SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission File Number 1-10751
OBJECTSOFT CORPORATION
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(Name of small business issue in its charter)
Delaware 22-3091075
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Continental Plaza III, 433 Hackensack Avenue, 07601
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Hackensack, New Jersey (Zip Code)
(Address of principal executive offices)
Issuer's telephone number: (201) 343-9100
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Securities registered under Section 12(b) of the Exchange Act: None
Title of each class: None
Name of each exchange on which registered:
Securities registered under Section 12(g) of the Exchange Act:
Title of Each Class: Common Stock
Redeemable Class A Warrants
Units, each consisting of one share of
Common Stock and one
Redeemable Class A Warrant
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X No_
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were: $441,130.00.
The aggregate market value of the Common Stock (the only class of voting stock)
held by non-affiliates (2,406,676 shares as of March 26, 1997 was $12,447,027.43
(based upon the average bid and asked prices of the Common Stock on such date on
the Nasdaq SmallCap Market System).
The number of shares of Common Stock (the only class of common equity)
outstanding on March 26, 1997 was 4,061,676.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the issuer's Definitive Proxy Statement for the 1997 Annual Meeting
of Stockholders of the Company are incorporated by reference into Part III
hereof.
Transitional Small Business Disclosure Format (check one): Yes ___ No X
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PART I
Item 1. Description of Business
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General
ObjectSoft Corporation (the "Company") was incorporated in Delaware in
January 1996 and is the surviving corporation of a merger on January 31, 1996
between it and its predecessor, ObjectSoft Corporation, a New Jersey corporation
incorporated in December 1990.
The Company's executive offices are located at Continental Plaza III, 433
Hackensack Avenue, Hackensack, New Jersey 07601; its telephone number is (201)
343-9100; its facsimile number is (201) 343-0056; its Internet e-mail address is
[email protected]; and its homepage on the World-Wide Web is at
http://www.objectsoftcorp.com.
The Company currently provides information and services through public
access kiosks, known as SmartStreet(TM), that combine the advantages of local
and wide area network technology. Like an intranet, the communication between
the kiosk and its servers is accomplished over private, secure lines. Like an
internet, it enables an organization to interact with the general public, not
just its own employees and customers. Generally, the kiosks have been installed
in high density pedestrian traffic areas. The Company anticipates that revenues
from the kiosks will be provided by leasing fees paid by service providers and
by usage fees paid by consumers who obtain services through the kiosks.
Prior to 1996, the Company's activities consisted primarily of consulting,
writing, training and custom software development for various corporate and
government clients, including Microsoft Corporation ("Microsoft") for which it
produced technical papers and provided consulting services. In performance of
these activities, the Company developed skills in rapid application development
and a base of courseware and reusable software objects to which it retains
title. In 1995, the Company decided to direct these skills and its expanding
body of reusable software objects toward the development of services through
which it can derive revenue on a "per transaction" basis. It initially developed
and operated OLEBroker(TM), an Internet-based subscription service that allows
customers to search its database of information about software objects, find the
information needed and at the customer's option, purchase needed objects
on-line. The Company discontinued active marketing of OLEBroker(TM) at the end
of 1996 in order to concentrate on its kiosk- and Internet- related businesses.
However, in connection with the development of OLEBroker(TM), the Company
developed significant additional software objects, which it then used in the
development of technology for the kiosk and Internet service delivery programs.
The Company anticipates that the kiosk and Internet service delivery programs
will constitute the most significant part of its business. It may continue to
engage in consulting activities as resources permit. In selecting consulting
opportunities, the Company will focus primarily on assignments in connection
with the sale of kiosk
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services or that can otherwise enhance its skill base.
In early 1996, as part of its Kiosk Demonstration Project, the City of New
York (the "City") entered into an agreement with the Company (the "City
Agreement") to develop public kiosks to be located in City offices and other
public locations in an effort to expedite transactions with the City. Under the
City Agreement, the City agreed to lease the first five kiosks, and the Company
may deploy additional kiosks throughout the New York City area at its own risk
and expense, subject to City approval of kiosk locations. The first five kiosks
were deployed in New York City in July 1996. All kiosks providing City services
or information, whether operated by the Company or other suppliers, carry the
City's "CityAccess(TM)" logo. Pursuant to the City Agreement, the Company has
developed kiosks through which members of the public can obtain access to the
records of the Department of Buildings, certain Department of Health services,
including obtaining copies (for a fee) of birth certificates, death certificates
and dog licenses, obtaining public health information, and registering for
certain courses offered by the Department of Health. Information on City
government, directional information and information about New York City's
events, museums, tourist attractions, shopping and similar matters is provided
without fee. The City has recently requested pricing information for extending
the City Agreement to include an additional 12 - 36 kiosks to be installed in
the third quarter of 1997. However, there can be no assurance that a contract
for this extension will ultimately be entered into.
The Company's goal in designing the SmartStreet(TM) kiosks was to maximize
potential use by developing software that would be inviting and easy to use. The
kiosks are designed so that a potential user is attracted to the kiosk by
digital videos played from the upper monitor. Initially these videos will
include an "attract loop," narrated by the noted actor Tony Randall (currently
Director of the National Repertory Theater) and a message from Mayor Rudolph W.
Giuliani, as well as "spot" advertisements. The attract loop explains what can
be done with the kiosks and how to use them, and shows people from many walks of
life using them successfully.
The kiosks are configured to permit the Company to offer additional
services provided either by the Company or third parties and to sell advertising
on such kiosks. The City Agreement requires the Company to pay to the City 50%
of advertising and third party service revenues from the first five kiosks and
15% of such revenues from such additional kiosks as carry the CityAccess logo.
The Company plans to exercise these rights and to actively solicit additional
service providers and advertisers. The Company will seek to provide
SmartStreet(TM) services to other municipalities, states and government agencies
and to organizations in the private sector that provide a large volume of
information, records and documents to the public. The Company may also seek to
enter into agreements with the City and other customers to provide information
and services over the Internet, in order to significantly expand the
accessibility of such information and services. To date, the Company has not
entered into any agreements to offer any of the foregoing additional services or
products.
In connection with the development of the kiosks and the deployment and
operation of the
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first five kiosks, the City agreed to pay to the Company an aggregate of
$661,080, of which $361,080 is payable in the form of monthly payments of
$30,090 ($6,018 per kiosk), which were commenced as of August 1, 1996, and the
balance of $300,000 is payable in partial amounts as certain milestones in the
development, deployment and operation of the kiosks are achieved, of which
$147,000 has been received prior to December 31, 1996.
The Company may also receive transaction fees in connection with the use of
the kiosks by the public to obtain documents or certain other services. As of
December 31, 1996, the first five kiosks were available only to provide City
information and did not provide transaction services or carry any paid
advertising or third party services. Consequently, no revenues have been
generated to date by user transactions or advertising. The amount of future
transaction and advertising revenues, if any, will depend on user and advertiser
acceptance of the kiosks.
As of December 31, 1996, no revenues have been generated by user
transactions or advertising. The kiosks are expected to be available to support
on-line inquiries into City databases by April 1997, and to conduct City
transactions on a fee basis by May 1997.
Pursuant to the City Agreement, the Company has the right to install
additional kiosks in the City, at the Company's risk and expense and subject to
certain conditions including site approval by the City. The City will not be
required to pay additional monthly payments for such kiosks, but it is
anticipated, although there can be no assurance, that use by the public will
generate transaction fees. The Company had commenced evaluating potential sites
and will seek to install up to 25 additional kiosks over the next year.
At the time the City Agreement with the Company was executed, the City also
signed similar agreements with two other companies for additional kiosks. The
City expects to evaluate its success with this program and, if it deems it
successful, to issue a Request for Proposals for competitive bidding to supply
additional kiosks throughout the City.
The Company has established a strategic relationship with Microsoft that it
believes is important to its sales, marketing and support activities, as well as
to its product development efforts relating to its kiosks. Microsoft supports
the Company in marketing its kiosk services, and has informally agreed to
exhibit the Company's kiosks in Microsoft displays at various trade shows. It
has also issued statements that included favorable references relating to the
Company's products. Microsoft has also entered into various non-disclosure
agreements with the Company with respect to unannounced Microsoft products,
under which the Company has the opportunity to have advance knowledge of
software technology being developed by Microsoft. Microsoft has also provided,
and continues to provide, fee-based consulting services to the Company through
Microsoft Consulting. Since 1994, the Company has served as the exclusive
regional host and sponsor of Microsoft Developer Days, an ongoing series of
technical conferences organized and operated by Microsoft. The most recent
conference was held on March 19, 1997. The conference attracted over 1,350 paid
registrants and was completely sold out. The Company has also produced technical
papers for, and
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provided consulting services to, Microsoft.
The Company intends to market kiosks to other municipalities, government
agencies and organizations in the private sector. In the future, the Company may
seek to make its transactional services available over the Internet and to make
the Internet available from the Company's public kiosks.
Research and Development expenditures were $92,693 in 1996 and $62,863 in
1995. In addition, during the years ended December 31,1996 and December 31,
1995, the Company has capitalized additional software development costs which
aggregated $137,904 and $118,478, respectively.
Competition
The Company is subject to competition from different sources for its
different services. The Company's intranet kiosk business competes with numerous
companies, including IBM, North Communications, Golden Screens and NCR (formerly
a division of AT&T). The City has also awarded contracts, comparable to the
contract awarded to the Company, to North Communications and DSSI (which awarded
a subcontract to Golden Screens), both of which have sold similar kiosks to
other municipalities. Many kiosk vendors serve a small number of clients and/or
limited geographic areas. After fulfillment of the initial contracts, if the
City chooses to install additional kiosks throughout the City of New York, it
may award to others, and not the Company, the contract to install such
additional kiosks. Further, there can be no assurance that other municipalities
or other entities will seek to acquire kiosks from the Company. In addition, if
the use of kiosks provided by the Company and others proves to be successful in
New York City and other municipalities and locations, additional companies in
the software, hardware and communications areas, among others, may seek to enter
the market. A total of 19 companies competed for the contracts with the City of
New York, many of which can be expected to compete aggressively in other
competitive situations.
Marketing
The objective of the Company's marketing efforts is to obtain the rights to
place its kiosks in compelling high-density locations. In addition, the Company
seeks to attract advertisers based on the number and demographics of
"impressions" that the Company can offer to advertisers. To this end, the
Company has commissioned site surveys that count the actual population at each
existing location. The Company has retained a consultant to assist the Company
in leasing space in favorable locations and on satisfactory terms. In addition,
the Company has retained a media consultant to prepare a media kit and to target
it to suitable advertisers. The Company has retained a public relations
consultant to disseminate news related to its kiosks and to stimulate demand.
Additional marketing efforts focus on identifying content-providers whose
offerings can create additional transaction revenue for the Company's kiosks. In
seeking content-providers, the Company will exhibit at major trade shows where
it will partner with several of its major vendors. For example, the
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Company partnered with Dell and Microsoft at the Government Technology trade
show held in Albany, New York in September 1996, and it expects to participate
in similar joint efforts on an ongoing basis. A telemarketing program has been
initiated to target tourist, recreational and similar facilities to list their
facilities on the Company's kiosks. This effort will be contracted to a
telemarketing firm on a commission basis.
The Company's marketing activities are currently performed by its executive
officers and consultants under such officers' supervision. In March 1997, the
Company engaged June R. Petroff as Senior Vice President of Sales and Marketing.
Ms. Petroff was formerly employed as Vice President-Corporate Marketing for
Gateway Outdoor Advertising, and has significant experience in non-traditional
media.
Proprietary Rights
The Company's success is highly dependent on its proprietary technology.
The Company views its software as proprietary, and relies on a combination of
trade secret, copyright and trademark laws, non-disclosure agreements and
contractual provisions to establish and protect its proprietary rights. The
Company has no patents or patents pending and has not to date registered any of
its trademarks or copyrights. The Company plans to seek registrations in the
United States for the following trademarks: SmartStreet(TM), SmartSign(TM)
ObjectSoft(TM). In addition, the Company plans to register certain of these
trademarks in principal foreign jurisdiction.
The source code for the Company's proprietary software is protected as a
trade secret. In addition, because the Company does not sell or license its
technology to third parties, but rather delivers services through its kiosks and
OLEBroker(TM), its proprietary software is not disclosed to third parties.
Furthermore, the Company enters into agreements, as appropriate, with employees,
consultants and subcontractors containing provisions relating to confidentiality
and the assignment of inventions and other developments to the Company. There
can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technologies or products.
Customers
The customer base for the Company's kiosk business consists principally of
municipalities and other public sector or commercial entities to which the
Company would sell or lease kiosks, prospective advertisers and ultimately
consumers accessing kiosk services or products. The Company expects that users
of its OLE Broker service will consist of software designers and programmers.
The Company also intends to market its consulting services to mall operators.
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The Company historically has derived a significant portion of its revenues
from a relatively limited number of customers. During the twelve months ended
December 31, 1996, two customers, the City of New York and Microsoft accounted
for 71% of the Company's revenues. During 1995, two customers accounted for
approximately 48% of the Company's revenues.
Government Regulations and Licensing
The Company believes that it has all licenses necessary to operate its
business as currently conducted in New Jersey and New York.
The Company is not currently subject to direct regulation by the Federal
Communications Commission or any other agency, other than regulations applicable
to businesses generally and businesses doing business with governmental
agencies. In connection with its contract with the City and future contracts, if
any, with the City and other municipalities or government entities, the Company
will have to comply with such regulations, including bidding procedures and
record-keeping, audit, insurance, bonding and anti-discrimination provisions,
among others.
Due to the increase in Internet use and publicity, it is possible that laws
and regulations may be adopted with respect to the Internet, including with
respect to privacy, pricing and characteristics of products or services. The
Company cannot predict the impact, if any, that future laws and regulations or
legal or regulatory changes may have on its business.
Employees
As of March 27, 1997, Company had 13 employees, 12 of which were full-time,
and all of whom are based in its Hackensack, NJ offices. These include 6 in
product development, 3 in management and sales, 2 in operations and 2 in finance
and administration.
Although the Company expects to increase its full-time staff to 17 or more,
on an "as-needed" basis, the Company intends to continue with its policy to
outsource non-strategic functions such as artwork development, repetitive
testing, maintenance and bookkeeping rather than using its own staff for these
functions.
Item 2. Description of Property
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The Company occupies approximately 4,300 square feet of office space in
Hackensack, New Jersey, under a lease with an unaffiliated landlord that expires
on March 31, 2003 and provides for a base rent of $58,008 per annum in 1997,
subject to certain increases in subsequent periods.
Item 3. Legal Proceedings
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The Company is not a party to, nor is its property the subject of, any
material pending legal proceeding.
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Item 4. Submission of Matters to a Vote of Security Holders
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No matter was submitted to a vote of the Company's security holders,
through the solicitation of proxies or otherwise, during the fourth quarter of
its fiscal year ended December 31, 1996.
PART II
Item 5. Market For Common Equity and Related Stockholder Matters
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The Company's common stock, par value $.0001 per share (the "Common
Stock"), and redeemable Class A Warrants are currently quoted on the Nasdaq
SmallCap Market under the symbols "OSFT" and "OSFTW", respectively, and units,
each consisting of one share of Common Stock and one redeemable Class A Warrant
(the "Units"), were quoted on the Nasdaq SmallCap Market under the symbol
"OSFTU" until January 9, 1997. Prior to the Company's initial public offering in
November 1996, there was no public market for the Company's securities. The
following table sets forth the high and low sales price per share for the Common
Stock, the Class A Warrants and the Units as reported on the Nasdaq SmallCap
Market.
Common Stock Class A Warrants Units
-------------- ---------------- -----
High Low High Low High Low
---- --- ---- ---- ---- ---
Fiscal Year 1996
Fourth Quarter 6 5 1/4 1 11/16 6 1/2 5 3/8
As of March 26, 1997, there were approximately 59 holders of record of the
Common Stock and 4 holders of record of Class A Warrants.
The Company did not pay cash dividends on its Common Stock during the two
years ended December 31, 1996 and the Company does not presently intend to pay
any dividends on its Common Stock.
Item 6. Management's Discussion and Analysis of Operation
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The following discussion and analysis provides information which the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. This discussion
should be read in conjunction with the consolidated financial statements and
notes thereto appearing elsewhere herein.
Special Note Regarding Forward-Looking Statements
A number of statements contained in this Report are forward-looking
statements within the
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meaning of the Private Securities Litigation Reform Act of 1995 that involve
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied in the applicable statements. These risks and
uncertainties include but are not limited to the recent establishment of new
business divisions; dependence on new untested product; risks associated with
the marketing of kiosks and expansion of services; risks related to
technological factors; potential manufacturing difficulties; dependence on
certain third parties and on the Internet; limited customer base; risk of system
failure, security risks and liability risks; and other risks described in the
Company's Prospectus dated November 12, 1996.
Overview
The Company provides kiosk- and Internet-based services. Beginning in
mid-1994, the Company changed its focus from consulting and training services to
transactional, fee-based and advertising-supported products and services. The
Company has sustained net losses in each of the last two fiscal years with a net
loss of $122,400 in 1995 and a net loss of $1,240,695 in 1996. In September
1995, the Company introduced OLEBroker(TM), its fee-based website on the
Internet. The Company's SmartStreet(TM) kiosks were introduced in July 1996. The
Company has not recognized any significant income to date from the
SmartStreet(TM) kiosk rentals or from OLEBroker(TM). Consequently, any analysis
of the Company's prior operations has only minimal relevance to an evaluation of
the Company, its current products and services and its prospects. Although the
Company anticipates that it will begin to recognize greater revenues from the
SmartStreet(TM) kiosks and from OLEBroker(TM) during 1997, it cannot predict the
actual timing or amount of such revenues.
Results of Operations
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net revenues decreased $125,464 or 22.1% to $441,130 for the fiscal year
ended December 31, 1996 over net revenues of $566,594 for the fiscal year ended
December 31, 1995. Consulting revenues decreased by $178,575 or 39.8%. Training
revenue decreased from $118,618 to $21,279 or 82%. Rental income increased from
$0 to $150,450. The Company's decreased revenues from consulting, training and
custom development services resulted from redirection of the Company resources
to transactional fee-based products and services.
The Company continues to devote its resources toward the growth in
transactional fee-based products and services utilizing intranet technology and
believes this trend will continue in the future. Kiosk-based rental revenues
represented approximately 34.1% of 1996 net revenues and kiosk-related
consulting, training and custom development represented approximately $145,000
or 38.8% of 1996 net revenues.
Costs and expenses for the year ended December 31, 1996 increased to
$1,681,825 from $688,994 in 1995. This increase is a result of an increase in
expensed development costs for the SmartStreet(TM) operations and financing
expenses.
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Costs of services for the year ended December 31, 1996 declined to $424,336
from $429,604 in 1995. This decline is a result of expenses for costs relating
to the New York City contract which management expects to use in other
Smartstreet(TM) applications.
General and Administrative expenses as a percentage of net revenues were
189.3% in 1996 as compared with 34.1% in 1995. Such increase is principally
attributable to startup costs for the Company's SmartStreet(TM) program.
Interest expense increased to $329,836 in fiscal year ended December 31,
1996 from $3,502 for the fiscal year ended December 31, 1995, primarily
reflecting the amortization of discount and interest on the $1,250,000 loan. See
"Financial Condition, Liquidity and Capital Resources" and Note D of Notes to
Financial Statements.
Net loss increased by $1,118,295 or 913.6% to a net loss of $1,240,695 for
the fiscal year ended December 31, 1996 over net loss of $122,400 for the fiscal
year ended December 31, 1995. The increase in losses occurred primarily because
of financing costs and startup costs relating to the Company's SmartStreet kiosk
program.
At December 31, 1996, the Company had federal net operating loss
carryforwards of approximately $2,200,000. A valuation allowance has been
recorded for the entire deferred tax asset as a result of uncertainties
regarding the realization of the asset due to the lack of earnings history of
the Company. See Note H of Notes to Financial Statements.
Financial Condition, Liquidity and Capital Resources
In November 1996, the Company completed the sale in a public offering of
1,366,050 Units, from which it received net proceeds of approximately
$5,465,000. Of such amount, approximately $1,298,000 was applied to the
repayment of certain bridge loans and $285,000 was applied to the redemption of
the Company's Series A Preferred Stock. Of the balance, the Company expects to
apply approximately $3,500,000 to deploying up to additional kiosks in the City,
to further expand SmartStreet(TM) kiosk operations and for kiosk related
acquisitions over the next 24 months, and the remainder to working capital. The
Company intends to lease equipment whenever possible on acceptable terms. The
Company believes that an additional $800,000 will be required to fund the
SmartStreet(TM) expansion, and that such funds will be derived from future
operating revenues. However, there can be no assurance that future revenues will
be generated in sufficient amounts or that additional funds will not be required
for the expansion of operations.
As of December 31, 1996, cash and cash equivalents were $4,039,000 as
compared with $64,000 at December 31, 1995.
The increase is a result of the receipt by the Company of the net proceeds
from an initial public offering and two private financings of the securities
completed in 1996 less the repayment obligations arising as a result of the
Company's initial public offering.
During 1996, the Company borrowed $1,250,000 which was repaid prior to
December 31,
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1996 from the proceeds of the initial public offering. The increase in
borrowings during 1996 were used to partially fund the initial acquisition of
the equipment necessary for the installation of the kiosks required under the
City Agreement and operating expenses.
The Company intends to meet its long-term liquidity needs through available
cash and cash flow. To the extent that such sources are inadequate, the Company
will be required to seek financing. In such event, there can be no assurance
that financing will be available to the Company on satisfactory terms.
The Company is continually exploring possible acquisitions of compatible
companies in the software business. If any such acquisition were to be made with
available cash, the Company's long-term liquidity would depend to a greater
extent on cash flow and financing.
Inflation and Seasonality
The rate of inflation was insignificant during the year ended December 31,
1996. In the past, the effects of inflation on personnel costs have been offset
by the Company's ability to increase its charges for services rendered. The
Company anticipates that it will be able to continue to do so in the near
future. The Company continually reviews its costs in relation to the pricing of
its products and services.
The Company's business is not seasonal.
Item 7. Financial Statements
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The financial statements of the Company required by this item are set forth
at end of this Form 10-KSB at pages F-1 through F-16.
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Item 8. Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
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None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
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with Section 16 (a) of the Exchange Act
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The information required by this item is incorporated by reference from the
Company's Definitive Proxy Statement under the captions "Management--Executive
Officers and Directors" and "--Section 16(a) Beneficial Ownership Reporting
Compliance."
Item 10. Executive Compensation
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The information required by this item is incorporated by reference from the
Company's Definitive Proxy Statement under the captions "Management--Directors'
Compensation" and "Executive Compensation."
Item 11. Security Ownership of Certain Beneficial Owners and Management
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The information required by this item is incorporated by reference from the
Company's Definitive Proxy Statement under the caption "Security Ownership."
Item 12. Certain Relationships and Related Transactions
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The information required by this item is incorporated by reference from the
Company's Definitive Proxy Statement under the caption "Certain Relationships
and Related Transactions."
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Item 13. Exhibits and Reports on Form 8-K
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a. Exhibits
2.1 * Certificate of Ownership and Merger of ObjectSoft Corporation (a
New Jersey corporation)into the Company.
2.2 * Plan of Merger of ObjectSoft Corporation (a New Jersey
corporation) into the Company.
3.1(a) * Certificate of Incorporation of the Company.
3.1(b) Amendment to Certificate of Incorporation of the Company.
3.2(a) * By-laws of the Company.
3.2(b) Amended and Restated By-laws of the Company.
4.1 * Form of Representative's Unit Purchase Option Agreement.
4.2 * Specimen Certificate of the Company's Common Stock
4.3 * Form of Class A Warrant Agreement, including form of Class A
Warrant.
10.1+ * Employment Agreement dated as of July 1, 1996 between the Company
and David E. Y. Sarna.
10.2+ * Employment Agreement dated as of July 1, 1996 between the Company
and George J. Febish.
10.3+ * 1996 Stock Option Plan.
10.4 * Form of Bridge Loan Promissory Note.
10.5 * Form of Bridge Loan Warrant.
10.6 * Form of Warrant Agreement with placement agent for Bridge Loan
Offering.
10.7 * Form of Subscription Agreement and Investment Representation of
Investor with each of the investors in the July 1996 Offering.
10.8 * Form of July 1996 Warrant Agreement.
10.9 * Form of Warrant Agreement with placement agent for July 1996
Offering.
10.10 * Agreement, dated January 11, 1996, as amended, with the City of
New York (Department of Information Technology and
Telecommunications).
10.11 * Cooperation Agreement with Microsoft Corporation, dated November
7, 1995.
10.12 * Agreement with ACORD Corporation dated July 5,1995.
10.13 * Form of Investor Warrant.
10.14+ * Form of Officer Warrant.
10.16 * Cyndel Warrant
27.1 Financial Data Schedule
b. The Company did not file any Report on Form 8-K during the last quarter of
its fiscal year ended December 31, 1996.
- ---------------------
* Denotes Exhibits incorporated by reference to the Company's Registration
Statement on Form SB-2 (Registration No. 333-10519).
+ Management contract or compensatory plan or arrangement.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 31, 1997 OBJECTSOFT CORPORATION
By: /s/ David E. Y. Sarna
-------------------------
David E. Y. Sarna, Chairman
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dated indicated:
Signature Title Date
/s/ David E. Y. Sarna Chairman, Co-Chief Executive Officer, March 31, 1997
- ---------------------- Secretary and Director (Principal
David E. Y. Sarna Executive Officer, Principal Financial
Officer and Principal Accounting
Officer)
/s/ George J. Febish President, Co-Chief Executive Officer, March 28, 1997
- --------------------- Treasurer and Director (Principal
George J. Febish Executive Officer)
/s/ Daniel E. Ryan Director March 27, 1997
- ---------------------
Daniel E. Ryan
Director March __, 1997
- ---------------------
Julius Goldfinger
/s/ Gunther L. Less Director March 27, 1997
- ---------------------
Gunther L. Less
<PAGE>
OBJECTSOFT CORPORATION
- I N D E X -
PAGE
NUMBER
REPORT OF INDEPENDENT AUDITORS F-2
BALANCE SHEET - AS AT DECEMBER 31, 1996 F-3
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1996 AND DECEMBER 31, 1995 F-4
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(CAPITAL DEFICIENCY) FOR THE YEARS ENDED
DECEMBER 31, 1996 AND DECEMBER 31, 1995 F-5
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1996 AND DECEMBER 31, 1995 F-6
NOTES TO FINANCIAL STATEMENTS F-7
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
ObjectSoft Corporation
Hackensack, New Jersey
We have audited the accompanying balance sheet of ObjectSoft Corporation
as at December 31, 1996, the related statements of operations, changes in
stockholders' equity (capital deficiency) and cash flows for each of the years
in the two-year period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our report.
In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of ObjectSoft Corporation as at
December 31, 1996 and the results of its operations and cash flows for each of
the years in the two-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Richard A. Eisner & Company, LLP
Florham Park, New Jersey
March 7, 1997
F-2
<PAGE>
OBJECTSOFT CORPORATION
BALANCE SHEET
AS AT DECEMBER 31, 1996
A S S E T S
Current assets:
Cash and cash equivalents (Notes A[9] and J[1]) .............. $ 4,039,358
Accounts receivable .......................................... 5,900
Prepaid expenses and other current assets .................... 180,463
-----------
Total current assets .................................. 4,225,721
Equipment, at cost, net of accumulated depreciation
(Notes A[2], B and E) ......................................... 457,848
Capitalized software (Notes A[5] and C).......................... 168,118
Other assets .................................................... 130,474
-----------
T O T A L ............................................. $ 4,982,161
===========
L I A B I L I T I E S
Current liabilities:
Current portion of obligations under capital lease
(Note E) ................................................... $ 45,740
Accounts payable ............................................. 57,309
Accrued expenses ............................................. 101,872
Other liabilities ............................................ 9,785
-----------
Total current liabilities ............................. 214,706
-----------
Obligations under capital lease (Note E) ........................ 38,335
-----------
Commitments (Note K)
STOCKHOLDERS' EQUITY
(Notes G and L)
Common stock, $.0001 par, authorized 20,000,000
shares, issued and outstanding 4,022,676 shares .............. 402
Additional paid-in capital ...................................... 6,878,868
Accumulated deficit ............................................. (2,150,150)
-----------
Total stockholders' equity ............................ 4,729,120
-----------
T O T A L ............................................. $ 4,982,161
===========
The accompanying notes to financial
statements are an integral part hereof.
F-3
<PAGE>
OBJECTSOFT CORPORATION
STATEMENTS OF OPERATIONS
Year Ended
December 31,
------------------------------
1996 1995
----------- -----------
Revenues (Note J[2]):
Consulting ............................ $ 269,401 $ 447,976
Training .............................. 21,279 118,618
Rental income (Note K[1]) ............. 150,450
----------- -----------
Total revenues .................. 441,130 566,594
----------- -----------
Expenses:
Cost of services ...................... 424,336 429,604
Research and development .............. 92,693 62,863
General and administrative ............ 834,960 193,025
Interest .............................. 329,836 3,502
----------- -----------
Total expenses ................. 1,681,825 688,994
----------- -----------
NET (LOSS) ............................... $(1,240,695) $ (122,400)
=========== ===========
Net loss per share ....................... $ (0.45) $ (0.05)
=========== ===========
Weighted average number
of shares outstanding ................. 2,848,943 2,797,134
=========== ===========
The accompanying notes to financial
statements are an integral part hereof.
F-4
<PAGE>
OBJECTSOFT CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid-in
Shares Amount Capital (Deficit) Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 ....................... 2,275,000 $ 228 $ 255,332 $ (735,879) $ (480,319)
Accretion of dividends on the Series A
Preferred stock ............................. -- -- -- (19,125) (19,125)
Series B preferred stock issuance costs (Note F) -- -- (2,500) -- (2,500)
Common stock issued, net of costs .............. 18,000 1 15,499 -- 15,500
Compensatory option granted (Note G[3]) ........ -- -- 10,000 -- 10,000
Net loss ....................................... -- -- -- (122,400) (122,400)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 ..................... 2,293,000 229 278,331 (877,404) (598,844)
Warrants issued in connection with bridge
loan, net of costs (Note D) ................. -- -- 123,525 -- 123,525
Compensatory warrants granted (Note G[3]) ...... -- -- 16,000 -- 16,000
Dividends declared ............................. -- -- -- (32,051) (32,051)
Units issued, net of costs (Note G[2]) ......... 1,639,051 164 6,279,771 -- 6,279,935
Exercise of warrants (Note G[3]) ............... 90,625 9 181,241 -- 181,250
Net loss ....................................... -- -- -- (1,240,695) (1,240,695)
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1996 ..................... 4,022,676 $ 402 $ 6,878,868 $(2,150,150) $ 4,729,120
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to financial
statements are an integral part hereof.
F-5
<PAGE>
OBJECTSOFT CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) .................................................. $(1,240,695) $ (122,400)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization ........................... 174,699 58,056
Amortization of discount on note payable ................ 268,525 --
Provision (recovery) for doubtful accounts .............. (16,200) 16,200
Stock options issued for services rendered .............. 16,000 10,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable ................................. 82,902 67,091
Prepaid expenses and other current assets ........... (153,884) 6,311
Other assets ........................................ (94,875) 34,587
Increase (decrease) in:
Accounts payable .................................... (1,005) (48,332)
Accrued expenses .................................... 7,617 (28,574)
Accrued officer compensation ........................ (391,687) 107,220
Other liabilities ................................... 8,169 --
----------- -----------
Net cash provided by (used in) operating activities (1,340,434) 100,159
----------- -----------
Cash flow from investing activities:
Capital expenditures ........................................ (419,096)
Capitalized software and courseware ......................... (137,904) (118,478)
----------- -----------
Net cash (used in) investing activities ........... (557,000) (118,478)
----------- -----------
Cash flow from financing activities:
Proceeds from issuance of preferred and common stock ........ -- 113,000
Proceeds from issuance of warrants - bridge units ........... 123,525 --
Proceeds from note payable .................................. 981,475 --
Repayment of note payable ................................... (1,250,000) --
Deferred offering costs ..................................... -- (30,250)
Proceeds from issuance of common stock and warrants ......... 6,279,935 --
Dividends ................................................... (32,051) --
Proceeds from exercise of warrants .......................... 181,250 --
Principal payments on obligations under capital leases ...... (27,431) (7,928)
Redemption of preferred stock ............................... (383,906) --
----------- -----------
Net cash provided by financing activities ......... 5,872,797 74,822
----------- -----------
NET INCREASE IN CASH ........................................... 3,975,363 56,503
Cash, beginning of period ...................................... 63,995 7,492
----------- -----------
CASH, END OF PERIOD ............................................ $ 4,039,358 $ 63,995
=========== ===========
Supplemental disclosures of cash flow
Cash paid during the period:
Interest expense .......................................... $ 61,311 $ 3,502
</TABLE>
The accompanying notes to financial statements are an integral
part hereof.
F-6
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Summary of Significant Accounting Policies:
- -----------------------------------------------------
[1] The Company:
-----------
ObjectSoft Corporation (the "Company") is currently engaged in
the business of providing transaction based services over the Internet and
through kiosks, computer software training and consulting.
[2] Equipment:
---------
Equipment is carried at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over estimated useful
lives of the assets (three to seven years).
[3] Provision for income taxes:
--------------------------
Deferred income taxes arise from temporary differences resulting
primarily from income and expense items being reported on an accrual basis for
financial reporting purposes and on a cash basis for tax purposes, capitalized
software and net operating loss carryforwards. The Company has available at
December 31, 1996, Federal net operating loss carryforwards of approximately
$2,200,000 which may be applied against future taxable income through 2011.
[4] Software revenue recognition policies:
-------------------------------------
The Company is engaged as a developer in a number of software
transactions. Generally, revenue from generic software is recognized upon
delivery of the software. After the sale, if significant obligations remain or
significant uncertainties exist about customer acceptance of the software,
revenue is deferred until the obligations are satisfied or the uncertainties are
resolved. Revenue from software services is recognized as the services are
performed. Revenue from software leased through the Internet (generally one
year) is deferred and amortized over the lease term. Revenue from custom
software development (included in consulting revenue) is recognized based upon
its percentage completion.
[5] Software development costs:
--------------------------
The Company capitalizes software development costs when project
technological feasibility is established and concluding when the project is
ready for release. Research and development costs related to software
development are expensed as incurred.
(continued)
F-7
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Summary of Significant Accounting Policies: (continued)
- -----------------------------------------------------
[5] Software development costs: (continued)
--------------------------
The Company's policy is to amortize capitalized software costs
by the greater of (a) the ratio that current gross revenues for a product bears
to the total of current and anticipated future gross revenues for that product
or (b) the straight-line method over the remaining estimated economic life of
the product including the period being reported on. It is reasonably possible
that those estimates of anticipated future gross revenues, the remaining
economic useful life of the product or both will be reduced in the near term.
[6] Use of estimates:
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
[7] Stock-based compensation:
------------------------
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS No. 123") allows companies to either
expense the estimated fair value of stock options or to continue to follow the
intrinsic value method set forth in APB Opinion 25, "Accounting for Stock Issued
to Employees" ("APB 25") but disclose the pro forma effects on net (loss) had
the fair value of the options been expensed. The Company has elected to continue
to apply APB 25 in accounting for its stock option incentive plans. See Note
G[3] to the financial statements for further information.
[8] Net loss per share:
------------------
Net loss per share was computed based on the weighted average
number of shares of common stock outstanding during the period and the net loss
increased by the dividends accruing on the cumulative preferred stock. Since, in
1995 and prior to November 13, 1996, certain shares of common stock and common
stock equivalents were issued and, in accordance with certain rules of the
Securities and Exchange Commission all such shares of common stock and common
stock equivalents were considered outstanding for 1995 and through June 30,
1996. Fully diluted net loss per share is not shown since it would be
anti-dilutive.
(continued)
F-8
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Summary of Significant Accounting Policies: (continued)
- -----------------------------------------------------
[8] Net loss per share: (continued)
------------------
During 1996, the Company issued units consisting of common stock
and warrants (see Note D) and utilized $125,000 of the proceeds to redeem the
Series B preferred stock. Additionally, the Company redeemed the Series A
preferred stock and repaid the short term debt with the proceeds from the
initial public offering. Had the Series A preferred been retired on January 1,
1995, the Series B preferred stock not been issued on December 31, 1995 nor the
short term debt initiated in 1996 and had the Company issued common stock
instead, the net loss per share for the years ended December 31, 1996 and
December 31, 1995 would have been $(0.31) and ($0.04), respectively. These loss
per share computations assume an additional weighted average number of shares
outstanding for the years ended December 31, 1996 and December 31, 1995 of
173,834 and 43,367, respectively.
[9] Cash and cash equivalents:
-------------------------
Cash and cash equivalents include cash on hand, demand deposits
and all highly-liquid investments with a maturity of three months or less at the
time of purchase.
(NOTE B) - Equipment:
- --------------------
At December 31, 1996, equipment consists of:
Kiosks ..................................$407,131
Equipment ............................... 179,323
--------
586,454
Accumulated depreciation ................ 128,606
--------
T o t a l .....................$457,848
========
Depreciation expense aggregated $83,587 and $19,573 for the years ended
December 31, 1996 and 1995, respectively. Included in depreciation expense is
depreciation expense on equipment under capital lease which aggregated $14,920
and $8,396, for the years ended December 31, 1996 and 1995, respectively.
During 1996, the Company acquired equipment under capital lease
aggregating $98,906.
(continued)
F-9
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(NOTE C) - Capitalized Software:
- -------------------------------
During the years ended December 31, 1996 and December 31, 1995, the
Company has capitalized software development costs which aggregated $137,904 and
$118,478, respectively. Amortization of capitalized software costs aggregated
$78,392 and $9,873 for the years ended December 31, 1996 and December 31, 1995,
respectively. Additionally amortization of capitalized courseware costs
aggregated $12,720 and $28,610 for the years ended December 31, 1996 and
December 31, 1995, respectively.
(NOTE D) - Financing:
- --------------------
In 1996, prior to the IPO, the Company sold 12.5 bridge units, each
consisting of a $100,000, 7% note and warrants to purchase 30,000 shares of
common stock or other securities as might be offered in the Company's IPO ("IPO
Securities"). Additionally, the placement agent received a warrant to purchase
37,500 shares of common stock or other securities as might be offered in the
Company's IPO. The notes were paid in full on November 22, 1996.
The Company valued the warrants at $138,750. Accordingly, additional
paid-in capital has been credited $123,525 which represents the value of the
warrants less the allocable portion of the offering costs. The short-term note
was discounted by the value of the warrants and the offering costs. The discount
was amortized as additional interest expense from the date of issuance to
November 22, 1996, the date the note was paid in full. The IPO was completed in
November 1996; the bridge unit warrants are exercisable into the IPO Securities
at $3.50 per unit. These warrants expire in November 1999. The placement agent
warrants are exercisable at $4.55 and expire in November 2001.
During the year ended December 31, 1996, amortization aggregated
$268,525.
(continued)
F-10
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(NOTE E) - Obligations Under Capital Lease:
- ------------------------------------------
Minimum future lease payments under capital leases expiring through
2001, as of December 31, 1996 are as follows:
Year Ending
December 31, Amount
------------ ------
1997.............................................. $ 57,676
1998.............................................. 30,933
1999.............................................. 6,723
2000.............................................. 5,080
2001.............................................. 2,193
--------
102,605
Less amount representing interest................. 18,530
--------
Present value of net minimum
lease payments.................................. 84,075
Less present value of net minimum lease payments
due within one year............................. 45,740
--------
Total...................................... $ 38,335
========
(NOTE F) - Preferred Stock:
- --------------------------
The Series A 9% cumulative voting preferred stock was redeemed at the
time of the initial public offering for a total of $212,500 plus cumulative
dividends of $71,214.
The Series B 10% cumulative preferred stock was redeemed at the time of
the private placement for a total of $125,000 and warrants expiring November 13,
1999 to purchase 20,000 shares of common stock at an exercise price of $7.00 per
share. Dividends paid in 1996 aggregated $7,243.
(NOTE G) - Stockholders' Equity:
- -------------------------------
[1] Recapitalization:
In January 1996, ObjectSoft Corporation, a New Jersey
corporation merged into a newly formed corporation, ObjectSoft Corporation, a
Delaware corporation. In conjunction with the merger, shares of the preferred
and common stock outstanding were exchanged for the same number of shares of
stock, the shares authorized increased to 5,000,000 preferred and 20,000,000
common and the par value was reduced to $.0001. This transaction is given
retroactive effect in the accompanying financial statements.
(continued)
F-11
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Stockholders' Equity: (continued)
[2] Private placement and initial public offerings:
In August 1996, the Company issued 273,001 units consisting of
one share of common stock and a warrant to purchase two-thirds of a share of
common stock at an exercise price of $3.00 per two-thirds share. The Company
received proceeds of $816,285, net of offering costs of $139,215. Additionally,
the placement agent was granted warrants to purchase 27,300 of these units at an
exercise price of $4.50 per unit. The warrants expire November 13, 1999.
In November 1996, the Company issued 1,366,050 units, consisting
of one share of common stock and a warrant to purchase one share of common stock
at an exercise price of $6.50 per share expiring November 2001. The Company
received proceeds of $5,463,650 net of offering costs of $1,366,600. In
connection with the IPO, the underwriter was granted an option to purchase
87,500 units at $8.00 per unit.
[3] Stock options and warrants:
As of January 1, 1995, the Company had issued warrants, expiring
in April 1998, to purchase 143,333 shares of common stock at an exercise price
of $0.50 and warrants, expiring in November 1996, to purchase 106,250 shares of
common stock at an exercise price of $2.00. In 1996, warrants to purchase 90,625
shares of common stock were exercised. Warrants to purchase 15,625 shares of
common stock expired.
In 1995, the Company granted an option to purchase 100,000
shares of common stock at $1.00 per share in exchange for consulting services.
The options are exercisable through September 2000. In 1996, in exchange for an
additional $5,000 payment to the option holder, the Company cancelled the option
on 50,000 shares.
In 1996, the Company granted a warrant to purchase 10,000 shares
of common stock at $1.00 per share in exchange for $20,000 of professional
services to be rendered during the vesting period. This warrant vests ratably
over a ten month period ending March 1997 and is exercisable through May 2001.
During 1996, the Company recognized expense of $16,000 and warrants to purchase
8,000 shares of common stock were vested as of December 31, 1996.
In addition, the Company adopted a stock option plan under which
250,000 shares of common stock are reserved for issuance upon exercise of either
incentive or nonincentive stock options which may be granted from time to time
by the Board of Directors to employees and others.
(continued)
F-12
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Stockholders' Equity: (continued)
- -------------------------------
[3] Stock options and warrants: (continued)
--------------------------------------
Other than the warrants to purchase 90,625 shares of common
stock, no other options or warrants were exercised in 1995 or 1996.
The Company applies APB 25 in accounting for its stock option
incentive plan and, accordingly, recognizes compensation expense for the
difference between the fair value of the underlying common stock and the grant
price of the option at the date of grant. The effect of applying SFAS No. 123 on
1996 pro forma net loss as stated above is not necessarily representative of the
effects on reported net loss for future years due to, among other things (1) the
vesting period of the stock options and the (2) fair value of additional stock
options in future years. Had compensation cost for the Company's stock option
plans been determined based upon the fair value at the grant date for awards
under the plans consistent with the methodology prescribed under SFAS No. 123,
the Company's net loss in 1996 would have been approximately $1.4 million or
$(0.50) per share. The weighted average fair value of the options granted during
1996 are estimated as $1.20 per share on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: dividend
yield 0%, volatility of 40%, risk-free interest rate of 6.37% and expected life
of 5 years.
During 1996, the Company granted options on 145,000 shares of
its common stock at an average exercise price of $3.43. No options were either
exercised or forfeited during the year.
The following table summarizes information about the plan's
options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------- ----------------------
Weighted
Average
Remaining Weighted Weighted
Range of Contractual Average Average
Exercise Number Life Exercise Number Exercise
Prices Outstanding (In Years) Price Exercisable Price
------ ----------- ---------- -------- ----------- -----
<C> <C> <C> <C> <C> <C>
$2.50 to $3.50 145,000 5.0 $3.43 129,999 $3.42
</TABLE>
The Company has reserved 2,961,887 shares of its common stock
for issuance upon exercise of the outstanding warrants and options.
(continued)
F-13
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(NOTE H) - Income Taxes:
- -----------------------
The significant components of the Company's deferred tax assets and
liabilities at December 31, 1996 as follows:
Accrual to cash adjustment................$ (52,000)
Capitalized software...................... (65,000)
Net operating losses carryforward......... 909,000
Valuation allowance....................... (792,000)
----------
Net deferred tax asset....................$ -0-
==========
The significant components of the provision for income taxes consists of
the following:
December 31,
-------------------
1996 1995
---- ----
Accrual to cash adjustment........... $ (255,000) $ 62,000
Net Operating loss carryforward...... 764,000 37,000
Capitalized software................. (28,000) (35,000)
Increase in valuation allowance...... (481,000) (64,000)
----------- ----------
Provision for income taxes........... $ -0- $ -0-
=========== ==========
The difference between the statutory federal income tax rate on the
Company's net loss and the Company's effective income tax rate for each of the
year ended December 31, 1996 and 1995, respectively, is summarized as follows:
December 31,
---------------
1996 1995
---- ----
Statutory federal income tax rate ....... 34.0% 34.0%
Increase in valuation allowance ......... (38.8) (39.2)
Research and development credit ......... 0.9 7.3
Miscellaneous ........................... 3.9 (2.1)
------ ------
Effective income tax rate ............... 0.0% 0.0%
====== ======
(NOTE I) - Employee Benefit Plan:
- --------------------------------
The Company maintains a noncontributory Employee Savings Plan, in
accordance with the provisions of Section 401 of the Internal Revenue Code.
Pursuant to the terms of the plan, participants can defer a portion of their
income through contributions to the Plan.
(continued)
F-14
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(NOTE J) - Financial Instruments, Revenues and Other Matters:
- ------------------------------------------------------------
[1] Cash:
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash. The Company maintains its cash
in a highly rated financial institution. At December 31, 1996, the Company had
bank deposits exceeding Federally insured limits by approximately $4,000,000.
[2] Revenues:
For the years ended December 31, 1996 and December 31, 1995, 71
percent and 48 percent, respectively, of revenues were derived from two
customers.
[3] Microsoft Corporation:
The Company's software is generally based upon Microsoft Windows
technology. Additionally, it has established a strategic relationship with
Microsoft that management believes is important to its sales, marketing and
support and product development activities. Accordingly, any change in this
relationship or any factor adversely affecting the demand for, or the use of,
Microsoft's Windows operating system could have a negative impact on demand for
the Company's products and services. Additionally, changes to the underlying
components of the Windows operating system would require changes to the
Company's products and could result in the loss of sales if the Company did not
implement changes in a timely manner.
(NOTE K) - Commitments:
- ----------------------
[1] Lease income:
In 1995, the Company entered into an agreement with the City of
New York ("New York") whereby the Company would develop custom software and upon
final acceptance of the software by New York, the Company will initially lease
five kiosks, hardware and software to New York for one year, renewable by New
York for two successive one year terms. The annual rental aggregates $361,080.
Additionally, the Company can earn fees based upon the number of transactions
effectuated in the kiosks. The remaining rent receivable at December 31, 1996
under this agreement is $210,630.
(continued)
F-15
<PAGE>
OBJECTSOFT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(NOTE K) - Commitments: (continued)
- ----------------------
[2] Lease:
The Company leases office space and equipment under operating
leases with an initial or remaining term of more than one year expiring through
2003.
Year Ending
December 31, Amount
------------ ------
1997..................... $ 58,008
1998..................... 77,822
1999..................... 80,494
2000..................... 84,787
2001..................... 89,080
Thereafter 116,984
----------
Total............. $ 507,175
==========
Rent expense approximated $62,500 and $18,300, for the years
ended December 31, 1996 and December 31, 1995, respectively.
[3] Employment agreements:
---------------------
The Company entered into employment agreements with two key
executives expiring in December 2001. Under the terms of the agreements, the
aggregate initial annual compensation is $208,000 per executive. Additionally,
the agreements include provisions for bonuses (aggregating the sum of 5 percent
of earnings before depreciation, interest, taxes and amortization and other
amounts, if any, to be determined by the board of directors), increases in
compensation and severance payment based upon certain events.
(NOTE L) - Subsequent Event:
- ---------------------------
In January 1997, with the approval of the board of directors, the
Company loaned $440,000 to the Company's chairman of the board. The loan which
is unsecured, bears interest at 8% per annum and is due in November 1997. The
chairman of the board used the proceeds for a block purchase of 80,000 shares of
the Company's common stock from the market maker, who was also the underwriter
of the Company's IPO, in an open market transaction.
F-16
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
OBJECTSOFT CORPORATION
I, David E. Y. Sarna, being the duly elected Chairman of OBJECTSOFT
CORPORATION, a Delaware corporation (the "Corporation"), do hereby certify as
follows:
(a) The name of the Corporation is ObjectSoft Corporation.
(b) The Certificate of Incorporation is amended by the addition of
an ARTICLE ELEVENTH, ARTICLE TWELFTH and ARTICLE THIRTEENTH to read as follows:
"ELEVENTH:
(i) At a Meeting of Stockholders in 1996, the directors
shall be divided into two classes, with respect to the time that
they severally hold office, as nearly equal in number as
possible, with the initial term of office of the first class of
directors to expire at the 1997 Annual Meeting of Stockholders
and the initial term of office of the second class of directors
to expire at the 1998 Annual Meeting of Stockholders. Commencing
with the 1997 Annual Meeting of Stockholders, directors elected
to succeed those directors whose terms have thereupon expired
shall be elected for a term of office to expire at the second
succeeding Annual Meeting of Stockholders after their election,
and upon the election and qualification of their successors. If
the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain or
attain, if possible, the equality of the number of directors in
each class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. If such
equality is not possible, the increase or decrease shall be
apportioned among the classes in such a way that the difference
in the number of directors in the classes shall not exceed one.
(ii) Any vacancies in the Board of Directors for any
reason and any newly created directorships resulting by reason
of any increase in the number of directors may be filled only by
the Board of Directors (unless there are no remaining
directors), acting by a majority of the remaining directors then
in office, although less than a quorum, and any directors so
chosen shall hold office until the next election of the class
for which such directors have been chosen and until their
successors are elected and qualified.
(iii) Any director, or the entire Board of Directors,
may be removed from office at any time, but only for cause and
only by the affirmative vote of the holders of at least 75% of
the voting power of all of the shares of capital stock of the
Corporation then entitled to vote generally in the election of
directors, voting together as a single class.
<PAGE>
TWELFTH: Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly
called annual or special meeting of stockholders of the
Corporation and may not be effected by any consent in writing by
such stockholders. Special meetings of stockholders of the
Corporation may be called only by (i) the Board of Directors
pursuant to a resolution adopted by a majority of the entire
Board of Directors, either upon motion of a director or upon
written request by the holders of at least 50% of the voting
power of all the shares of capital stock of the Corporation then
entitled to vote generally in the election of directors, voting
together as a single class or (ii) the chairman of the Board or
the president of the Corporation.
THIRTEENTH: In addition to any requirements of the General
Corporation Law of Delaware (and notwithstanding the fact that a
lesser percentage may be specified by the General Corporation
Law of Delaware), the affirmative vote of the holders of at
least 75% of the voting power of all of the shares of capital
stock of the Corporation then entitled to vote generally in the
election of directors, voting together as a single class, shall
be required for the stockholders of the Corporation to amend,
alter, change, adopt or repeal Article Eleventh, Article Twelfth
or Article Thirteenth hereof."
(c) The Board of Directors of the Corporation has adopted
resolutions by unanimous written consent setting forth the amendment herein
contained, declaring its advisability and providing that such resolutions be
presented for adoption by a vote at an annual meeting by the holders of a
majority of the shares entitled to vote thereon. By a vote at the annual meeting
of the stockholders of a majority of the outstanding shares of the Common Stock
and Series A Preferred Stock of the Corporation voting together, such amendment
has been adopted in accordance with Section 242 of the General Corporation Law
of the State of Delaware.
Signed and attested to on November 14, 1996.
(Corporate Seal)
/s/ David E. Y. Sarna
---------------------------------
David E. Y. Sarna, Chairman
Attest:
/s/ Tania M. Selverian
- ---------------------------------
Tania M. Selverian, Assistant Secretary
AMENDED AND RESTATED
BY-LAWS OF
OBJECTSOFT CORPORATION
(A Delaware Corporation)
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the Corporation
within the State of Delaware shall be in the City of Dover, County of Kent.
Section 2. Other Offices. The Corporation may also have any office or
offices other than said registered office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at any such place,
either within or without the State of Delaware, as shall be designated from time
to time by the Board of Directors and stated in the notice of meeting or in a
duly executed waiver thereof.
Section 2. Annual Meeting. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the state
of Delaware, and at such time and date as the board of directors, by resolution,
shall determine and as set forth in the notice of the meeting. At each annual
meeting, the stockholders entitled to vote shall elect a board of directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.
Section 3. Special Meetings. Special meetings of the stockholders of the
Corporation shall be held on such date, and at such time and place either within
or without the State of Delaware and shall be held only for such purpose or
purposes as may be designated by the President or Chairman of the Board of the
Corporation or the Board of Directors and stated in the notice of the meeting,
in accordance with these By-Laws. Special meetings of stockholders of
<PAGE>
the Corporation may be called only by (i) the Board of Directors pursuant to a
resolution adopted by a majority of the entire Board of Directors, either upon
motion of a director or upon written request by the holders of at least 50% of
the voting power of all the shares of capital stock of the corporation then
entitled to vote generally in the election of directors, voting together as a
single class or (ii) the President or the Chairman of the Board of the
Corporation.
Section 4. Notice of Meetings. Except as otherwise expressly required by
statute, written notice of each annual and special meeting of stockholders
stating the date, place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder of record entitled to vote there at not less than ten nor
more than sixty days before the date of the meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice. Notice shall be given personally or by mail and, if by mail, shall be
sent in a postage prepaid envelope, addressed to the stockholder at his address
as it appears on the records of the Corporation. Notice by mail shall be deemed
given at the time when the same shall be deposited in the United States mail,
postage prepaid. Notice of any meeting shall not be required to be given to any
person who attends such meeting, except when such person attends the meeting in
person or by proxy for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, or who, either before or after the meeting, shall submit a
signed written waiver of notice, in person or by proxy. Neither the business to
be transacted at, nor the purpose of, an annual or special meeting of
stockholders need be specified in any written waiver of notice.
Section 5. List of Stockholders. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before each
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, showing the address of and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city, town or village where the
meeting is to be held, which place shall be specified in the notice of meeting,
or, if not specified, at the place where the meeting is to be held. The list
shall be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum, Adjournments. The holders of a majority of the voting
power of the issued and outstanding stock of the Corporation entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of stockholders, except as
otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented by proxy at any meeting
of stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented by proxy. At such adjourned meeting at which a
quorum shall be present or represented by proxy, any business may
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<PAGE>
be transacted which might have been transacted at the meeting as originally
called. If the adjournment is for more than thirty days, or, if after
adjournment a new record date is set, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 7. Organization. At each meeting of stockholders, the Chairman
of the Board, if one shall have been elected, or, in his absence or if one shall
not have been elected, the President shall act as chairman of the meeting. The
Secretary or, in his absence or inability to act, the person whom the chairman
of the meeting shall appoint secretary of the meeting shall act as secretary of
the meeting and keep the minutes thereof.
Section 8. Order of Business; Proposed Business at Stockholders'
Meeting. The order of business at all meetings of the stockholders shall be as
determined by the chairman of the meeting. No business may be transacted at any
meeting of stockholders, other than business that is either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board (or any duly authorized committee thereof), which shall include any
stockholder proposals contained in the Corporation's proxy statement made in
accordance with Rule 14a-8 of the Securities and Exchange Act of 1934 or any
successor thereto, (b) otherwise properly brought before the meeting by or at
the direction of the Board (or any duly authorized committee thereof) or (c)
otherwise properly brought before the meeting by any stockholder of the
Corporation (i) who is a stockholder of record on the date of such meeting, on
the date of the giving of the notice provided for in this Section, and on the
record date for the determination of stockholders entitled to vote at such
meeting and (ii) who complies with the procedures set forth in these By-Laws. In
addition to any other applicable requirements, for business to be properly
brought before a meeting by a stockholder or for a stockholder to nominate a
nominee for election as a director of the Corporation, such stockholder must
have given timely notice thereof in properly written form to the Secretary of
the Corporation. For business to be properly brought before an Annual Meeting of
stockholders by a stockholder, such stockholder's notice must be delivered to or
mailed and received by the Secretary at the principal executive offices of the
Corporation not less than one hundred-twenty (120) days nor more than one
hundred fifty (150) days prior to the one year anniversary of the date of the
notice of the Annual Meeting of stockholders that was held in the immediately
preceding year; provided, however, that in the event that the month and day of
the Annual Meeting of stockholders to be held in the current year is changed by
more than thirty (30) calendar days from the one year anniversary of the date
the Annual Meeting of stockholders was held in the immediately preceding year,
and less than one hundred-thirty (130) days' informal notice or other prior
public disclosure of the date of the Annual Meeting in the current year is given
or made to stockholders, notice of such proposed business to be brought before
the meeting by the stockholder to be timely must be so received not later than
the close of business on the tenth (10th) day following the day on which formal
or informal notice of the date of the Annual Meeting of stockholders was mailed
or such other public disclosure was made, whichever first occurs. In the case of
any other meeting, to be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the
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<PAGE>
scheduled date of such meeting; provided, however, that in the event that less
than seventy (70) days notice or prior public disclosure of the date of a
meeting other than the Corporation's annual meeting is given or made to
stockholders, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure of the date of the meeting was made, whichever first occurs.
To be in proper written form, such stockholder's notice shall set forth as to
each matter such stockholder proposes to bring before the meeting (i) a brief
and complete description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting, (ii) the
name and business address and residence address of such stockholder, (iii) the
class and number of shares of the Corporation which are owned beneficially and
of record by such stockholder, (iv) any other information relating to such
person or proposal that is required to be disclosed in solicitations of proxies,
or is otherwise required, in each case pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934, (v) any other information that is or
would be required to be disclosed in a Schedule 13D promulgated under the
Securities Exchange Act of 1934 regardless of whether such person would
otherwise be required to file a Schedule 13D, (vi) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names and other information with respect to such person
or persons similar to that provided by such stockholder) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business and (viii) a representation that such stockholder
intends to appear in person or by proxy at the meeting to bring such business
before the meeting. In addition, a person providing notice under this Section
shall supplementally and promptly provide such other information as the
Corporation otherwise requests. No business shall be conducted at the meeting of
the stockholders except business brought before the meeting by a stockholder in
accordance with the procedures set forth in this Section; provided, however,
that, once business has been properly brought before the meeting in accordance
with such procedures, nothing in this Section shall be deemed to preclude
discussion by any stockholder of any such business; provided further, however,
that if the stockholder bringing such matter before the meeting withdraws such
matter, such matter shall no longer be properly before the meeting. The chairman
of a meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with the
procedures prescribed by these By-Laws, and if he should so determine, such
business shall not be transacted.
Section 9. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation, each stockholder of the Corporation shall be
entitled at each meeting of stockholders to one vote for each share of capital
stock of the Corporation standing in his name on the record of stockholders of
the Corporation:
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<PAGE>
(a) on the date fixed pursuant to the provisions of Section 7 of
Article V of these By-Laws as the record date for the determination of the
stockholders who shall be entitled to notice of and to vote at such meeting; or
(b) if no such record date shall have been so fixed, then at the
close of business on the day next preceding the day on which notice thereof
shall be given, or, if notice is waived, at the close of business on the date
next preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for him by a proxy signed by such stockholder
or his attorney-in-fact, but no proxy shall be voted after three years from its
date, unless the proxy provides for a longer period. Any such proxy shall be
delivered to the secretary of the meeting at or prior to the time designated in
the order of business for so delivering such proxies. When a quorum is present
at any meeting, the vote of the holders of a majority of the voting power of the
issued and outstanding stock of the Corporation entitled to vote thereon,
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of statute or of the Certificate of Incorporation or of these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question. Unless required by statute, or
determined by the chairman of the meeting to be advisable, the vote on any
question need not be by ballot. On a vote by ballot, each ballot shall be signed
by the stockholder voting, or by his proxy, if there by such proxy, and shall
state the number of shares voted.
Section 10. Inspectors. The Board of Directors may, in advance of
any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If any of the inspectors so appointed shall
fail to appear or act, the chairman of the meeting shall, or if inspectors shall
not have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the results, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as an inspector of an election of directors. Inspectors
need not be stockholders.
Section 11. Action by Consent. Any action required or permitted to be
taken by the stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and may not be
effected by any consent in writing by such stockholders.
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<PAGE>
ARTICLE III
Board of Directors
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. The Board
of Directors may exercise all such authority and powers of the Corporation and
do all such lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
Section 2. Number, Classification, Qualifications, Election and Term of
Office. The number of directors constituting the initial Board of Directors
shall be not less than three (3) nor more than seven (7). Thereafter, the number
of directors may be fixed, from time to time, by the affirmative vote of a
majority of the entire Board of Directors or by action of the stockholders of
the Corporation. Any decrease in the number of directors shall be effective at
the time of the next succeeding annual meeting of stockholders unless there
shall be vacancies in the Board of Directors, in which case such decrease may
become effective at any time prior to the next succeeding annual meeting to the
extent of the number of such vacancies. Directors need not be stockholders.
Except as otherwise provided by statute or these By-Laws, the directors (other
than members of the initial Board of Directors) shall be elected at the annual
meeting of stockholders. Each director shall hold office until his successor
shall have been elected and qualified, or until his death, or until he shall
have resigned, or have been removed, as hereinafter provided in these By-Laws.
The Directors shall be classified with respect to the time during which they
shall severally hold office by dividing them into two (2) classes, as provided
in the Certificate of Incorporation, each such class to be as nearly equal in
number as the then total number of Directors constituting the entire Board
permits. At a Meeting of Stockholders in 1996, the directors shall be divided
into two classes (designated Class I and Class II), with respect to the time
that they severally hold office, as nearly equal in number as possible, with the
initial term of office of the Class I directors to expire at the 1997 Annual
Meeting of Stockholders and the initial term of office of the Class II directors
to expire at the 1998 Annual Meeting of Stockholders. Commencing with the 1997
Annual Meeting of Stockholders, directors elected to succeed those directors
whose terms have thereupon expired shall be elected for a term of office to
expire at the second succeeding Annual Meeting of Stockholders after their
election (so that the term of office of one class of Directors shall expire in
each year), and upon the election and qualification of their successors. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain or attain, if possible, the equality of the
number of directors in each class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. If such equality is not
possible, the increase or decrease shall be apportioned among the classes in
such a way that the difference in the number of directors in the classes shall
not exceed one. Any Directors elected by holders of any preferred stock of the
Corporation voting as a separate class or series under any provisions of the
Certificate of Incorporation or Certificate of Designation establishing such
series shall be classified so that all additional Directors
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<PAGE>
are so apportioned among the classes as to make all the classes as nearly equal
in number as possible. Notwithstanding anything herein to the contrary, the term
of office of any Director elected by any holders of the Corporation's preferred
stock voting as a separate class or series shall terminate as provided in the
Certificate of Incorporation or Certificate of Designation establishing such
series, notwithstanding the fact that the term of the other members of any class
in which any such Director is included has not yet expired.
Section 3. Place of Meetings. Meetings of the Board of Directors shall
be held at such place or places, within or without the State of Delaware, as the
Board of Directors may from time to time determine or as shall be specified in
the notice of any such meeting.
Section 4. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholder, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
other time or place (within or without the State of Delaware) as shall be
specified in a notice thereof given as hereinafter provided in Section 7 of this
Article III.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and place as the Board of Directors may fix. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board of Directors need not be given except as
otherwise required by statute or these By-Laws.
Section 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, if one shall have been elected, or
by two or more directors of the Corporation or by the President.
Section 7. Notice of Meetings. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 7, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be mailed, postage
prepaid, to each director, addressed to him at his residence or usual place of
business, by first class mail, at least two days before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
telegraph, cable, telex, telecopier or other similar means, or be delivered to
him personally or be given to him by telephone or other similar means, at least
twenty-four hours before the time at which such meeting is to be held. Notice of
any such meeting need not be given to any director who shall attend such
meeting, except when he shall attend for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
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<PAGE>
Section 8. Quorum and Manner of Action. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these By-Laws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat
may adjourn such meeting to another time and place. Notice of the time and place
of any such adjourned meeting shall be given to all of the directors unless such
time and place were announced at the meeting at which the adjournment was taken,
in which case such notice shall only be given to the directors who were not
present thereat. At any adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and the individual
directors shall have no power as such.
Section 9. Organization. At each meeting of the Board of Directors, the
Chairman of the Board, if one shall have been elected, or, in the absence of the
Chairman of the Board or if one shall not have been elected, the President (or,
in his absence, another director chosen by a majority of the directors present)
shall act as chairman of the meeting and preside thereat. The Secretary or, in
his absence, any person appointed by the chairman shall act as secretary of the
meeting and keep the minutes thereof.
Section 10. Resignations. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 11. Vacancies. Any vacancies in the Board of Directors for any
reason and any newly created directorships resulting by reason of any increase
in the number of directors may be filled only by the Board of Directors (unless
there are no remaining directors), acting by a majority of the remaining
directors then in office, although less than a quorum; provided, however, that
if there are no directors then in office due to a vacancy the stockholders may
elect a successor, and any directors so chosen shall hold office until the next
election of the class for which such directors have been chosen and until their
successors are elected and qualified.
Section 12. Removal of Directors. Any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 75% of the voting power of
all of the shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class.
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Section 13. Compensation. The Board of Directors shall have authority to
fix the compensation, including fees and reimbursement of expenses, of directors
for services to the Corporation in their capacity as directors or otherwise.
Section 14. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
addition, in the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting are not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Each such committee shall serve at the
pleasure of the Board of Directors and have such name as may be determined from
time to time by resolution adopted by the Board of Directors. Each committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors.
Except to the extent restricted by statute or the Certificate of
Incorporation, any committee, to the extent provided in the resolution of the
Board of Directors, or in these ByLaws, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers that may require it.
Section 15. Action by Consent. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board of Directors or such committee, as the case may be.
Section 16. Telephonic Meeting. Unless restricted by the Certificate of
Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting.
Section 17. Contracts and Transactions Involving Directors. No contract
or transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the
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<PAGE>
contract or transaction, or solely because his, her or their votes are counted
for such purpose, if: (1) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a majority of
the disinterested directors, even though the disinterested directors be less
than a quorum; or (2) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IV
Officers
Section 1. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors or the stockholders and shall include
the President, one or more Vice-Presidents, the Secretary and the Treasurer. If
the Board of Directors or the stockholders wish, either may also elect as an
officer of the Corporation a Chairman of the Board and may elect other officers
(including one or more Assistant Treasurers and one or more Assistant
Secretaries) as may be necessary or desirable for the business of the
Corporation. Any two or more offices may be held by the same person, and no
officer except the Chairman of the Board need be a director. Each officer shall
hold office until his successor shall have been duly elected and shall have
qualified, or until his death, or until he shall have resigned or have been
removed, as hereinafter provided in these By-Laws.
Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein, immediately
upon receipt. Unless otherwise specified therein, the acceptance of any such
resignation shall not be necessary to make it effective.
Section 3. Removal. Any officer of the Corporation may be removed,
either with or without cause, at any time by the Board of Directors at any
meeting thereof. Such removal shall be without prejudice to a person's contract
rights, if any, but the election as an officer of the Corporation shall not of
itself create contract rights.
Section 4. Chairman of the Board. The Chairman of the Board, if one
shall have been elected, shall be a member of the Board, an officer of the
Corporation and, if present, shall preside at each meeting of the Board of
Directors or the stockholders. He shall advise and counsel with the President,
and in the President's absence (or if designated by the Board of Directors as
the co-chief executive officer of the Corporation with the President) with other
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executives of the Corporation, and shall perform such other duties as may from
time to time be assigned to him by the Board of Directors, including but not
limited to those of co-chief executive officer.
Section 5. The President. The President shall be the chief executive
officer of the Corporation (or, if so designated by the Board of Directors, the
co-chief executive officer with the Chairman). He shall, in the absence of the
Chairman of the Board or if a Chairman of the Board shall not have been elected,
preside at each meeting of the Board of Directors or the stockholders. He shall
have general charge of the business affairs of the Corporation. He may employ or
discharge employees and agents of the Corporation, except such as shall be
appointed by the Board of Directors, and he or she may delegate these powers.
The Board of Directors by resolution from time to time may confer like powers
upon any other person or persons. He shall have the power to appoint any person
to the office of Assistant Secretary of the Corporation, without approval by the
Board of Directors or Assistant Treasurer as he shall determine to be in the
best interests of the Corporation. The President shall perform such other duties
incident to the office of President and chief executive officer and any other
duties as may from time to time be assigned to him by the Board of Directors.
Section 6. Vice-President. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Board of Directors or
the President. At the request of the President or in his absence or in the event
of his inability or refusal to act, the Vice-President, or if there shall be
more than one, the Vice-Presidents in the order determined by the Board of
Directors (or if there be no such determination, then the Vice-Presidents in the
order of their election), shall perform the duties of the President, and, when
so acting, shall have the powers of and be subject to the restrictions placed
upon the President in respect of the performance of such duties.
Section 7. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the
funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositories as may be designated by the Board of Directors
or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
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<PAGE>
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of
Directors may require, an account of the financial condition of the Corporation;
and
(g) in general, perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board of Directors.
Section 8. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the committees
of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a facsimile,
as hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors.
Section 9. The Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by
either the President or the Board of Directors (or if there be no such
determination, then in the order of their election), shall, in the absence or of
the Treasurer or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties as from time to time may be assigned by the President or the Board of
Directors.
Section 10. The Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by
either the President or the Board of Directors (or if there be no such
determination, then in the order of their election), shall, in the absence of
the Secretary or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties as from time to time may be assigned by the President or the Board of
Directors.
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<PAGE>
Section 11. Delegation of Duties. In case of the absence of any officer
of the Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may confer for the time being the powers or
duties, or any of them, of such officer upon any other officer or upon any
directors.
Section 12. Officers' Bonds or Other Security. If required by the Board
of Directors, any officer of the Corporation shall give a bond or other security
for the faithful performance of this duties, in such amount and with such surety
as the Board of Directors may require.
Section 13. Compensation. The compensation of the Officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An Officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he is also a director of
the Corporation.
Section 14. Loans to Officers and Employees; Guaranty of Obligations of
Officers and Employees. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or any subsidiary, including any officer or employee who is a
director of the Corporation or any subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or other assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the Board
of Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation.
ARTICLE V
Stock Certificates and Their Transfer
Section 1. Stock Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the Chairman of the Board or the President or a Vice-President
and by the Treasurer or an Assistant-Treasurer or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by him in
the Corporation. If the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, or in lieu of the foregoing,
such certificate shall contain a statement that the Corporation will furnish
without charge to each stockholder who so requests the designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series hereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
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<PAGE>
Section 2. Facsimile Signatures. Any of or all the signatures on a
certificate may be a facsimile. In case any Officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct sufficient to indemnify it
against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
Section 4. Transfers of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
Section 5. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
Section 6. Regulations. The Board of Directors may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
Section 7. Fixing the Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. A determination of
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<PAGE>
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
If no record date is fixed by the Board of Directors, (1) the record
date for determining stockholders entitled to notice of or to vote at a meeting
stockholders shall be at the close of business on the day next preceding the
date on which notice is given, or, if notice is waived by all stockholders
entitled to vote at the meeting, at the close of business on the day next
preceding the day on which the meeting is held, (2) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be at the close of business on the day on which the first
written consent is expressed by the filing thereof with the Corporation as
provided in Section 1.9 of these By-Laws, and (3) the record date for
determining stockholders for any other purpose shall be at the close of business
of the day on which the Board of Directors adopts the resolution relating
thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholder shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 8. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its records as the owner
of shares of stock to receive dividends and to vote as such owner, shall be
entitled to hold liable for calls and assessments a person registered on its
records as the owner of shares of stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares of stock on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VI
Indemnification of Directors and Officers
Section 1. General. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any
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<PAGE>
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendre or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 3. Indemnification in Certain Cases. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 1 and 2 of this Article VI, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 4. Procedure. Any indemnification under Sections 1 and 2 of this
Article VI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in such Sections 1 and 2.
Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
Section 5. Advances for Expenses. Expenses incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or
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<PAGE>
agent to repay such amount unless it shall be ultimately determined that he is
entitled to be indemnified by the Corporation as authorized in this Article VI.
Section 6. Rights Not Exclusive. The indemnification provided by this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 7. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VI.
Section 8. Definition of Corporation. For the purposes of this Article
VI, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a, director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another, corporation, partnership, joint venture, trust or other enterprise
shall stand in the same position under the provisions of this Article VI with
respect to the resulting or surviving corporation as he would if he had served
the resulting or surviving corporation in the same capacity.
Section 9. Definitions. For purposes of this Article VI, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article VI.
ARTICLE VII
General Provisions
Section 1. Dividends. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by
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the Board of Directors at any regular or special meeting. Dividends may be paid
in cash, in property or in shares of stock of the Corporation, unless otherwise
provided by statute or the Certificate of Incorporation.
Section 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of' Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may modify
or abolish any such reserves in the manner in which it was created.
Section 3. Seal. The seal of the Corporation shall be in such form as
shall be approved by the Board of Directors.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
Section 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
Section 6. Execution of Contracts, Deeds, Etc. The Board of Directors
may authorize any officer or officers, agent or agents, in the name and on
behalf of the Corporation, to enter into or execute and deliver any and all
deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
Section 7. Voting of Stock in Other Corporations. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board or
the President or the Secretary, from time to time, may (or may appoint one or
more attorneys or agents and delegate to them the powers requisite to) cast the
votes which the Corporation may be entitled to cast as a shareholder or
otherwise in any other corporation, or may execute any stockholders' or other
consents in respect thereof, any of whose shares or securities may be held by
the Corporation, at meetings of the holders of the shares or other securities of
such other corporation. In the event one or more attorneys or agents are
appointed, the Chairman of the Board or the President or the Secretary may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent. The Chairman of the Board or the President or the
Secretary may, or may instruct the attorneys or agents appointed to, execute or
cause to be executed in the name and on behalf of the Corporation and under its
seal or otherwise, such written proxies, consents, waivers or other instruments
as may be necessary or proper in the circumstances.
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<PAGE>
ARTICLE VIII
Amendments
These By-Laws may be amended or repealed or new bylaws adopted (a) by
action of the stockholders entitled to vote thereon at any annual or special
meeting of stockholders or (b) if the Certificate of Incorporation so provides,
by action of the Board of Directors at a regular or special meeting thereof. Any
by-law made by the Board of Directors may be amended or repealed by action of
the stockholders at any annual or special meeting of stockholders.
Notwithstanding the foregoing, in addition to any requirements of the General
Corporation Law of Delaware (and notwithstanding the fact that a lesser
percentage may be specified by the General Corporation Law of Delaware), the
affirmative vote of the holders of at least 75% of the voting power of all of
the shares of capital stock of the Corporation then entitled to vote generally
in the election of directors, voting together as a single class, shall be
required for the stockholders of the Corporation to amend, alter, change, adopt
or repeal Article Eleventh, Article Twelfth or Article Thirteenth of the
Certificate of Incorporation.
ARTICLE IX
Emergency By-Laws
Section 1. Emergency By-Laws. The Emergency By-Laws provided in this
Section 9.1 shall be operative during any emergency in the conduct of the
business of the corporation resulting from an attack on the United States or on
a locality in which the corporation conducts its business or customarily holds
meetings of its Board of Directors or its stockholders, or during any nuclear or
atomic disaster, or during the existence of any catastrophe, or other similar
emergency condition, as a result of which a quorum of the Board of Directors or
a standing committee thereof cannot readily be convened for action
notwithstanding any different provision in the preceding By-Laws or in the
Certificate of Incorporation or in the law. To the extent not inconsistent with
the provisions of this Section, the By-Laws of the Corporation shall remain in
effect during any emergency and upon its termination the Emergency By-Laws shall
cease to be operative. Any amendments of these Emergency By-Laws may make any
further or different provision that may be practical and necessary for the
circumstances of the emergency.
During any such emergency: (A) A meeting of the Board of Directors or a
committee thereof may be called by any officer or director of the Corporation.
Notice of the time and place of the meeting shall be given by the person calling
the meeting to such of the directors as it may be feasible to reach by any
available means of communication. Such notice shall be given at such time in
advance of the meeting as circumstances permit in the judgment of the person
calling the meeting; (B) The director or directors in attendance at the meeting
shall constitute a quorum; (C) The officers or other persons designated on a
list approved by the Board of Directors before the emergency, all in such order
of priority and subject to such conditions and for such period of time (not
longer than reasonably necessary after the termination of the emergency) as may
be provided in the resolution approving the list, shall, to the extent required
to provide a quorum at any
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<PAGE>
meeting of the Board of Directors, be deemed directors for such meeting; (D) The
Board of Directors, either before or during any such emergency, may provide, and
from time to time modify, lines of succession in the event that during such
emergency any or all officers or agents of the Corporation shall for any reason
be rendered incapable of discharging their duties; (E) The Board of Directors,
either before or during any such emergency, may, effective in the emergency,
change the head office or designate several alternative head offices or regional
offices, or authorize the officers to do so; and (F) To the extent required to
constitute a quorum at any meeting of the Board of Directors during such an
emergency, the officers of the Corporation who are present shall be deemed, in
order of rank and within the same rank in order of seniority, directors for such
meeting.
No officer, director or employee acting in accordance with any Emergency
By-Laws shall be liable except for willful misconduct.
These Emergency By-Laws shall be subject to repeal or change by further
action of the Board of Directors or by action of the stockholders.
- 20 -
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