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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-13524
TIMELINE, INC.
(Exact name of small business issuer as specified in its charter)
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<S> <C>
WASHINGTON 91-1590734
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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3055 112TH AVENUE N.E., STE. 106
BELLEVUE, WA 98004
(Address of principal executive offices)
(206) 822-3140
(Issuer's telephone number)
Securities registered under Section 12(b)
of the Exchange Act: COMMON STOCK, $.01 PAR VALUE
WARRANTS TO PURCHASE COMMON STOCK
Securities registered under Section 12(g)
of the Exchange Act: (none)
PURPOSE OF AMENDMENT
Item 13(a) of Part III of Issuer's report on Form 10-KSB for the fiscal year
ended March 31, 1996 is amended to read in its entirety as set forth herein.
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This filing consists of four documents. Exhibits filed herewith are listed on
page 2 of Document 1.
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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EXHIBIT
NUMBER DESCRIPTION
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2.1* Articles of Merger of Timeline Services, Inc. into
Timeline, Inc.
3.1* Articles of Incorporation, as amended and in effect
3.2* Bylaws
4.1* Specimen Common Stock Certificate
4.2* Form of Warrant Agreement with Representative and
Warrant Agent
4.3* Form of Representative's Warrant
4.4* Specimen Redeemable Common Stock Purchase Warrant
10.1.A* Amended and Restated 1993 Stock Option Plan
10.1.B* Form of Employee Stock Option Agreement
10.5* 1994 Stock Option Plan
10.6* Directors' Nonqualified Stock Option Plan
Common Stock Purchase Warrants issued in
consideration of loans or loan guarantees:
10.8.A* Warrant issued July 31, 1994 to Frederick W. Dean
10.8.B* Warrant issued July 31, 1994 to Charles R. Osenbaugh
10.8.C* Warrant issued July 31, 1994 to John W. Calahan
10.8.D* Warrant issued July 31, 1994 to Michael R. Hallman
Employment Agreements
10.9.A* Form of Employment Agreement with John W. Calahan
10.9.B* Form of Employment Agreement with David B. Kouchi
10.9.C* Form of Employment Agreement with Donald K. Babcock
10.11* Form of Indemnification Agreement with directors and
officers
10.12* Form of Lock-up Agreement with securityholders
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10.13* Form of Employee (Confidentiality) Agreement
10.14* Form of License Agreement for Computer Application
Software (client/server)
10.15* Form of License Agreement for Computer Application
Software (VAX-based)
10.16* Form of Basic Service for Software Agreement
10.17* Form of Value Added Reseller (Distribution) Agreement
10.18.A* Solution Provider Agreement with Microsoft
Corporation dated September 23, 1994
10.19* Letter of Intent effective as of September 29, 1994
with Centre-file Limited
10.20* Private Label Software Development and Distribution
Agreement dated January 7, 1994 with
CompuServe/Collier-Jackson
10.21* U.S. Patent and Trademark Office Notice of Allowance
(Serial No. 08/162,839 [3/28/94])
10.22* Lease Agreement dated July 7, 1986, as amended, with
G&W Investment Partners, successor lessor under the
Agreement initially entered into with The Mutual
Life Insurance Company of New York
10.23** Value Added Reseller Agreement with K2 Group plc,
effective as of December 31, 1994
10.24*** Form of Consulting Partners Agreement
10.25*** Software Distribution Agreement with Centre-file
Limited dated April 28, 1995
10.26 Form of Stock Purchase Agreement dated May 1996
10.27 Form of Stock Purchase Warrant issued to Pacific
Crest Securities
11.1*** Statement re: computation of per share earnings
21.1* Subsidiary of Timeline, Inc.
27.1 Financial Data Schedule
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*Incorporated herein by reference from Item 27 of Registrant's Form SB-2.
**Incorporated herein by reference from Item 6(a) of Registrant's Form 10-QSB
for the quarter ended December 31, 1994 (therein listed as Exhibit 10.1).
***Incorporated herein by reference from Item 13 of Registrant's Form 10-KSB for
the year ended March 31, 1995.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this amendment to be signed on its behalf by the undersigned, thereunto
duly authorized.
Timeline, Inc.
By: /s/ John W. Calahan
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John W. Calahan, President
Dated: August 1, 1996
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
dates indicated.
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Signature Capacities Date
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/s/ John W. Calahan Director August 1, 1996
- -------------------------------------------- President
John W. Calahan Chief Executive Officer
/s/ Donald K. Babcock Director August 1, 1996
- -------------------------------------------- Senior Technologist
Donald K. Babcock
/s/ Charles R. Osenbaugh Director August 1, 1996
- -------------------------------------------- Chief Financial Officer
Charles R. Osenbaugh Executive Vice President
Treasurer and Secretary
(principal accounting officer)
Director August , 1996
- --------------------------------------------
Michael R. Hallman
Director August , 1996
- --------------------------------------------
Kent L. Johnson
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TIMELINE, INC.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of May
_____, 1996 by and among Timeline, Inc., a Washington corporation (the
"Company"), with its principal office at 3055 - 112th Avenue NE, Suite 106,
Bellevue, Washington 98004, and the persons listed on the Schedule of Purchasers
attached hereto as Exhibit A (the "Purchasers").
Section 1
Definitions; Authorization; Sale of Common Shares,
and Description of Common Shares
1.1 Definitions. The "Common Shares" are defined herein as the Five
Hundred Ten Thousand Two Hundred Four (510,204) shares of common stock, at a par
value of $0.01 per share, to be issued by the Company as part of a private
placement which is expected to close in May 1996 (the "Private Placement").
1.2 Authorization. The Company is authorized to issue Twenty Million
(20,000,000) shares of common stock at a par value of $0.01 per share (the
"Common Stock").
1.3 Sale of Common Shares. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to the Purchasers and the
Purchasers agree to purchase from the Company the number of Common Stock
specified on the attached Exhibit A.
1.4 Description of Common Shares. The Common Shares have the following
characteristics, all of which are set forth in the Company's Articles of
Incorporation, a copy of which is attached hereto as Exhibit B: (a) Conversion
Rights: Holders of Common Shares have no rights to convert their Common Shares
into any other security; (b) Dividends: Holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Company's Board of
Directors, subject to preferential rights of any outstanding preferred stock;
(c) Liquidation Preference: In the event of a liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share ratably
all assets remaining after payment of liabilities and the liquidation preference
of any outstanding preferred stock of the Company; (d) Voting Rights: The
holders of Common Stock are entitled to one vote for each share of record on all
matters submitted to a vote of the shareholders; (e) Registration Rights: The
Company shall file a registration statement for the Common Shares to be issued
as part of the private placement, and shall utilize its best efforts to complete
the registration process within ninety (90) days of closing of the Private
Placement (see Section 5.2).
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Section 2
Closing Date: Delivery
2.1 Closing Date. The closing of the purchase and sale of the Stock
(the "Closing") shall be held at the offices of Pacific Crest Securities, 111 SW
Fifth Avenue, 42nd Floor, Portland, Oregon 97204, at 10:00 a.m., May _____,
1996, or at such other time and place as the Company and the holders of a
majority of the Common Shares shall agree. The date of the Closing is
hereinafter referred to as the "Closing Date".
2.2 Delivery. At the Closing, the Company will deliver to each
Purchaser a certificate, registered in the Purchasers's name and address as
shown on Exhibit A, representing the number of Common Shares to be purchased by
such Purchaser. Such delivery shall be against payment of the purchase price
therefor by check or wire transfer to the Company's bank account in the amount
specified on the attached Exhibit A.
Section 3
Representations and Warranties of the Company
The Company represents and warrants to the Purchasers as of the Closing
Date as follows:
3.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Washington, and is in good standing as a domestic corporation under the laws of
said state.
3.2 Corporate Power and Authorization. The Company has all requisite
legal and corporate power and has taken all requisite corporate action to
execute and deliver this Agreement, to sell and issue the Common Shares and to
carry out and perform all of its obligations under this Agreement. This
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except (a) as rights to
indemnification and contribution hereunder may be limited by applicable law,
equitable principals or public policy, (b) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and (c) as limited by equitable
principles generally. The execution and delivery of this Agreement does not, and
the performance of this Agreement and the compliance with the provisions hereof
and the issuance, sale and delivery of the Common Shares by the Company will not
materially conflict with, or result in a material breach or violation of the
terms, conditions or provisions of, or constitute a material default under, or
result in the creation or imposition of any material lien pursuant to the terms
of, the Articles or Bylaws of the Company or any statute, law, rule or
regulation or any state or federal order, judgment or decree or any indenture,
mortgage, lease or other material agreement or instrument to which the Company
or any of its properties is subject.
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3.3 Issuance and Delivery of the Common Shares. The Common Shares when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable. The issuance and delivery of the Common
Shares is not subject to preemptive or any other similar rights of the
shareholders of the Company or any liens or encumbrances.
3.4 SEC Documents; No Material Adverse Change. The Company has filed in
a timely manner all documents that the Company was required to file with the SEC
under Sections 13, 14(a) and 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), during the twelve (12) months preceding the date
of this Agreement. As of their respective filing dates, all documents filed by
the Company with the SEC (the "SEC Documents") complied in all material respects
with the requirements of the Exchange Act or the Securities Act of 1933, as
amended (the "Securities Act"), as applicable. None of the SEC Documents as of
their respective dates included an untrue statement of material fact or omitted
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Except as previously disclosed to the Purchasers, since the date of the
financial statements in the most recent SEC Documents, there have not been any
changes in the assets, liabilities, financial condition, business prospects or
operations of the Company from that reflected in financial statements contained
in the SEC Documents, except changes in the ordinary course of business which
have not had a material adverse effect on the Company and its subsidiaries
considered as one enterprise.
3.5 NASDAQ and Boston Common Shares Exchange Listing. The Company's
common stock is traded on the NASDAQ Small-Cap Market and is listed on the
Boston Stock Exchange. The Company will use its reasonable best efforts to
maintain the qualification of its common stock for trading on the NASDAQ
Small-Cap Market and listing on the Boston Stock Exchange.
Section 4
Representation, Warranties and Covenants of the Purchasers
4.1 Authorization. Purchasers have all requisite legal power and
capacity and have taken all requisite action to execute and deliver this
Agreement, to purchase the Common Shares to be purchased by them and to carry
out and perform all of obligations under this Agreement. This Agreement
constitutes the legal, valid and binding obligation of the Purchasers,
enforceable in accordance with its terms, except (a) as rights to
indemnification and contribution hereunder may be limited by applicable law,
equitable principals or public policy, (b) as limited by applicable bankruptcy,
insolvency, reorganization, or similar laws relating to or affecting the
enforcement of creditors' rights generally and (c) as limited by equitable
principles generally.
4.2 Investment Experience. Purchasers are "accredited investors" as
defined in Rule 501(a) under the Securities Act. Purchasers are aware of the
Company's business affairs and financial condition and have had access to and
has acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Common Shares. Purchasers have such
business and financial experience as is required to give them the capacity to
protect their own interests in connection with the purchase of the Shares.
Purchasers are not "brokers" or a "dealers" as such terms are defined in the
Exchange Act.
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4.3 Investment Intent. Purchasers are purchasing the Common Shares for
their own account as principal for investment purposes only, and not with a
present view to, or for, resale, distribution or fractionalization thereof, in
whole or in part, within the meaning of the Securities Act. Purchasers
understand that their acquisition of the Common Shares has not been registered
under the Securities Act or registered or qualified under any state securities
law in reliance on specific exemptions therefrom, which exemptions may depend
upon, among other things, the bona fide nature of Purchasers' investment intent
as expressed herein. Purchasers have, in connection with their decision to
purchase the Common Shares, relied solely upon the SEC Documents and the
representations and warranties of the Company contained herein. Purchasers will
not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose
of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Common Shares, except in compliance with the Securities Act and
the rules and regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchasers further
acknowledge and understand that the Common Shares may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available. Purchasers understand
that the certificate(s) evidencing the Common Shares will be imprinted with a
legend that prohibits the transfer of the Common Shares unless (a) such
transaction is registered, or (b) an opinion reasonably satisfactory to the
Company of counsel reasonably satisfactory to the Company is obtained to the
effect that the transaction is so exempt.
4.5 No Legal, Tax or Investment Advice. Purchasers understand that
nothing in this Agreement or any other materials presented to Purchasers in
connection with the purchase and sale of the Common Shares constitutes legal,
tax or investment advice. Purchasers have consulted such legal, tax and
investment advisors as they, in their sole discretion, have deemed necessary or
appropriate in connection with their purchase of the Common Shares.
Section 5
Affirmative Covenants of the Company
The Company hereby covenants and agrees as follows:
5.1 Financial Information. During the period of time in which the
Purchasers hold the Common Shares, the Company shall mail the following reports
to the Purchasers:
(a) Within one hundred (100) days after the end of each fiscal
year, a copy of its Annual Report on Form 10-K.
(b) Within fifty-five (55) days after the end of the first,
second and third quarterly accounting periods of each fiscal year of the
Company, a copy of its Quarterly Report on Form 10-Q.
(c) Within ten (10) days after the Company files any Current
Report on Form 8-K with the SEC, such Current Report on Form 8-K.
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5.2 Registration Rights.
(a) Not later than the date which is thirty (30) days after
the Closing Date hereof, the Company shall prepare and file a registration
statement (the "Registration Statement") with the SEC under the Securities Act
to register the resale of the Common Shares by the Purchasers and thereafter
shall use its reasonable best efforts to secure effectiveness of such
Registration Statement within ninety (90) days after the Closing Date.
(b) The Company shall pay all Registration Expenses (as
defined below) in connection with any registration, qualification or compliance
hereunder, and each Purchaser shall pay all of its respective Selling Expenses
(as defined below) and other expenses that are not Registration Expenses
relating to the Common Shares resold by such Purchasers. "Registration Expenses"
shall mean all expenses, except for Selling Expenses, incurred by the Company in
complying with the registration provisions herein described, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses and the expense of any special audits incident to or required by
any such registration. "Selling Expenses" shall mean all selling commissions,
underwriting fees and stock transfer taxes applicable to the Common Shares and
all fees and disbursements of counsel for any Purchasers.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its reasonable
best efforts to: (i) keep such registration effective until the earlier of (A)
the third anniversary of the date hereof, (B) such date as all of the Common
Shares have been resold or (C) such time as all of the Common Shares held by the
Purchasers can be sold within a given three-month period without compliance with
the registration requirements of the Securities Act pursuant to Rule 144
promulgated thereunder ("Rule 144"); (ii) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus used
in connection with the Registration Statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
Common Shares covered by the Registration Statement; (iii) furnish such number
of prospectuses and other documents incident thereto, including any amendment of
or supplement to the prospectus, as a Purchaser from time to time may reasonably
request; (iv) cause the Common Shares to be listed on each securities exchange
and quoted on each quotation service on which similar securities issued by the
Company are then listed or quoted; (v) provide a transfer agent and registrar
for all Common Shares registered pursuant to the Registration Statement and a
CUSIP number for all such Common Shares; (vi) comply with all applicable rules
and regulations of the SEC; and (vii) file the documents required of the Company
and otherwise use its reasonable best efforts to maintain requisite blue sky
clearance in (X) all jurisdictions in which any of the Common Shares are
originally sold and (Y) all other states specified in writing by a Purchaser,
provided, however, that, as to clause (Y), the Company shall not be required to
qualify to do business or consent to service of process in any state in which it
is not now so qualified or has not so consented.
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(d) The Company shall furnish to each Purchaser upon request a
reasonable number of copies of a supplement to or an amendment of the prospectus
used in connection with the Registration Statement as may be necessary in order
to facilitate the public sale or other disposition of all or any of the Common
Shares held by the Purchasers.
(e) With a view to making available to the Purchasers the
benefits of Rule 144 and any other rule or regulation of the SEC that may at any
time permit a Purchaser to sell Common Shares to the public without registration
or pursuant to a registration statement on Form S-3, the Company covenants and
agrees to use its reasonable best efforts to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) the third anniversary of the date hereof or (B) such
date as all of the Common Shares shall have been resold; (ii) file with the SEC
in a timely manner all reports and other documents required of the Company under
the Securities Act and Exchange Act; and (iii) furnish to any Purchaser upon
request, as long as the Purchaser owns any Common Shares, (A) a written
statement by the Company that it has complied with the reporting requirements of
the Securities Act and the Exchange Act, (B) a copy of the most recent annual or
quarterly report of the Company, and (C) such other information as may be
reasonably requested in order to avail any Purchaser of any rule or regulation
of the SEC that permits the selling of any such Common Shares without
registration or pursuant to such registration statement on Form S-3.
(f) If, at any time, the Company delivers a certificate in
writing to the Purchasers to the effect that a delay in a sale of Common Shares
pursuant to the Registration Statement in its then current form is necessary
because a sale pursuant to such Registration Statement would not be in the best
interests of the Company and its shareholders due to disclosure obligations of
the Company, the Company may refuse to permit the Purchasers to resell any
Common Shares pursuant to the Registration Statement for an initial period not
to exceed thirty (30) days from the date of such certificate. If the Company
shall exercise its right to refuse to permit the Purchasers to resell any Common
Shares, the Company shall use its reasonable best efforts to amend the
Registration Statement if such amendment is necessary to allow such sale, and to
take all other actions necessary to allow such sale, and shall notify the
Purchasers promptly after it has determined that sales pursuant to the
Registration Statement have become permissible. Notwithstanding the foregoing,
the Company shall not be entitled to exercise its right to withdraw the
registration statement more than three (3) times in any calendar year or for
more than two consecutive thirty (30) day periods in any calendar year. Each
Purchaser hereby covenants and agrees that it will not sell any Common Shares
pursuant to the Registration Statement during the periods the Registration
Statement is withdrawn as set forth in this Section 5.2(f).
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5.3 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Purchaser from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which such Purchaser may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement of a material fact contained in a
Registration Statement prepared pursuant to Section 5.2, on the effective date
thereof, or arise out of any failure by the Company to fulfill any undertaking
included in the Registration Statement, and the Company will, as incurred,
reimburse such Purchaser for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon (i) an untrue statement made in such Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Purchaser specifically for use in preparation of
the Registration Statement, (ii) the failure of such Purchaser to comply with
the representations, warranties, covenants and agreements contained in Sections
4 and 6.3 hereof, or (iii) any untrue statement in any Prospectus that is
corrected in any subsequent Prospectus that was delivered to the Purchasers
prior to the pertinent sale or sales by the Purchasers.
(b) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
the Company may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon (i) an untrue statement made in
such Registration Statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Purchaser
specifically for use in preparation of the Registration Statement, provided,
however, that no Purchaser shall be liable in any such case for any untrue
statement included in any Prospectus which statement has been corrected, in
writing, by such Purchaser and delivered to the Company before the sale from
which such loss occurred, (ii) the failure of such Purchaser to comply with the
representations, warranties, covenants and agreements contained in Sections 4
and 6.3 hereof, or (iii) any untrue statement in any prospectus that is
corrected in any subsequent Prospectus that was delivered to the Purchaser prior
to the pertinent sale or sales by the Purchaser, and each Purchaser, severally
and not jointly, will, as incurred, reimburse the Company for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Section 5.3,
such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying
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person's election to assume the defense thereof, the indemnifying person shall
not be liable to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the defense thereof,
provided, however, that if there exists or shall exist a conflict of interest
that would make it inappropriate in the reasonable judgment of the indemnified
person for the same counsel to represent both the indemnified person and such
indemnifying person or any affiliate or associate thereof, the indemnified
person shall be entitled to retain its own counsel reasonably satisfactory to
such indemnifying person at the expense of such indemnifying person.
(d) If the indemnification provided for in this Section 5.3 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Purchasers on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or a Purchaser on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the net amount received by the
Purchasers from the sale of the Common Shares to which such loss relates exceeds
the amount of any damages which such Purchasers have otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Purchasers' obligation pursuant to this subsection (d) to contribute are several
in proportion to their respective sales of Common Shares to which such loss
relates and not joint.
(e) The obligations of the Company and the Purchasers under
this Section 5.3 shall be in addition to any liability which the Company and the
respective Purchasers may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls the Company or any
Purchaser within the meaning of the Act.
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Section 6
Restrictions on Transferability of Common Shares
Compliance with Securities Act
6.1 Restrictions on Transferability. The Common Shares shall not be
transferable in the absence of registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement. The Company shall be entitled to give stop transfer instructions to
its transfer agent with respect to the Common Shares in order to enforce the
foregoing restrictions.
6.2 Legends on Common Shares. Purchasers understand that the
certificates evidencing the Common Shares may bear the following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
UNDER THE ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SUCH SALE OR OFFER. THE
TRANSFER AGENT HAS BEEN ORDERED TO EFFECTUATE TRANSFERS OF
THIS CERTIFICATE ONLY IN ACCORDANCE WITH THE ABOVE
INSTRUCTION.
(b) Any legend required by any applicable blue sky laws or
regulations.
The Company need not register a transfer of any Common
Shares unless the conditions specified in the foregoing legends are satisfied.
Without in any way limiting Purchasers' representations and warranties set forth
above, Purchasers further agree that Purchasers shall in no event make any
disposition of all or any portion of the Common Shares in the absence of an
effective Registration Statement unless and until Purchasers shall have (i)
notified the Company of the proposed disposition and furnished the Company with
a detailed statement of the circumstances surrounding the proposed disposition,
and (ii) furnished the Company with an opinion of Purchasers' own counsel to the
effect that such disposition will not require registration of such Common Shares
under the Securities Act, and such opinion of Purchasers's counsel shall have
been concurred in by counsel for the Company and the Company shall have advised
Purchasers of such concurrence.
6.3 Transfer of Common Shares After Registration. The Purchasers hereby
covenant with the Company not to make any sale of the Common Shares except
either (a) in accordance with the Registration Statement, in which case the
Purchasers covenant to comply with the requirement of delivering a current
prospectus, (b) in accordance with Rule 144, in which case Purchasers covenant
to comply with Rule 144, or (c) subject to such conditions as the Company in its
sole discretion shall impose, in accordance with another exemption from the
registration requirements of the Securities Act. The Purchasers further
acknowledge and agree that such
-9-
<PAGE> 10
Common Shares are not transferable on the books of the Company unless the
certificate submitted to the Company's transfer agent evidencing such Common
Shares is accompanied by such additional certification, documentation or
information as the Company in its sole discretion shall require in order to
effect such sale in accordance with the Registration Statement, Rule 144 or such
other exemption from the registration requirements of the Securities Act. The
legend set forth in Section 6.2 will be removed from a certificate representing
Common Shares following and in connection with any sale of Common Shares
pursuant to subsection (a) or (b) hereof but not in connection with any sale of
Common Shares pursuant to subsection (c).
Section 7
Miscellaneous
7.1 Waivers and Amendments. With the exception of Sections 5 and 6
hereof, the terms of this Agreement may be waived or amended with the written
consent of the Company and a majority of the holders of the Common Shares.
7.2 Governing Law. This Agreement shall be governed in all respect by
and construed in accordance with the laws of the State of Washington without
regard to conflicts of laws principles.
7.3 Survival. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and shall survive the Closing.
7.4 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Notwithstanding the foregoing,
the Purchasers shall not assign this Agreement without the prior written consent
of the Company. The provisions of Sections 5, 6 and 7 hereof shall be binding on
and shall inure to the benefit of subsequent holders of the Common Shares, other
than subsequent holders purchasing pursuant to a valid registration statement,
in which case Purchasers covenant to comply with the requirement of delivery in
a current prospectus, or, in the event subsequent holders purchase in accordance
with Rule 144, in which case Purchasers covenant to comply with Rule 144.
7.5 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.
7.6 Notices, etc. All notices and other communications required or
permitted under this Agreement shall be in writing and may be delivered in
person, by telecopy, overnight delivery service or United States mail, addressed
to the Company or the Purchasers, as the case may be, at their respective
addresses set forth at the beginning of this Agreement or on Exhibit A, or at
such other address as the Company or the Purchasers shall have furnished to the
other party in writing. All notices and other communications shall be effective
upon the earlier of (a) actual receipt thereof by the person to whom notice is
directed or (b) (i) in the case of notices and communications sent by personal
delivery or telecopy, the time such notice or communication arrives at the
applicable address or is successfully sent to the applicable telecopy
-10-
<PAGE> 11
number, (ii) in the case of notices and communications sent by overnight
delivery service, at noon (local time) on the second business day following the
day such notice or communication is sent, and (iii) in the case of notices and
communications sent by United States mail, five days after such notice or
communication is deposited in the United States mail.
7.7 Severability of this Agreement. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
7.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 Further Assurances. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
7.10 Termination. In the event that the Closing shall not have occurred
on or before ninety (90) days from the date hereof, this Agreement shall
terminate at the close of business on such date.
7.11 Expneses. The Company and each such Purchaser shall bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby, including fees of legal counsel.
7.12 Currency. All references to "dollars" or "$" in this Agreement
shall be deemed to refer to United States dollars.
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY" TIMELINE, INC., a Washington corporation
By:__________________________________________
Print Name:__________________________________
Title:_______________________________________
"PURCHASER" _____________________________________________
Print Name:__________________________________
-11-
<PAGE> 1
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED.
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
TIMELINE, INC.
THIS CERTIFIES that, for value received, Pacific Crest Securities (the
"Holder" or "Placement Agent") is entitled, upon the terms and subject to the
conditions hereinafter set forth, to subscribe for and purchase from Timeline,
Inc., a Washington corporation (the "Company"), Thirty-Six Thousand (36,000)
shares (the "Shares") of the Company's common stock (the "Common Stock").
This Warrant is issued pursuant to letter agreement by and between the
Company and the Placement Agent, in connection with the private placement,
through the Placement Agent, of shares of the Company's Common Stock.
1. EXERCISE PRICE
The per-Share purchase price under this Warrant (the "Exercise Price")
shall be Five Dollars and Eighty-eight Cents ($5.88).
2. EXERCISE OF WARRANT
(a) The purchase rights represented by this Warrant are exercisable by
the Holder, in whole or in part, at any time during the five-year period
commencing on the date hereof, by the surrender of this Warrant and the Notice
of Exercise form annexed hereto duly executed at the principal office of the
Company in Bellevue, Washington (or such other office or agency of the Company
as it may designate by notice in writing to the Holder at the address of such
Holder appearing on the books of the Company), and upon payment of the purchase
price of the Shares thereby purchased (by cash or by check or bank draft payable
to the order of the Company or by cancellation of indebtedness of the Company to
the Holder, if any, at the time of exercise in an amount equal to the purchase
price of the Shares thereby purchased), whereupon the Holder shall be entitled
to receive a certificate for the number of Shares so purchased.
(b) Notwithstanding the foregoing, at any time during the five-year
period commencing on the date hereof the Holder may elect to exercise this
Warrant in whole by receiving shares of Common Stock equal to the value (as
determined below) of this Warrant upon surrender of this
- 1 -
<PAGE> 2
Warrant at the office specified above together with notice of this election,
whereupon the Holder shall be entitled to receive a certificate for the number
of shares of Common Stock equal to the quotient obtained by dividing [(A - B)
(X)] by (A), where:
(A) = the average of the high and low trading prices per share of
the Common stock for the five trading days immediately
preceding the date of such election;
(B) = the Exercise Price per Share under this Warrant; and
(X) = the number of shares of Common Stock issuable upon
exercise of this Warrant.
3. TITLE TO WARRANT
This Warrant shall not be transferred, sold, assigned, or hypothecated,
except that it may be transferred or assigned to successors of the Holder, and
may be transferred or assigned in whole or in part to any person who is an
officer or employee (including without limitation registered representatives) of
the Holder. Any such assignment shall be effected by the Holder by (i) executing
the form of assignment at the end hereof, and (ii) surrendering this Warrant for
cancellation at the office or agency of the Company referred to in Section 2
above, accompanied by a certificate (signed by an officer of the Holder if the
Holder is a corporation), stating that each transferee is a permitted transferee
under this Section, whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) a new Warrant or Warrants of like
tenor and representing in the aggregate rights to purchase the same number of
Shares as are purchasable hereunder.
4. ISSUANCE OF SHARES; NO FRACTIONAL SHARES OR SCRIP
Certificates for shares of Common Stock purchased hereunder shall be
delivered to the Holder within a reasonable time after the date on which this
Warrant shall have been exercised in accordance with the terms hereof. The
Company covenants that all shares of Common Stock which may be issued upon the
exercise of rights represented by this Warrant will, upon exercise of the rights
represented by this Warrant, be fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue). The
Company agrees that, if at the time of the surrender of this Warrant and
exercise of the rights represented hereby, the Holder shall be entitled to
exercise such rights, the shares so issued shall be and be deemed to be issued
to such holder as the record owner of such shares as of the close of business on
the date on which this Warrant shall have been exercised. No fractional shares
or scrip representing fractional shares shall be issued upon the exercise of
this Warrant. With respect to any fraction of a share called for upon the
exercise of this Warrant, an amount equal to such fraction multiplied by the
then-current price at which each share may be purchased hereunder shall be paid
in cash to the Holder.
- 2 -
<PAGE> 3
5. CHARGES, TAXES AND EXPENSES
Issuance of certificates for shares of Common Stock upon the exercise
of this Warrant shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in such name or
names as may be directed by the Holder; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. NO RIGHTS AS SHAREHOLDERS
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise thereof.
7. REGISTRY OF WARRANT
The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the Holder of this Warrant. This
Warrant may be surrendered for exchange, transfer or exercise, in accordance
with its terms, at such office or agency of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
9. SATURDAYS, SUNDAYS, HOLIDAYS, ETC.
If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a Saturday or a
Sunday or shall be a legal holiday, then such action may be taken or such right
may be exercised on the next succeeding day not a legal holiday.
- 3 -
<PAGE> 4
10. EARLY TERMINATION; RECLASSIFICATION
(a) Merger, Sale of Assets. If at any time during the five-year period
commencing from the Effective Date the Company proposes to merge with or into
any other corporation, effect a reorganization or sell or convey all or
substantially all of its assets to any other entity in a transaction in which
the shareholders of the Company immediately before the transaction own
immediately after the transaction less than a majority of the outstanding voting
securities of the surviving entity (or its parent), then: (i) the Company shall
give the Holder thirty (30) days notice of the proposed effective date of such
transaction; (ii) notwithstanding Section 2 above to the contrary, this Warrant
shall be exercisable subject to the limitation of this Section 10(a); and (iii)
if the Warrant has not been exercised by the effective date of such transaction
it shall terminate.
(b) Reclassification, Etc. If the Company at any time shall, by
subdivision, stock split, stock dividend, combination or reclassification of
securities or otherwise, change any of the securities to which purchase rights
under this Warrant exist into the same or a different number of the same or
securities of any other class or classes, this Warrant shall thereafter be to
acquire such number and kind of securities, and at such prices, as would have
been issuable as the result of such change with respect to the securities which
were subject to the purchase rights under this Warrant immediately prior to such
subdivision, combination, reclassification or other change.
(c) Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of shares of
Common Stock upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the exercise of the purchase rights under this Warrant.
11. REGISTRATION RIGHTS
If the Company proposes to register, under the Securities Act of 1933
in connection with a public offering, any of those certain shares of Common
Stock which were or are to be issued by the Company in connection with a private
placement through the Placement Agent, then the Company shall promptly give the
Holder written notice of such registration, together with a list of the
jurisdictions in which the Company intends to attempt to qualify such securities
under applicable state securities laws. Upon the written request of Holder given
within twenty (20) days after mailing of such written notice from the Company,
the Company shall use its best efforts to include in such registration the
Shares underlying this Warrant, on the same terms as to selling costs and
registration expenses, and on and subject to such other terms, provisions and
conditions, as are applicable generally to the securities being registered.
12. MISCELLANEOUS
The provisions of this Warrant shall be construed and shall be given
effect in all respect as if it had been issued and delivered by the Company on
June 7, 1996. This Warrant shall be
- 4 -
<PAGE> 5
binding upon any successors or assigns of the Company. This Warrant shall
constitute a contract under the laws of the State of Washington and for all
purposes shall be construed in accordance with and governed by the laws of said
state.
IN WITNESS WHEREOF, Timeline, Inc. has caused this Warrant to be
executed by its officer thereunto duly authorized.
By______________________________________
John W. Calahan, President
and Chief Executive Officer
- 5 -
<PAGE> 6
NOTICE OF EXERCISE
TO: TIMELINE, INC.
(1) The undersigned hereby elects to purchase ______ shares of Common
Stock of Timeline, Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below.
--------------------------------
(Name)
--------------------------------
(Address)
(3) The undersigned represents that the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares.
- ----------------------------- -------------------------------------
(Date) (Signature)
- 6 -
<PAGE> 7
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute
this form and supply required information.
Do not use this form to purchase Shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_____________________________________________________________________________
(Please print)
whose address is ____________________________________________________________
(Please print)
_____________________________________________________________________________
Dated: ______________________________, 19__
Holder's Signature: ____________________________________
Holder's Address: ____________________________________
____________________________________
Signature Guaranteed: _________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
- 7 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from registrant's
audited financial statements as of March 31, 1996, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 284,542
<SECURITIES> 107,174
<RECEIVABLES> 1,250,923
<ALLOWANCES> 69,601
<INVENTORY> 0
<CURRENT-ASSETS> 1,868,164
<PP&E> 2,099,082
<DEPRECIATION> 1,245,908
<TOTAL-ASSETS> 3,017,825
<CURRENT-LIABILITIES> 1,324,462
<BONDS> 413,204
0
0
<COMMON> 26,146
<OTHER-SE> 6,843,166
<TOTAL-LIABILITY-AND-EQUITY> 3,017,825
<SALES> 1,902,813
<TOTAL-REVENUES> 5,047,277
<CGS> 1,828,790
<TOTAL-COSTS> 1,828,790
<OTHER-EXPENSES> 4,736,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,340
<INCOME-PRETAX> (1,422,830)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,422,830)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,422,830)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
