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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 3, 1997
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Capitol Multimedia, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-20102 52-1283993
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
200 Baker Avenue, Suite 300
Concord, MA 01760
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 287-5888
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(Former name or former address, if changed since last report.)
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
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On March 31, 1997, Capitol Multimedia, Inc. (the "Company") purchased all
of the outstanding capital stock of Client Server Technologies, Inc. (CSTI), a
Massachusetts-based, privately-held developer and integrator of supply-chain
management software, for approximately $4.2 million. The consideration consisted
of $1.17 million in cash, 1.2 million shares of unregistered common stock of the
Company and seventeen separate promissory notes with an aggregate initial
principal amount of $2 million. The registrant hereby incorporates by reference
hereto a list of the individual promissory note holders and note amounts in
Exhibit 2.4, - Capitol Multimedia, Inc. - CSTI Promissory Note Holders. One of
the notes, the initial principal amount of which is approximately $1.6 million,
is payable to Mr. Paul Carr, former majority shareholder and president of CSTI,
and is secured by selected assets of CSTI. The portion of Mr. Paul Carr's note
that is due on December 31, 1998, and the other 16 promissory notes, which are
due on the same date, are convertible into the Company's common stock at a
conversion price of $3 per share.
In determining the purchase price for the acquisition, the Company
considered the nature and characteristics of the professional software market,
as well as the market opportunities present in the supply-chain management
software market. The purchase price was also determined by several factors,
including, without limitation, the valuation of recent similar acquisitions;
comparable industry multiples; potential product development; sales and
marketing synergies between the two companies; combined revenue and earnings
potential based on past and projected business; and the recent price for the
Company's outstanding securities. The funds for the acquisition were obtained
from available cash reserves, and operating cash flow from the combined
businesses.
All of the shareholders of CSTI received proceeds from the purchase. Two of
the seventeen shareholders, Mr. Carr and Mr. Richard Sheflin, Vice President
Research and Development, owned 61.3% and 19.1% of the CSTI stock, respectively.
Pursuant to the employment agreement between the Company and Mr. Carr, dated
March 31, 1997, Mr. Carr was granted an option to purchase 250,000 shares of the
Company's common stock under the Company's Amended and Restated 1991
Non-Qualified Employee Stock Option Plan. The registrant hereby incorporates by
reference hereto the information contained in Exhibit 2.5 - Agreement for the
Acquisition of the Outstanding Stock of Client Server Technologies, Inc., by and
between the Company and the selling shareholders of CSTI, dated March 31, 1997,
which also contains an employment agreement between the Company and Mr. Carr
whereby Mr. Carr agrees to serve as President of CSTI for a three-year term.
ITEM 5: OTHER EVENTS
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On March 3, 1997, the Company's Board of Directors voted to extend the
expiration of the Company's Series A Warrants until March 31, 1998. The Series A
Warrants were scheduled to expire on March 31, 1997. The Company currently has
344,500 warrants outstanding. Each warrant entitles the holder to purchase 1.09
shares of common stock at an exercise price of $5.72 per share. The registrant
hereby incorporates by reference hereto the information contained in
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Exhibit 20.15 - Press Release. "Capitol Multimedia, Inc. Announces Extension of
Series A Warrants," dated March 3, 1997.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
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(a.) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
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The registrant hereby incorporates by reference hereto the information
contained in Exhibit 2.5 Agreement for the Acquisition of the Outstanding Stock
of Client Server Technologies, Inc., Schedule 3.3(a) - Unaudited Income
Statement and Balance Sheet as of December 31, 1995 and December 31, 1996.
(b.) PRO FORMA FINANCIAL STATEMENTS
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Pursuant to Item 7(a)(4) of Form 8-K, any pro forma financial information
will be filed pursuant to an amendment to this Form 8-K as soon as practicable
(but not later than 60 days following the date on which this report was required
to have been filed).
(c.) EXHIBITS
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2.4 Capitol Multimedia, Inc. - CSTI Promissory Note Holders
2.5 Agreement for the Acquisition of the Outstanding Stock of Client
Server Technologies, Inc., by and between the Company and the selling
shareholders of CSTI, dated March 31, 1997.
99.14 Press Release. "Capitol Multimedia, Inc. Acquires Client Server
Technologies, Inc.," dated March 31, 1997.
99.15 Press Release. "Capitol Multimedia, Inc. Announces Extension of
Series A Warrants," dated March 3, 1997.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CAPITOL MULTIMEDIA, INC.
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(Registrant)
Date: April 11, 1997 By: /s/ Edward Terino
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Edward Terino
Chief Financial Officer, Treasurer, Secretary
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EXHIBIT INDEX
NUMBER DESCRIPTION OF EXHIBITS PAGE
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2.4 Capitol Multimedia, Inc. - CSTI Promissory Note Holders
2.5 Agreement for the Acquisition of the Outstanding Stock of
Client Server Technologies, Inc., by and between the Company
and the selling shareholders of CSTI, dated March 31, 1997.
99.14 Press Release. "Capitol Multimedia, Inc. Acquires Client
Server Technologies, Inc.," dated March 31, 1997.
99.15 Press Release. "Capitol Multimedia, Inc. Announces
Extension of Series A Warrants," dated March 3, 1997.
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Capitol Multimedia, Inc.
CSTI Promissory Note Holders
Exhibit 2.4
<TABLE>
<CAPTION>
12/98 NOTE 4/1/98 NOTE TOTAL
---------- ----------- -----
NAME ADDRESS CONVERTIBLE QUARTERLY
- ---- ------- ----------- ---------
<S> <C> <C> <C> <C>
Paul Carr 2 Monadnock Road $ 613,177 $1,000,000 $1,613,177
Wellesley, MA 02181 secured secured secured
Richard Sheflin 326 Old Billerica Road 191,280 191,280
Bedford, MA 01730
Kenneth Bloom 11 Wilson Lane 55,335 55,335
Acton, MA 01720
Richard D Myers 9722 Cypress Point Circle 1,143 1,143
Littleton, CO 80124
Jeffrey D Brunelle III 117 Highland Avenue 1,143 1,143
So. Attleboro, MA 02703
Brice C Buchanan 11 Fairfield Road 14,478 14,478
Wayland, MA 01778
YuSang Kwan 27 Faxon Street 11,430 11,430
Newton, MA 02158
Armando Prato 4 Brook Street 7,810 7,810
Chelmsford, MA 01824
James Holt 74 Brookside Road 9,144 9,144
Needham, MA 02192
Lynn Vena 11 Albano Street 4,762 4,762
Roslindale, MA 02131
Kenneth W Cole 48 Oregon Road 38,100 38,100
Southboro, MA 01772
Brian J Moran 20 Alexander Drive 32,004 32,004
Hampton, NH 03842
John G Kilray 34 Lee Street 7,048 7,048
Jamaica Plain, MA 02130
Robert B Gates Jr. 10 Maple Tree Lane 2,286 2,286
Franklin, MA 02038
Linda Duncan 66 Brockton Avenue 1,524 1,524
Scituate, MA 02066
Richard J Heier 18 Goshen Road 2,286 2,286
Dedham, MA 02026
John D Bean P.O. Box 3053 7,048 7,048
No. Attleboro, MA 02761
------------------------------------------
------------------------------------------
$ 1,000,000 $1,000,000 $2,000,000
</TABLE>
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EXHIBIT 2.5
AGREEMENT FOR THE ACQUISITION
OF THE OUTSTANDING STOCK
OF CLIENT SERVER TECHNOLOGIES, INC.
March 31, 1997
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AGREEMENT FOR THE ACQUISITION
OF THE OUTSTANDING STOCK OF
CLIENT SERVER TECHNOLOGIES, INC.
THIS AGREEMENT (the "Agreement"), made as of the 31st day of March, 1997,
by and among Capitol Multimedia, Inc. ("Capitol"), a Delaware corporation, and
the individuals identified in Exhibit A and executing this Agreement
(hereinafter referred to as the "Selling Shareholders") who own, in the
aggregate, one hundred percent (100%) of the issued and outstanding capital
stock of Client Server Technologies, Inc., a Massachusetts corporation ("CSTI").
WITNESSETH
WHEREAS, Paul Carr ("Carr") owns eight hundred and four thousand seven
hundred one (804,701) shares, and other individuals identified in Exhibit A
own, in the aggregate, five hundred and seven thousand six hundred forty five
(507,645) shares of the issued and outstanding shares of Common Stock, par
value of one cent ($0.01) per share (the "Shares"), of CSTI;
WHEREAS, Capitol desires to purchase the Shares, and the Selling
Shareholders desire to sell their Shares upon terms herein specified
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
hereinafter set forth, and of other good and valuable consideration, the parties
hereto agree as follows:
ARTICLE I
SALE OF CSTI STOCK
1.1 SALE OF SHARES - Subject to the terms and conditions set forth
herein, each of the Selling Shareholders hereby agrees to sell, assign,
transfer, and convey to Capitol at the Closing (as defined at Article V) and
Capitol agrees to accept and purchase, for the consideration set forth and
payable in accordance with the provisions of Article II, all of such Selling
Shareholder's rights, title, and interest in and to the Shares. At the Closing,
each of the Selling Shareholders shall deliver to Capitol certificates
representing all the Shares owned by such Selling Shareholder and Capitol will
deliver payment set forth in Article II.
ARTICLE II
CONSIDERATION FOR THE PURCHASE OF CSTI STOCK
2.1 CONSIDERATION - As consideration for the sale of the Shares and
subject to the adjustment specified in the last sentence of Section 2.2 and
Section 6.7 Capitol shall pay to the Selling Shareholders the following
consideration: (1) one million two hundred thousand (1,200,000) shares (the
"Capitol Shares") of Capitol Common Stock, par value of [ten cents ($0.10) per
share]; (2) the sum of one million two
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hundred fifty thousand dollars ($1,250,000) cash; (3) the delivery of a
convertible, promissory note in the form of Exhibit B in favor of [each] of the
Selling Shareholders other than Paul Carr; and (4) the delivery of a
convertible, promissory note in the form of Exhibit C in favor of Paul Carr
(notes referred to in (3) and (4) collectively the "Notes"). The Capitol Shares
shall be issued to the Selling Shareholders at the Closing in proportion to the
Shares held by each such Selling Shareholder in relation to the aggregate number
of Shares outstanding as of the Closing.
2.2 THE NOTES - the Notes shall be executed and delivered by Capitol
in connection with the Closing. Payments of principal and interest thereon shall
be made in accordance with the terms of the Notes. The obligations of Capitol
under the Note issued to Paul Carr shall be secured in accordance with the terms
of the Note. The principal amount payable on the Notes by Capitol shall be
reduced for each Selling Shareholders by an amount equal to the principal
balance and accrued interest on any loan by CSTI to the corresponding Selling
Shareholder which is outstanding as of the Closing.
2.3 ACKNOWLEDGMENT OF SELLING SHAREHOLDERS - As a condition to the
Capitol's issuance of the Capitol Shares, each Selling Shareholder acknowledges
that (i) he is acquiring the Capitol Shares for his own account for investment
only and not for or with a view to resale or distribution; (ii) he has
substantial experience and knowledge in financial and business matters, or is
relying on his own advisors, in order to evaluate the merits and risks of an
investment in the Capitol Shares; (iii) he has been furnished and has carefully
read (a) the Annual Report, Form 10-K and Proxy Statement of the Capitol for the
fiscal year ended March 31, 1996; (b) the Forms 10-Q of the Capitol for the
three month periods ended June 30, September 30 and December 31, 1996 and (c)
Forms 8-K dated September 12, 1996 and November 11, 1996 (the "Documents") and
has received information with respect to all matters he considers material to
the decision to enter into this Agreement and has relied solely upon the
Documents and upon independent investigations in making the decision to enter
into this Agreement. No oral or written statement or inducement which is
contrary to the information set forth in the Documents has been made by or on
behalf of the Capitol.
2.4 ACKNOWLEDGMENT OF RESTRICTED NATURE OF COMMON STOCK - The
Selling Shareholders hereby acknowledge that the Capitol Shares
are subject to the following:
(a) The Selling Shareholders may not, directly or
indirectly, offer, sell, transfer, assign, pledge, hypothecate or
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otherwise dispose of the Capitol Shares (or solicit any offers to purchase or
otherwise acquire or take a pledge of the Capitol Shares), except pursuant to
(i) an effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations thereunder and
(ii) an effective registration statement or qualification under applicable "Blue
Sky" state securities laws (the "Blue Sky Laws"), or unless such Investors shall
have delivered to the Company an opinion of counsel, which opinion and counsel
shall be satisfactory to the Company, to the effect that no registration
statement or qualification is required because of the availability of exemptions
from registration and/or qualification under the Securities Act of Blue Sky
Laws;
(b) The Selling Shareholders understand that (i) the offer
and sale of Capitol Shares has not been registered under the Securities Act or
registered or qualified under any Blue Sky Laws as of the date hereof and will
not be registered or qualified under the Securities Act or any Blue Sky Laws at
the Closing Date (as such term is defined in the Purchase Agreement), (ii) each
of the Selling Shareholders must continue to bear the economic risk of the
investment in the Capitol Shares before such period of time until the offer and
sale of the Capitol Shares is subsequently registered and/or qualified under the
Securities Act and any applicable Blue Sky Laws or an exemption from such
registration and/or qualification is available, (iii) there can be no assurance
that the offer and sale of the Capitol Shares will be registered and/or
qualified under the Securities Act or any applicable Blue Sky Laws at any time,
(iv) when and if Capitol Shares may be disposed of without registration in
reliance upon Rule 144 under the Act ("Rule 144"), the offer and sale of Capitol
Shares may not qualify under Rule 144 since dispositions under such Rule can be
made only in limited amounts in accordance with the terms and conditions of such
Rule, (v) if the exemption afforded by Rule 144 is not available, public offer
or sale of the Capitol Shares without registration will require the availability
of an exemption under the Securities Act, (vi) a restrictive legend in
substantially the form hereinafter set forth shall be placed upon the Common
Stock and (vii) a notation shall be made in the appropriate records of the
Capitol indicating that such Capitol Shares are subject to restrictions on
transfer and appropriate stop-transfer instructions will be issued to the
transfer agent of the Company with respect to such Capitol Shares; and
(c) The Selling Shareholders understand that the Shares
shall bear a legend in substantially the following form:
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "ACT"). SUCH SHARES MAY NOT BE OFFERED,
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SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR, UNLESS, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER, IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER, SUCH OFFER, SALE, TRANSFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT AND SUCH LAWS.
(d) Capitol will use its best efforts to make timely filings
with SEC of all required documents in order to enable the Selling
Shareholders to utilize Rule 144 in accordance with the terms and
conditions of such Rule.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. The Management
Shareholders which include Paul Carr, Ken Cole, Dick Sheflin, Ken Bloom and
Brian Moran, jointly and severally, represent and warrant except as to Section
3.21 with respect to which each Selling Shareholder severally represents the
following as of the date hereof and as of the Closing Date to Capitol as
follows:
3.1 ORGANIZATION AND GOOD STANDING - CSTI is a corporation duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts, and has the corporate power and lawful authority
to own, lease and operate its assets, properties and business and to carry on
its business activities as now conducted. CSTI has since its incorporation
insofar as failure to comply would have any material impact at this or any
future time, complied in all material respects with all laws, regulations,
ordinances, and orders applicable to its business activities and properties.
3.2 CAPITALIZATION - The authorized capital stock of CSTI consists
of One Million Four Hundred Fifty Thousand (1,450,000) Shares of common
stock, par value of one cent ($0.01) per share, of which one million three
hundred twelve thousand three hundred forty six (1,312,346) shares are issued
and outstanding. Except as shown on Schedule 3.2, there are no outstanding
options, rights, warrants, or claims to purchase any of the common stock or
other securities of CSTI.
3.3 FINANCIAL STATEMENTS AND CONDITION -
(a) Attached hereto and made a part hereof as Schedule
3.3(a) are the unaudited income statement and balance sheet of CSTI for the
fiscal years ended December 31, 1996, and 1995 and a
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cumulative unaudited income statement and a balance sheet for each of the first
three calendar quarters in each of such fiscal years. Also attached hereto and
made a part hereof as Schedule 3.3(b) are the unaudited income statements and
balance sheets of CSTI for the period ending February 28, 1997. (The financial
statements set forth in Schedule 3.3(a) and 3.3(b) are collectively referred to
herein as the "Financial Statements".)
(b) Except as disclosed in Schedule 3.3(b) and except to the extent
that the Financial Statements are modified or restated as a result of the post
closing audit specified in Section 6.7 and agreed to by Capitol, the Financial
Statements (i) fairly and accurately present the assets, liabilities,
shareholders' equity and financial position of CSTI as of the dates thereof,
(ii) contain no material misstatements or omissions, and (iii) contain and
reflect all necessary adjustments for a fair presentation of the financial
condition and results of operations of CSTI for the periods covered thereby.
(c) The accounts and notes receivable set forth in the Financial
Statements or arising since the date thereof are valid and genuine and have
arisen from bona fide transactions in the ordinary course of business,
consistent with past practices, for goods sold or services performed and to the
knowledge of Management Shareholders are not subject to valid defenses,
set-offs, or counterclaims. Except as set forth in Schedule 3.3(c), such
receivables have been recorded in accordance with CSTI's historical revenue
recognition policy and have been collected or are collectable in accordance with
their terms at the full recorded amount thereof no later than 90 days following
the Closing except to the extent that CSTI has made reserves for bad debt in the
Financial Statements.
3.4 ABSENCE OF CERTAIN CHANGES - Except as described in Schedule
3.4, since the date of the Financial Statements set forth in Schedule 3.3 the
Company has conducted its business in the ordinary course consistent with past
practices and there has not been and as of the Closing shall not have been:
(a) to the best knowledge of each Management Shareholder
after reasonable inquiry of appropriate Company personnel, any material adverse
change in the business, assets, condition (financial or otherwise), results of
operations or prospects of CSTI (a "Material Adverse Change"), or any event,
occurrence, development or state of circumstances or facts which could
reasonably be expected to result in a Material Adverse Change;
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any securities of CSTI, any
repurchase, redemption or other acquisition by CSTI of any outstanding shares of
capital stock or other securities of,
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or other ownership interests in CSTI;
(c) any amendment of any outstanding security of CSTI;
(d) any incurrence, assumption or guarantee by CSTI of any
indebtedness for borrowed money;
(e) any creation or assumption by CSTI of any Lien on any
asset;
(f) any making of any loan, advance or capital contributions
to or investment in any person;
(g) any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of CSTI which,
individually or in the aggregate, has had or would reasonably be expected to
have a material adverse effect on the business, assets, condition (financial or
otherwise), results of operations or prospects of CSTI;
(h) any transaction or commitment made, or any contract or
agreement entered into, by CSTI relating to its assets or business (including
the acquisition or disposition of any assets) or any relinquishment by CSTI of
any contract or other right, in either case, material to CSTI, other than
transactions and commitments in the ordinary course of business consistent with
past practices and those contemplated by this Agreement;
(i) any change in any method of accounting or accounting
practice by CSTI;
(j) any (i) grant of any severance or termination pay to any
director, officer or employee of CSTI (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of CSTI, (iii) change
in benefits payable under existing severance or termination pay policies or
employment agreements or (iv) change in compensation, bonus or other benefits
payable to directors, officers or employees of CSTI; or
(k) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representation
thereof to organize any employees of CSTI.
3.5 TAXES -
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(a) CSTI has duly and timely filed, or caused to be filed,
with the appropriate agencies and parties all tax returns and tax reports
required by law to be filed by CSTI or for which CSTI is responsible, and (i)
all such reports and returns report all required data, information, and other
matters; (ii) all data, information, and other matters set forth therein are
true and correct and not subject to adjustment upon audit; (iii) no audit of any
federal, foreign, state, or local income tax returns or other tax returns filed
by CSTI is in progress or pending or, to the Management Shareholders' knowledge,
threatened; (iv) there exists no unpaid tax deficiency assessed against CSTI by
any
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governmental authority; (v) all income, withholding, profits, franchise, gross
receipts, sales, use, occupation, property, excise, ad valorem, unemployment,
social security, transfer (and all penalties and interest in respect thereof),
and other taxes due, or payable, have been fully paid, or adequate reserves set
up for the same and reflected on Schedule 3.3; (vi) federal income tax returns
of CSTI have not been audited during the last five years; (vii) copies of all
federal, foreign and state income tax returns, tax examination reports, and
statements of deficiencies assessed against or agreed to by CSTI with respect to
the last three completed fiscal years have been made available to Capitol; and
(viii) no waiver of any statute of limitations has been given and is in effect
in respect to the assessment of any taxes against CSTI.
(b) CSTI has withheld or collected for each payment made to
each of its employees the amount of all taxes required to be withheld or
collected therefrom and has duly and timely paid the same to the appropriate
governmental agencies to the extent required to do so.
(c) CSTI has collected from each of its customers the amount
of all sales, use, excise, and similar taxes required to be collected and has
duly and timely remitted the same to the appropriate government agencies to the
extent required to do so. (d) In accordance with subchapter S and Section 1362
of the Internal Revenue Code, CSTI validly elected S corporation status and
properly maintained such status during all taxable years for which it filed with
the Internal Revenue Service as an S corporation.
3.6 LITIGATION - Except as disclosed in Schedule 3.6, there are, and
within the prior twenty-four (24) months there have been, no actions, suits,
investigations, or proceedings pending or, to the knowledge of the Selling
Shareholders, threatened or anticipated against or affecting CSTI or its assets,
at law or in equity, or before any court, arbitrator, or federal, state,
municipal, or other governmental department, commission, board, bureau, agency,
or instrumentality, domestic or foreign. CSTI is not operating under, subject
to, or in default with respect to any order, writ, injunction, or decree of any
court or federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign.
Except as disclosed in Schedule 3.6, CSTI has not, since January 1, 1993,
received or had outstanding any claim or complaint from or on behalf of any
employee or former or potential employee alleging wrongful termination, failure
to hire, harassment, or discrimination by reason of race, age, sex, handicap, or
veteran's status.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES - Except as
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specifically reserved against or reflected in the Financial Statements or
described in Schedule 3.7 or another Schedule, CSTI is not subject to any
material liability or financial obligation (known or unknown, direct or
indirect, absolute, contingent, accrued or otherwise), other than liabilities or
financial obligations arising in the ordinary course of business since the date
of the Financial Statements included as Schedule 3.3. CSTI is not in default
with respect to any term or condition of any indebtedness or liability
(including any current or deferred trade payable). The Management Shareholders
do not know of any facts or circumstances which might reasonably serve as the
basis for any material liabilities or financial obligations with respect to CSTI
which are not disclosed in the Schedules. For purposes of this Section 3.7, any
individual liability, or all such liabilities in the aggregate, should be deemed
to be material if the individual value is greater than $10,000.
3.8 ABSENCE OF QUESTIONABLE PAYMENTS - Neither CSTI nor any
director, officer, agent, employee, or other person acting on behalf of CSTI has
used any of CSTI's funds for improper or unlawful contributions, payment, gifts,
or entertainment, or made any improper or unlawful expenditures relating to
political activity to governmental officials or others. Neither CSTI nor any
director, officer, agent, employee, or other person acting on behalf of CSTI has
accepted or received any improper or unlawful contributions, payments, gifts, or
entertainment or expenditures. CSTI has adequate financial controls to prevent
the making or receiving of such improper or unlawful contributions, payments,
gifts, entertainment, or expenditures.
3.9 DIVIDENDS - Since December 31, 1996, CSTI has not declared, paid
or set aside for payment, or agreed to declare or pay, any dividend or other
distribution in respect of its capital stock.
3.10 INSOLVENCY - CSTI is not the subject of any existing, pending or
threatened insolvency or bankruptcy proceedings under the laws of any
jurisdiction. The consummation of the transactions contemplated by this
Agreement will not result in any Selling Shareholder or CSTI being the subject
of such proceedings.
3.11 INTELLECTUAL PROPERTY -
(a) CSTI neither owns nor uses any trademarks, service
marks, trade names (except its corporate name), copyrights, or patents, except
as listed and described in Schedule 3.11, all of which are owned, possessed, or
lawfully used by CSTI.
(b) Except as set forth in Schedule 3.11, CSTI has not
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received any notice to the effect that any product it makes or sells, or the
distribution or use by it or another of any such product, or any services it
performs in the course of its business may infringe any trademark, service mark,
trade name, copyright, patent, trade secret, or similar legally protectable
right of another.
(c) All patentable inventions utilized or first reduced to
practice in connection with the business or activities of CSTI or the employment
by same of individuals, including the Selling Shareholders and others, are the
property of CSTI and no other party.
(d) Except as set forth in Schedule 3.11 or another Schedule
to this Agreement, CSTI has not entered into and is not a party to any
development, work for hire, license or other agreement pursuant to which CSTI
has secured the right or obligation to use, or granted others the right or
obligation to use, any trademarks, service marks, trade names, copyrights,
patents or know-how.
3.12 REAL PROPERTY LEASES - Schedule 3.12 contains a complete and
accurate legal description of each parcel of real property leased to CSTI
(collectively, the "Real Property"). Schedule 3.12 contains a description of all
buildings, fixtures and improvements located on the Real Property. True, correct
and complete copies of all leases of the Real Property (the "Real Property
Leases") have been delivered to Capitol. All of the Real Property Leases are
valid and in full force and effect, and there does not exist any default or
event which with notice or lapse of time or both would constitute a default
under any of the Real Property Leases. Except as set forth in Schedule 3.12, the
Real Properties are used and operated in compliance and in conformity with all
applicable leases, contracts, commitments, licenses and permits to the extent
that the failure to so comply would not have a material adverse effect on the
business or CSTI.
3.13 LICENSES FOR THIRD PARTY SOFTWARE - Set forth on Schedule 3.13
hereto is a description of each license under which CSTI is the licensee of any
Third Party Software (as such term is hereinafter defined) along with a
description of such Third Party Software. Except as set forth on Schedule 3.13,
CSTI has delivered to Capitol a true, correct and complete copy of each license
agreement with licensing payments in excess of $500 over the life of the license
identified in Schedule 3.13. The software or computer programs described in said
licenses are presently used by CSTI as licensee under the terms of said
licenses. All royalties due under said licenses have been paid and there exists
no default under the terms of said licenses and no event has occurred which,
upon the passage of time or the giving of notice, or both, would result in any
event of default
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or prevent CSTI from exercising and obtaining the benefits of any options
contained therein. CSTI has all rights, title and interest of the licensee under
the terms of said licenses, free of all liens, claims or encumbrances, all such
licenses are valid and in full force and effect and CSTI is in compliance with
the terms thereof. There will be no default or basis for acceleration under any
of said licenses as a result of the transactions contemplated by this Agreement.
CSTI has not received any notice of infringement, violation or conflict with any
Intellectual Property Rights of third parties with respect to its use of any
Third Party Software.
3.14 CONTRACTS, LEASES AND COMMITMENTS - Schedule 3.14 sets forth all
contracts, agreements, orders and commitments, written or oral, presently used
by CSTI or which are binding upon CSTI, which are material to conduct of the
business and identifies those material Contracts (including without limitation
licenses for Third Party Software) which require the approval or consent of a
third party as a condition to the continuing effectiveness of such agreement as
a result of the transactions contemplated hereunder. Schedule 3.14 also sets
forth all contracts, agreements, orders and commitments, oral or written,
pursuant to which CSTI has any interest (including without limitation a retained
ownership interest, right to receive royalty or licensing fees, distribution or
other rights) in programs, titles or intellectual property developed by CSTI.
The contracts, agreements, orders and commitments identified on Schedule 3.14
are hereinafter referred to as the "Contracts." Except as set forth on Schedule
3.14, (i) no event has occurred or is continuing which, upon the passage of time
or the giving of notice, or both, could constitute an event of default by CSTI
with respect to any Contract, and the Management Shareholders are not aware of
any claim of any such default having been made against CSTI with respect to any
Contract, and (ii) CSTI is not aware of any event which upon the passage of time
or the giving of notice, or both, could constitute an event of default by any
other party to any such Contract or could cause the acceleration of any
obligation of any other party thereto or the creation of a lien or encumbrance
upon any of CSTI's assets. Except as set forth on Schedule 3.14, each of the
Contracts is valid, binding and enforceable against CSTI and each other party
thereto in accordance with its terms without any defenses, setoffs,
counterclaims or disputes of any nature and is in full force and effect. No
purchase commitment for materials, supplies, component parts or other items of
inventory of the business to which CSTI is a party is in excess of the ordinary,
normal, usual and current requirements of the business or at a price in excess
of the current reasonable market price. No Contract which relates to the
business obligates CSTI (i) to provide software, products
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or services to third parties except for software warranty arrangements and
Beta-support work which CSTI knows or has reason to believe are at prices which
would result in a net loss on the sale or provision of such software, products
or services, or which are pursuant to terms or conditions it cannot reasonably
expect to satisfy or fulfill in their entirety, or (ii) to purchase or acquire
services, information, Third Party Software, inventory or equipment in excess of
the normal, ordinary, usual and current requirements of the business or at a
price in excess of the current reasonable market price. CSTI has not waived any
right under any Contract. Except as set forth in Schedule 3.14, there are no
agreements, understandings, instruments or proposed transactions between CSTI
and any employee, officer or director of CSTI which shall survive the Closing
Date. CSTI is not a party to, nor are any of CSTI's assets bound by, any
agreement that is adverse to its business. CSTI has not received notice that any
party to any of the Contracts intends to cancel or terminate any contract or to
exercise or not exercise any option under any Contract.
3.15 EMPLOYMENT RELATIONS - CSTI is in compliance with all federal,
state, or other applicable laws, domestic or foreign, respecting employment and
employment practices, terms and conditions of employment, and wages and hours
and has not and is not engaged in any violation of the Fair Labor Standards Act
or Service Contract Act or, to the knowledge of the Management Shareholders, any
unfair labor practice. CSTI is not a party to a collective bargaining agreement
and none of its employees are represented by a labor union. CSTI has entered
into no employment agreements other than those contemplated by this Agreement
and has not agreed to any salary or wage increases or committed to provide
employees of CSTI with employment benefits (including vacation or sick leave,
medical, life or dental insurance, disability and the like) except as set forth
in Schedule 3.15. All sums due to current or former employees for accrued
compensation and benefits as well as vacation time have been duly and adequately
accrued on the accounting records of CSTI and are reflected in the financial
statements.
3.16 TITLE AND RELATED MATTERS - CSTI has good and marketable title
to all of its assets (except for Third Party software, for which CSTI has valid
and enforceable licenses), free and clear of all mortgages, options, leases,
covenants, conditions, agreements, liens, security interests, adverse claims,
restrictions, charges, encumbrances or rights of others. There exists no
restriction on the use or transfer of any of CSTI's assets. Schedule 3.16 sets
forth a list of (i) all machinery or equipment, including without limitation,
computer hardware, used to conduct the business of CSTI with an original
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market value in excess of $1,000 (the "Equipment"), together with the date of
acquisition of each piece of Equipment, and the location of each piece of
Equipment and (ii) all "Company Software," which shall include all of CSTI's
software and computer programs used in its business, including any software or
computer programs not wholly-owned by CSTI ("Third Party Software") embedded
therein, in machine readable source code forms and in machine executable object
code forms and all related specifications (including, without limitation, all
logic architectures, algorithms and logic flows and all physical, functional,
operating and design parameters), operating systems and procedures (including
development methodology), designs, design revisions, related applications
software in any language, concepts, ideas, processes, techniques, software
design and test tools, third party software interfaces, methods of
implementation and packaging, all associated know-how and show-how and all
related programmer and user manuals, which are used by CSTI to install, operate,
maintain, correct, test, repair, enhance, extend, modify, prepare derivative
works based upon, design, develop, reproduce and package such software and
computer programs.
3.17 USE AND CONDITION OF PROPERTY - CSTI's assets are in good
operating condition and repair, ordinary wear excepted, are fit and usable for
the purposes for which they are being used, are sufficient for all current
operations of the business and conform to all applicable laws and regulations to
the best of knowledge of Management Shareholders, and no notice of any violation
of any law, statute, ordinance or regulation relating to any such property or
assets has been received by CSTI except as have been fully complied with or are
listed on Schedule 3.18 hereof. All of CSTI's assets are located at the premises
of the business located at CSTI's corporate headquarters at Dedham,
Massachusetts except as otherwise noted on Schedule 3.17 or Schedule 3.16.
CSTI's assets constitute all of the property now used in, and necessary for the
conduct of, the business in the manner and to the extent conducted by CSTI
during the period covered by the Financial Statements or as presently conducted.
CSTI does not, and has not since the date of its formation, own or have any
interest in real estate except as described in Schedule 3.17 or Schedule 3.12.
3.18 CONDITIONS AFFECTING THE BUSINESS - CSTI has used its best
efforts to keep available for Capitol the services of the professional
employees, consultants, agents, customers, and suppliers of CSTI active in the
conduct of its business. Except as set forth in Schedule 3.18, the Management
Shareholders have no knowledge of any threatened or anticipated loss of any
employees, consultants, customers, suppliers or agents or other
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advantageous arrangement and have not received any notice of any threatened or
anticipated loss of any customer or supplier, as a result of the sale and
transfer of the Shares or for any other reason.
3.19 COMPLIANCE WITH LAWS - CSTI is in compliance with all federal,
state, local and foreign laws, regulations, rules, ordinances and orders to
which its business and operations are subject except in cases when
non-compliance is not material to the business. CSTI has all requisite licenses,
permits and certificates from federal, state and local governmental authorities
as may be necessary to conduct its business and own and operate its assets and
such permits are valid and in full force and effect and will not be terminated
or adversely affected by the consummation of the transactions contemplated
hereby except in cases when non-compliance is not material to the business. All
information which CSTI has provided to customs authorities (in the U.S., Europe
or any other jurisdiction) in connection with the import and export of goods is
correct and the company has complied with all U.S. and foreign legislation
relating to the same. CSTI is in compliance with its obligations to the customs
authorities. CSTI does not owe customs duties to any governmental entity, nor
does a customs pledge of any property of CSTI exist. There are no claims against
CSTI by customs authorities in the U.S., or any other jurisdiction. CSTI is not
and has not been in breach of any currency regulation and currency control
legislation.
3.20 DISCLOSURE - This Agreement, the Exhibits, the Schedules, and
the other documents, certificates, and statements delivered to Capitol in
connection herewith or with the transactions contemplated hereby as taken as a
whole, do not contain any untrue statement of a material fact and do not omit to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. Having regard for the ordinary nature of the various
segments of the business of CSTI, there is no material fact known to the
Management Shareholders, which materially adversely affects or in the future, as
a result of existing material facts whose impact has not yet been experienced,
may (so far as the Management Shareholders can now reasonably foresee)
materially adversely affect the business of CSTI which has not been set forth in
this Agreement, the Exhibits, the Schedules, or the other documents,
certificates, and written statements furnished or to be furnished to Capitol by
or on behalf of the Selling Shareholders.
3.21 OWNERSHIP OF SHARES - Each Selling Shareholder owns or will own
at Closing the Shares as referenced in the recitals hereto, of record and
beneficially, free and clear of any liens,
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claims, encumbrances or restrictions. Each Selling Shareholder has or will have
at Closing good and marketable title to his respective Shares and has, and at
the Closing shall have, the absolute right, power and capacity to sell, assign
and deliver his Shares to Capitol, free and clear of all liens, claims,
encumbrances and restrictions.
3.22 RELATED PARTY TRANSACTIONS. Except as set forth in Schedule
3.22, there are no loans, leases, royalty agreements or other continuing
transactions between CSTI and the Selling Shareholders, any affiliate of any
Selling Shareholder, or any member of any Selling Shareholder's family. Except
as set forth in Schedule 3.22, to the knowledge of the Management Shareholders,
none of the officers or directors of CSTI or the Selling Shareholders (a) has
any material direct or indirect interest in any entity which does business with
CSTI; (b) has any direct or indirect interest in any property, asset or right
which is used by CSTI in the conduct of its business; or (c) has any contractual
relationship with CSTI other than such relationships which occur from being an
employee, officer, director or stockholder of CSTI.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CAPITOL
Capitol represents and warrants the following as of the date hereof:
4.1 ORGANIZATION AND GOOD STANDING OF CAPITOL - Capitol is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Capitol has full corporate power to carry on its
businesses as now conducted and is entitled to own, lease, and operate the
properties or assets it now owns, leases, and operates.
4.2 AUTHORITY OF CAPITOL - The execution of this Agreement by
Capitol, its delivery to the Selling Shareholders, the fulfillment of Capitol's
obligations, and the transactions contemplated hereby have been duly authorized
by the Board of Directors of Capitol, and no further corporate action will be
necessary on the part of the Capitol to make this Agreement valid and binding
upon them in accordance with its terms.
4.3 LITIGATION - Except as disclosed in Schedule 4.3, there are, and
within the prior twenty-four (24) months there have been, no actions, suits,
investigations, or proceedings pending or, to the knowledge of Capitol,
threatened or anticipated against or affecting Capitol or its assets, at law or
in equity, or before any court, arbitrator, or federal, state, municipal, or
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other governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign. Capitol is not operating under, subject
to, or in default with respect to any order, writ, injunction, or decree of any
court or federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign.
Except as disclosed in Schedule 4.3, Capitol has not, since January 1, 1997,
received or had outstanding any claim or complaint from or on behalf of any
employee or former or potential employee alleging wrongful termination, failure
to hire, harassment, or discrimination by reason of race, age, sex, handicap, or
veteran's status.
4.4 COMPLIANCE WITH LAWS - Capitol is in compliance with all
federal, state, local and foreign laws, regulations, rules, ordinances and
orders to which its business and operations are subject except in cases when
non-compliance is not material to the business. Capitol has all requisite
licenses, permits and certificates from federal, state and local governmental
authorities as may be necessary to conduct its business and own and operate its
assets and such permits are valid and in full force and effect and will not be
terminated or adversely affected by the consummation of the transactions
contemplated hereby except in cases when non-compliance is not material to the
business.
4.5 CONTRACTS AND COMMITMENTS - Capitol has not received notice that
any party to any of the outstanding contracts with third parties referred to in
Documents intends to cancel or terminate any contract or to exercise or not
exercise any option under any contract.
4.6 DISCLOSURE - The Documents and the other documents,
certificates, statements and information provided to the Selling Shareholders by
Capitol in connection herewith or with the transactions contemplated hereby,
when read together as a single disclosure, do not contain any untrue statement
of material fact and do not omit to state a material fact necessary in order to
make the statements contained herein and therein not misleading. Having regard
for the ordinary nature of the various segments of the business of the Capitol,
there is no material fact known to Capitol, which materially adversely affect or
in the future, as a result of existing material facts whose impact has not yet
been experienced, may (so far as Capitol can now reasonably foresee) materially
adversely affect the business of Capitol which has not been disclosed to the
Selling Shareholders.
ARTICLE V
CLOSING AND CONDITIONS PRECEDENT
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5.1 CLOSING DATE - Subject to the satisfaction or waiver of the
conditions to closing set forth below, the delivery of the Shares pursuant to
Article I, the issuance of the Capitol Shares and the delivery of the cash and
Notes pursuant to Section 2.1 (referred to herein as the "Closing") shall take
place at 4:30 p.m., local time, on the fifth business day following satisfaction
of the conditions to Closing set forth below, at the offices of the Capitol or
at such other time, date, and place as may be fixed by agreement in writing
among the parties hereto (the "Closing Date"). In the event that the Closing
does not occur till April 30, 1997, this Agreement will terminate unless a new
Closing Date is agreed upon in writing among the parties.
5.2 CONDITIONS TO CLOSING
(a) CONDITIONS PRECEDENT TO CAPITOL PERFORMANCE - The
obligation of Capitol to effect the transactions referenced herein shall be
subject to the fulfillment (or waiver of fulfillment at the sole discretion of
Capitol), at or prior to the Closing Date, of the following conditions:
(i) The representations and warranties of the
Management Shareholders contained in Article III hereof shall be deemed to have
been made again at and as of the Closing Date and shall be true and correct in
all material respects and, at the Closing, Selling Shareholders shall have
caused an officer of CSTI to have delivered to Capitol a certificate signed by
such officer to such effect.
(ii) Each of the obligations of Selling Shareholders
to be performed on or before the Closing Date pursuant to the terms of this
Agreement shall have been duly performed at the Closing Date. (iii) Capitol
shall have retained an independent accounting firm to audit CSTI's Financial
Statements for the twelve month period ended December 31, 1996 conducted in
accordance with generally accepted auditing standards. Such Financial Statements
shall be prepared in accordance with generally accepted accounting principles
and delivered to Capitol together with the signed opinion of the accounting firm
with respect to such Financial Statements. CSTI shall have caused its officers
to furnish to the accounting firm any and all material financial, technical and
operating data necessary for the audit.
(iv) The members of the Board of Directors of CSTI
shall have resigned in writing from the Board of Directors effective upon the
Closing;
(v) Carr shall have executed employment agreements
with Capitol in the form of Exhibit D.
(vi) There shall have been no material adverse change
in the financial condition, business or prospects of CSTI.
(vii) Capitol shall have completed its due diligence
review of CSTI, its books, records, financial condition
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and operations to the satisfaction of Capitol.
(viii) each of the shareholders of CSTI shall have
executed this Agreement and agreed to sell all of its CSTI stock to Capitol. .
(b) CONDITIONS PRECEDENT TO SELLING SHAREHOLDERS'
PERFORMANCE The obligation of Selling Shareholders to effect the transactions
referenced herein shall be subject to the fulfillment (or waiver of fulfillment
at the sole discretion of Selling Shareholders), at or prior to the Closing
Date, of the following conditions:
(i) The representations and warranties of Capitol
contained in Article IV hereof shall be deemed to have been made again at and as
of the Closing Date and shall be true and correct in all material respects.
(ii) Each of the obligations of Capitol to be
performed on or before the Closing Date pursuant to the terms of this Agreement
shall have been duly performed at the Closing Date.
(vi) There shall have been no material adverse change
in the financial condition, business or prospects of Capitol.
(viii) Capitol shall have delivered payment as set
forth in Article II to the Selling Shareholders on the Closing Date.
ARTICLE VI
COVENANTS OF PARTIES
6.1 COVENANT OF SELLING SHAREHOLDERS - During the period between the
date hereof and the Closing Date, the Selling Shareholders agree that they shall
not, directly or indirectly, through any officer, director or agent of CSTI,
solicit, initiate or encourage submission of any proposal or offer from any
person with respect to or assist, facilitate or encourage any person relating
to:
(a) any acquisition or purchase of all or any part of the
business or assets or any equity interest in CSTI on any basis; or
(b) any merger, consolidation or business combination with
CSTI.
The Selling Shareholders shall promptly notify Capitol of any such
proposal or offer, or any inquiry or contact with any person with respect
thereto, and the terms thereof.
6.2 CONDUCT OF BUSINESS - During the period between the date hereof
and the Closing Date, Selling Shareholders shall cause CSTI to conduct its
business only in the ordinary course, except as otherwise permitted by this
Agreement or consented to by Capitol in writing. Without limiting the generality
of the
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foregoing covenant, except as so permitted or consented to, CSTI shall (a)
continue to operate under normal business terms; (b) not make any distributions
or pay any dividends with respect to any class of its capital stock; (c) have
all material operating and non-operating decisions not reflecting normal course
operations approved by the chief executive officer of Capitol; (d) not hire any
personnel that require an employment contract without prior approval of Capitol;
(e) not pay bonuses or increase salaries; (f) not pay any unusual compensation
to any officer or employee, or enter into any agreement to increase or decrease
the rate of compensation of or to pay any unusual compensation to any officer or
employee; (g) conduct the business in substantial compliance with all applicable
laws, regulations or ordinances; and (h) promptly advise Capitol in writing of
any material adverse change in the business, assets or prospects of CSTI; (i)
not sell or dispose of any of CSTI's assets other than in the ordinary course of
its business; or (j) not enter into any contract or commitment of a type
required to be disclosed in any Exhibit to this Agreement.
6.3 ACCESS - Between the date hereof and the Closing Date, the
Shareholders shall cause CSTI to give to authorized representatives of Capitol
full access, during normal business hours and upon reasonable notice, in such
manner as to not disrupt normal business activities, to the assets, material
contracts, personnel, books of account and records of CSTI and will cause its
officers to furnish to Capitol any and all material financial, technical and
operating data and other information pertaining to CSTI and its assets and
business as is reasonably available and as Capitol shall from time to time
reasonably request for such purpose.
6.4 BEST EFFORTS; CONSENTS - Each of Selling Shareholders and
Capitol shall each use his and its best efforts, and shall cooperate with and
assist each other party in its efforts, to obtain such consents and approvals of
third parties to the transactions contemplated hereby as may be necessary to
consummate this Agreement.
6.5 NO SALE OF SUBJECT SHARES - Prior to Closing, Selling
Shareholders shall not (a) sell, offer for sale or otherwise transfer or dispose
of any of the Shares owned by Selling Shareholders or any interest therein or
(b) incur, permit, cause or suffer to exist any lien, security interest, charge
or encumbrance upon such Shares.
6.6 TERMINATION OF STOCK AGREEMENTS - Prior to Closing, Selling
Shareholders shall have caused all Stock and Stock Options Agreements between
Selling Shareholders and CSTI to be
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terminated in their entirety.
6.7 POST-CLOSING ADJUSTMENTS.
(a) The parties hereto acknowledge and agree that the audit
of CSTI's Financial Statements according with Section 5.2.(iii) will be
completed following Closing. Accordingly, Capitol shall be entitled to reduce
the consideration payable under Article II of this Agreement in the case of an
adjustment to the Financial Statements resulting from the audit. Such reduction
shall be made within 10 days after completion of the audit.
(b) The consideration reduction will be computed in the
following manner: (i) if adjustments are made to reflect and include in the
accrual for pursuant to Taxes or accrued vacation time, the consideration paid
to the Selling Shareholders will be decreased by the amount of these
adjustments; (ii) if the remaining total adjustments are less than or equal than
one hundred thousand dollars ($100,000), the consideration paid to the Selling
Shareholders will not be adjusted further; (iii) if the remaining total
adjustments to the Financial Statements are greater than one hundred thousand
dollars ($100,000), the consideration will be decreased by fifty percent (50%)
of the total amount over $100,000.
(c) Any reduction in the consideration payable by Capitol
pursuant to this Section 6.7 shall be allocated to the Selling Shareholders in
proportion to their shareholdings in CSTI, and such amounts shall be applied
first against the outstanding principal balance of the Notes. Capitol's
calculations of such reductions to the principal and/or interest on the Notes
shall be final and binding upon the parties hereto absent demonstrated error.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY CAPITOL - Capitol, shall defend, indemnify,
and hold harmless the Selling Shareholders, their heirs, personal
representatives and assigns, against and in respect of any damages, losses,
claims, or liabilities, including costs, expenses, and fees incident or related
thereto, resulting from any misrepresentation, breach of express warranty or
covenant, or non-fulfillment of any obligation of Capitol under this Agreement.
7.2 INDEMNIFICATION BY THE SELLING SHAREHOLDERS -
(a) Except as provided in paragraph (b) hereof, the
Management Shareholders, jointly and severally, shall defend, indemnify, and
hold harmless Capitol, CSTI, and any successor in interest against and in
respect of any damages, losses, claims, or liabilities, including costs,
expenses, and fees incident or related thereto, resulting from any
misrepresentation, breach of
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warranty or covenant under this Agreement provided, however, that Capitol will
not be entitled to remedies under this Section 7.2(a) until such time when the
aggregate liability under this Section 7.2 is greater than or equal to one
hundred thousand dollars ($100,000) at which point the Selling Shareholders will
be liable for the total amount of the liability up to the "Liability Limit"
defined herein.. No liability should accrue to the Selling Shareholders in the
event that within six months of the date of this agreement the uncollected
balance of the receivables set forth in the Financial Statements minus the bad
debt reserve set forth in the Financial Statements is less that thirty thousand
dollars ($30,000). The maximum liability of each of the Selling Shareholders
under this Section 7.2(a), except in case of fraud or willful misrepresentation,
when added to the amount of any liabilities of such Selling Shareholder pursuant
to Section 7.2(b), shall not exceed the sum of (i) the aggregate net cash or
cash equivalents proceeds received by the Selling Shareholder pursuant to this
Agreement; plus (ii) the aggregate net proceeds received by the Selling
Shareholder from the sale or transfer of any of the Capitol Shares; plus (iii)
the fair market value of all of the Capitol Shares beneficially owned (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended and in accordance with the provisions set forth below) by
the Selling Shareholder as of the date (the "Demand Date") Capitol makes a
demand upon Selling Shareholder for payment of any damages, losses, claims or
liabilities under this Section 7.2. The fair market value of the Capitol Shares
beneficially owned by Selling Shareholder for purposes of this Section 7.2 shall
be determined by multiplying the number of Capitol Shares beneficially owned by
the Selling Shareholder on the Demand Date by the average of the closing price
of the Capitol's Common Stock for the ten trading days immediately preceding the
Demand Date. The sum so determined for each Selling Shareholder shall
hereinafter be referred to as the "Liability Limit". For purposes of the
foregoing determination, any Capitol Shares transferred without the receipt of
consideration by the Selling Shareholder prior to the Demand Date shall be
deemed to be beneficially owned by Selling Shareholder. In the event that
Selling Shareholder receives non-cash consideration from the sale of Capitol
Shares, such shares shall be deemed to be beneficially owned by the Selling
Shareholder as of the Demand Date unless the Capitol and Selling Shareholder
agree upon the fair market value of such non-cash consideration. In the event
that the Selling Shareholder sells Capitol Shares for consideration less than
the fair market value of such shares, the Liability Limit shall be calculated
using the fair market value for such shares instead of the actual cash
consideration received by Selling Shareholder. The Selling Shareholders can
satisfy the liability arising under this Section 7.2 through
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returning Capitol shares received as their part of Consideration under Article
II to Capitol to represent the fair market value of these shares according to
the computation defined in this Section, provided that they have submitted cash
payments to Capitol in the amount proportional to their cash consideration under
Article II before the return of the shares.
(b) Each individual Selling Shareholder shall defend,
indemnify, and hold harmless Capitol, CSTI, and any successor in interest
against and in respect of any damages, losses, claims, or liabilities, including
costs, expenses, and fees incident or related thereto, resulting from any
misrepresentation or breach of the representation and warranty set forth in
Section 3.21, or the non-fulfillment of any individual obligation on the part of
such Selling Shareholder under this Agreement; provided, however, that, except
in case of fraud or willful misrepresentation, each Selling Shareholder's
liabilities under this Section 7.2(b) shall not exceed the Liability Limit.
7.3 NOTICE OF CLAIMS - The party (the "Indemnified Party") which has
identified or incurred any damage, loss, claim, or liability for which such
party is indemnified under this Agreement shall deliver written notice thereof
to the other party hereto (the "Indemnifying Party"), which notice shall set
forth and describe the exact nature of any such damages, losses, claims, or
liabilities, the specific or best estimated amount or amount involved, and the
Section of this Agreement deemed by such party to establish responsibility on
the part of the other.
7.4 DEFENSE AND SETTLEMENT OF LAWSUITS - If any legal proceeding
shall be instituted against an Indemnified Party by any party in respect of
which the Indemnifying Party may be responsible under this Article VII, the
Indemnified Party shall give written notice thereof to the Indemnifying Party.
Upon receipt of such notice, the Indemnifying Party shall undertake the defense
of such proceeding through counsel selected by it (provided that the Indemnified
Party shall be entitled, at its own expense, to participate in any such legal
proceeding or the negotiation and settlement thereof through counsel of its
choice). The Indemnifying Party shall in all cases have the right to settle or
compromise any such proceeding or to refrain therefrom; provided, however, that
(i) without the prior written consent of the Indemnified Party, the Indemnifying
Party shall not have the right to enter into any settlement or compromise which
would obligate or adversely affect the Indemnified Party in any way, if the
Indemnified Party does not consent to a settlement or compromise proposed by the
Indemnifying Party and agreed to by the third party plaintiff, and (ii) if the
Indemnified Party does not give such consent and such proceeding shall
ultimately result in a monetary judgment or settlement
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greater than the proposed settlement or compromise, the Indemnifying Party shall
be deemed discharged from any monetary liability hereunder with respect to any
amount in excess of the amount of the settlement or compromise so proposed and
agreed to by the third party and from any expenses (including attorneys' fees
and expenses) incurred by the Indemnified Party subsequent to the date the
proposed settlement or compromise was agreed to by the third-party plaintiff;
provided further, however, that no Indemnified Party shall be required to
consent to the terms of any settlement or compromise which imposes any
non-monetary obligation upon or admission of guilt by such Indemnified Party,
and such Indemnifying Party shall not be deemed discharged from such liabilities
by reason of the failure of the Indemnified Party to consent to such
non-monetary obligation or admission of guilt. If the Indemnifying Party is
Selling Shareholders, consent will be obtained by the majority vote of the
Selling Shareholders.
ARTICLE VIII
MISCELLANEOUS
8.1 NOTICES - All notices, request, demands, and other
communications called for or contemplated hereunder shall be in writing and
shall be deemed to have been duly given when delivered or when mailed by United
States certified or registered mail, prepaid, addressed to the parties at the
following address for the Capitol and the addresses listed in Schedule 8.1 for
Selling Shareholders (or at such other addresses as the parties may designate by
written notice given in the manner aforesaid):
If to Capitol: Capitol Multimedia, Inc.
200 Baker Avenue, Suite 300
Concord, MA 01742
Attn: Chief Financial Officer
With a copy to: Thomas J. Egan, Jr., Esq.
Baker & McKenzie
815 Connecticut Ave., N.W.
Washington, D.C. 20006-4078
If to CSTI: Client Server Technologies, Inc.
270 Bridge Street,
Dedham, MA 02026
Attn: Paul Carr
8.2 FEES OF FINDERS, BROKERS AND OTHERS - The respective parties
hereto certify that no person or company provided services as a broker, agent,
or finder or assisted in the negotiations of this Agreement, except for counsel.
Each party agrees to indemnify the other for any claim asserted by any person or
company purporting to act on its behalf in providing
22
<PAGE> 24
services as a broker, agent, or finder in connection with this Agreement.
8.3 ENTIRE AGREEMENT - This Agreement, the Exhibits, and the
Schedules and certain employment agreements to be entered into in connection
with the Closing contain the entire agreement between the parties with respect
to the transactions contemplated herein and supersede all previous written or
oral negotiations, commitments, and understandings.
8.4 COUNTERPART - This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. A facsimile signature by
a representative of the Capitol or by a Selling Shareholders shall be deemed the
original signature of such party.
8.5 CONFIDENTIALITY - The parties hereto agree that the contents of
this Agreement, the Exhibits, and any Schedules (but not the effect of the
transaction) and any and all information delivered to the other in conjunction
herewith concerning the business and financial affairs of the Selling
Shareholders, CSTI, or Capitol shall be held in confidence by the recipient
party and its agents and representatives and shall not be disclosed to other
parties without the written consent of all parties hereto; provided, however,
that any party shall have the right to make such public announcement and filings
as it may deem appropriate to comply with applicable law, including applicable
securities laws.
8.6 SURVIVAL OF REPRESENTATIONS - All the representations,
covenants, warranties, and understandings contained in this Agreement shall
survive the Closing and shall terminate on the second anniversary of the
Closing. No performance or execution of this Agreement in whole or in part by a
party hereto shall constitute a waiver by such party or stop such party from
asserting its rights hereunder, nor shall a waiver of or failure to exercise one
or more rights hereunder constitute a waiver of any other rights.
8.7 INTERPRETATION - The article and section headings contained in
this Agreement are for reference purposes only and shall not affect the
interpretation of this Agreement. All references to section and article number
refer to sections and articles of this Agreement, except as otherwise specified.
All references to schedules refer to schedules which are attached to this
Agreement, except as otherwise specified, and are hereby made a part of this
Agreement. All references in this Agreement to gender shall be deemed to include
all genders, and an
23
<PAGE> 25
references in the singular or plural shall be deemed to include the plural and
singular, as appropriate.
8.8 GOVERNING LAW - This Agreement shall be construed and enforced
in accordance with the laws of the State of Massachusetts, except the conflict
of laws provisions thereof.
8.9 SEVERABILITY - Every provision of this Agreement is intended to
be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality of invalidity shall not affect the validity
of the remainder of this Agreement.
8.10 ASSIGNMENT - No party hereto may assign or delegate or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of the other party hereto, and any agreement, act, or deed purporting to
effect any such assignment, delegation, or transfer without such prior written
consent shall be void; provided however that such prohibition shall not exclude
assignment by operation of law, such as by merger of a party into another
corporation.
8.11 BINDING EFFECT - Subject to the provisions of Section 8.10, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, heirs and assigns.
8.12 NO THIRD-PARTY BENEFICIARIES - Except as provided in Section
8.10, the provisions of this Agreement are intended solely for the benefit of
the parties hereto, and no other party is entitled to any rights, benefits, or
privileges created hereunder.
8.13 AMENDMENT - This Agreement may not be modified or amended except
by a writing or writings signed by the party against whom any modification or a
mendment is asserted or sought to be enforced.
8.14 FURTHER ASSURANCES - Each of the parties hereto will, at any
time and from time to time, use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable laws and regulations to fulfill its
obligations under this Agreement, to consummate and make effective the transfer
to Capitol of the Shares pursuant to this Agreement.
24
<PAGE> 26
IN WITNESS WHEREOF, the parties have duly exercised this Agreement as of
the date first referenced above.
Capitol Multimedia, Inc.
By: /s/ Luda Kopokina
--------------------------------
Its: President
--------------------------------
SELLING SHAREHOLDERS
/s/ Paul Carr
-------------------------------------
Paul Carr
/s/ Richard Sheflin
-------------------------------------
Richard Sheflin
/s/ Kenneth Bloom
-------------------------------------
Kenneth Bloom
-------------------------------------
Richard D. Myers
/s/ Jeffrey D. Brunelle
-------------------------------------
Jeffrey D. Brunelle
/s/ Brice C. Buchanan
-------------------------------------
Brice C. Buchanan
/s/ YuSang Kwan
-------------------------------------
YuSang Kwan
/s/ Armando Prato
-------------------------------------
Armando Prato
/s/ James Holt
-------------------------------------
James Holt
/s/ Lynn Vena
-------------------------------------
Lynn Vena
/s/ Kenneth W. Cole
-------------------------------------
Kenneth W. Cole
/s/ Brian J. Moran
-------------------------------------
Brian J. Moran
25
<PAGE> 27
Selling Shareholders (cont.)
/s/ John G. Kilray
-------------------------------------
John G. Kilray
/s/ Robert B. Gates Jr.
-------------------------------------
Robert B. Gates Jr.
/s/ Linda Duncan
-------------------------------------
Linda Duncan
/s/ Richard J. Heier
-------------------------------------
Richard J. Heier
/s/ John D. Bean
-------------------------------------
John D. Bean
26
<PAGE> 28
EXHIBITS AND SCHEDULES
Exhibit A Selling Shareholders
Exhibit B Promissory Note
Exhibit C Promissory Note to Paul Carr
Exhibit D Form of employment agreement between Capitol Multimedia,
Inc. and Paul Carr
Schedule 3.3 CSTI Financial Statements
Schedule 3.4 Certain Changes
Schedule 3.7 CSTI Disclosed Liabilities
Schedule 3.11 Intellectual Property
Schedule 3.12 CSTI Real Property Leases
Schedule 3.13 CSTI Licenses for Third Party Software
Schedule 3.14 CSTI Contracts, Leases and Commitments
Schedule 3.15 CSTI Employment Benefits
Schedule 3.16 CSTI Machinery, Equipment and Company Software
Schedule 8.1 Selling Shareholders addresses
Note: All other schedules to the "Agreement for the Acquisition of the
Outstanding Stock of Client Server Technologies, Inc." are blank
27
<PAGE> 29
<TABLE>
March 31, 1997
Exhibit A
CSTI Shareholder List
Stock Certificates
<CAPTION>
NAME ADDRESS SS # SHRS CSTI STOCK
- ---- ------- ---- ---------------
<S> <C> <C> <C>
Paul Carr 2 Monadnock Road ###-##-#### 804,701
Wellesley, MA 02181
Richard Sheflin 326 Old Billerica Road ###-##-#### 251,026
Bedford, MA 01730
Kenneth Bloom 11 Wilson Lane ###-##-#### 72,619
Acton, MA 01720
Richard D Myers 9722 Cypress Point Circle ###-##-#### 1,500
Littleton, CO 80124
Jeffrey D Brunelle III 117 Highland Avenue ###-##-#### 1,500
So. Attleboro, MA 02703
Brice C Buchanan 11 Fairfield Road ###-##-#### 19,000
Wayland, MA 01778
YuSang Kwan 27 Faxon Street ###-##-#### 15,000
Newton, MA 02158
Armando Prato 4 Brook Street ###-##-#### 10,250
Chelmsford, MA 01824
James Holt 74 Brookside Road ###-##-#### 12,000
Needham, MA 02192
Lynn Vena 11 Albano Street ###-##-#### 6,250
Roslindale, MA 02131
Kenneth W Cole 48 Oregon Road ###-##-#### 50,000
Southboro, MA 01772
Brian J Moran 20 Alexander Drive ###-##-#### 42,000
Hampton, NH 03842
John G Kilray 34 Lee Street ###-##-#### 9,250
Jamaica Plain, MA 02130
Robert B Gates Jr. 10 Maple Tree Lane ###-##-#### 3,000
Franklin, MA 02038
Linda Duncan 66 Brockton Avenue ###-##-#### 2,000
Scituate, MA 02066
Richard J Heier 18 Goshen Road ###-##-#### 3,000
Dedham, MA 02026
John D Bean P.O. Box 3053 ###-##-#### 9,250
No. Attleboro, MA 02761 ---------
1,312,346
</TABLE>
<PAGE> 30
EXHIBIT B
CONVERTIBLE PROMISSORY NOTE
CAPITOL MULTIMEDIA, INC.
CLIENT SERVER TECHNOLOGIES, INC.
200 BAKER AVENUE, SUITE 300
CONCORD, MA 01742
U.S. $_________ Dated: March 31, 1997
Principal Amount
1. AMOUNT AND RATE. Capitol Multimedia, Inc., a Delaware
orporation having its principal place of business at 200 Baker Avenue, Suite
300, Concord, MA 01742 ("Capitol"), and Client Server Technologies, Inc., a
Massachusetts corporation whose principal office is at 270 Bridge Street,
Dedham, MA 02026 ("CSTI") (collectively the "Obligors"), for value received,
jointly and severally, hereby promise to pay to the order of
_____________________ as a selling shareholder of CSTI (the "Selling
Shareholder) the principal amount of____________________________Dollars,
($___________) in lawful money of the United States of America in immediately
available funds on the date hereinafter specified. Except to the extent
otherwise provided in the Share Purchase Agreement and subject to the conversion
rights contained herein, the principal balance of this Convertible Promissory
Note and Security Agreement (the "Note") shall be payable as follows: one
payment of _____________________________Dollars (U.S. $_________) on December
31, 1998. This Note may be prepaid in whole or in part at any time without
penalty and at a discount rate to maturity of fourteen percent (14%) per annum.
2. CONVERSION RIGHTS. The Selling Shareholder shall have a
conversion right with respect to the Note, which shall be the principal due on
the Note on December 31, 1998 (the "Interest"), as follows:
(a) Right to Convert. The Selling Shareholder may elect to
convert its Interest, in whole or in part, into the right to receive common
stock of Capitol (the "Common Stock") in full satisfaction of the amount payable
by the Obligors with respect to the Interest so convertible, through and until
the Selling Shareholder's Interest is repaid in full or converted in its
entirety into shares of Common Stock. The Interest may be converted at the
office of Capitol, or any transfer agent for such stock, into such whole number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing the Interest of the Selling Shareholder by the Conversion Price. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Interest (the "Conversion Price") shall be three dollars ($3) per share of
Common Stock.
(b) MECHANICS OF CONVERSION. The Selling Shareholder wishing
to convert his or her Interest into shares of the Common Stock of Capitol shall
deliver, one month prior to the due date of the principal payment made in
accordance with the terms of this Note, written notice
<PAGE> 31
to Capitol at such office where notice is required herein and shall state
therein the name or names in which he wishes the certificate or certificates for
shares of Common Stock to be issued. Capitol shall, as soon as practicable
thereafter, issue and deliver to the Selling Shareholder a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the last business day of 1998, or
immediately prior to the close of business on the last business day of the
quarter in relation to which a principal payment hereunder is due, as the case
may be, and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
3. LATE PAYMENTS. Upon the failure of the Obligors to make a
payment of principal in accordance with the terms hereof, interest shall accrue
on such principal amount due and outstanding at the rate of prime plus six
percent (6%) per annum, compounded monthly, and shall be due and payable when
the principal on which it accrues is paid. No interest shall accrue on any
installment of the unpaid principal balance until the due date of such
installment as provided herein.
4. SHARE PURCHASE AGREEMENT. This Convertible Promissory Note is
one of the Notes referred to in the Share Purchase Agreement dated March 31,
1997 between the Selling Shareholders and Obligors (the "Share Purchase
Agreement"), and it evidences consideration provided by the Obligors to the
Selling Shareholders thereunder. This Note is subject to all of the terms and
conditions contained in the Share Purchase Agreement, which are incorporated
herein by reference. Capitalized terms used in this Note shall, unless otherwise
stated herein, have the respective meanings assigned to them in the Share
Purchase Agreement.
5. SUCCESSORS AND ASSIGNS. The terms and provisions of this
Agreement shall be binding upon, and the benefits thereof shall inure to, the
parties hereto and their respective permitted successors and assigns. Neither
this Agreement nor any rights or obligations hereunder may be assigned by
Obligors without the prior written consent of the Selling Shareholder. Except
with respect to a transfer to an affiliate or relative of the Selling
Shareholder, notice of any transfer of this Note by a Selling Shareholder shall
be given to Obligors within a reasonable time period after such transfer. Upon
surrender of this Note at the office of the Obligors, the Obligors shall execute
and deliver one or more replacement Notes in the name of the transferee(s).
6. NO IMPLIED WAIVER. No delay or omission to exercise any right,
power or remedy accruing to the Selling Shareholder upon any breach or default
of Obligors under this Agreement shall impair any such right, power or remedy of
the Selling Shareholder, nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default occurring thereafter, nor shall any waiver of any single breach or
default be deemed a wavier of any other breach or default occurring theretofore
or thereafter.
7. NO REGISTRATION. THIS CONVERTIBLE PROMISSORY NOTE AND
2
<PAGE> 32
SECURITY AGREEMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND THEREFORE CANNOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR ASSIGNED UNLESS IT IS REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND UNDER ALL APPLICABLE STATE SECURITIES
LAWS, OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.
8. SET-OFF. Any principal and accrued interest thereon due under
the terms of this Note may be reduced or offset pursuant to the set-off
provision contained in the Share Purchase Agreement.
9. AMENDMENTS; WAIVERS. No amendments, modification or waiver of or
consent with respect to, any provision of this Agreement, shall be effective
unless the same shall be in writing and signed and delivered by the Selling
Shareholder and Obligors. Any amendment, modification, waiver or consent
hereunder shall be effective only in the specific instance and for the specific
purpose for which given.
10. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall be, only as to such
jurisdiction, ineffective to the extent of such prohibition or unenforceability,
but all the remaining provisions of this Agreement shall remain valid.
11. NOTICES. Any notice which the Selling Shareholder or Obligors
may be required or may desire to give to the other party under any provision of
this Agreement shall be in writing by overnight delivery service, certified
mail, telex or electronic facsimile transmission and shall be deemed to have
been given or made when received and addressed as follows:
To Obligors:
Capitol Multimedia, Inc.
200 Baker Avenue, Suite 300
Concord, MA 01742
Attn: President
To the Selling Shareholder:
-----------------------------
-----------------------------
Any party may change the address to which all notices, requests and other
communications are to be sent to it by giving written notice of such address
change to the other parties in conformity with this paragraph, but such change
shall not be effective until notice of such change has been received by the
other parties.
3
<PAGE> 33
12. GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT OF THIS
AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
13. HEADINGS AND SECTIONS. Captions, headings and the table of
contents in this Agreement are for convenience only, and are not to be deemed
part of this Agreement. Unless otherwise specified, references in this Agreement
to Sections, Articles, Exhibits or Schedules are references to sections and
articles of and exhibits and schedules to, this Agreement. IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the date and year first
above written.
Capitol: CAPITOL MULTIMEDIA, INC.
a Delaware corporation
By:
---------------------------------------
Its:
--------------------------------------
CSTI: CLIENT SERVER TECHNOLOGIES, Inc.
a Massachusetts corporation
By:
---------------------------------------
Its:
--------------------------------------
Selling Shareholder:
------------------------------------------
------------------------------------------
4
<PAGE> 34
EXHIBIT C
CONVERTIBLE PROMISSORY NOTE AND SECURITY AGREEMENT
CAPITOL MULTIMEDIA, INC.
CLIENT SERVER TECHNOLOGIES, INC.
200 BAKER AVENUE, SUITE 300
CONCORD, MA 01742
U.S. $1,613,177 Dated: March 31, 1997
Principal Amount
1. AMOUNT AND RATE. Capitol Multimedia, Inc., a Delaware
corporation having its principal place of business at 200 Baker Avenue, Suite
300, Concord, MA 01742 ("Capitol"), and Client Server Technologies, Inc., a
Massachusetts corporation whose principal office is at 270 Bridge Street,
Dedham, MA 02026 ("CSTI") (collectively the "Obligors"), for value received,
jointly and severally, hereby promise to pay to the order of Paul Carr as a
majority selling shareholder of CSTI (the "Majority Shareholder"), the principal
amount of One Million Six Hundred Thirteen Thousand One Hundred Seventy Seven
United States Dollars (U.S. $1,613,177), in lawful money of the United States of
America in immediately available funds on the dates hereinafter specified.
Except to the extent otherwise provided in the Share Purchase Agreement and
subject to the conversion rights contained herein, the principal balance of this
Convertible Promissory Note and Security Agreement (the "Note") shall be payable
as follows: one payment of Six Hundred Thirteen Thousand One Hundred Seventy
Seven United States Dollars (U.S. $613,177) on December 31, 1998, and twelve
(12) equal payments of Eighty-Three Thousand Three Hundred Thirty-Three United
States Dollars and Thirty-Three Cents (U.S. $83,333.33) on the first business
day of April, 1999, and on the first business day of each successive quarter
until the Note is paid in full.
2. CONVERSION RIGHTS. The Majority Shareholder shall have a
conversion right with respect to the portion of principal due on the Note on
December 31, 1998 and any interest accrued thereon through the date of
conversion (the "Interest"),as follows:
(a) Right to Convert. The Majority Shareholder may elect to
convert its Interest, in whole or in part, into the right to receive common
stock of Capitol (the "Common Stock") in full satisfaction of the amount payable
by the Obligors with respect to that portion of the Interest so convertible,
through and until the Majority Shareholder's Interest is repaid in full or
converted in its entirety into shares of Common Stock. The Interest may be
converted at the office of Capitol, or any transfer agent for such stock, into
such whole number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Interest of the Majority Shareholder by the
Conversion Price. The price at which shares of Common Stock shall be deliverable
upon conversion of the Interest (the "Conversion Price") shall be three dollars
($3) per share of Common Stock.
(b) MECHANICS OF CONVERSION. The Majority Shareholder
wishing to convert the Interest into shares of the Common Stock of Capitol shall
deliver, one month prior to the due date of the principal payment made in
accordance with the terms of this Note, written notice to Capitol at such office
where notice is required herein and shall state therein the amount to be
converted and the name or names in which he wishes the certificate or
certificates for shares of Common Stock to be issued. Capitol shall, as soon as
practicable thereafter, issue and deliver to the Majority Shareholder a
certificate or certificates for the number of shares of Common Stock to which he
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the last business day of
1998, or immediately prior to the close of business on the last business day of
the quarter in relation to which a principal payment hereunder is due, as the
case may be, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
3. LATE PAYMENTS. Upon the failure of the Obligors to make a
payment of principal in accordance with the terms hereof, interest shall accrue
on such principal amount due and outstanding at the rate of prime plus six
percent (6%) per annum, compounded monthly, and shall be due and payable when
the principal on which it accrues is paid. No interest shall accrue on any
installment of the unpaid principal balance until the due date of such
installment as provided herein. Late Payments will be first applied to the
accrued interest and then to the principal of the Note.
4. EVENT OF DEFAULT. In the event the Obligors fail to make a
payment of principal or interest in accordance with the terms hereof, and should
the Obligors fail to remedy such failure for a period of one year following the
due date of such principal and interest, Obligors will have the right to pay
fifty percent (50%) of the principal amount and the interest accrued up to this
point and defer the payment of the remainder of the principal for additional one
year period. In the event the Obligors fail to make a payment of the remaining
principal or interest two years following the original due date of the Note, and
the Majority Shareholder may (a) exercise any remedies of a secured party under
the Massachusetts Uniform Commercial Code; and (b) exercise any other remedies
available to it at law or equity.
5. SECURITY INTEREST.
(a) DEFINITIONS. In addition to any terms defined elsewhere
in this Agreement, the following terms have the meanings indicated for purposes
of this Agreement (such definitions being equally applicable to the singular and
plural forms of the defined term):
(1) "Affiliate" means, with respect to any Person,
any Person directly or indirectly controlling, controlled by or under common
control with such Person; provided, however, that neither party to this
Agreement shall be deemed to be an Affiliate of the other party.
(2) "Collateral" refers to the following: (a) any
right, title and interest
2
<PAGE> 35
in and to computer software developed by CSTI with improvements and enhancements
added hereafter, and (b) the names and addresses of CSTI's past or present
customers. "Collateral" does not include: (i) computer software hereafter
developed or acquired by CSTI or Capitol that represents product functionality
that is not in the CSTI computer software as of the date first written above
including without limitation interfaces which may hereafter be developed to the
current CSTI software; (ii) any plans or processes relating to the production,
sale and distribution of the Collateral; (iii) any computer software or other
products that incorporate or utilize any element of the Collateral pursuant to
any license agreements whether now owned or hereafter acquired; or (iv) the
proceeds, income or royalties attributable to such computer software prior to an
Event of Default (as defined herein).
(3) "Financing Statements" shall mean the form of
financing statements as shall be necessary to perfect, upon filing, a security
interest in the Collateral in each jurisdiction in which such Collateral is
located or in which a filing is required under the UCC to perfect such security
interest.
(4) "UCC" means the Uniform Commercial Code as in
effect on the date hereof in the State of Massachusetts, as amended from time to
time, and any successor statute; PROVIDED that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the security interest in any Collateral is governed by the Uniform Commercial
Code, or other applicable statute, law or provision relating to the perfection
or the effect of perfection or non-perfection of any such security interest, as
in effect on or after the date hereof in any other jurisdiction, "UCC" means the
Uniform Commercial Code or such other statute, law or provision as in effect in
such other jurisdiction for purposes of the provision hereof relating to such
perfection or the effect of perfection or non-perfection.
(b) GRANT OF SECURITY INTEREST. The Obligors hereby grant to
Secured Party a continuing security interest in and to all right, title and
interest of CSTI or Capitol in the Collateral, provided that CSTI held such
right, title and interest to the Collateral as of the Closing (as defined in the
Share Purchase Agreement), to secure payment and performance of the obligations
under this Agreement. Anything herein to the contrary notwithstanding: CSTI and
its successors shall remain liable under the contracts and agreements included
in the Collateral to the extent set forth therein to perform all of its duties
and obligations thereunder to the same extent as if this Agreement had not been
executed.
(c) WAIVERS. The Obligors waive any right to require the
Majority Shareholder to proceed against any person or to exhaust any Collateral
or to pursue any remedy available to the Majority Shareholder. The Obligors
waive any defenses they may have arising from the Majority Shareholder's failure
to perfect or maintain a perfected security interest in the Collateral.
(d) TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL. Upon payment in full of the Obligations, the security interest
created hereby shall terminate. Upon such
3
<PAGE> 36
termination of the security interest or release of any Collateral, the Majority
Shareholder will execute and deliver to the Obligors such documents as the
Obligors shall reasonably request to evidence the termination of the security
interest or the release of such Collateral which has not yet theretofore been
sold or otherwise applied or released. Such release shall be without warranty or
recourse to Secured Party, except as to the absence of any prior assignments by
Secured Party on behalf of its interest in the Collateral, as the case may be.
(e). CHANGE OF CONTROL. Obligors can sell the Collateral to
another party ("Purchaser") provided that the Purchaser assumes the obligations
under this Note with the Secured Party's consent or that this Note shall become
due and payable at the time of the sale.
6. SHARE PURCHASE AGREEMENT. This Convertible Promissory Note and
Security Agreement is one of the Notes referred to in the Share Purchase
Agreement dated March 31, 1997 between the Selling Shareholders and Obligors
(the "Share Purchase Agreement"), and it evidences consideration provided by the
Obligors to the Selling Shareholders thereunder. This Note is subject to all of
the terms and conditions contained in the Share Purchase Agreement, which are
incorporated herein by reference. Capitalized terms used in this Note shall,
unless otherwise stated herein, have the respective meanings assigned to them in
the Share Purchase Agreement.
7. SUCCESSORS AND ASSIGNS. The terms and provisions of this
Agreement shall be binding upon, and the benefits thereof shall inure to, the
parties hereto and their respective permitted successors and assigns. Neither
this Agreement nor any rights or obligations hereunder may be assigned by
Obligors without the prior written consent of Secured Party. Except with respect
to a transfer to an affiliate or relative of the Selling Shareholder, notice of
any transfer of this Note by a Selling Shareholder shall be given to Obligors
within a reasonable time period after such transfer. Upon surrender of this Note
at the office of the Obligors, the Obligors shall execute and deliver one or
more replacement Notes in the name of the transferee(s).
8. NO IMPLIED WAIVER. No delay or omission to exercise any right,
power or remedy accruing to Secured Party upon any breach or default of Obligors
under this Agreement shall impair any such right, power or remedy of Secured
Party, nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default occurring
thereafter, nor shall any waiver of any single breach or default be deemed a
wavier of any other breach or default occurring theretofore or thereafter.
9. NO REGISTRATION. THIS CONVERTIBLE PROMISSORY NOTE AND SECURITY
AGREEMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER ANY STATE SECURITIES LAWS, AND THEREFORE CANNOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR ASSIGNED UNLESS IT IS REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR
UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.
10. SET-OFF. Any principal and accrued interest thereon due under
the terms of this Note may be reduced or offset pursuant to the set-off
provision contained in the Share Purchase Agreement.
11. AMENDMENTS; WAIVERS. No amendments, modification or waiver of or
consent with respect to, any provision of this Agreement, shall be effective
unless the same shall be in writing and signed and delivered by Secured Party
and Obligors. Any amendment, modification, waiver or consent hereunder shall be
effective only in the specific instance and for the specific purpose for which
given.
12. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall be, only as to such
jurisdiction, ineffective to the extent of such prohibition or unenforceability,
but all the remaining provisions of this Agreement shall remain valid.
13. NOTICES. Any notice which Secured Party or Obligors may be
required or may desire to give to the other party under any provision of this
Agreement shall be in writing by overnight delivery service, certified mail,
telex or electronic facsimile transmission and shall be deemed to have been
given or made when received and addressed as follows:
To Obligors:
Capitol Multimedia, Inc.
200 Baker Avenue, Suite 300
Concord, MA 01742
Attn: President
To Secured Party:
Paul Carr
2 Monadnock Road
Wellesley, MA 02181
Any party may change the address to which all notices, requests and other
communications are to be sent to it by giving written notice of such address
change to the other parties in conformity with this paragraph, but such change
shall not be effective until notice of such change has been received by the
other parties.
14. GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT OF THIS
AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
15. HEADINGS AND SECTIONS. Captions, headings and the table of
contents in this
5
<PAGE> 37
Agreement are for convenience only, and are not to be deemed part of this
Agreement. Unless otherwise specified, references in this Agreement to Sections,
Articles, Exhibits or Schedules are references to sections and articles of and
exhibits and schedules to, this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
Capitol: CAPITOL MULTIMEDIA, INC.
a Delaware corporation
By: /s/ Luda Kopokina
---------------------------------------
Its: President
CSTI: CLIENT SERVER TECHNOLOGIES, Inc.
a Massachusetts corporation
By: /s/ Paul Carr
--------------------------------------
Its: President
Secured Party:
/s/ Paul Carr
------------------------------------------
Paul Carr
6
<PAGE> 38
EXHIBIT D
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is made as of the 31 day of March, 1997, by
and between Capitol Multimedia, Inc., a Delaware corporation ("Employer" or "
Company"), and Paul Carr ("Employee").
WITNESSETH
----------
WHEREAS, Employee and the Company desire to embody in this Agreement the
terms and conditions under which Employee shall be employed;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Employee and the Company,
intending to be legally bound hereby, AGREE AS FOLLOWS:
1. EMPLOYMENT, DUTIES AND RESPONSIBILITIES OF EMPLOYEE
---------------------------------------------------
(a) DUTIES OF EMPLOYEE. As President of CSTI Employee is hereby
assigned all normal duties and responsibilities with regard to the management of
the business acquired from Client Server Technologies, Inc. ("CSTI") including
but not limited to the following: revenue projections and budget preparation for
approval by the President of Employer and, if necessary, by the Board of
Directors, management of sales of the Company's products and services to satisfy
revenue projections, operation within approved budgets, management of all
customer projects to successful completion and acceptance by customers. The
Employee shall at all times be subject to the direction of the President of the
Employer and/or its designated representative or representatives, support the
President in strategic development and expansion of the business and in all
respects use his best efforts to further enhance and develop the Company's
business, affairs, interests, welfare and value. The position and duties of the
Employee may change during the Term of this Agreement.
(b) FULL TIME AND ATTENTION. Employee shall not, without prior
written consent of the Employer, render services of a business, commercial, or
professional nature to any other person or organization or take on
responsibilities that would otherwise materially interfere in any way with the
Employee's obligations under this Agreement.
2. TERM OF AGREEMENT
The term of this agreement shall be approximately three years,
commencing on the effective date of the Agreement as written above and
terminating on March 31, 2000.
(a) TERMINATION BY THE COMPANY FOR CAUSE. The foregoing
notwithstanding, the Employer may terminate this Agreement prior to the
expiration of the Term by sending Employee written notice of such termination
for Cause. The date of such notice shall be the date of Employee's termination.
If the Company terminates Employee's employment for Cause, Employee shall not
receive any pay or benefits described herein. For purposes of this Agreement,
"Cause" shall include but is not limited to the following: (1) dishonesty or
fraud resulting in injury to the business of the Company; (2) embezzlement or
theft of assets of the Company; (3)negligence in performing his duties under
this Agreement; (4) conviction for a felony resulting in damage to the business
of the Company or its Affiliates; or (5) activities which constitutes a serious
conflict of interest to the Employer.
1
<PAGE> 39
Employee may be terminated for Cause only by the affirmative vote of a majority
of the Board of Directors, provided that Employee shall have at least ten days
written notice of the meeting at which the Board of Directors will consider such
Employee's termination and will be afforded the opportunity to address the Board
of Directors and present evidence regarding the absence of cause.
(b) TERMINATION BY THE COMPANY OR EMPLOYEE WITHOUT CAUSE. The
foregoing notwithstanding, the Company may terminate this Agreement without
cause effective upon twelve months written notice to the Employee. The Employee
will be entitled to severance payments in the amount of his salary during these
twelve months. The Employee may terminate his employment with the Company with
not less than 30 days written notice. Upon the termination of employment under
this subparagraph by either Employee or Company, all wages and benefits to which
Employee would otherwise be entitled shall terminate.
(c) DEATH. This Agreement shall terminate upon the death or
disability of Employee for a period of not less than ninety (90) days. Any
compensation payable pursuant to this Agreement from and after Employee's death
shall be paid to Employee's estate or one or more beneficiaries as designated in
writing by Employee.
(d) DELIVERY OF MATERIAL. Employee agrees that upon the termination
of this Agreement, he will deliver to the Company all documents, papers,
materials and other property of the Company relating to its affairs which may
then be in his possession or under his control.
(e) RENEWAL. In case the Company decides not to enter into a similar
agreement with the Employee after the expiration of the Term of this Agreement,
the Company will notify the Employee no later than six months before the
expiration date of the Term of this Agreement.
(f) OTHER TERMINATION. This Agreement will terminate in case the
Employee acquires the rights to software from Capitol through the enforcement of
the security interest referred to in the Secured Promissory Note between the
Company and the Employee dated March 31, 1997. Provisions of Sections 4,5 and 6
of this Agreement will survive such termination to the extent they apply to the
business of the Company other than the business acquired by the Employee through
the enforcement of the security interest.
3. COMPENSATION OF EMPLOYEE
As compensation and consideration for the performance by Employee of his
obligations under this Agreement, Employee shall be entitled to the following:
(a) BASE SALARY. In compensation for services rendered pursuant to
this Agreement, the Employee shall receive a first year annual salary of One
Hundred Eighty Five Thousand Dollars ($185,000) (the "Base Salary"). The Base
Salary shall be payable in regular bi-weekly intervals, and shall be subject to
such withholding and other normal employee deductions as may be required by law.
The Employee shall be eligible for merit base salary increases annually to be
determined by the President of the Company and approved by the Compensation
Committee of the Board of Directors of the Company upon meeting standards agreed
upon with the President for such merit increases.
(b) BENEFITS. Employee shall be eligible to participate during the
Term in such life insurance, health, disability and major medical insurance
benefits, pension, and such other employee benefit plans and programs for the
benefit of the employees of the Company, as may be maintained from time to time,
in each case to the extent and in the manner available to other
2
<PAGE> 40
employees of the Company, and subject to the terms and provisions of such plan
or programs. The level of benefits to which Employee shall be entitled, if
determined by the level of Employee's annual compensation, shall include for
purposes of such calculation any performance bonus payments to be made to
Employee pursuant to paragraph (c) below.
(c) ANNUAL BONUS. The Employee shall be eligible for an annual bonus
to be determined by the President of the Company and approved by the
Compensation Committee of the Board of Directors of the Company.
(d) VACATIONS AND HOLIDAYS.
A. The Employee shall be entitled to four weeks paid
vacation and two weeks paid sick leave during the year of his employment under
the Agreement.
B. Employee shall be entitled to all holidays applicable to
all other company employees.
(e) NON-QUALIFIED STOCK OPTIONS. The Company shall grant options to
the Employee, pursuant to the Company's Employee Stock Option Plan, for the
purchase of 250,000 shares of common stock at a per share price equal to $1.00
per share. These options shall vest on the last day of the Term of this
Agreement and shall expire three years from the vesting date. In the event of
Termination by the Company without cause, these options will vest on the date
of the termination and the Employee will have 60 days to exercise the options.
4. CONFIDENTIALITY
(a) CONFIDENTIALITY. Employee acknowledges that during the course of
his employment with the Company he will, from time to time, be invested with
confidential information relating to the business practices, products, product
plans, development ideas and schedules and other confidential and proprietary
information regarding the Company. Employee hereby agrees to keep all such
information confidential. Employee also agrees that he will not, except as
required in the conduct of Company business, or as authorized in writing by the
Company, publish, disclose or make use of any such information or knowledge
unless and until such information or knowledge shall have ceased to be secret or
confidential without his fault.
(b) EXCLUSIVE PROPERTY. All business records, papers and other
documents kept or made by Employee relating to the business of the Company or an
Associated Company shall be and remain the property of the Company. Upon the
termination of his employment with the Company or upon the request of the
Company at any time, Employee shall promptly deliver to the Company, and shall
retain no copies of, any written materials, records and documents made by
Employee or coming into his possession concerning the business or affairs of the
Company or an Associated Company other than personal notes or correspondence of
Employee not containing proprietary information relating to such business or
affairs.
(c) INVENTIONS, RIGHTS TO IMPROVEMENTS. Employee hereby sells,
transfers and assigns to the Company any right, title and interest in any and
all inventions, improvements, discoveries, and ideas (whether or not patentable
or copyrightable) (collectively the "Intellectual Property") which Employee may
make or conceive during the term of this Agreement, and which relate to or are
applicable to any phase of the Company's business. Employee hereby agrees to
communicate promptly and disclose to the Company all
3
<PAGE> 41
information, details and data pertaining to the aforementioned Intellectual
Property and to execute any document and do any act reasonably necessary to
perform Employee's duties under this Section 6(c). Employee also affirms that if
any such Intellectual Property shall be deemed confidential by the Company, he
will not disclose any such Intellectual Property without prior written
authorization from a majority of the members of the Company's Board of
Directors.
(d) SURVIVAL OF SECTION. The provisions of this Section 4 shall
survive the termination of this Agreement for any reason whatsoever except
termination under Section 2 (f).
5. EXCLUSIVITY / NON-COMPETITION
(a) EXCLUSIVITY / NON COMPETING EMPLOYMENT. The Employee agrees that
for a period of twelve months subsequent to his termination of employment for
any reason other than non-renewal of this Agreement after the Term, he will not
compete directly or be employed in any way by individuals, companies, interests
or entities that compete directly with the Company. The Employee also
acknowledges that for twelve months subsequent to his termination of employment
for any reason other than non-renewal of this Agreement, that he will not
utilize the Company's customer lists for any business related purpose.
(b) NO INTERFERENCE. During the twelve months subsequent to his
termination, Employee shall not, whether for his own account or for the account
of any other individual, partnership, firm, corporation or other business
organization which is engaged in marketing or selling a product or products
similar to any product sold by the Company, intentionally solicit, endeavor to
entice away from the Company, or otherwise interfere with the relationship of
the Company with any person who is employed by the Company, or any person or
entity who is, or was within the most recent twelve-month period, a customer or
client of the Company.
(c) STOCK OWNERSHIP. Nothing in this Agreement shall prohibit
Employee from acquiring or holding any securities of any company listed on a
national securities exchange or quoted on the automated quotation system of the
National Association of Securities Dealers, Inc., provided that at any time
during the six months subsequent to his termination Employee and members of his
immediate family do not own more than five percent (5%) of any voting securities
of any company engaged in the same type of business of the Company.
(d) SURVIVAL OF SECTION. The provisions of this Section 5 shall
survive the termination of this Agreement except termination under Section 2
(f).
6. REMEDIES
(a) SPECIFIC PERFORMANCE. Employee hereby acknowledges that a breach
of Sections 4 or 5 of this Agreement may result in material irreparable injury
to the Company for which there is no adequate remedy at law, that it will not be
possible to measure damages for such a breach, and that in the event of such a
breach or threat thereof the Company shall be entitled to obtain a temporary
restraining order, a preliminary injunction, and a permanent injunction
restraining Employee from engaging in activities prohibited by this Agreement.
Employee further acknowledges that in the event of such a breach or threat
thereof the Company shall be entitled to obtain such other or further relief as
may be required to specifically enforce any of the covenants of this Agreement.
Employee hereby agrees and consents that such injunctive or other relief may be
sought ex parte in any state or federal court in the
4
<PAGE> 42
Commonwealth of Massachusetts or in the state and county in which such violation
may occur or in any other court having jurisdiction, at the election of the
Company. Employee agrees to and hereby does submit to in personam jurisdiction
before each and every such court for that purpose.
(b) SUSPENSION OF PAYMENTS. Employee hereby acknowledges that should
a breach of Sections 4 or 5 of this Agreement be adjudicated, the Company shall
be entitled to offset against payments otherwise due Employee hereunder and
under the Promissory Note between Company and CSTI shareholders dated March 31,
1997, any damages incurred by the Company with respect to such breach.
(c) REMEDIES NOT EXCLUSIVE. The remedies of this Section shall be
cumulative and not exclusive, and shall be in addition to any other remedy which
the Company may have.
(d) SURVIVAL OF REMEDIES. This Section 6 shall survive the
termination of this Agreement for any reason whatsoever except termination under
Section 2 (f).
7. NOTICES
All notices given hereunder shall be in writing and shall be deemed
delivered when served personally or on the third business day after being
deposited in the United States mail, certified or registered mail, postage
prepaid, addressed as follows:
If to the Company:
Capitol Multimedia, Inc.
200 Baker Avenue, Suite 300
Concord, MA 01742
Attention: CEO
Telecopier: (508) 287-4222
If to Employee:
Paul Carr
2 Monadnock Road
Wellesley, MA 02181
Any party may change its address for notices by communicating its new
address in writing to the other party.
8. MISCELLANEOUS
(a) AGREEMENT IS NON-ASSIGNABLE. This Agreement is a personal
service contract and shall not be assignable by Employee or by the Company,
except that the Company may assign this Agreement to a Person which succeeds to
the Company's rights and liabilities by merger, sale of assets as a going
concern, or consolidation with the Company.
(b) BINDING EFFECT. All rights and obligations and agreements of the
parties under this Agreement shall be binding upon and enforceable against, and
inure to the benefit of the parties and their personal representatives, heirs,
legatees and devises, and any Person succeeding by operation of law to their
rights under this Agreement, except that such personal representatives, heirs,
legatees, devises and other persons shall have no obligation to perform
Employee's duties described in Section 1 hereof.
(c) REPRESENTATIONS. Employee and the Company each represent and
5
<PAGE> 43
warrant that there are no restrictions, agreements or limitations on their
rights or ability to enter into and perform the terms of this Agreement.
(d) FURTHER ASSURANCES. Employee and the Company, as the case may
be, shall execute and deliver such further instruments and do such further acts
and things as may be required to carry out the terms or conditions of this
Agreement or as may be consistent with the intent and purpose of this Agreement.
(e) RIGHTS OF THIRD PARTIES. Nothing in this Agreement, expressed or
implied, is intended to confer upon any person other than the parties hereto any
rights or remedies under or by reason of this Agreement.
(f) EFFECT OF WAIVER. A waiver of, or failure to exercise, any
rights provided for in this Agreement, in any respect, shall not be deemed a
waiver of any further or future rights hereunder. Except for rights which must
be exercised within a specified time period under this Agreement, no rights
herein shall be considered as waived, whether intentionally or not, unless
waived in a writing signed by the party to be charged with the waiver.
(g) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Massachusetts applicable
to contracts made and performed in that jurisdiction, without regard to the
principles of conflicts of laws.
(h) AMENDMENTS. This Agreement may not be changed or amended orally,
but only by an agreement in writing signed by all parties hereto.
(i) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, and such counterparts shall
together constitute but one and the same instrument.
(j) SEVERABILITY. If a court of competent jurisdiction declares that
any term or provision of this Agreement is invalid or unenforceable, then:
(1) the remaining terms and provisions hereof shall be
unimpaired, and
(2) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision.
(k) CAPTIONS. The captions to the Sections contained in this
Agreement are for reference only, do not form a substantive part of this
Agreement, and shall not restrict or enlarge any substantive provision of this
Agreement.
(l) ENTIRE AGREEMENT. This Agreement supersedes all prior
agreements, oral or written, between the parties hereto with respect to the
employment of Employee by the Company. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof, and the
parties shall not be bound by any terms, conditions, statements, covenants,
representations or warranties, oral or written, not herein contained.
6
<PAGE> 44
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
effective as of the date first written above.
Capitol Multimedia, Inc.,
a Delaware corporation
By: /s/ Luda Kopokina /s/ Paul Carr
--------------------------------- --------------------------------
Paul Carr
Its: President
7
<PAGE> 45
<TABLE>
<CAPTION>
SCHEDULE 3.3(A) UNAUDITED INCOME STATEMENT AND BALANCE SHEET
====================================================================================================================================
3/28/97 10:39 INTERNAL FS Jan thru April thru July thru October thru Calendar Jan. thru
- ------------------------------------------------------------------------------------------------------------------------------------
Dec-95 March June September December Jan-96 Feb-97
- ------------------------------------------------------------------------------------------------------------------------------------
YTD 1996 1996 1996 1996 to Dec 96 1997
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
43 PROJECTS- SALES 2,627,799.72 540,565.36 664,429.04 603,959.61 435,597.17 2,244,551.18 221,889.58
- ------------------------------------------------------------------------------------------------------------------------------------
44 C0NSULTING- SALES 964,467.02 95,160.25 116,037.78 160,197.01 203,173.13 574,568.17 162,769.74
- ------------------------------------------------------------------------------------------------------------------------------------
48 CUSTOMER SUPPORT 685,262.92 173,824.25 173,452.89 90,008.00 157,260.75 594,545.89 116,248.00
- ------------------------------------------------------------------------------------------------------------------------------------
49 WEST - SALES 65,387.40 21,364.40 69,910.86 58,692.39 79,720.98 229,688.63 42,863.75
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 4,342,917.06 830,914.26 1,023,830.57 912,857.01 875,752.03 3,643,353.87 543,771.07
------------- ============ ========== ============ ========== ========== ============ ==========
====================================================================================================================================
COST OF SALES
- ------------------------------------------------------------------------------------------------------------------------------------
53 Subcontractor Fees 103,952.35 1,230.00 29,237.00 40,305.00 26,829.00 97,601.00 11,707.50
- ------------------------------------------------------------------------------------------------------------------------------------
59 NB - Customer Expenses 14,684.42 5,762.18 482.29 637.93 393.75 7,276.15 349.29
- ------------------------------------------------------------------------------------------------------------------------------------
50 Salaries and Wages 1,136,212.07 219,541.82 212,643.76 198,256.75 217,670.20 848,112.53 148,064.26
- ------------------------------------------------------------------------------------------------------------------------------------
Staff Additions -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
99 CMI Synergies -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
57 Bonus And Incentives 241,665.08 21,333.69 24,970.23 27,573.20 28,324.27 102,201.39 13,831.76
- ------------------------------------------------------------------------------------------------------------------------------------
51 BENEFITS 206,915.79 41,133.12 37,467.20 32,062.15 21,294.30 131,956.77 18,121.48
- ------------------------------------------------------------------------------------------------------------------------------------
58 InterDept. Labor 268,699.75 20,256.25 32,812.50 59,185.00 63,262.50 175,516.25 45,333.75
- ------------------------------------------------------------------------------------------------------------------------------------
Deprec. And Amort. -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COST OF SALES 1,972,129.46 309,257.06 337,612.98 358,020.03 357,774.02 1,362,664.09 237,408.04
============ ========== ============ ========== ========== ============ ==========
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
RESEARCH & DEV.
--------------
- ------------------------------------------------------------------------------------------------------------------------------------
453 Subcontractor Fees 24,168.00 3,000.00 6,060.00 -- -- 9,060.00 --
- ------------------------------------------------------------------------------------------------------------------------------------
450 Salaries and Wages 609,074.65 185,834.30 167,018.77 173,283.23 172,785.01 698,921.31 113,573.34
- ------------------------------------------------------------------------------------------------------------------------------------
Staff Additions -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
499 CMI Synergies -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
457 Bonus And Incentives (10,307.30) 3,331.32 10,014.51 10,779.53 8,303.93 32,429.29 5,132.93
- ------------------------------------------------------------------------------------------------------------------------------------
451 Benefits 80,220.45 28,432.75 24,457.62 24,999.58 18,008.29 95,898.24 13,400.94
- ------------------------------------------------------------------------------------------------------------------------------------
458 lnterDept. Labor (263,943.75) (17,027.50) (24,333.75) (54,197.50) (48,807.50 (144,366.25) (43,102.50)
- ------------------------------------------------------------------------------------------------------------------------------------
Research & Development 439,212.05 203,570.87 183,217.15 154,864.84 150,289.73 691,942.59 89,004.71
============ ========== ============ ========== ========== ============ ==========
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
GROSS MARGIN 1,931,575.55 318,086.33 503,000.44 399,972.14 367,688.28 1,588,747.19 217,358.32
------------ ============ ========== ========== ========== ========== ============ ==========
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
Page 1
<PAGE> 46
<TABLE>
<CAPTION>
SCHEDULE 3.3(A) UNAUDITED INCOME STATEMENT AND BALANCE SHEET
====================================================================================================================================
3/28/97 10:39 INTERNAL FS Jan thru April thru July thru October thru Calendar Jan. thru
- ------------------------------------------------------------------------------------------------------------------------------------
Dec-95 March June September December Jan-96 Feb-97
- ------------------------------------------------------------------------------------------------------------------------------------
YTD 1996 1996 1996 1996 to Dec 96 1997
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
50 Salaries and Wages 341,723.66 114,557.27 117,757.27 120,507.28 130,251.46 483,073.28 87,651.00
- ------------------------------------------------------------------------------------------------------------------------------------
Staff Additions -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
51 Benefits 72,213.60 42,572.74 13,513.99 16,546.70 5,891.27 78,524.70 30,020.19
- ------------------------------------------------------------------------------------------------------------------------------------
53 Professional Fees 14,778.16 -- 22,803.26 14,814.18 4,141.89 41,759.33 3,174.27
- ------------------------------------------------------------------------------------------------------------------------------------
54 Advertising & Promo 84,282.48 7,572.91 7,995.17 13,179.60 14,630.10 43,377.78 11,175.35
- ------------------------------------------------------------------------------------------------------------------------------------
55 Facility costs Mass 219,431.24 32,109.41 58,524.18 58,535.17 72,757.34 221,926.10 44,915.34
- ------------------------------------------------------------------------------------------------------------------------------------
56 Facility costs west 32,884.21 8,237.66 9,561.84 10,068.79 9,093.57 36,961.86 6,621.96
- ------------------------------------------------------------------------------------------------------------------------------------
57 Bonus And Incentives 22,465.99 10,340.67 15,893.03 24,908.60 14,888.30 66,030.60 7,384.85
- ------------------------------------------------------------------------------------------------------------------------------------
58 InterDept. Labor (4,756.00) (3,228.75) (8,478.75) (4,987.50) (14,455.00) (31,150.00) (2,231.25)
- ------------------------------------------------------------------------------------------------------------------------------------
59 NB - Customer Expenses 14.73 -- -- -- 113.48 113.48 --
- ------------------------------------------------------------------------------------------------------------------------------------
62 Equipment Maintenance 10,239.88 6,658.45 2,640.63 7,453.69 8,938.31 25,691.08 3,415.90
- ------------------------------------------------------------------------------------------------------------------------------------
63 Travel & Entertainment 62,665.14 4,952.58 7,002.91 15,514.63 7,992.12 35,462.24 4,693.92
- ------------------------------------------------------------------------------------------------------------------------------------
64 Insurance 6,182.75 3,513.79 4,476.34 1,485.66 154.32 9,630.11 --
- ------------------------------------------------------------------------------------------------------------------------------------
65 Supplies 28,003.79 995.59 5,306.90 5,289.37 7,217.73 18,809.59 3,907.09
- ------------------------------------------------------------------------------------------------------------------------------------
66 Postage & Freight 9,668.55 1,973.66 3,139.05 2,652.97 2,794.44 10,560.12 1,372.51
- ------------------------------------------------------------------------------------------------------------------------------------
68 Deprec. And Amort. 172,450.00 43,050.00 43,050.00 43,050.00 43,050.00 172,200.00 28,700.00
- ------------------------------------------------------------------------------------------------------------------------------------
69 Other Expenses 22,664.37 32,163.32 8,387.18 3,672.95 23,144.73 67,368.18 16,900.38
- ------------------------------------------------------------------------------------------------------------------------------------
80 Bad Debt Expense 135,300.00 9,000.00 3,000.00 -- -- 12,000.00 --
- ------------------------------------------------------------------------------------------------------------------------------------
1,230,212.55 314,469.30 314,573.00 332,692.09 330,604.06 1,292,338.45 247,701.51
============ ========== ========== ========== ========== ============ ==========
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER
-----
- ------------------------------------------------------------------------------------------------------------------------------------
75 Interest Income (4,386.16) (6,432.46) (5,489.59) (7,525.89) (4,969.45) (24,417.39) (1,553.24)
- ------------------------------------------------------------------------------------------------------------------------------------
969 Other Income (26,941.45) (49,841.73) (75.00) (13,169.89) -- (63,086.62) --
- ------------------------------------------------------------------------------------------------------------------------------------
70 Interest Expense 28,364.85 -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
(2,962.76) (56,274.19) (5,564.59) (20,695.78) (4,969.45) (87,504.01) (1,553.24)
============ ========== ========== ========== ========== ============ ==========
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
704,325.76 59,891.22 193,992.03 87,975.83 42,053.67 383,912.75 (28,789.95)
============ ========== ========== ========== ========== ============ ==========
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
90 Income Tax (998.82) 23,697.68 228.00 2,960.78 169.32 27,055.78 37.66
============ ============
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
NET INCOME 705,324.58 36,193.54 193,764.03 85,015.05 41,884.35 356,856.97 (28,827.61)
============ ========== ========== ========== ========== ============ ==========
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
Page 2
<PAGE> 47
<TABLE>
Schedule 3.3(a) Unaudited Income Statement and balance Sheet
<CAPTION>
- --------------------------------------------------------------------------------------------------
Dec-95 Mar-96 Jun-96 Sep-96 Dec-96 Feb-97
- --------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
11 CASH 480,481 570,782 371,909 217,183 300,284 339,292
- --------------------------------------------------------------------------------------------------
12 AR 319,101 133,120 344,284 538,464 422,073 383,720
- --------------------------------------------------------------------------------------------------
11 PREPAID EXPENSES 34,757 61,257 61,257 61,257 71,257 71,257
- --------------------------------------------------------------------------------------------------
15 FIXED ASSETS 783,814 801,903 813,954 831,972 854,275 876,683
- --------------------------------------------------------------------------------------------------
16 ACCUM DEPR (182,190) (216,240) (250,290) (284,340) (318,390) (341,090)
- --------------------------------------------------------------------------------------------------
NET FIXED ASSETS 601,624 585,663 563,664 547,632 535,885 535,593
- --------------------------------------------------------------------------------------------------
18 INTELLECTUAL 537,881 537,881 537,881 S37,881 537,881 537,881
- --------------------------------------------------------------------------------------------------
18 ORG COSTS 2,434 2,434 2,434 2,434 2,434 2,434
- --------------------------------------------------------------------------------------------------
18 ACCUM AMORT (56,837) (65,.837) (74,837) (83,837) (92,837) (98,837)
- --------------------------------------------------------------------------------------------------
NET 483,478 474,478 465,478 456,478 447,478 441,478
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
TOTAL ASSETS 1,919,441 1,825,300 1,806,592 l,821,014 1,776,977 1,771,340
--------- --------- --------- -------- --------- ---------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
20 PAYABLES 15,891 60,208 84,480 125,641 40,752 63,943
- --------------------------------------------------------------------------------------------------
21 ACCRUALS 30,817 27,812 27,817 28,793 27,761 27,761
- --------------------------------------------------------------------------------------------------
24 OTHER CURR. LIAB. - - - -
- --------------------------------------------------------------------------------------------------
27 LONG TERM DEBT 32,303 - - -
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 79,011 88,020 112,297 154,434 68,513 91,704
------ ------ ------- ------- ------ ------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
EQUITY
- --------------------------------------------------------------------------------------------------
30 COMMON STOCK (1,870) (1,870) (1,870) (1,870) (1,870) (1,870)
- --------------------------------------------------------------------------------------------------
31 ADDITION PI 761,141 761,141 761,141 761,141 761,141 761,141
- --------------------------------------------------------------------------------------------------
32 TREASURY STOCK (1,472) (7,739) (7,739) (7,739) (7,739) (7,739)
- --------------------------------------------------------------------------------------------------
33 RETAINED EARNINGS 1,480,476 1,516,670 1,710,434 1,795,449 1,837,333 1,495,514
- --------------------------------------------------------------------------------------------------
39 CAPITAL DISTRIBUTION (397,845) (530,922) (767,671) (880,401) (880,401) (567,410)
- --------------------------------------------------------------------------------------------------
TOTAL EQUITY 1,840,430 1,737,280 1,694,295 1,666,580 1,708,464 1,679,636
--------- --------- --------- --------- --------- ---------
- --------------------------------------------------------------------------------------------------
TOTAL LIAB & EQUITY 1,919,441 1,825,300 1,806,592 1,821,014 1,776,977 1,771,340
--------- --------- --------- --------- --------- ---------
- --------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE> 48
<TABLE>
SCHEDULE 3.4
CERTAIN CHANGES
---------------
<CAPTION>
CHANGE NEW SALARY
------ ----------
<S> <C>
Planned increase in salary $155,000/year
for D. Sheflin
starting 3/1/97
Planned increase in salary $140,000/year
for K. Cole
starting 3/1/97
With regard to Section 3.4 of the agreement. The following stock sales have
taken place within the list month.
<CAPTION>
SHAREHOLDER SHARES
<S> <C>
Brice Buchanan 1,000
John Kilray 3,000
Brad Gates 3,000
Linda Duncan 2,000
Rich Heier 3,000
John Bean 3,000
</TABLE>
The stock was sold at $.80 per share. The proceeds from the above sales
($12,000) will be retained by CSTI and therefore will be added to the initial
payment of $1,250,000 distributed at closing.
<TABLE>
Stock was purchased from the following shareholders.
<CAPTION>
SHAREHOLDER SHARES
<S> <C>
John Giles 94,010
Armand Brunelle 21,750
Stock was purchased at $1.14 per share. CSTI funds were used to purchase this
stock. The disbursement ($131,966) will be subtracted from the initial payment
of $1,250,000 distributed at closing.
Options are also being exercised at closing.
<CAPTION>
SHAREHOLDER SHARES
<S> <C>
Paul Carr 256,309
Richard Sheflin 110,012
Kenneth Bloom 40,119
Brice Buchanan 15,000
YuSang Kwan 15,000
Kenneth Cole 25,000
Brian Moran 10,750
</TABLE>
The option price is $.10 per share. The proceeds from the exercised options
($47,219) will be retained by CSTI and therefore will be added to the initial
payment of $1,250,000 distributed at closing.
<PAGE> 49
<TABLE>
SCHEDULE 3.7
CSTI DISCLOSED LIABILITIES
--------------------------
<CAPTION>
Liability Amount
- --------- ------
<S> <C>
License fees for graphical user interface $180,000.00
developed for Honeywell
(the following letter dated 12/29/92)
</TABLE>
<PAGE> 50
[LOGO]BOSS
SYSTEMS
December 29, 1992
Mr. Ed Rivers Prospect Place
Director of Logistics XXXXXXX Avenue
Honeywell Industrial Automotion Controls Waltham, MA 02134
Phoeniz, AZ (617) 622-1445
Fax (617) 622-1422
Dear Ed:
In enjoyed our meeting. I hope you and Rich found it worthwhile. The purpose of
this letter is to document my proposal concerning the development of the
graphical user interface facility.
Honeywell will fund the development effort. Ross systems will complete all
development activities. Honeywell will receive an unrestricted, paid up,
license to use the software on all current and future installations of the
distribution products.
Ross Systems will market this product as an optional module to existing and
future customers. Honeywell will receive a royalty of 40% on all future sales
of the graphical user interface facility until Honeywell's original investment
is re-couped.
Ed, this is an exciting project for Ross Systems. It adds value to our product
and allows us to extend our strategic relationship with Honeywell. Please call
me if you have questions on the above, or if there is additional assistance I
can provide. Have a happy holiday.
Sincerely,
/s/ Paul Carr
- ----------------------------------
Paul Carr
President
Logistics Products Division
Ross Systems Incorporated
<PAGE> 51
<TABLE>
SCHEDULE 3.11
INTELLECTUAL PROPERTY
---------------------
Technology License Agreement from Plan Paradigms, Inc. dated March 15, 1994
for use of the Planning Technology.
<CAPTION>
Distribution Agreements Date
- ----------------------- ----
<S> <C>
A) C/A Ingress 9/11/95
B) Oracle 5/3/94
C) Cognos 10/31/95
D) Business Forecast Systems
</TABLE>
Distribution Agreement with the Orion Group under negotiation.
<PAGE> 52
CLIENT SERVER TECHNOLOGY, INC.
REAL PROPERTY LEASES
SCHEDULE 3.12
MARCH 31, 1997
1. Lease of Offices located at 270 Bridge Street, Dedham, MA 02026
a. Term - October 1, 1996 through September 30, 1999
b. Annual Base Rent
* 11/1/96-9/30/97 - $100,567.50
* 10/1/97-9/30/98 - $117,660.00
* 10/1/98-9/30/99 - $121,635.00
2. Lease of Offices located at 5445 DTC Parkway, Englewood, CO 80111
a. Term - 7/1/95 - 6 month renewal term
b. Annual Base Rent - $8,400
3. Rent of Offices located at 13896 Harbor Blvd., Suite 5-C, Garden Grove,
CA 92643
a. Term - monthly rental with option to extend indefinitely
b. Annual Base Rent - $18,000 with annual increase up to 7%
c. Agreement per Management Contract with Mr. Richard V. Evans
CSTI does not warrant that qualification to do business is not required in other
states in which CSTI has customers.
<PAGE> 53
<TABLE>
SCHEDULE 3.13
CSTI LICENSES FOR THIRD PARTY SOFTWARE
--------------------------------------
<CAPTION>
DEC AXP DEC VAX HPUX HPPMPE NT SERVER
------- ------- ---- ------ ---------
<S> <C> <C> <C> <C>
COBOL COBOL COBOL COBOL NT
C C C TRAX C++
VMS VMS INGRES QEDIT VB
TCP/IP TCP/IP C ORACLE
ORACLE GEMBASE ADAGER
</TABLE>
Personal computers may have software installed for which no license agreement
can be located. It is also possible that employees have installed software which
CSTI has not licensed.
<PAGE> 54
<TABLE>
SCHEDULE 3.14 CSTI CONTRACTS, LEASES AND COMMITMENTS
<CAPTION>
- --------------------------------------------------------------------------------------
INVOICE DATE TERM TERM
CLIENT COMMENT AMOUNT PAID START END
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Monthly maintenance (Support) CONTRACTS
- --------------------------------------------------------------------------------------
ACEP Bi Annual 5,744 1/15/97 1/1/97 7/1/97
- --------------------------------------------------------------------------------------
Activision Quarterly 5,430 4/1/97 7/1/97
- --------------------------------------------------------------------------------------
IAIcatel 19,707 1/30/97 1/1/97 1/1/98
- --------------------------------------------------------------------------------------
American Mirrex 17,467 12/21/96 1/1/97 1/1/96
- --------------------------------------------------------------------------------------
Atlas Supply 36,343 2/8/96 3/1/96 3/1/97
- --------------------------------------------------------------------------------------
Atlas Supply 33,402 10/2/96 11/1/96 11/1/97
- --------------------------------------------------------------------------------------
Belco 4,388 1/19/96 1/1/96 12/31/96
- --------------------------------------------------------------------------------------
Bertek 7,087 3/31/96 6/1/96 6/1/97
- --------------------------------------------------------------------------------------
Brown Printin~ 5,350 6/30/96 6/1/96 8/1/97
- --------------------------------------------------------------------------------------
Champion Quarterly 3,027 10/31/96 12/1/96 2/28/97
- --------------------------------------------------------------------------------------
Champion Quarterly 3,177 12/4/96 1/1/97 3/31/97
- --------------------------------------------------------------------------------------
Consilium 3,223 10/1/96 10/1/97
- --------------------------------------------------------------------------------------
Dateq 4,650 5/28/96 7/1/96 7/1/97
- --------------------------------------------------------------------------------------
Dimac 6,988 6/21/96 7/1/96 7/1/97
- --------------------------------------------------------------------------------------
EDS Steel Company 6,300 12/27/95 2/1/96 1/31/97
- --------------------------------------------------------------------------------------
Emery Waterhouse 4,319 12/26/96 1/1/97 1/1/98
- --------------------------------------------------------------------------------------
Fermenta 750 1/17/96 1/1/96 12/31/96
- --------------------------------------------------------------------------------------
Fermenta 14,018 4/1/97 4/1/98
- --------------------------------------------------------------------------------------
Granville Phillips 8,880 7/17/96 8/1/96 8/1/97
- --------------------------------------------------------------------------------------
GTE 16,224 4/1/97 4/1/98
- --------------------------------------------------------------------------------------
HoneyWell 15,600 10/7/96 11/1/96 11/1/97
- --------------------------------------------------------------------------------------
HygeJa Dairy 3,440 6/14/96 6/1/96 6/1/97
- --------------------------------------------------------------------------------------
Invacare 8,820 7/17/96 8/1/96 8/1/97
- --------------------------------------------------------------------------------------
ISP 13,260 411/97 4/1/98
- --------------------------------------------------------------------------------------
ISP Level Ii SMA 6,740 4/1/97 4/1/98
- --------------------------------------------------------------------------------------
Kencrest 4,789 4/1/97 4/1/98
- --------------------------------------------------------------------------------------
Lockheed Martin 12,450 4/1/97 4/1/95
- --------------------------------------------------------------------------------------
Metro Dade Solid Waste 18,197 9/1/96 9/1/97
- --------------------------------------------------------------------------------------
My1an Pharmaceutical 8,700 2/6/96 2/1/96 1/31/97
- --------------------------------------------------------------------------------------
Mylan Pharmaceutical 8,700 11/12/96 12/1/96 12/1/97
- --------------------------------------------------------------------------------------
Mylan Pharmaceutical 7,370 4/1/97 4/1/98
- --------------------------------------------------------------------------------------
NMSS 13,200 8/31/96 9/1/96 9/1/97
- --------------------------------------------------------------------------------------
Pacificare 13,800 4/22/96 5/1/96 5/1/97
- --------------------------------------------------------------------------------------
Pacificare 15,179 1 2/26/96 1/1/97 1/1/98
- --------------------------------------------------------------------------------------
Pinkerton 14,463 2/1/97 2/1/98
- --------------------------------------------------------------------------------------
Quorom 18,450 5/20/96 6/1/96 6/1/97
- --------------------------------------------------------------------------------------
Sierra Health 10,314 5/31/96 7/1/96 7/1/97
- --------------------------------------------------------------------------------------
Spaulding 8,100 10/7/96 10/1/96 10/1/97
- --------------------------------------------------------------------------------------
Sutter Medical 6,989 4/1/97 4/1/98
- --------------------------------------------------------------------------------------
United Liquors 6,481 8/28/96 9/1/96 9/1/97
- --------------------------------------------------------------------------------------
United McGill 3,300 10/20/96 11/1/96 11/1/97
- --------------------------------------------------------------------------------------
Vistawall 5,250 11/18/96 12/1/96 12/1/97
- --------------------------------------------------------------------------------------
Vistawall 17,208 12/26/96 1/1/97 1/1/98
- --------------------------------------------------------------------------------------
Wackenhut 6,960 7/17/96 8/1/96 8/1/97
- --------------------------------------------------------------------------------------
</TABLE>
(CONTINUED)
<PAGE> 55
<TABLE>
SCHEDULE 3.14 CSTI CONTRACTS, LEASES AND COMMITMENTS
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FEB. 28 SALES
1997 % COMMENTS
---- -- --------
ACTIVE CONSULTING CONTRACTS:
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALCATEL 108,913 21.80%
- ---------------------------------------------------------------------------------------------------------
BROWN & COMPANY 400 0.08%
- ---------------------------------------------------------------------------------------------------------
BROWN PRINTING 13,963 2.80%
- ---------------------------------------------------------------------------------------------------------
CANADA COMMUNICATIONS 800 0.16%
- ---------------------------------------------------------------------------------------------------------
CHAMPION EXPORT 10,700 2.14%
- ---------------------------------------------------------------------------------------------------------
CUNA SERVICE GROUP 300 0.06%
- ---------------------------------------------------------------------------------------------------------
EMERY WATERHOUSE 4,300 0.86%
- ---------------------------------------------------------------------------------------------------------
GE: LOCKHEED MARTIN 13,505 2.70% Contract is over Cap but close to completion.
- ---------------------------------------------------------------------------------------------------------
G O CARLSON 11 0.00%
- ---------------------------------------------------------------------------------------------------------
HEROES WORLD DISTRIBUTION 36,389 7.29% This business has been shut down.
- ---------------------------------------------------------------------------------------------------------
HONEYWELL INC. 40,204 8.05% Month to month basis at full rates.
- ---------------------------------------------------------------------------------------------------------
KEN-CREST SERVICES 6,900 1.38%
- ---------------------------------------------------------------------------------------------------------
MILLER ELECTRIC 1,261 0.25%
- ---------------------------------------------------------------------------------------------------------
ORANGE CNTY FIRE AUTHORITY 18 0.00%
- ---------------------------------------------------------------------------------------------------------
SWEDISH MATCH (PINKERTON) 45,710 9.15% Contract is over Cap but close to completion.
- ---------------------------------------------------------------------------------------------------------
P Q CORPORATION 1,720 0.34%
- ---------------------------------------------------------------------------------------------------------
PRAIRIE MATERIAL 29,182 5.84% Contract is over Cap but close to completion.
- ---------------------------------------------------------------------------------------------------------
ROSS EUROPE 2,000 0.40%
- ---------------------------------------------------------------------------------------------------------
ROSS REDWOOD CITY 1,000 0.20%
- ---------------------------------------------------------------------------------------------------------
SANTA FE PACIFIC GOLD 17,595 3.52%
- ---------------------------------------------------------------------------------------------------------
TCG 29,193 5.84%
- ---------------------------------------------------------------------------------------------------------
UNITED LIQUORS 135,426 27.11%
- ---------------------------------------------------------------------------------------------------------
TOTAL PER DETAIL 499,488 1 -
INCLUDES SOME MARCH ACTIVITY!
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Maintenance contracts are subject to annual renewal. The contracts referenced in
schedule 3.14 can be canceled at any time. The past rate of cancellation is not
being represented as a predictor of future cancellations.
Capitol has been provided with a sales and profit forecast as part of the due
diligence process. The Firm forecast page lists projects which have contractual
commitments along with customers who have indicated intent to purchase but have
not signed a license agreement. This includes TCG and State of New Jersey. TCG
has initiated a General Design Study. At the completion of this study a decision
regarding CSTI software will be made. The state of New Jersey has signed a
letter indicating their intent to purchase. This letter is non-binding. The
purchase must be approved by state authorities. The pipeline page of the
forecast lists prospects which are expected to make a purchase decision over the
next 90 days. A probability of closing is made for each prospect. CSTI makes no
representations regarding the accuracy of these estimates.
A significant portion of CSTI's monthly consulting is not covered by a formal
consulting contract. It is done on a work order or purchase order. These
customers may terminate the consulting relationship at any time.
<PAGE> 56
<TABLE>
SCHEDULE 3.15 CSTI EMPLOYMENT BENEFITS
<CAPTION>
Empl.
Description Contri. Csti Policy/ Benefit Description
- ----------- ------- --------------------------------
<S> <C> <C> <C>
Probationary Period 6 Mths.
Part-Time Less than 40 hrs
Maternity leave 8 Weeks unpaid
Jury Duty 3 Days Paid
Insurance Continuation Cost + 15%
Employee Credit Cards Max. $50. towards Annual credit card fee.
Travel Advances Allowed if est. travel cost is more than CC limit.
Mileage reimbursement $.28 per mile
Life Insurance none $50,000 flat amount for life as well as AD&D. Metropolitan Life
Health Insurance 25% $100/200 Deductible for sickness, $0 for accidents Metropolitan Life
PPO Plan 100% coverage after deductible is satisfied
CSTI is partially self- PPO- $10 office visit copay. , Nursery care.
funded with stop loss Hospital care- 80% coinsurance up to 2,500/5,000
protection at $15,000 $500 outpatient psychological benefit
Maternity coverage(same as illness). No
waiting period for eligibility. Prescrptions
are covered - $10 Co-pay .
Dental Insurance 25% 100% payment for Exams, X-rays, Cleanings, Guardian Ins.
PPO plan Fluoride, and Space maintainers ($0 deductible)
$50 deductible for C&D
Basic Services- 80%, includes lab tests,
fillings, root canals, periodontics and
extractions.
50% payment for gold crowns, dentures, bridges
Orthodontic treatment has a $1,500 lifetime
limit.
Long term Disability Ins. none 3 Month waiting period Paul Revere Life
Coverage to 60% of monthly
earnings to a Max. of $5,000 per month
Short-term Disability none CSTI self funds the first three months of CSTI
Disability for disabilities which qualify
for the long term plan.
Medical/Eye Exam none CSTI reimburses up to $150 for CSTI
an employee physical exam every two
years. Up to $50 will be reimbursed for eye
examinations. Applies to portion not covered
under insurance.
</TABLE>
(Continued)
<PAGE> 57
<TABLE>
SCHEDULE 3.15 CSTI EMPLOYMENT BENEFITS
<CAPTION>
<S> <C> <C>
Educational assistance CSTI will pay a minimum of 50% of CSTI
course and book costs for employment
related courses. A minimum grade of C must be
obtained.
Hiring Bonus An employee who refers a candidate who
is hired and completes the 6 month
probationary period will receive a $500 bonus.
Vacation Computed on a calendar year basis. During: CSTI
1st year vaca. accrues at .5 days per full month.
1st thru 3rd year anniversaries receive 10 days.
5th thru 7th year anniversaries receive 15 days.
9th anniversaries onward receive 20 days.
4th and 8th years anniversaries are prorated
Holidays Each employee receives 8 holidays and 1 CSTI
floating holidays per year that do not
carry forward.
Personal/Sick Each employee receives 5 personal/sick days CSTI
per year. They do not carry forward.
401k Retirement plan Effective date 1/1/97 ADP
All employees are eligible except Hourly paid.
Minimum age -21, Minimum service requirement
is 6 months. Compensation is all W-2 wages.
Employee minimum deferral percentage is 1% and
maximum is 15%
Employer matching equals 30% on the first 8%
of the participants Elective Deferral.
Vesting by years of service:
Less than 2 0%
At least 2, but less than 3 20%
At least 3, but less than 4 40%
At least 4, but less than 5 60%
At least 5, but less than 6 80%
6 or more 100%
Sec. 125 cafeteria plan Premium only pretax plan. ADP
</TABLE>
<PAGE> 58
SCHEDULE 3.16
MACHINERY, EQUIPMENT AND SOFTWARE
---------------------------------
No title to HP/MPIX Server
<PAGE> 59
<TABLE>
SCHEDULE 3.15 CSTI MACHINERY, EQUIPMENT AND COMPANY SOFTWARE
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NET NET
ACCT DESCRIPTION DESCRIPTION PURCHASE BOOK BOOK
DATE COST 12/31/96 3/31/97
- ----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
9-1301 Furniture & Fixtures
- ----------------------------------------------------------------------------------------------------------------
9-1301 Training Room 7 tables Nov-94 3,503.00 1,985.03 1,809.88
- ----------------------------------------------------------------------------------------------------------------
9-1301 Training Room 14 chairs Nov-94 3,161.00 1,791.23 1,633.18
- ----------------------------------------------------------------------------------------------------------------
9-1301 Training Room 13 VT 420 Terminals Nov-94 5,070.00 1,408.33 985.83
- ----------------------------------------------------------------------------------------------------------------
9-1301 Training Room 1 Goldstar VDT Nov-94 300.00 170.00 155.00
- ----------------------------------------------------------------------------------------------------------------
9-1301 Training Room 1 3M Overhead Projector Nov-94 1,267.00 717.97 654.62
- ----------------------------------------------------------------------------------------------------------------
9-1301 Training Room 1 Enclosed white board Nov-94 914.00 517.93 472.23
- ----------------------------------------------------------------------------------------------------------------
9-1301 Conference Room 1 Oak Table ( Ken Cole's) Nov-94 788.00 446.53 407.13
- ----------------------------------------------------------------------------------------------------------------
9-1301 Conference Room 8 upholstered chairs Nov-94 4,226.00 2,394.73 2,183.43
- ----------------------------------------------------------------------------------------------------------------
9-1301 Conference Room 1 Granite Conf. Table Nov-94 3,962.00 2,245.13 2,047.03
- ----------------------------------------------------------------------------------------------------------------
9-1301 Conference Room 10 Chairs Nov-94 3,370.00 1,909.67 1,741.17
- ----------------------------------------------------------------------------------------------------------------
9-1301 Conference Room 4 Oak Credenza's Nov-94 2,148.00 1,217.20 1,109.80
- ----------------------------------------------------------------------------------------------------------------
9-1301 Conference Room Overhead Equipment Nov-94 1,827.00 1,035.30 943.95
- ----------------------------------------------------------------------------------------------------------------
9-1301 Reception Area 1 Reception Station Nov-94 1,038.00 588.20 536.30
- ----------------------------------------------------------------------------------------------------------------
9-1301 Reception Area 2 Black leather chairs Nov-94 554.00 313.93 286.23
- ----------------------------------------------------------------------------------------------------------------
9-1301 Reception Area 1 oak & glass table Nov-94 162.00 91.80 83.70
- ----------------------------------------------------------------------------------------------------------------
9-1301 Reception Area 2 2-drawer pedestal file cab Nov-94 115.00 65.17 59.42
- ----------------------------------------------------------------------------------------------------------------
9-1301 Reception Area 1 Parsons table Nov-94 162.00 91.80 83.70
- ----------------------------------------------------------------------------------------------------------------
9-1301 Reception Area 1 Sharp Fax #F05220 Nov-94 2,492.00 1,412.13 1,287.53
- ----------------------------------------------------------------------------------------------------------------
9-1301 Reception Area 1 Oak credenza Nov-94 276.00 156.40 142.60
- ----------------------------------------------------------------------------------------------------------------
9-1301 equipment 1 Canon copies Nov-94 700.00 396.67 361.67
- ----------------------------------------------------------------------------------------------------------------
9-1301 equipment 1 Sharp Fax Nov-94 2,196.00 1,244.40 1,134.60
- ----------------------------------------------------------------------------------------------------------------
9-1301 other furniture 32 cubicles & work stations Nov-94 51,958.00 29,442.87 26,844.97
- ----------------------------------------------------------------------------------------------------------------
9-1301 other furniture 16 Executive desks Nov-94 7,465.00 4,230.17 3,856.92
- ----------------------------------------------------------------------------------------------------------------
9-1301 other furniture 92 chairs Nov-94 20,517.00 11,626.30 10,600.45
- ----------------------------------------------------------------------------------------------------------------
9-1301 other furniture 44 pedestal storage units Nov-94 3,950.00 2,238.33 2,040.83
- ----------------------------------------------------------------------------------------------------------------
9-1301 other furniture 30 bookcases Nov-94 4,339.00 2,458.77 2,241.82
- ----------------------------------------------------------------------------------------------------------------
9-1301 other furniture 8 file cabinets Nov-94 2,969.00 1,682.43 1,533.98
- ----------------------------------------------------------------------------------------------------------------
9-1301 other furniture 20 hanging prints Nov-94 1,674.00 948.60 864.90
- ----------------------------------------------------------------------------------------------------------------
9-1301 other furniture 2 lateral file cabinets Nov-94 637.00 360.97 329.12
- ----------------------------------------------------------------------------------------------------------------
131,740.00 73,188.00 66,432.00
- ----------------------------------------------------------------------------------------------------------------
Trade Shows Balance on booth 1/31/97 10,125.00 10,125.00 9,618.75
- ----------------------------------------------------------------------------------------------------------------
- -
- ----------------------------------------------------------------------------------------------------------------
Telephone and Furn Bat# 907000 , Line# 0010 4/30/95 5,000.00 3,250.00 3,000.00
- ----------------------------------------------------------------------------------------------------------------
Transfer to Furn. Bat# 926000 , Line# 0002 11/30/96 9,450.00 9,135.00 8,662.50
- ----------------------------------------------------------------------------------------------------------------
BALANCE PER DETAIL 156,315.00 95,698.00 87,713.25
---------- --------- ---------
- ----------------------------------------------------------------------------------------------------------------
Okidata Printer 400
- ----------------------------------------------------------------------------------------------------------------
Copier 20,000
- ----------------------------------------------------------------------------------------------------------------
Emulex Hub 20,000
- ----------------------------------------------------------------------------------------------------------------
Trade Show Booth 10,000 None
- ----------------------------------------------------------------------------------------------------------------
TI Printer 1,200
- ----------------------------------------------------------------------------------------------------------------
3 Oak Credenzas 1,500
- ----------------------------------------------------------------------------------------------------------------
6 Work Tables 1,800
- ----------------------------------------------------------------------------------------------------------------
5 Book Cases 2,500
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 60
<TABLE>
SCHEDULE 3.16 CSTI MACHINERY, EQUIPMENT AND COMPANY SOFTWARE
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NET NET
ACCT DESCRIPTION DESCRIPTION PURCHASE BOOK BOOK
DATE COST 12/31/96 3/31/97
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
9-1302 Computer Equip. 25 personal computers Nov-94 45,049.00 12,513.61 10,261.15
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. 3 HP laser jet printers Nov-94 5,826.00 3,301.40 3,010.10
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. 2 MAC PC's Nov-94 7,925.00 4,490.83 4,094.58
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. 1 MAC laserwriter Nov-94 2,759.00 1,563.43 1,425.48
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. 10 HP desk jet printers Nov-94 4,242.00 2,403.80 2,191.70
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. VAX 4200 with (2) RF31 & Printer Nov-94 131,337.00 36,482.50 25,537.75
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. 2-DS200 & 2-DS300 terminal server Nov-94 10,492.00 5,945.47 5,420.87
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. Cabletron misc communication eq. Nov-94 25,431.00 7,064.17 4,944.92
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. 9 Modems Nov-94 7,758.00 4,396.20 4,008.30
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. 1 HP 925 LX with drived Nov-94 63,122.00 17,533.89 12,273.72
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. Nov-94 - -
- --------------------------------------------------------------------------------------------------------------------
303,941.00 131,125.30 108,688.57
---------- ---------- ----------
- --------------------------------------------------------------------------------------------------------------------
Disk Drive 340 MB Bat#901000 Line#0004 10/30/94 197.40 108.57 98.70
- --------------------------------------------------------------------------------------------------------------------
Vax Disk Drives Bat#902000 Line#0001 11/30/94 6,148.89 3,484.37 3,176.93
- --------------------------------------------------------------------------------------------------------------------
John Giles Bat#903000 Line#0014 12/30/94 251.99 146.99 134.39
- --------------------------------------------------------------------------------------------------------------------
January T&E Bat#904000 Line#0011 1/31/95 31.49 18.89 17.32
- --------------------------------------------------------------------------------------------------------------------
January T&E Bat#904000 Line#0010 1/31/95 3,616.28 2,169.77 1,988.95
- --------------------------------------------------------------------------------------------------------------------
January T&E Bat#904000 Line#0009 1/31/95 1,137.49 682.49 625.62
- --------------------------------------------------------------------------------------------------------------------
January T&E Bat#904000 Line#0009 1/31/95 688.11 412.87 378.46
- --------------------------------------------------------------------------------------------------------------------
Unix System Bat#904000 Line#0035 1/31/95 24,888.15 14,932.89 13,688.48
- --------------------------------------------------------------------------------------------------------------------
Total Peripherals Bat#904000 Line#0001 1/31/95 6,754.80 4,052.88 3,715.14
- --------------------------------------------------------------------------------------------------------------------
modem- K. Cole Bat#904000 Line#0007 2/28/95 136.49 84.17 77.34
- --------------------------------------------------------------------------------------------------------------------
1.3 GB Disk T. McFadd Bat#904000 Line#0008 2/28/95 560.00 345.33 317.33
- --------------------------------------------------------------------------------------------------------------------
Enet Cards Surge Prot Bat#904000 Line#0009 2/28/95 308.59 190.30 174.87
- --------------------------------------------------------------------------------------------------------------------
March T&E Bat#904000 Line#0007 3/31/95 1,334.39 845.11 778.39
- --------------------------------------------------------------------------------------------------------------------
April T&E Bat#904000 Line#0005 4/30/95 3,826.02 2,486.91 2,295.61
- --------------------------------------------------------------------------------------------------------------------
April T&E Bat#904000 Line#0006 5/31/95 1,613.92 1,075.95 995.25
- --------------------------------------------------------------------------------------------------------------------
PB Axel 454(D. Waldr) Batch 1000 Line#0001 6/30/95 1,678.95 1,147.28 1,063.34
- --------------------------------------------------------------------------------------------------------------------
Disc Drive Batch 1000 Line#0001 6/30/95 209.97 143.48 132.98
- --------------------------------------------------------------------------------------------------------------------
Winbook Computer Batch 1000 Line#0001 6/30/95 2,553.95 1,745.20 1,617.50
- --------------------------------------------------------------------------------------------------------------------
DEC Server Batch 1000 Line#0001 6/30/95 1,346.20 919.90 852.59
- --------------------------------------------------------------------------------------------------------------------
Correct JE# 100028 Bat#904000 Line#0006 7/31/95 260.22 182.15 169.14
- --------------------------------------------------------------------------------------------------------------------
Correct JE# 100028 Bat#904000 Line#0005 7/31/95 209.98 146.99 136.49
- --------------------------------------------------------------------------------------------------------------------
Correct JE# 100028 Bat#904000 Line#0003 7/31/95 814.64 570.25 529.52
- --------------------------------------------------------------------------------------------------------------------
Alpha Box Batch 1000 Line#0001 8/11/95 18,000.00 12,900.00 12,000.00
- --------------------------------------------------------------------------------------------------------------------
Alpha Box Batch 1000 Line#0001 9/20/95 329.35 241.52 225.06
- --------------------------------------------------------------------------------------------------------------------
Alpha Box Batch 1000 Line#0001 9/20/95 3,349.40 2,456.23 2,288.76
- --------------------------------------------------------------------------------------------------------------------
Alpha Keyboard Batch 1000 Line#0001 9/20/95 68.85 50.49 47.05
- --------------------------------------------------------------------------------------------------------------------
Alpha Box Balance Batch 1000 Line#0001 9/22/95 13,623.06 9,990.24 9,309.09
- --------------------------------------------------------------------------------------------------------------------
Alpha Box Batch 1000 Line#0001 9/25/95 231.80 169.99 158.40
- --------------------------------------------------------------------------------------------------------------------
Computer ( Rob M) Batch 1000 Line#0001 8/31/95 3,654.94 2,619.37 2,436.63
- --------------------------------------------------------------------------------------------------------------------
Disc Drive Batch 1000 Line#0001 8/31/95 346.11 248.05 230.74
- --------------------------------------------------------------------------------------------------------------------
Modems Batch 1000 Line#0001 8/31/95 629.97 451.48 419.98
- --------------------------------------------------------------------------------------------------------------------
Correct JE# 100035 Bat#904000 Line#0001 8/31/95 6,528.36 4,678.66 4,352.24
- --------------------------------------------------------------------------------------------------------------------
PC/Jeff B Disc Dr/Ken Batch 1000 Line#0001 9/30/95 3,405.68 2,497.50 2,327.21
- --------------------------------------------------------------------------------------------------------------------
Hard Drive Batch 1000 Line#0001 9/30/95 249.99 183.33 170.83
- --------------------------------------------------------------------------------------------------------------------
PC for West Coast Batch 1001 Line#0001 10/23/95 1,856.53 1,392.40 1,299.57
- --------------------------------------------------------------------------------------------------------------------
COD 3 Pentium Computers Batch 1001 Line#0001 10/30/95 4,146.00 3,109.50 2,902.20
- --------------------------------------------------------------------------------------------------------------------
CTC Assets/ Final pymt Batch 1001 Line#0001 11/14/95 5,000.00 3,833.33 3,583.33
- --------------------------------------------------------------------------------------------------------------------
VMS-12 Batch 1001 Line#0001 11/27/95 989.90 758.92 709.43
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 61
<TABLE>
SCHEDULE 3.16 CSTI MACHINERY, EQUIPMENT AND COMPANY SOFTWARE
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NET NET
ACCT DESCRIPTION DESCRIPTION PURCHASE BOOK BOOK
DATE COST 12/31/96 3/31/97
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
PC Server Batch 1001 Line#0001 11/28/95 6,298.15 4,828.58 4,513.67
- --------------------------------------------------------------------------------------------------------------------
3 Ethernet Cards Batch 1001 Line#0001 12/6/95 141.72 111.01 103.93
- --------------------------------------------------------------------------------------------------------------------
Modems Batch 1001 Line#0001 12/6/95 179.52 140.62 131.65
- --------------------------------------------------------------------------------------------------------------------
8M Memory/ Hard Drive Batch 1001 Line#0001 12/29/95 661.44 518.13 485.06
- --------------------------------------------------------------------------------------------------------------------
PC for Robert Henley Batch 1001 Line#0001 1/19/96 3,599.00 2,879.20 2,699.25
- --------------------------------------------------------------------------------------------------------------------
CD Rom Drive Batch 1001 Line#0001 1/31/96 157.46 125.97 118.10
- --------------------------------------------------------------------------------------------------------------------
Disc Drive 486sx Batch 1001 Line#0001 1/31/96 243.45 194.76 182.59
- --------------------------------------------------------------------------------------------------------------------
Server Disk Drive Batch 1001 Line#0001 1/31/96 932.37 745.90 699.28
- --------------------------------------------------------------------------------------------------------------------
Disc. Drive Harvey Batch 1001 Line#0001 1/31/96 283.48 226.78 212.61
- --------------------------------------------------------------------------------------------------------------------
PC for Rich Heir Batch 1003 Line#0001 2/7/96 1,932.00 1,577.80 1,481.20
- --------------------------------------------------------------------------------------------------------------------
Network Printer Chip Batch 1001 Line#0001 2/15/96 427.13 348.82 327.47
- --------------------------------------------------------------------------------------------------------------------
Network Cards Batch 1002 Line#0001 2/29/96 230.96 188.62 177.07
- --------------------------------------------------------------------------------------------------------------------
Diskettes Batch 1002 Line#0001 2/29/96 25.73 21.01 19.73
- --------------------------------------------------------------------------------------------------------------------
Winbook Computer Batch 1002 Line#0001 3/5/96 3,083.95 2,569.96 2,415.76
- --------------------------------------------------------------------------------------------------------------------
3 pentium PC's Batch 1002 Line#0001 3/8/96 4,725.00 3,937.50 3,701.25
- --------------------------------------------------------------------------------------------------------------------
HP Color Laserjet Batch 1002 Line#0001 3/8/96 472.49 393.74 370.12
- --------------------------------------------------------------------------------------------------------------------
Intel network cards Batch 1002 Line#0001 3/31/96 472.49 393.74 370.12
- --------------------------------------------------------------------------------------------------------------------
Internal modem Batch 1002 Line#0001 4/30/96 167.00 141.95 133.60
- --------------------------------------------------------------------------------------------------------------------
cd Rom Drive Batch 1002 Line#0001 4/30/96 114.45 97.28 91.56
- --------------------------------------------------------------------------------------------------------------------
4 Pentium 133 PC's Batch 1003 Line#0001 6/25/96 5,827.50 5,147.63 4,856.25
- --------------------------------------------------------------------------------------------------------------------
PC Payment 1 Batch 1003 Line#0001 6/30/96 250.00 220.83 208.33
- --------------------------------------------------------------------------------------------------------------------
Ethernet Cards, Mouse Batch 1003 Line#0001 6/30/96 225.75 199.41 188.13
- --------------------------------------------------------------------------------------------------------------------
Printer Batch 1003 Line#0001 6/30/96 1,153.70 1,019.10 961.42
- --------------------------------------------------------------------------------------------------------------------
Laser Printer Batch 1003 Line#0001 6/30/96 1,550.74 1,369.82 1,292.28
- --------------------------------------------------------------------------------------------------------------------
PC Jeff Batch 1003 Line#0001 6/30/96 2,047.50 1,808.63 1,706.25
- --------------------------------------------------------------------------------------------------------------------
PC Payment 2 Batch 1003 Line#0001 7/31/96 250.00 225.00 212.50
- --------------------------------------------------------------------------------------------------------------------
Hard drive jeff Batch 1003 Line#0001 7/31/96 262.49 236.24 223.12
- --------------------------------------------------------------------------------------------------------------------
cd Rom Drive Batch 1003 Line#0001 7/31/96 70.30 63.27 59.76
- --------------------------------------------------------------------------------------------------------------------
Memory Dave, Jeff,St Batch 1003 Line#0001 7/31/96 372.00 334.80 316.20
- --------------------------------------------------------------------------------------------------------------------
PC Payment 3 Batch 1003 Line#0001 7/31/96 250.00 225.00 212.50
- --------------------------------------------------------------------------------------------------------------------
PC Dell Dimension Pro Batch 1003 Line#0001 8/16/96 2,459.10 2,254.18 2,131.22
- --------------------------------------------------------------------------------------------------------------------
PC for Linda Duncan Batch 1003 Line#0001 8/19/96 1,506.75 1,381.19 1,305.85
- --------------------------------------------------------------------------------------------------------------------
Laptop for Dave Waldr Batch 1003 Line#0001 8/21/96 2,131.48 1,953.86 1,847.28
- --------------------------------------------------------------------------------------------------------------------
Laptop for Terry Batch 1003 Line#0001 8/23/96 1,921.49 1,761.37 1,665.29
- --------------------------------------------------------------------------------------------------------------------
ingres Database Batch 1003 Line#0001 8/26/96 562.50 515.63 487.50
- --------------------------------------------------------------------------------------------------------------------
HP 1X4GB SE SCSI-2 Batch 1003 Line#0001 8/26/96 4,272.24 3,916.22 3,702.61
- --------------------------------------------------------------------------------------------------------------------
Network Cards Batch 1003 Line#0001 8/31/96 163.80 150.15 141.96
- --------------------------------------------------------------------------------------------------------------------
Memory Chip Batch 1003 Line#0001 8/31/96 222.00 203.50 192.40
- --------------------------------------------------------------------------------------------------------------------
PC Upgrade Batch 1004 Line#0001 9/30/96 422.00 393.87 372.77
- --------------------------------------------------------------------------------------------------------------------
See Req Batch 1004 Line#0001 9/30/96 403.65 376.74 356.56
- --------------------------------------------------------------------------------------------------------------------
Modems Batch 1004 Line#0001 9/30/96 179.97 167.97 158.97
- --------------------------------------------------------------------------------------------------------------------
17" Monitor Batch 1004 Line#0001 9/30/96 700.36 653.67 618.65
- --------------------------------------------------------------------------------------------------------------------
CD Rom/ Compuserve Fee Batch 1004 Line#0001 9/30/96 219.45 204.82 193.85
- --------------------------------------------------------------------------------------------------------------------
Computer equipment Batch 1004 Line#0001 9/30/96 250.00 233.33 220.83
- --------------------------------------------------------------------------------------------------------------------
Computer equipment Batch 1004 Line#0001 9/30/96 250.00 233.33 220.83
- --------------------------------------------------------------------------------------------------------------------
HP Laserjet 4 Printer Batch 1004 Line#0001 10/30/96 1,400.00 1,330.00 1,260.00
- --------------------------------------------------------------------------------------------------------------------
Oracle RDB V/A Lic Batch 1004 Line#0001 10/31/96 2,055.09 1,952.34 1,849.58
- --------------------------------------------------------------------------------------------------------------------
2 New PC's (ACER /AST) Batch 1004 Line#0001 10/31/96 3,478.10 3,304.20 3,130.29
- --------------------------------------------------------------------------------------------------------------------
Computer Equipment Batch 1004 Line#0001 10/31/96 250.00 237.50 225.00
- --------------------------------------------------------------------------------------------------------------------
PC for Brad Batch 1004 Line#0001 11/4/96 1,170.75 1,131.73 1,073.19
- --------------------------------------------------------------------------------------------------------------------
Voucher Delete Batch 1004 Line#0001 11/8/96 (562.50) (543.75) (515.63)
- --------------------------------------------------------------------------------------------------------------------
Print Server Batch 1004 Line#0001 11/30/96 209.00 202.03 191.58
- --------------------------------------------------------------------------------------------------------------------
Etherlink III Batch 1004 Line#0001 11/30/96 124.37 120.22 114.01
- --------------------------------------------------------------------------------------------------------------------
PC Adina Batch 1005 Line#0001 12/31/96 1,391.23 1,368.04 1,298.48
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 62
<TABLE>
SCHEDULE 3.16 CSTI MACHINERY, EQUIPMENT AND COMPANY SOFTWARE
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NET NET
ACCT DESCRIPTION DESCRIPTION PURCHASE BOOK BOOK
DATE COST 12/31/96 3/31/97
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Rocketport Batch 1005 Line#0001 12/31/96 526.00 517.23 490.93
- --------------------------------------------------------------------------------------------------------------------
8 US Robotic Modems Batch 1005 Line#0001 12/31/96 1,503.60 1,478.54 1,403.36
- --------------------------------------------------------------------------------------------------------------------
2 Memory Modules Batch 1005 Line#0001 1/31/97 83.98 83.98 79.78
- --------------------------------------------------------------------------------------------------------------------
2 Microsoft Mouses Batch 1005 Line#0001 1/31/97 46.00 46.00 43.70
- --------------------------------------------------------------------------------------------------------------------
Power Supply & Batt Batch 1005 Line#0001 1/31/97 59.85 59.85 56.86
- --------------------------------------------------------------------------------------------------------------------
FAX Machine Batch 1005 Line#0001 1/31/97 2,528.40 2,528.40 2,401.98
- --------------------------------------------------------------------------------------------------------------------
New PC Batch 1005 Line#0001 2/11/97 1,223.25 1,223.25 1,162.09
- --------------------------------------------------------------------------------------------------------------------
4 17" Monitors Dave Batch 1005 Line#0001 2/19/97 2,436.00 2,436.00 2,314.20
- --------------------------------------------------------------------------------------------------------------------
Hub Batch 1005 Line#0001 2/28/97 103.95 103.95 98.75
- --------------------------------------------------------------------------------------------------------------------
Memory (Brian,Dick) Batch 1005 Line#0001 2/28/97 335.96 335.96 319.16
- --------------------------------------------------------------------------------------------------------------------
Memory (Brian,Dick) Batch 1005 Line#0001 2/28/97 157.25 157.25 149.39
- --------------------------------------------------------------------------------------------------------------------
HP Jet Direct card Batch 1005 Line#0001 2/28/97 671.40 671.40 637.83
- --------------------------------------------------------------------------------------------------------------------
cables, Hub, Etc. Batch 1005 Line#0001 2/28/97 718.73 718.73 682.79
- --------------------------------------------------------------------------------------------------------------------
Mice Batch 1005 Line#0001 2/28/97 121.30 121.30 115.24
- --------------------------------------------------------------------------------------------------------------------
PC Sarah Reiss Batch 1005 Line#0001 3/12/97 1,191.75 1,191.75 1,132.16
- --------------------------------------------------------------------------------------------------------------------
- -
BALANCE PER DETAIL 498,214.88 278,065.88 245,915.46
---------- ---------- ----------
ASSETS DISPOSED :
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. 25 personal computers replaced (45,049.00) (12,513.61) (10,261.15)
- --------------------------------------------------------------------------------------------------------------------
ADJUSTED BALANCE PER MGMT. 453,165.88 265,552.27 235,654.31
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
<PAGE> 63
<TABLE>
SCHEDULE 3.16 CSTI MACHINERY, EQUIPMENT AND COMPANY SOFTWARE
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NET NET
ACCT DESCRIPTION DESCRIPTION PURCHASE BOOK BOOK
DATE COST 12/31/96 3/31/97
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
9-1320 PURCHASED SOFTWARE
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. Software licenses related to comp. Nov-94 84,009.00 47,605.10 43,404.65
- --------------------------------------------------------------------------------------------------------------------
9-1302 Computer Equip. Software licenses related to comp. Nov-94 35,310.00 20,009.00 18,243.50
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
BALANCE PER DETAIL 119,319.00 67,614.10 61,648.15
---------- --------- ---------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 64
March 31, 1997
Client Server Technologies, Inc.
Shareholder List
Schedule 8.1
NAME ADDRESS
- ---- -------
Paul Carr 2 Monadnock Road
Wellesley, MA 02181
Richard Sheflin 326 Old Billerica Road
Bedford, MA 01730
Kenneth Bloom 11 Wilson Lane
Acton, MA 01720
Richard D Myers 9722 Cypress Point Circle
Littleton, CO 80124
Jeffrey D Brunelle III 117 Highland Avenue
So. Attleboro, MA 02703
Brice C Buchanan 11 Fairfield Road
Wayland, MA 01778
YuSang Kwan 27 Faxon Street
Newton, MA 02158
Armando Prato 4 Brook Street
Chelmsford, MA 01824
James Holt 74 Brookside Road
Needham, MA 02192
Lynn Vena 11 Albano Street
Roslindale, MA 02131
Kenneth W Cole 48 Oregon Road
Southboro, MA 01772
Brian J Moran 20 Alexander Drive
Hampton, NH 03842
John G Kilray 34 Lee Street
Jamaica Plain, MA 02130
Robert B Gates Jr. 10 Maple Tree Lane
Franklin, MA 02038
Linda Duncan 66 Brockton Avenue
Scituate, MA 02066
Richard J Heier 18 Goshen Road
Dedham, MA 02026
John D Bean P.O. Box 3053
No. Attleboro, MA 02761
<PAGE> 1
EXHIBIT 99.14
[LOGO]
CAPITOL MULTIMEDIA, INC.
NEWS FROM CAPITOL MULTIMEDIA, INC.
FOR RELEASE UPON RECEIPT
FOR MORE INFORMATION CONTACT
LUDA KOPEIKINA, PRESIDENT, 508-287-5888, EXT. 114 OR
EDWARD TERINO, CHIEF FINANCIAL OFFICER, 508-287-5888, EXT. 113
E.MAIL: [email protected]
[email protected]
CAPITOL MULTIMEDIA, INC. ACQUIRES CLIENT SERVER TECHNOLOGIES, INC.
CONCORD, MASSACHUSETTS, MARCH 31, 1997 -- Capitol Multimedia, Inc. (NASDAQ:
CDIM, CDIMW, or the "Company") announced today that it has acquired Client
Server Technologies, Inc. (CSTI), a privately-held developer and integrator of
supply chain management software based in Dedham, Massachusetts for
approximately $4.2 million, consisting of $1.17 million in cash, 1.2 million in
Capitol unregistered common stock and notes payable beginning in fiscal 1999.
CSTI's financial performance (unaudited) in calendar 1996 included sales of
approximately $3.7 million, income before taxes of approximately $360,000 and a
positive cash flow of approximately $500,000. CSTI is debt free and does not
capitalize software development costs.
According to Luda Kopeikina, Capitol's President, "This acquisition represents
the first step in realization of our strategic initiative to diversify into a
business software market. This acquisition is an entry for Capitol into a fast
growing sector of the application software industry supply chain management
software. We selected this software market because of its high growth, the
existing fragmentation and the fact that larger competitors like Manugistics
Group, Baan Company, PeopleSoft and others are enjoying high revenue and
earnings multiples. We believe that this market will experience further growth
enhanced by the Internet. CSTI is expected to serve as a base for Capitol's
expansion through future acquisitions and internal growth. We expect to realize
synergistic benefits through leveraging our competitive development capability,
senior management knowledge of the industry and international channel
development expertise."
200 BAKER AVENUE, SUITE 300, CONCORD, MA 01742
PHONE: 508-287-5888 FAX: 508-287-4222 INTERNET: WWW.CAPITOL.COM
<PAGE> 2
[LOGO]
CAPITOL MULTIMEDIA, INC.
Client Server Technologies, Inc.'s "Continuum" product set provides software
solutions and integration services for logistics, planning, distribution and
financial functions within a business to increase productivity and improve
planning and control. CSTI solutions can significantly increase profitability of
its customers through inventory reductions and cost savings. Included in the
"Continuum" product line are modules for distribution resource planning, sales
order processing, inventory planning and control, purchase order management, and
financial management. The software is available in client/server environment
utilizing Microsoft Windows and several widely used relational database
products, including Oracle, Ingres, and Sybase. The software is fully Year 2000
compliant. CSTI has over 75 customer in the U.S and over 30 customer in Europe
in the middle market (companies ranging in size from $50 million to $1 billion)
of manufacturing, distribution and retail businesses. CSTI employs approximately
40 people with offices in Dedham, Massachusetts, Denver, Colorado and Los
Angeles, California.
Capitol Multimedia, Inc. is a high-end producer of CD-ROM software with offices
in Concord, Massachusetts and St. Petersburg, Russia.
**********************************
This press release contains certain forward-looking statements. The phrase
"expects to", "believe" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
presently anticipated or projected. Capitol cautions readers not to place undue
reliance on any forward looking statements, which speak only as to management's
expectations on the date hereof. Capitol does not undertake - and specifically
declines any obligation - to publicly release the result of any revision which
may be made to any forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of anticipated or
unanticipated events.
200 BAKER AVENUE, SUITE 300, CONCORD, MA 01742
PHONE: 508-287-5888 FAX: 508-287-4222 INTERNET: WWW.CAPITOL.COM
<PAGE> 1
EXHIBIT 99.15
[LOGO]
CAPITOL MULTIMEDIA, INC.
NEWS FROM CAPITOL MULTIMEDIA, INC.
FOR RELEASE UPON RECEIPT
FOR MORE INFORMATION CONTACT
EDWARD TERINO, CHIEF FINANCIAL OFFICER
508-287-5888 X 113
E.MAIL: [email protected]
CAPITOL MULTIMEDIA, INC. ANNOUNCES EXTENSION OF SERIES A WARRANTS
Concord, Massachusetts, March 3, 1997. Capitol Multimedia, Inc. (NASDAQ:CDIM,
CDIMW, or the "Company") a creator of CD-ROM based software, today announced
that the Company's Board of Directors has extended its Series A Warrant
expiration date for one year to March 31, 1998.
The Company currently has 344,500 Series A Warrants outstanding. Each Warrant
entitles the holder thereof to purchase 1.09 Shares of Common Stock at an
exercise price of $5.72 per share through March 31, 1997. The Warrants are
redeemable by the Company on an all or nothing basis at a redemption price of
$0.01 per Warrant, upon 30 days written notice, provided, however, that holders
may exercise Warrants at any time prior to the expiration of the 30-day
redemption notice period.
In the event that all of the Warrants are exercised, the Company will receive
proceeds of approximately $2,150,000. The Company currently plans to use any
proceeds received upon exercise of the Warrants to fund working capital
requirements and finance the development of software products.
Capitol Multimedia, Inc. is a leading developer and publisher of CD-ROM
software. The Company currently employs approximately 120 people with offices in
Concord, Massachusetts; and St. Petersburg, Russia.
200 BAKER AVENUE, SUITE 300, CONCORD, MA 01742
PHONE: 508-287-5888 FAX: 508-287-4222 INTERNET: WWW.CAPITOL.COM
