1,750,000 15,000
2,250,000 25,000
2,750,000 35,000
3,500,000 45,000
3,500,001 55,000
and above
Capri shall have its regularly retained independent auditor calculate the
Pre-tax Income as of the last day of each Fiscal Year and Officer's Incentive
Bonus shall be based on those calculations. For the purposes of this Schedule A
to the Employment Agreement:
(1) "Pre-tax Income" shall mean income of the Company, on a
consolidated basis, determined in accordance with generally accepted
accounting principles consistently applied; provided, however, that
Pre-tax Income shall not include income from extraordinary items, as
determined pursuant to generally accepted accounting principles.
7
<PAGE> 8
(2) In case of any dispute between Capri and Officer as to the
amount of the Net Income, the determination thereof by the independent
auditor of Capri shall be binding and conclusive.
Capri Corp.
By:/s/ Mehul J. Dave /s/ David Harris
------------------------------------ ------------------------
Mehul J. Dave, President David Harris
8
<PAGE> 1
EXHIBIT 6.5
AMERICAN NATIONAL BANK
AND TRUST COMPANY OF CHICAGO
- --------------------------------------------------------------------------------
PROMISSORY NOTE (SECURED)
- --------------------------------------------------------------------------------
$500,000.00 CHICAGO, ILLINOIS OCTOBER 30,1999
DUE OCTOBER 30, 2000
FOR VALUE RECEIVED, the undersigned (jointly and severally if more than
one) ("Borrower"), promises to pay to the order of AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO ("Bank"), at its principal place of business in
Chicago, Illinois or such other place as Bank may designate from time to time
hereafter, the principal sum of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS, or
such lesser principal sum as may then be owed by Borrower to Bank hereunder,
which sum shall be due and payable on October 30, 2000.
This Note restates and replaces a Demand Note (Secured) in the
principal amount of $150,000.00, dated September 18, 1996 executed by Borrower
in favor of Bank (the "Prior Note") and is not a repayment or novation of the
Prior Note.
Borrower's obligations and liabilities to Bank under this Note, and all
other obligations and liabilities of Borrower to Bank (including without
limitation all debts, claims and indebtedness) whether primary, secondary,
direct, contingent, fixed or otherwise, including those evidenced in rate
hedging agreements designed to protect the Borrower from the fluctuation of
interest rates, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and however
arising, whether under this Note, any agreement, instrument or document
heretofore, now or from time to time hereafter executed and delivered to Bank by
or on behalf of Borrower, or by oral agreement or operation of law or otherwise
shall be defined and referred to herein as "Borrower's Liabilities."
The unpaid principal balance of Borrower's Liabilities due hereunder
shall bear interest from the date of disbursement until paid, computed at a
daily rate equal to the daily rate equivalent of 1.0% per annum (computed on the
basis of a 360-day year and actual days elapsed) in excess of the rate of
interest announced or published publicly from time to time by Bank as its prime
or base rate of interest (the "Base Rate"); provided, however, that in the event
that any of Borrower's Liabilities are not paid when due, the unpaid amount of
Borrower's Liabilities shall bear interest after the due date until paid at a
rate equal to the sum of the rate that would otherwise be in effect plus 3%.
The rate of interest to be charged by Bank to Borrower shall fluctuate
hereafter from time to time concurrently with, and in an amount equal to, each
increase or decrease in the Base Rate, whichever is applicable.
Accrued interest shall be payable by Borrower to Bank on the same day
of each (i) month, and at maturity, commencing with the last day of November,
1999, or as billed by Bank to Borrower, at Bank's
Page 1 of 6
<PAGE> 2
principal place of business, or at such other place as Bank may designate from
time to time hereafter. After maturity, accrued interest on all of Borrower's
Liabilities shall be payable on demand.
Borrower warrants and represents to Bank that Borrower shall use the
proceeds represented by this Note solely for proper business purposes and
consistently with all applicable laws and statutes.
To secure the prompt payment to Bank of Borrower's Liabilities and the
prompt, full and faithful performance by Borrower of all of the provisions to be
kept, observed or performed by Borrower under this Note and/or any other
agreement, instrument or document heretofore, now and/or from time to time
hereafter delivered by or on behalf of Borrower to Bank, Borrower grants to Bank
a security interest in and to the following property: (a) all of Borrower's now
existing and/or owned and hereafter arising or acquired monies, reserves,
deposits, deposit accounts and interest or dividends thereon, securities, cash,
cash equivalents and other property now or at any time or times hereafter in the
possession or under the control of Bank or its bailee for any purpose; (b) ALL
BUSINESS ASSETS OF BORROWER PURSUANT TO SECURITY AGREEMENT (GENERAL) DATED
SEPTEMBER 18, 1996, AS AMENDED FROM TIME TO TIME, BY AND BETWEEN BORROWER AND
BANK; and (c) all substitutions, renewals, improvements, accessions or additions
thereto, replacements, offspring, rents, issues, profits, returns, products and
proceeds thereof, including without limitation proceeds of insurance policies
insuring the foregoing collateral (all of the foregoing property is referred to
herein individually and collectively as "Collateral").
Regardless of the adequacy of the Collateral, any deposits or other
sums at any time credited by or payable or due from Bank to Borrower, or any
monies, cash, cash equivalents, securities, instruments, documents or other
assets of Borrower in the possession or control of Bank or its bailee for any
purpose, may be reduced to cash and applied by Bank to or setoff by Bank against
Borrower's Liabilities.
Borrower agrees to deliver to Bank immediately upon Bank's demand, such
additional collateral as Bank may request from time to time should the value of
the Collateral (in Bank's sole and exclusive opinion) decline, deteriorate,
depreciate or become impaired, or should Bank deem itself insecure for any
reason whatsoever, including without limitation a change in the financial
condition of Borrower or any party liable with respect to Borrower's
Liabilities, and does hereby grant to Bank a continuing security interest in
such other collateral, which shall be deemed to be a part of the Collateral.
Borrower shall execute and deliver to Bank, at any time upon Bank's demand, all
agreements, instruments, documents and other written matter that Bank may
request, in form and substance acceptable to Bank, to perfect and maintain
perfected Bank's security interest in the Collateral or any additional
collateral. Borrower agrees that a carbon, photographic or photostatic copy, or
other reproduction, of this Note or of any financing statement, shall be
sufficient as a financing statement.
Bank may take, and Borrower hereby waives notice of, any action from
time to time that Bank may deem necessary or appropriate to maintain or protect
the Collateral, and Bank's security interest therein, and in particular Bank may
at any time (i) transfer the whole or any part of the Collateral into the name
of the Bank or its nominee, (ii) collect any amounts due on Collateral directly
from persons obligated thereon, (iii) take control of any proceeds and products
of Collateral, and/or (iv) sue or make any compromise or settlement with respect
to any Collateral. Borrower hereby releases Bank from any and all causes of
action or claims which Borrower may now or hereafter have for any asserted loss
or damage to Borrower claimed to be caused by or arising from: (a) Bank's taking
any action permitted by
Page 2 of 6
<PAGE> 3
this paragraph; (b) any failure of Bank to protect, enforce or collect in whole
or in part any of the Collateral; and/or (c) any other act or omission to act on
the part of Bank, its officers, agents or employees, except for willful
misconduct.
The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Note: (a) if Borrower
fails to pay any of Borrower's Liabilities when due and payable or declared due
and payable (whether by scheduled maturity, required payment, acceleration,
demand or otherwise); (b) if Borrower or any guarantor of any of Borrower's
Liabilities fails or neglects to perform, keep or observe any term, provision,
condition, covenant, warranty or representation contained in this Note; (c)
occurrence of a default or event of default under any agreement, instrument or
document heretofore, now or at any time hereafter delivered by or on behalf of
Borrower to Bank; (d) occurrence of a default or an event of default under any
agreement, instrument or document heretofore, now or at any time hereafter
delivered to Bank by any guarantor of Borrower's Liabilities or by any person or
entity which has granted to Bank a security interest or lien in and to some or
all of such person's or entity's real or personal property to secure the payment
of Borrower's Liabilities; (e) if the Collateral or any other of Borrower's
assets are attached, seized, subjected to a writ, or are levied upon or become
subject to any lien or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors; (f) if a notice of lien,
levy or assessment is filed of record or given to Borrower with respect to all
or any of Borrower's assets by any federal, state or local department or agency;
(g) if Borrower or any guarantor of Borrower's Liabilities becomes insolvent or
generally fails to pay or admits in writing its inability to pay debts as they
become due, if a petition under Title 11 of the United States Code or any
similar law or regulation is filed by or against Borrower or any such guarantor,
if Borrower or any such guarantor shall make an assignment for the benefit of
creditors, if any case or proceeding is filed by or against Borrower or any such
guarantor for its dissolution or liquidation, or if Borrower or any such
guarantor is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business affairs; (h) the death or
incompetency of Borrower or any guarantor of Borrower's Liabilities, or the
appointment of a conservator for all or any portion of Borrower's assets or the
Collateral; (i) the revocation, termination or cancellation of any guaranty of
Borrower's Liabilities without written consent of Bank; (j) if a contribution
failure occurs with respect to any pension plan maintained by Borrower or any
corporation, trade or business that is, along with Borrower, a member of a
controlled group of corporations or a controlled group of trades or businesses
(as described in Sections 414(b) and (c) of the Internal Revenue Code of 1986 or
Section 4001 of the Employee Retirement Income Security Act of 1974, as amended,
"ERISA") sufficient to give rise to a lien under Section 302(f) of ERISA; (k) if
Borrower or any guarantor of Borrower's Liabilities is in default in the payment
of any obligations, indebtedness or other liabilities to any third party and
such default is declared and is not cured within the time, if any, specified
therefor in any agreement governing the same; (l) if any material statement,
report or certificate made or delivered by Borrower, any of Borrower's partners,
officers, employees or agents or any guarantor of Borrower's Liabilities is not
true and correct; or (m) if Bank is reasonably insecure.
Upon the occurrence of an Event of Default, at Bank's option, without
notice by Bank to or demand by Bank of Borrower: (i) all of Borrower's
Liabilities shall be immediately due and payable; (ii) Bank may exercise any one
or more of the rights and remedies accruing to a secured party under the Uniform
Commercial Code of the relevant jurisdiction and any other applicable law upon
default by a debtor; (iii) Bank may enter, with or without process of law and
without breach of the peace, any premises where the Collateral is or may be
located, and may seize or remove the Collateral from said
Page 3 of 6
<PAGE> 4
premises and/or remain upon said premises and use the same for the purpose of
collecting, preparing and disposing of the Collateral; and/or (iv) Bank may sell
or otherwise dispose of the Collateral at public or private sale for cash or
credit, provided, however, that Borrower shall be credited with the net proceeds
of any such sale only when the same are actually received by Bank.
Upon an Event of Default, Borrower, Immediately upon demand by Bank,
shall assemble the Collateral and make it available to Bank at a place or places
to be designated by Bank which is reasonably convenient to Bank and Borrower.
All of Bank's rights and remedies under this Note are cumulative and
non-exclusive. The acceptance by Bank of any partial payment made hereunder
after the time when any of Borrower's Liabilities become due and payable will
not establish a custom or waive any rights of Bank to enforce prompt payment
hereof. Bank's failure to require strict performance by Borrower of any
provision of this Note shall not waive, affect or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Any waiver of
an Event of Default hereunder shall not suspend, waive or affect any other Event
of Default hereunder. Borrower and every endorser waive presentment, demand and
protest and notice of presentment, protest, default, non-payment, maturity,
release, compromise, settlement, extension or renewal of this Note, and hereby
ratify and confirm whatever Bank may do in this regard. Borrower further waives
any and all notice or demand to which Borrower might be entitled with respect to
this Note by virtue of any applicable statute or law (to the extent permitted by
law).
Borrower agrees to pay, immediately upon demand by Bank, any and all
costs, fees and expenses (including reasonable attorneys' fees, costs and
expenses) incurred by Bank (i) in enforcing any of Bank's rights hereunder, and
(ii) in representing Bank in any litigation, contest, suit or dispute, or to
commence, defend or intervene or to take any action with respect to any
litigation, contest, suit or dispute (whether instituted by Bank, Borrower or
any other person) in any way relating to this Note, Borrower's Liabilities or
the Collateral, and to the extent not paid the same shall become part of
Borrower's Liabilities.
This Note shall be deemed to have been submitted by Borrower to Bank
and to have been made at Bank's principal place of business. This Note shall be
governed and controlled by the internal laws of the State of Illinois and not
the law of conflicts.
Advances under this Note may be made by Bank upon oral or written
request of any person authorized to make such requests on behalf of Borrower
("Authorized Person"). Borrower agrees that Bank may act on requests which Bank
in good faith believes to be made by an Authorized Person, regardless of whether
such requests are in fact made by an Authorized Person. Any such advance shall
be conclusively presumed to have been made by Bank to or for the benefit of
Borrower. Borrower does hereby irrevocably confirm, ratify and approve all such
advances by Bank and agrees to indemnify Bank against any and all losses and
expenses (including reasonable attorneys' fees) and shall hold Bank harmless
with respect thereto.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE
Page 4 of 6
<PAGE> 5
CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND
STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE
VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS
PARAGRAPH.
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR
(II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO
THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES
THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
Page 5 of 6
<PAGE> 6
2301 West 22nd Street Suite 203 Capri Corp., a Minnesota
Oakbrook, Illinois 60521 corporation
By: s/ P. Balasubramanian
-------------------------------
CIMNET SYSTEMS, INC., an Illinois
FEIN: 36-3617399 corporation
By: /s/ P. Balasubramanian
-------------------------------
Page 6 of 6
<PAGE> 1
EXHIBIT 10.1
CONSENT OF ACCOUNTANT
We hereby consent to the use of our report dated August 20, 1999, on the
financial statements of Capri Corp. and Subsidiary for the years ended June 30,
1999 and 1998. Such report is being included in the Registration Statement
(Amendment No. 1 to Form 10-SB) of Capri Corp.
/s/ Klesman, Halper & Co., P.C.
Palos Heights, Illinois
February 22, 2000
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
1. Cimnet Systems, Inc., an Illinois corporation
2. Cimnet Informationssysteme GmbH, a German limited liability corporation
3. Cimnet Systems I Private Limited, an India private limited company
4. Cimnet Systems Asia Pacific Limited, a Hong Kong corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,288,887
<SECURITIES> 0
<RECEIVABLES> 2,960,997
<ALLOWANCES> 203,679
<INVENTORY> 0
<CURRENT-ASSETS> 4,127,120
<PP&E> 676,103
<DEPRECIATION> 294,427
<TOTAL-ASSETS> 5,311,156
<CURRENT-LIABILITIES> 1,087,772
<BONDS> 0
0
0
<COMMON> 122,853
<OTHER-SE> 3,930,944
<TOTAL-LIABILITY-AND-EQUITY> 5,311,156
<SALES> 139,334
<TOTAL-REVENUES> 3,205,835
<CGS> 101,881
<TOTAL-COSTS> 908,410
<OTHER-EXPENSES> 232,142
<LOSS-PROVISION> 12,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 909,164
<INCOME-TAX> 362,978
<INCOME-CONTINUING> 546,186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 546,186
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
