<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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SEEC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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<S> <C> <C>
PENNSYLVANIA 7372 55-0686906
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
5001 BAUM BOULEVARD
PITTSBURGH, PENNSYLVANIA 15213
(412) 682-4991
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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RAVINDRA KOKA
PRESIDENT
SEEC, INC.
5001 BAUM BOULEVARD
PITTSBURGH, PENNSYLVANIA 15213
(412) 682-4991
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies to:
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<S> <C>
DANIEL L. WESSELS, ESQ. JEFFREY P. SOMERS, ESQ.
COHEN & GRIGSBY, P.C. MORSE, BARNES-BROWN & PENDLETON, P.C.
2900 CNG TOWER RESERVOIR PLACE
625 LIBERTY AVENUE 1601 TRAPELO ROAD
PITTSBURGH, PENNSYLVANIA 15222 WALTHAM, MASSACHUSETTS 02154
(412) 394-4900 (617) 622-5930
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
<S> <C> <C> <C> <C>
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Common Stock, par value $.01
per share..................... 1,150,000 shares $11.00 $12,650,000 $4,362.07
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</TABLE>
(1) Includes 150,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(a)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 11, 1996
PROSPECTUS
1,000,000 SHARES
LOGO
COMMON STOCK
The 1,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby are being issued and sold by SEEC, Inc. (the "Company"
or "SEEC"). Prior to the offering contemplated hereby (the "Offering"), there
has been no public market for the Common Stock of SEEC. It is currently
estimated that the initial public offering price will be in the range of $9.00
to $11.00 per share. For a discussion of the factors to be considered in
determining the initial public offering price for the Common Stock, see
"Underwriting." SEEC has applied to list the Common Stock for quotation on the
Nasdaq Small-Cap Market under the symbol "SEEC."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE UNDERWRITING PROCEEDS TO
TO PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
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Per Share.................................... $ $ $
- ---------------------------------------------------------------------------------------------------
Total(3)..................................... $ $ $
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</TABLE>
(1) Excludes a non-accountable expense allowance equal to three percent (3%) of
the total proceeds from the sale of the common stock ($ per share)
payable to H.C. Wainwright & Co., Inc., representative of the Underwriters
(the "Representative"), and the value of warrants to be issued to the
Representative to purchase the number of shares of Common Stock equal to ten
percent (10%) of the number of shares being offered hereby at an exercise
price of 120% of the public offering price (the "Representative's Warrant").
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting expenses of the Offering estimated to be $675,000,
including the Representative's non-accountable expense allowance.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
150,000 additional shares of its Common Stock at the Price to Public, less
the Underwriting Discount shown above, solely to cover over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered severally by the Underwriters named
herein, when, as and if received and accepted by them, subject to their right to
reject orders in whole or in part and subject to other conditions. It is
expected that delivery of the certificates for the shares of Common Stock will
be made against payment therefor at the offices of the Representative in Boston,
Massachusetts on or about , 1996.
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H.C. WAINWRIGHT & CO., INC.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 3
SEEC PROVIDES PC-BASED SOFTWARE ANALYSIS TOOLS
TO ENABLE CUSTOMERS TO MAINTAIN AND REDEVELOP LEGACY
COBOL APPLICATIONS AND RELATED DATABASES.
A diagram describing SEEC's products and illustrating their use on a PC/LAN to
maintain and redevelop COBOL applications which are downloaded from a mainframe
to a LAN Server.
SEEC, COBOL ANALYST(TM), COBOL ANALYST 2000(TM), SMART CHANGE FACTORY(TM),
COBOL SLICER(TM), AND DATE ANALYZER(TM) ARE TRADEMARKS, SERVICE MARKS OR
REGISTERED TRADEMARKS OF SEEC. THIS PROSPECTUS ALSO INCLUDES TRADEMARKS, TRADE
NAMES AND REFERENCES TO INTELLECTUAL PROPERTY OWNED BY OTHER COMPANIES.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Prospective investors should consider carefully the information
discussed under "Risk Factors." Except as otherwise indicated, all information
in this Prospectus assumes that (i) prior to the effectiveness of the
Registration Statement of which this Prospectus is a part the Company's charter
will be amended to increase its authorized Common Stock to 20,000,000 shares and
to authorize 10,000,000 shares of preferred stock and the Company will effect a
1-for-3.3183 reverse split of the Company's Common Stock and (ii) the
Underwriters' over-allotment option is not exercised. See "Description of
Capital Stock" and "Underwriting." References herein to fiscal years are
references to the fiscal year of SEEC ended March 31 of the year specified
(e.g., "fiscal 1996" refers to the fiscal year ended March 31, 1996).
THE COMPANY
SEEC provides a suite of software products and business solutions for
maintaining and redeveloping legacy COBOL software applications and related
databases, including solutions for year 2000 compliance. SEEC also provides
solutions for the migration of existing COBOL applications from mainframe to
client/ server environments. The Company's software products and solutions are
designed to minimize the time and cost of maintenance and redevelopment by
automating various functions and utilizing well-defined and repeatable
processes.
COBOL applications require continual maintenance and redevelopment in order
to satisfy constantly changing information requirements and to incorporate
advances in technology. The installed base of software applications written in
the COBOL programming language is enormous. Industry sources estimate that more
than 150 billion lines of COBOL code are in use worldwide. Industry sources
indicate that a substantial portion of COBOL application resources are dedicated
to maintenance and redevelopment. An immediate maintenance requirement is caused
by the inability of most legacy applications to process accurately calculations
and logic involving the year 2000 and beyond. Date dependent programs are
ubiquitous in many existing COBOL applications. SEEC anticipates that demand for
year 2000 compliance products and solutions, such as those provided by SEEC,
will increase rapidly over the next few years. Industry sources estimate that
total costs to industry and government to address year 2000 compliance could
total $300 billion to $600 billion worldwide.
The Company's software products, which are based on the Company's core
COBOL analysis technology, automate many of the procedures required for COBOL
application maintenance and redevelopment, including year 2000 compliance. The
Company's products analyze and modify COBOL source code, which is downloaded
from a mainframe to a PC/LAN Microsoft Windows environment where it is stored in
application dictionaries for performance of maintenance and redevelopment
functions. SEEC has also developed software tools that enable customers to
extract business rules and functions from legacy COBOL applications for reuse in
object-oriented client/server environments.
SEEC provides year 2000 solutions through its Smart Change Factory, a
repeatable process that combines the Company's proprietary software tools and
third-party software tools with well-defined procedures to efficiently utilize
customer information resources. The Smart Change Factory provides an end-to-end
solution, including impact assessment, planning, source code correction and
testing. The Company's products and solutions may be integrated with the
customer's existing organization, allowing the customer to retain control of
critical software applications. The Company's products and solutions may also be
used for complete application outsourcing by the customer to SEEC or to licensed
third-party solution providers.
3
<PAGE> 5
The Company's primary objective is to become a leading provider of software
products and business solutions for the maintenance and redevelopment of legacy
software applications and related databases. The key elements of the Company's
strategy to achieve its objective are (i) pursuing a broad-based distribution
strategy, (ii) efficiently utilizing customer information resources and
maximizing customer options and flexibility with the Smart Change Factory
approach, and (iii) providing PC/LAN-based software tools with a graphical user
interface that are easier to use and learn than mainframe-based tools and
conserve valuable mainframe resources. SEEC anticipates that the knowledge and
close working relationship developed with customers in providing year 2000
solutions will provide additional opportunities for SEEC to provide ongoing
solutions for COBOL maintenance and redevelopment and for migration from
mainframe to client/server environments.
SEEC sells and licenses its products and solutions predominantly to Fortune
1000 or similarly-sized companies, government organizations, and third-party
service providers worldwide. Representative customers for the Company's year
2000 solutions include Wheeling Pittsburgh Corporation, Mack Trucks, Rockwell
International Corporation, Northern Illinois Gas, Foremost Insurance Company
(through IBM's Integrated Systems and Solutions Corp.), and Aluminum Company of
America (ALCOA). Representative customers for which SEEC has provided general
COBOL maintenance and redevelopment products and solutions include Sallie Mae,
American Savings Bank, Mellon Bank, N.A., Securities Industry Automation
Corporation, Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corporation, Deere & Co., Illinois Department of Employment Security and
Columbia Gas. SEEC has licensed its software products to several service
providers, including Complete Business Solutions, Inc., IBM's Integrated Systems
and Solutions Corp., Coopers & Lybrand and Unisys Corporation.
THE OFFERING
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<S> <C>
Common Stock being offered by SEEC........ 1,000,000 shares
Common Stock to be outstanding after the
Offering................................ 2,868,505 shares (1)
Use of proceeds........................... To expand sales and marketing, hire new
personnel, increase capital expenditures and for
working capital and other general corporate
purposes.
Proposed Nasdaq Small-Cap Market Symbol... SEEC
</TABLE>
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(1) Excludes (i) 57,096 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the SEEC, Inc. 1994 Stock Option
Plan (the "Stock Option Plan") at a weighted average exercise price of $2.66
per share, (ii) 111,494 shares of Common Stock issuable upon exercise of
outstanding warrants at a weighted average exercise price of $0.03 per
share, (iii) 100,000 shares (115,000 shares if the Underwriters'
over-allotment option is exercised) of Common Stock issuable upon exercise
of the Representative's Warrant at an exercise price equal to 120% of the
public offering price, (iv) 6,026 shares of Common Stock issuable upon
exercise of options granted to non-employee directors, and (v) 91,323 shares
of Common Stock reserved for the grant of additional options under the Stock
Option Plan. See "Management--Stock Option Plan," "Management--Compensation
of Directors" and "Description of Capital Stock--Warrants and Conversion
Rights."
4
<PAGE> 6
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, JUNE 30,
-------------------------------------------- ----------------
1992 1993 1994 1995 1996 1995 1996
----- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues................... $ 363 $ 456 $ 948 $ 961 $1,265 $ 237 $ 509
Costs and expenses............... 544 831 1,054 1,159 1,363 305 429
Income (loss) from operations.... (181) (375) (106) (198) (98) (68) 80
Other expense, net............... (13) (41) (49) (58) (55) (11) (15)
Net income (loss)................ (194) (416) (155) (256) (153) (79) 65
Net income (loss) per common and
common share equivalent....... $(.12) $(.23) $ (.09) $ (.14) $ (.09) $ (.04) $ .03
Weighted average number of common
shares outstanding............ 1,611 1,792 1,792 1,792 1,797 1,794 1,986
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
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PROFORMA AS
ADJUSTED
ACTUAL PROFORMA (1) (2)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 107 $ 854 $ 9,479
Working capital (deficit)................................ (224) 523 9,148
Total assets............................................. 463 1,210 9,835
Due to officers and shareholders......................... 175 -- --
Notes payable to related parties......................... 609 -- --
Total long-term obligations.............................. 1,026 242 242
Total shareholders' equity (deficit)..................... (1,215) 316 8,941
</TABLE>
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(1) Adjusted to give effect to (i) the conversion, in July 1996, of $225,000 of
the Company's 10% Subordinated Notes, $220,000 of unsecured notes and
advances payable to certain directors and shareholders, and $127,106 of
deferred salaries payable to two officers, together with accrued interest,
into 157,779 shares of Common Stock and (ii) the sale, subsequent to June
30, 1996, of 140,765 shares of Common Stock for an aggregate of $747,440.
See "Capitalization."
(2) Adjusted further to give effect to the sale of 1,000,000 shares of Common
Stock offered by SEEC hereby at an assumed public offering price of $10.00
per share, after deducting the estimated underwriting discount and estimated
offering expenses. See "Use of Proceeds."
5
<PAGE> 7
RISK FACTORS
In evaluating the Company and the Offering, potential investors should
carefully consider the following factors, among other things, before purchasing
the Common Stock offered by this Prospectus.
HISTORY OF NET OPERATING LOSSES; ACCUMULATED DEFICIT; ANTICIPATED LOSSES
The Company has incurred a net loss in each of the last three fiscal years,
and as of March 31, 1996 and June 30, 1996, the Company had an accumulated
deficit of approximately $1.3 million and $1.2 million, respectively, and a
working capital deficit of approximately $228,000 and $224,000, respectively.
While the Company had net income for the first quarter of fiscal 1997, the
Company anticipates that it will incur a net loss for the current fiscal year as
the Company substantially increases expenditures for sales and marketing and
hiring new personnel. There can be no assurance that the Company will be
profitable in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Financial Statements.
POSSIBLE FLUCTUATION OF OPERATING RESULTS; FUTURE OPERATING RESULTS UNCERTAIN
The Company has experienced fluctuations in revenue and operating results.
These fluctuations are due, in part, to the budgeting and purchasing practices
of the Company's customers, which affect the volume and timing of product orders
and solution engagements received by the Company. The Company's solutions
business may be characterized by significant customer concentration and
relatively large projects. The timing of product shipments or completion of
customer solution engagements, especially at or near the end of any accounting
period, could cause variations in operating results from period to period and
could result in quarterly losses. In addition, variations in the Company's
revenue and operating results may occur as a result of a number of other
factors, such as employee hiring and utilization rates and the number of working
days in a quarter, demand for the Company's products and solutions, and
competitive conditions in the industry. Many of these factors are not within the
Company's control. Fluctuations in operating results may also adversely affect
and cause volatility in the market price of the Company's Common Stock. The
Company believes that quarter-to-quarter comparisons of its financial results
are not necessarily meaningful and should not be relied upon as an indication of
future performance. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Financial Statements.
INTENSE COMPETITION
The market for the Company's software products and solutions, including its
solutions for the year 2000 problem and client/server migration, is intensely
competitive and is characterized by rapid change in technology and user needs
and the frequent introduction of new products. The Company's principal
competitors in the software tools market include VIASOFT, Inc., Micro-Focus
Group Public Limited Company and Computer Associates International, Inc. The
Company also competes with large service providers such as IBM's Integrated
Systems and Solutions Corp., Cap Gemini America, Computer Horizons Corp. and the
Big Six accounting firms. Certain of these service providers have developed or
acquired proprietary software tools. Many of the Company's competitors are more
established, benefit from greater name recognition and have substantially
greater financial, technical and marketing resources than the Company. The
Company believes that the principal factors affecting competition in its markets
include product performance and reliability, product functionality, ability to
respond to changing customer needs, ease of use, training, quality of support
and price. Other than technical expertise and, with respect to the year 2000
compliance market, the limited time available to enter the market, there are no
significant proprietary or other barriers to entry that could keep potential
competitors from developing or acquiring similar tools or providing competing
solutions in the Company's market.
The Company's ability to compete successfully in the sale of products and
solutions will depend in large part upon its ability to attract new customers,
sell products and services, deliver and support product enhancements to its
existing and new customers and respond effectively to continuing technological
change by developing new products and solutions. There can be no assurance that
the Company will be able to compete
6
<PAGE> 8
successfully in the future, or that future competition for product sales and
solutions will not have a material adverse effect on the business, results of
operations and financial condition of the Company. See "Business-- Competition."
CURRENT AND FUTURE DEMAND FOR YEAR 2000 SOLUTIONS
The Company is currently focusing significantly on the marketing and sale
of products and solutions for year 2000 assessment, planning, correction and
testing. Although the Company believes that the market for solutions to the year
2000 problem will grow significantly as the year 2000 approaches, there can be
no assurance that this market will develop to the extent anticipated by the
Company. In addition, organizations affected by the year 2000 problem may not be
willing or able to allocate the financial or other resources required to address
the problem in a timely manner. Many organizations may attempt to resolve the
problem internally rather than purchase tools and solutions from outside firms
such as the Company. Due to these factors, development of the market for
solutions to the year 2000 problem is uncertain and unpredictable. If the market
fails to increase, or increases more slowly than anticipated, the Company's
business, operating results and financial condition could be materially and
adversely affected. Furthermore, the demand for year 2000 products and solutions
is likely to diminish rapidly after the year 2000. As a result, the Company
could experience a significant decline in revenues unless it is able to offset
declines in year 2000 related revenues with increased sales of products and
solutions for general legacy system maintenance and redevelopment or for
migration of COBOL applications from mainframe systems to client/server systems.
There can be no assurance that the Company will be able to replace revenues
related to year 2000 products and solutions after the year 2000.
MARKET ACCEPTANCE OF SEEC'S PRODUCTS AND SOLUTIONS
Failure of the Company to achieve market acceptance of its products and
solutions will have a material adverse effect on the Company's business, results
of operations and financial condition. Future revenues from sales of products
and solutions are dependent on the use of PCs by large organizations as a
solution platform for COBOL maintenance and redevelopment. Currently most
maintenance and redevelopment software tools are designed for use on mainframe
platforms. The Company believes that PC-based tools and solutions have certain
advantages over mainframe-based solutions but are relatively new and not widely
used. A large number of decision-makers who might evaluate the Company's
products and solutions are experienced in mainframe operating environments and
may not readily accept PC-based products and solutions. Additional marketing and
educational activities will be necessary to convince the COBOL maintenance and
redevelopment market of the advantages of PC-based solutions. Failure to achieve
wider market acceptance of PC-based solutions could have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company's year 2000 products and solutions provide automated solutions
for many year 2000 assessment, planning, correction and testing tasks and
procedures. There can be no assurance that potential customers will perceive the
benefits of automation of various year 2000 compliance tasks, and therefore they
may determine to perform manually all aspects of the year 2000 compliance
process.
The Company has developed products for the migration of existing COBOL
software applications from mainframe to client/server architectures. The Company
has not attempted to market and sell such products to date and there can be no
assurance that they will achieve market acceptance. The Company anticipates that
migration from mainframe systems to client/server systems will be gradual,
particularly for customized applications. Many organizations perceive a high
degree of risk and expense in migrating entire applications from a mainframe to
a client/server. As a result, the market for client/server migration tools and
solutions may not develop to the extent or in the time periods anticipated by
the Company.
DEPENDENCE ON MAJOR CUSTOMERS AND LARGE CONTRACTS
Historically, a large portion of the Company's annual revenues have been
derived from a relatively small number of customers. During fiscal 1994, 1995
and 1996, and the three months ended June 30, 1996, revenues from VIASOFT, Inc.
("VIASOFT"), including amortization of an advance royalty payment, were $86,000,
7
<PAGE> 9
$279,000, $314,000 and $79,000, which accounted for approximately 9%, 29%, 25%
and 15%, respectively, of the Company's revenues in each of these periods. The
Company does not expect that it will continue to receive revenues from VIASOFT
after fiscal 1997. During fiscal 1994, 1995 and 1996, and the three months ended
June 30, 1996, revenues from Complete Business Solutions, Inc. were $181,000,
$319,000, $330,000 and $137,000, which accounted for 19%, 33%, 26% and 27%,
respectively, of the Company's total revenues in each of these periods. If the
Company is unable to broaden its customer base and reduce its dependence on
large orders from relatively few customers, the loss of, or significant
reduction in orders from, any of such customers could materially and adversely
affect the Company's business, operating results and financial condition. See
"Business--Customers" and Notes 3 and 6 to Financial Statements.
DEPENDENCE ON KEY PERSONNEL
The Company's success will depend in part upon its ability to hire and
retain key senior management and skilled technical, professional services and
marketing personnel. Although the Company believes it will be able to hire
qualified personnel for such purposes, an inability to do so could materially
adversely affect the Company's ability to market, sell and enhance its products
and solutions. The market for qualified personnel has historically been, and the
Company expects that it will continue to be, intensely competitive. The demand
for experienced COBOL project managers and programmers is expected to continue
to increase significantly over the next several years, particularly as a result
of the year 2000 problem. The Company has recently hired several senior
management personnel, including a Chief Financial Officer, and the Company's
success will depend in part on the successful assimilation and performance of
these individuals. The loss of one or more of its key employees or the Company's
inability to hire and retain other qualified employees could have a material
adverse effect on the Company's business. The Company has employment agreements
with certain key employees, but does not maintain key man life insurance on any
of these persons. See "Management-- Employment Agreements."
ABILITY TO MANAGE CHANGE AND RAPID GROWTH
The Company expects its business and the industry in which it competes to
continue to undergo rapid change. The Company plans to expand significantly
distribution and marketing capabilities, solutions capabilities, the number of
Smart Change Factories and management and personnel infrastructure. In light of
the business opportunities presented by the year 2000 problem, the Company's
business strategy contemplates rapid growth. If the Company experiences rapid
growth, its ability to be profitable may depend, among other things, on its
ability to manage a large number of personnel, a number of Smart Change
Factories and other maintenance and redevelopment projects concurrently on a
worldwide basis. The failure of the Company's management to respond effectively
to and manage changing technological and business conditions could have a
material adverse impact on the Company's business, results of operations and
financial condition. See "Business."
ABILITY TO ADDRESS TECHNOLOGICAL CHANGES AND CUSTOMER REQUIREMENTS
The Company's future success will depend significantly on its ability to
enhance its current products and develop or acquire new products to satisfy
evolving industry standards, technological developments and changing customer
needs. There can be no assurance that the Company will be successful in
developing or acquiring product enhancements or new products, that it can
introduce such products or enhancements on a timely basis, or that any such
products or enhancements will be successful in the marketplace. The Company's
delay or failure to develop or acquire technological improvements or to adapt
its products to technological change would have a material adverse effect on its
business, results of operations and financial condition. There can also be no
assurance that new technologies will not be developed by one or more third
parties that render the Company's tools and solutions for COBOL maintenance and
redevelopment or client/server migration technologically obsolete.
8
<PAGE> 10
POSSIBLE VOLATILITY OF STOCK PRICE
The Company believes factors such as general conditions in the computer
hardware and software industries and announcements of new products by the
Company or by its competitors may cause the market price of the Common Stock to
fluctuate, perhaps substantially. In addition, in recent years the stock market
in general, and the shares of technology companies in particular, have
experienced extreme price fluctuations. These broad market and industry
fluctuations, over which the Company has no control, may adversely affect the
market price of the Common Stock.
IMPORTANCE OF PROPRIETARY RIGHTS
The Company regards its software products and solutions as proprietary and
attempts to protect them under a combination of copyright, trade secret and
trademark laws as well as by contractual restrictions on employees and third
parties. Despite these precautions, it may be possible for unauthorized parties
to copy the Company's software or to reverse engineer or otherwise obtain and
use information the Company regards as proprietary. The Company has no patents,
and existing trade secret and copyright laws provide only limited protection.
Certain provisions of the license and distribution agreements generally used by
the Company, including provisions protecting against unauthorized use, copying,
transfer and disclosure, may be unenforceable under the laws of certain
jurisdictions, and the Company is required to negotiate limits on these
provisions from time to time. In addition, the laws of some foreign countries do
not protect the Company's proprietary rights to the same extent as do the laws
of the United States. There can be no assurance that the steps taken by the
Company will be adequate to deter misappropriation of proprietary information or
that the Company will be able to detect unauthorized use and take appropriate
steps to enforce its intellectual property rights.
Significant and protracted litigation may be necessary to protect the
Company's intellectual property rights, to determine the scope of the
proprietary rights of others or to defend against claims for infringement.
Although the Company is not currently involved in any litigation with respect to
intellectual property rights, infringement claims against software developers
are likely to increase as the number of functionally similar products in the
market increases. There can be no assurance that third-party claims, with or
without merit, alleging infringement will not be asserted against the Company in
the future. Such assertions can be time consuming and expensive to defend and
could require the Company to cease the manufacture, use and sale of infringing
products and services, to incur significant litigation costs and expenses and to
develop or acquire non-infringing technology or to obtain licenses to the
alleged infringing technology. There can be no assurance that the Company would
be able to develop or acquire alternative technologies or to obtain such
licenses on commercially acceptable terms. See "Business--Product Protection."
POTENTIAL FOR PRODUCT LIABILITY
The Company's products and solutions relate to key aspects of its
customers' information systems. The Company has never been the subject of a
damages claim related to its products. However, any failure in a customer's
system could result in a claim for substantial damages against the Company,
regardless of the Company's responsibility for such failure. In connection with
the sale of its products and services, the Company attempts to limit
contractually its liability for damages arising from negligent acts, errors,
mistakes or omissions. Despite this precaution, there can be no assurance that
the limitations of liability set forth in its customer contracts would be
enforceable or would otherwise protect the Company from liability for damages.
Additionally, the Company maintains general liability insurance coverage with
limits of $1 million. However, there can be no assurance that such coverage will
continue to be available on acceptable terms, or will be sufficient to cover one
or more large claims, or that the insurer will not disclaim coverage as to any
future claim. The successful assertion of one or more large claims against the
Company that exceed available insurance coverages or changes in the Company's
insurance policies, such as premium increases or the imposition of large
deductible or co-insurance requirements, could materially and adversely affect
the Company's business, operating results and financial condition.
9
<PAGE> 11
SIGNIFICANT UNALLOCATED NET PROCEEDS
The Company intends to use the net proceeds of this Offering to expand
sales and marketing efforts, hire management, sales and technical personnel,
increase capital expenditures and for working capital and other general
corporate purposes. In addition, the Company may use a portion of the net
proceeds of this Offering to acquire businesses, products or technologies
complementary to its business. Although the Company has from time to time
engaged in discussions with respect to possible acquisitions, it has no present
plans, intentions, understandings, commitments or agreements, nor is it
currently engaged in any negotiations, with respect to any such transaction.
Pending such uses, the Company intends to invest the net proceeds from this
Offering in short-term, investment-grade, interest-bearing securities. The
Company has no other specific uses for the proceeds of this Offering, and the
exact use of the proceeds will be subject to the discretion of management. See
"Use of Proceeds."
INFLUENCE BY EXISTING SHAREHOLDERS
After the sale of shares of Common Stock offered hereby, the Company's
officers, directors and principal shareholders with whom certain directors are
affiliated will own beneficially an aggregate of approximately 46% of the
outstanding shares of Common Stock (approximately 44% if the Underwriters'
over-allotment option is exercised in full). As a result, these shareholders, if
they act together, will be able to elect all of the Company's directors and
generally to direct its affairs. This concentration of ownership by existing
shareholders may also have the effect of delaying or preventing a change in
control of the Company. See "Principal Shareholders and Holdings of Management."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock
and does not anticipate paying any cash dividends in the foreseeable future. The
Company currently anticipates that it will retain future earnings, if any, to
fund the development and growth of its business. In addition, the Company's Loan
Agreement with the Industrial Credit and Investment Corporation of India Limited
("ICICI") prohibits it from declaring dividends on its capital stock at any time
when it is in default of its payment obligations under such Loan Agreement. In
1996, the Company was in default of certain payment and other obligations under
the ICICI Loan Agreement, but as of September 30, 1996 brought such payment
obligations current and received a written waiver from ICICI of all existing and
prior defaults. See "Dividend Policy."
DILUTION OF NEW INVESTORS; BENEFITS TO CURRENT SHAREHOLDERS
New investors purchasing Common Stock in the Offering will experience
immediate and substantial dilution in the net tangible book value of each share
of the Common Stock purchased by them. The Company's current shareholders will
benefit from an immediate increase in the net tangible book value per share of
their Common Stock and will also benefit from the development of any public
market for their Common Stock as a result of the Offering. The holders of
outstanding stock options and warrants to purchase shares of the Common Stock
will similarly benefit upon the exercise thereof. See "Dilution" and "Shares
Eligible for Future Sale."
ABSENCE OF PRIOR MARKET FOR COMMON STOCK
There has been no public market for the Common Stock prior to the Offering
and there can be no assurance that a public market will develop or, if
developed, will be sustained following the Offering. The Company has applied to
list the Common Stock for quotation on the Nasdaq Small-Cap Market under the
symbol "SEEC." The price of the Common Stock offered hereby will be determined
through negotiation between the Company and the Representative and may not be
indicative of the market price for the Common Stock after the Offering. The
factors to be considered in determining the Offering price will be the
preliminary demand for the Common Stock, prevailing market and economic
conditions, the Company's revenue and earnings, estimates of its business
potential and prospects, the present state of its business operations, an
assessment of its management, the consideration of these factors in relation to
the market valuation of
10
<PAGE> 12
comparable companies in related businesses and the current condition of the
markets in which it operates. Certain factors, such as subsequent sales of
Common Stock into the market by existing shareholders and market conditions
generally, could cause the market price of the Common Stock to vary
substantially. Certain existing shareholders and the Representative have
registration rights for the Common Stock they own or may acquire and accordingly
will have the ability to exercise such rights and sell such shares free of
securities law restrictions. See "Certain Transactions," "Shares Eligible for
Future Sale" and "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET PRICES
Sales of a substantial number of shares of the Common Stock in the public
market following this Offering could adversely affect the market price for the
Common Stock. Of the 1,868,505 shares of Common Stock that will be held by the
Company's current shareholders immediately after the completion of the Offering,
(representing approximately 65% of the Common Stock outstanding after the
Offering, or approximately 62% if the Underwriters' over-allotment option is
exercised in full), shares will be eligible for sale in the public market
after the expiration of the 270-day lock-up period described below, subject to
certain volume and other limitations, pursuant to Rule 144 promulgated under the
Securities Act ("Rule 144"). Certain of the existing shareholders of the Company
and the Representative have registration rights for the Common Stock they own
and accordingly will have the ability to exercise such rights and sell their
Common Stock free of such volume and other limitations after the 270-day lock-up
period expires. Except for the exercise of stock options pursuant to the Stock
Option Plan and the exercise of certain outstanding warrants, the Company and
its directors, executive officers, and holders of substantially all of its
outstanding shares of Common Stock, stock options and warrants, have agreed with
the Underwriters not to sell any Common Stock for 270 days from the date of this
Prospectus without the prior written consent of the Representative. See "Shares
Eligible for Future Sale" and "Underwriting."
ANTITAKEOVER MEASURES
The Company's Bylaws divide the Board of Directors into three classes, with
each class to be as equal in number of directors as possible. At each annual
meeting of shareholders, directors will be elected for three-year terms to
succeed the directors of the class whose terms are expiring. In accordance with
the Pennsylvania Business Corporation Law, directors serving on classified
boards of directors may only be removed from office for cause. In addition,
under the Company's Articles of Incorporation, the Board of Directors has the
authority to fix the rights and preferences of, and issue shares of, Preferred
Stock without further action of the shareholders. Therefore, Preferred Stock
could be issued, without shareholder approval, that could have voting,
liquidation and dividend rights superior to that of the Common Stock. The
issuance of Preferred Stock could adversely affect the voting power of holders
of Common Stock and the likelihood that such holders of Common Stock would
receive dividend payments and payments on liquidation. The Company has no
present plan to issue any shares of Preferred Stock. One or all of these
provisions could, under certain circumstances, operate to delay, deter or
prevent a change in control of the Company or limit the price that potential
acquirors or investors may be willing to pay in the future for the Company or
shares of its Common Stock.
CERTAIN TRANSACTIONS
The Company has engaged in certain material transactions with certain of
its management and shareholders and maintains certain material business
relationships with ERA Software Systems Private Limited ("ERA"), a significant
shareholder of the Company. Ravindra Koka, the President, a director and a
principal shareholder of the Company, and Shankar Krish, an employee of the
Company, are directors and significant shareholders of ERA. See
"Business--Research and Development," "Certain Transactions--ERA Relationship"
and Notes 5 and 6 to Financial Statements.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains certain forward-looking statements, including (i)
the potential size of and anticipated growth in the year 2000 compliance market;
(ii) anticipated trends in the Company's financial condition and results of
operations (including expected changes in the Company's gross margin and
general,
11
<PAGE> 13
administrative and selling expenses); (iii) the Company's business strategy for
growth in the market for year 2000 compliance, other COBOL maintenance and
redevelopment and client/server migration; and (iv) the Company's ability to
distinguish itself from its current and future competitors. These
forward-looking statements are based largely on the Company's current
expectations and are subject to a number of risks and uncertainties. In addition
to the other risks described elsewhere in this "Risk Factors" discussion,
important factors to consider in evaluating such forward-looking statements
include (i) the shortage of reliable market data regarding the market for year
2000 solutions, other COBOL maintenance and redevelopment and client/ server
migration; (ii) changes in external competitive market factors which might
impact trends in the Company's results of operations; (iii) unanticipated
working capital or other cash requirements; (iv) changes in the computer
hardware and software industries and the year 2000 solutions market; and (v)
various competitive factors that may prevent the Company from competing
successfully in the marketplace. In light of these risks and uncertainties, many
of which are described in greater detail elsewhere in this "Risk Factors"
discussion, actual results could differ materially from the forward-looking
statements contained in this Prospectus.
THE COMPANY
The Company was incorporated under the name Software Engineering and
Enhancement Center, Inc., as a West Virginia corporation, in 1988. In 1989, the
Company changed its name to SEEC, Inc. and in 1992 reincorporated in
Pennsylvania. When used in this Prospectus, unless the context requires
otherwise, the terms "Company" and "SEEC" refer to SEEC, Inc. and its
predecessor. The Company's executive offices are located at 5001 Baum Boulevard,
Pittsburgh, Pennsylvania 15213 and its telephone number is (412) 682-4991.
USE OF PROCEEDS
The net proceeds to SEEC from the sale of the Common Stock offered hereby
(based upon an assumed public offering price of $10.00 per share (the mid-point
of the price range on the cover of this Prospectus) and after deducting the
estimated underwriting discount and estimated expenses of the Offering) are
estimated to be approximately $8,625,000 (approximately $10,020,000 if the
Underwriters' over-allotment option is exercised in full). SEEC anticipates that
the net proceeds of the Offering will be utilized over an approximately two-year
period. Approximately $3.0 million to $5.0 million of such proceeds are
anticipated to be used to market the Company's products and services,
approximately $1.0 million for capital expenditures and approximately $1.0
million to hire management, sales and technical personnel. The remainder of the
net proceeds will be used for working capital and general corporate purposes.
Although SEEC has no current understandings, commitments or agreements, and is
not currently engaged in any negotiations, with respect to any acquisition
transaction, a portion of the proceeds may be used for the acquisition of
complementary businesses, products or technologies. Pending such uses, SEEC
intends to invest the net proceeds from this Offering in short-term,
investment-grade, interest-bearing securities.
DIVIDEND POLICY
SEEC has never declared or paid any cash dividends on its Common Stock.
SEEC intends to continue to retain its earnings, if any, to finance the
development and growth of its business. Consequently, SEEC does not expect to
pay cash dividends in the foreseeable future. The Company's Loan Agreement with
ICICI prohibits it from declaring any dividends on its capital stock at any time
when it is in default of its payment obligations under such Loan Agreement. In
1996, the Company was in default of certain payment and other obligations under
the ICICI Loan Agreement, but as of September 30, 1996 brought such payment
obligations current and received a written waiver from ICICI of all existing and
prior defaults. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and Note 9 to
Financial Statements.
12
<PAGE> 14
DILUTION
The pro forma net tangible book value of SEEC as of June 30, 1996 was
approximately $.17 per share of Common Stock. Pro forma net tangible book value
per share of the Common Stock is equal to the book value of SEEC's total assets
less the book value of its total liabilities, divided by the total number of
shares of Common Stock outstanding as of June 30, 1996, as adjusted to give
effect to (i) the conversion, in July 1996, of $225,000 of the Company's 10%
Subordinated Notes, $220,000 of unsecured notes and advances payable to certain
directors and shareholders and $127,106 of deferred salaries payable to two
officers, together with accrued interest, into 157,779 shares of Common Stock
and (ii) the sale, subsequent to June 30, 1996, of 140,765 shares of Common
Stock for an aggregate of $747,440. After giving effect to the sale by SEEC of
the 1,000,000 shares of Common Stock offered hereby (assuming a public offering
price of $10.00) and after deducting the estimated underwriting discount and the
estimated offering expenses payable by SEEC, the pro forma net tangible book
value of SEEC at June 30, 1996 would have been $8,941,000, or $3.12 per share.
This represents an immediate increase in the net tangible book value of $2.95
per share to existing holders of Common Stock and an immediate dilution of $6.88
per share to the persons purchasing shares of Common Stock at the assumed public
offering price. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price............................................... $10.00
Pro forma net tangible book value before the Offering..................... $ .17
Increase attributable to new investors.................................... 2.95
------
Pro forma net tangible book value after the Offering........................ 3.12
------
Dilution to new investors (68.8%)........................................... $ 6.88
======
</TABLE>
The following table compares, as of June 30, 1996, the number of shares of
Common Stock purchased from SEEC by its existing shareholders prior to the
Offering and to be purchased by new investors in the Offering, the total
consideration paid or to be paid to SEEC and the average price per share paid or
to be paid to SEEC by SEEC's current shareholders and by new investors
purchasing shares in the Offering, at an assumed public offering price of $10.00
per share, and assuming no exercise of the Underwriters' over-allotment option:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders (1)..................... 1,868,505 65% $ 1,585,000 14% $ .85
New investors................................. 1,000,000 35 10,000,000 86 $ 10.00
--------- --- ----------- ----
Total......................................... 2,868,505 100% $11,585,000 100%
========= === =========== ====
</TABLE>
- ---------
(1) Reflects (i) the conversion, in July 1996, of $225,000 of the Company's 10%
Subordinated Notes, and $220,000 of unsecured notes and advances payable to
certain directors and shareholders and $127,106 of deferred salaries payable
to two officers, together with accrued interest, into 157,779 shares of
Common Stock and (ii) the sale, subsequent to June 30, 1996, of 140,765
shares of Common Stock for an aggregate of $747,440.
The foregoing table assumes no exercise of outstanding options or warrants.
As of June 30, 1996, there were (i) 36,001 shares of Common Stock reserved for
issuance upon exercise of outstanding options granted under the Stock Option
Plan, (ii) 111,494 shares of Common Stock reserved for issuance upon exercise of
outstanding warrants, and (iii) 112,418 shares of Common Stock reserved for
issuance upon the grant of additional options under the Stock Option Plan.
Subsequent to June 30, 1996, SEEC granted options to purchase 21,095 shares of
Common Stock under the Stock Option Plan and granted options to non-employee
directors to purchase 6,026 shares of Common Stock. In addition, SEEC will issue
to the Representative, effective upon consummation of this Offering, the
Representative's Warrant. See "Management--Stock Option Plan," "Principal
Shareholders and Holdings of Management" and "Underwriting."
13
<PAGE> 15
CAPITALIZATION
The following table presents the capitalization of SEEC as of June 30,
1996, on a pro forma basis, giving effect to (i) the conversion, in July 1996,
of $225,000 of the Company's 10% Subordinated Notes, $220,000 of unsecured notes
and advances payable to certain directors and shareholders and $127,106 of
deferred salaries payable to two officers, together with accrued interest, into
157,779 shares of Common Stock and (ii) the sale, subsequent to June 30, 1996,
of 140,765 shares of Common Stock for an aggregate of $747,440, and proforma as
adjusted to give effect to the sale by SEEC of the 1,000,000 shares of Common
Stock offered hereby at an assumed public offering price of $10.00 per share
after deducting the estimated underwriting discount and the estimated offering
expenses payable by SEEC.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-----------------------------------
PROFORMA
ACTUAL PROFORMA AS ADJUSTED
------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations:
Notes payable to related parties, less current portion.... $ 609 $ -- $ --
Due to officers and shareholders.......................... 175 -- --
Accrued royalties......................................... 32 32 32
Long-term debt, less current maturities................... 210 210 210
------- --------- -----------
Total.................................................. 1,026 242 242
------- --------- -----------
Shareholders' Equity (Deficit):
Preferred Stock, $.01 par value, no shares authorized, no
shares issued and outstanding; as adjusted, 10,000,000
shares authorized, no shares issued and outstanding.... -- -- --
Common Stock, $.01 par value, 10,000,000 shares
authorized, 1,569,961 shares issued and outstanding;
proforma 10,000,000 shares authorized, 1,868,505 shares
issued and outstanding; proforma as adjusted,
20,000,000 shares authorized, 2,868,505 shares issued
and outstanding (1).................................... 16 19 29
Additional paid-in capital................................ 38 1,566 10,181
Retained earnings (accumulated deficit)................... (1,269) (1,269) (1,269)
------- --------- -----------
Total shareholders' equity (deficit)................... (1,215) 316 8,941
------- --------- -----------
Total capitalization................................... $ (189) $ 558 $ 9,183
======= ========= ==========
</TABLE>
- ---------
(1) Does not include 57,096 shares of Common Stock issuable upon exercise of
outstanding options granted under the Stock Option Plan, 6,026 shares of
Common Stock issuable upon exercise of options granted to non-employee
directors, 111,494 shares of Common Stock issuable upon exercise of
outstanding warrants, 91,323 shares of Common Stock reserved for issuance
upon the grant of additional options under the Stock Option Plan, and the
shares of Common Stock issuable upon exercise of the Representative's
Warrant. See "Management--Stock Option Plan" and "Principal Shareholders and
Holdings of Management."
14
<PAGE> 16
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus. Portions of the selected financial data
presented below have been derived from the Company's financial statements which
have been audited by BDO Seidman, LLP, independent certified public accountants,
whose report covering the balance sheets as of March 31, 1995 and 1996 and the
statements of operations, changes in capital deficit and cash flows for each of
the three years in the period ended March 31, 1996 is included elsewhere herein.
The statement of operations data for the year ended March 31, 1993 and the
balance sheet data as of March 31, 1993 are derived from unaudited financial
statements of the Company not included herein. The statement of operations data
for the year ended March 31, 1992 and the balance sheet data as of March 31,
1992 are derived from audited financial statements of the Company not included
herein. The statement of operations data for the three months ended June 30,
1995 and 1996 and the balance sheet data as of June 30, 1995 and 1996 are
derived from unaudited financial statements of the Company which are included
herein. Management believes that the unaudited financial statements of the
Company include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial condition and
results of operations of the Company for the periods presented. The results for
the three months ended June 30, 1996 are not necessarily indicative of results
that may be realized for any other interim period or for the full year.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED MARCH 31, ENDED JUNE 30,
---------------------------------------------- ------------------
1992 1993 1994 1995 1996 1995 1996
----- ----- ------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license fees............................... $ 43 $ 187 $ 481 $ 463 $ 506 $ 100 $ 151
Software maintenance fees........................... -- 13 64 106 102 26 42
Professional services--product related.............. -- 68 40 42 181 9 120
Professional services--other........................ 182 138 363 350 476 102 196
Grant revenue....................................... 138 50 -- -- -- -- --
----- ----- ------ ------- ------- ------- -------
Total revenues................................ 363 456 948 961 1,265 237 509
----- ----- ------ ------- ------- ------- -------
Operating expenses:
Cost of software license and maintenance fees....... -- 29 108 127 148 26 45
Professional services--product related.............. -- 37 10 14 59 -- 49
Professional services--other........................ 156 77 255 243 440 80 149
General and administrative.......................... 46 150 149 132 142 30 30
Sales and marketing................................. 46 221 215 236 237 60 88
Research and development............................ 296 317 317 407 337 109 68
----- ----- ------ ------- ------- ------- -------
Total operating expenses...................... 544 831 1,054 1,159 1,363 305 429
----- ----- ------ ------- ------- ------- -------
Income (loss) from operations......................... (181) (375) (106) (198) (98) (68) 80
----- ----- ------ ------- ------- ------- -------
Other expense, net:
Interest expense.................................... (16) (42) (50) (63) (75) (18) (18)
Other income........................................ 3 1 1 5 20 7 3
----- ----- ------ ------- ------- ------- -------
Total other expense, net...................... (13) (41) (49) (58) (55) (11) (15)
----- ----- ------ ------- ------- ------- -------
Net income (loss)..................................... $(194) $(416) $ (155) $ (256) $ (153) $ (79) $ 65
===== ===== ====== ====== ====== ====== ======
Net income (loss) per common share equivalent......... $(.12) $(.23) $ (.09) $ (.14) $ (.09) $ (.04) $ .03
===== ===== ====== ====== ====== ====== ======
Weighted average number of common shares
outstanding......................................... 1,611 1,792 1,792 1,792 1,797 1,794 1,986
===== ===== ====== ====== ====== ====== ======
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 18 $ 26 $ 45 $ 328 $ 111 $ 307 $ 107
Working capital (deficit)............................. (37) (28) (86) (122) (228) (319) (224)
Total assets.......................................... 100 128 235 571 395 470 463
Due to officers and shareholders...................... 137 146 155 164 172 166 175
Notes payable to related parties (current and
long-term portions)................................. 155 488 525 562 600 572 609
Total long-term obligations........................... 306 702 810 1,038 1,084 917 1,026
Total shareholders' equity (deficit).................. (257) (720) (875) (1,129) (1,280) (1,208) (1,215)
</TABLE>
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis should be read in
conjunction with the preceding "Selected Financial Data" and the Company's
Financial Statements and the Notes thereto and the other financial data included
elsewhere in this Prospectus. Information for the three months ended June 30,
1996 is not necessarily indicative of results that may be realized for any other
interim period or for the full fiscal year.
OVERVIEW
The Company was founded in 1988 to develop tools and solutions for
maintenance and redevelopment of legacy COBOL applications. In 1992, the Company
commercially introduced its first product, COBOL Analyst. From 1992 to 1996, the
Company devoted significant resources to developing its proprietary suite of
products for COBOL maintenance and redevelopment, including products for year
2000 impact analysis. In 1995 and 1996, the Company introduced its COBOL Analyst
2000, COBOL Slicer, LAN version of COBOL Analyst, and Date Analyzer products.
The Company has continually enhanced its COBOL Analyst product line. The Company
began to increase its commitment to providing year 2000 related professional
services in fiscal 1996 as a result of the increased awareness of and demand for
year 2000 solutions.
The Company derives its revenues primarily from software license fees,
professional services fees and royalties from distributors of the Company's
software products. The Company's software is licensed primarily to Fortune 1000
companies, governmental organizations and service providers. The Company's
product related services are provided to customers in conjunction with its
software products and its other professional services are primarily programming
services provided on a contract basis to similar large organizations. The
Company's products and services are marketed through its sales force directly in
the United States and Canada and through product distributors, service providers
and systems integrators worldwide. To date, substantially all of the Company's
revenues have come from sales in the United States.
The Company's revenues from software license fees and product-related
professional services increased significantly in the three months ended June 30,
1996. This increase is attributable to the investments made since July 1995 in
marketing year 2000 tools and solutions. The Company anticipates that this trend
will continue as it continues to build its sales and marketing infrastructure.
The demand for the Company's year 2000 products and solutions are expected to
increase significantly as market awareness of the year 2000 problem continues to
grow.
The Company recognizes software license fees upon shipment of the software
to the customer. Revenues from software maintenance are deferred and recognized
straight-line over the contract support period, which is generally one year.
Software maintenance contracts are generally renewable on an annual basis,
although the Company also negotiates long-term maintenance contracts from time
to time. Revenues from professional services are recognized as the services are
provided or on achievement of performance milestones. See Note 1 to Financial
Statements.
16
<PAGE> 18
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of total revenues represented by certain income and expense items.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31, JUNE 30,
---------------------- ------------
1994 1995 1996 1995 1996
---- ---- ---- ---- ---
<S> <C> <C> <C> <C> <C>
Revenues:
Software license fees................................ 51% 48% 40% 42% 30%
Software maintenance fees............................ 7 11 8 11 8
Professional services fees--product related.......... 4 4 14 4 24
Professional services fees--other.................... 38 37 38 43 38
---- ---- ---- ---- ---
Total revenues.................................... 100 100 100 100 100
---- ---- ---- ---- ---
Operating expenses:
Cost of software license and maintenance fees........ 11 13 12 11 9
Professional services--product related............... 1 2 5 -- 10
Professional services--other......................... 27 25 35 34 29
Sales and marketing.................................. 23 25 19 25 17
Research and development............................. 33 42 26 46 13
General and administrative........................... 16 14 11 13 6
---- ---- ---- ---- ---
Total operating expenses.......................... 111 121 108 129 84
---- ---- ---- ---- ---
Income (loss) from operations.......................... (11 ) (21 ) (8 ) (29 ) 16
---- ---- ---- ---- ---
Total other income (expense), net...................... (5 ) (6 ) (4 ) (4 ) (3)
---- ---- ---- ---- ---
Net income (loss)...................................... (16 )% (27 )% (12 )% (33 )% 13%
==== ==== ==== ==== ===
</TABLE>
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
Revenues. Total revenues were $509,000 in the first quarter of fiscal 1997,
an increase of 115% from $237,000 in the first quarter of fiscal 1996. Software
license fees were $151,000 in the first quarter of fiscal 1997, an increase of
51% from $100,000 in the first quarter of fiscal 1996. The increase in software
license fees was attributable to the Company's decision to market its products
and solutions directly to end users, and to increased customer awareness of the
year 2000 problem and resulting demand for the Company's year 2000 tools and
solutions. Software license fees include royalties from distributors of the
Company's products. Royalties were $95,000 in the first quarter of fiscal 1997,
an increase of 48% from $64,000 in the first quarter of fiscal 1996. This
increase is attributable to the commencement of marketing by ERA, the Company's
distributor in India, in the third quarter of fiscal 1996. VIASOFT, which was
the Company's only distributor in the first quarter of fiscal 1996, accounted
for $64,000 and $79,000 of royalties in the first quarter of fiscal 1996 and
1997, respectively.
Software maintenance fees were $42,000 in the first quarter of fiscal 1997,
an increase of 62% from $26,000 in the first quarter of fiscal 1996. The
increase in software maintenance fees is attributable to the increase in
software license fees during the quarter and during all of fiscal 1996.
Professional services-product related revenues increased to $120,000 in the
first quarter of fiscal 1997, from $9,000 in the first quarter of fiscal 1996.
This increase is primarily attributable to increased customer awareness of the
year 2000 problem and acceptance of the Company's Smart Change Factory process
and tools. The number of the Company's customers for year 2000 services
increased from one in the first quarter of fiscal 1996 to ten in the first
quarter of fiscal 1997. Professional services--other revenues were $196,000 in
the first quarter of fiscal 1997, an increase of 92% from $102,000 in the first
quarter of fiscal 1996. This increase is attributable to increased demand for
C++ and Windows programming services. The Company does not expect this rate of
increase to be sustained through fiscal 1997 as it shifts its resources to meet
the expected increase in demand for year 2000 products and services.
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Cost of Revenues. Cost of revenues includes cost of software license and
maintenance fees, cost of professional services--product related and cost of
professional services--other. Included in the cost of software license and
maintenance fees are royalties which the Company pays to ICICI and ERA for each
product which the Company sells, and to VIASOFT for certain products. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations--Liquidity and Capital Resources."
The Company's total cost of revenue was $243,000 in the first quarter of
fiscal 1997, an increase of 129% from $106,000 in the first quarter of fiscal
1996. Royalty and other fees for products and professional services increased
73%, from $26,000 in the first quarter of fiscal 1996 to $45,000 in the first
quarter of fiscal 1997. This increase is primarily attributable to increased
royalty expenses, in particular those payable to ICICI, ERA and VIASOFT.
Professional services--product related costs increased from $433 in the first
quarter of fiscal 1996 to $49,000 in the first quarter of fiscal 1997,
corresponding to the increase in revenues for year 2000 services discussed
above. Professional services--other costs increased by 87%, from $80,000 in the
first quarter of fiscal 1996 to $149,000 in the first quarter of fiscal 1997.
These increases in professional services--product related and professional
services--other are both due to the additional costs of professional staff
required to provide the services. See Note 6 to Financial Statements.
The Company's gross margin (total revenues less cost of revenues) as a
percentage of revenue was 52% in the first quarter of fiscal 1997 compared to
55% in the first quarter of fiscal 1996. Gross margin percentages were 77% and
79% for software license and maintenance fees, 59% and 95% for professional
services--product related, and 24% and 22% for professional services--other,
respectively, for the first quarter of fiscal 1997 and first quarter of fiscal
1996. Gross margin percentages for software license and maintenance fees will
fluctuate depending on the mix of software products sold and the varying royalty
expenses associated with those products. The gross margin percentages for
professional services--product related will vary depending on the type of
services provided. Services that are relatively highly automated, such as year
2000 inventory and impact assessments, typically require fewer professional
hours to perform than services involving planning, source correction or testing.
Furthermore, the Company's pricing for product related services will vary based
on the complexity and scope of the engagement, and competitive considerations.
The gross margin percentage of 95% for professional services--product related in
the first quarter of fiscal 1996 was generated from $9,000 in revenues on
non-labor intensive contracts. In contrast, the gross margin percentage of 59%
in the first quarter of fiscal 1997 was generated from $120,000 in revenues, and
is more representative of the margin that can be expected for this category of
revenue as it reflects the experience of providing a wider range of services for
a larger number of engagements. The gross margin percentages for professional
services--other will fluctuate based on the prices of the individual service
contracts, the Company's payroll and other costs of professional staff providing
the services, and the proportionate share of each contract's fees to the total
revenue for this category in a given time period. The increase in gross margin
percentage for professional services-- other to 24% in the first quarter of
fiscal 1997 from 22% in the first quarter of fiscal 1996 is due to an increased
proportion of higher margin contracts.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and related benefits allocated to the Company's sales and
marketing personnel, plus the costs of advertising and promotional activities.
Sales and marketing expenses were $88,000 in the first quarter of fiscal 1997,
an increase of 47% from $60,000 in the first quarter of fiscal 1996. This
increase is due primarily to the Company's decision to increase the direct
marketing of its products and solutions to customers.
General and Administrative. General and administrative expenses include the
cost of finance and accounting, rental of office space and other administrative
functions of the Company. General and administrative expenses were $30,000 in
the first quarter of fiscal 1997, approximately the same as in the first quarter
of fiscal 1996. The Company made no significant changes to general and
administrative costs between periods.
Research and Development. Total expenditures for research and development
were $68,000 in the first quarter of fiscal 1997 as compared to $109,000 in the
first quarter of fiscal 1996, a decrease of 38%. The decrease was due to a
reduction in the total number of Company personnel allocated to research and
development. The Company has temporarily redirected some professional staff to
meet the increased demand for year 2000 services, while additional professional
staff is being recruited and trained.
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Interest Expense. Interest expense was $18,000 in the first quarter of
fiscal 1997, essentially unchanged from the first quarter of fiscal 1996. The
expense in both quarters includes interest on various obligations, including
indebtedness to ICICI, notes and advances payable to certain directors and
shareholders, and deferred salaries of two operating officers and shareholders.
Certain of the interest-bearing obligations were converted to shares of the
Company's Common Stock in July 1996. See Notes 6, 8, 9 and 11 to Financial
Statements.
COMPARISON OF FISCAL YEARS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Revenues. The Company's total revenues were $1,265,000 in fiscal 1996
compared to $961,000 in fiscal 1995, an increase of 32%. This growth resulted
principally from an increase in professional services fees related to year 2000
compliance and, to a lesser extent, increases in software license fees and
distributor royalties. Total software license fees were $506,000 in fiscal 1996
compared to $463,000 in fiscal 1995. The modest increase reflected the Company's
decision to defer further development of its internal sales infrastructure until
VIASOFT's limited exclusive distribution rights expired in May 1995 and the
limited resources available to build additional sales infrastructure. Total
distributor royalties were $274,000 in fiscal 1996 as compared to $257,000 in
fiscal 1995, an increase of 7%. Distributor royalties included the amortization
of advance royalties from VIASOFT in the amount of $257,000 for each period and,
during fiscal 1996, royalties from ERA's distribution activities in India. The
growth in distributor royalties was affected by VIASOFT's limited exclusive
distribution rights which restricted the Company from appointing other
distributors until May 1995. Since that time, the Company has pursued a
distribution strategy of licensing its software products to third-party service
providers and to end-user customers.
Maintenance revenue was $102,000 in fiscal 1996 compared to $106,000 in
fiscal 1995, a decrease of 3%. The decrease is attributable to the timing of
recognition of maintenance revenue, typically ratably over a 12-month period
following the software license sale. Software license fee revenue declined by 4%
in fiscal 1995 which resulted in reduced maintenance fees over the following 12
months. Total product-related professional service fees were $181,000 in fiscal
1996 compared to $42,000 in fiscal 1995, an increase of 331%. This increase is
attributable to the Company's introduction of year 2000 compliance services and
the increase in the demand for these services. Other professional services
revenue was $476,000 in fiscal 1996 compared to $350,000 in fiscal 1995, an
increase of 36%. The increase was attributable to increased demand for C++ and
Windows programming services. The Company does not expect this rate of increase
to be sustained through fiscal 1997 as it shifts resources to meet the expected
increase in demand for its year 2000 products and services.
Cost of Revenues. The Company's total cost of revenues was $647,000 in
fiscal 1996 compared to $384,000 in fiscal 1995, an increase of $263,000, or
69%. This increase was primarily attributable to the Company hiring additional
professional staff to meet the increased customer demand for services.
Royalties and other fees for products and professional services were
$148,000 in fiscal 1996, an increase of 18% from $127,000 in fiscal 1995. The
increase is due to increased royalty costs and additional material costs related
to software license sales and maintenance. Professional services--product
related costs and expenses were $59,000 in fiscal 1996 compared to $14,000 in
fiscal 1995, an increase of 321%. This is due to the Company's hiring additional
professional staff to perform services. Professional services--other costs
increased by $197,000, or 81%, to $440,000 in fiscal 1996 from $243,000 in
fiscal 1995. The increase in costs is attributable to growth in the volume of
services provided, coupled with increases in personnel costs, including
non-recurring recruiting and placement expenses. The cost of personnel and
recruiting and placement expenses are expected to increase due to anticipated
additions to the Company's professional staff and increased market demand for
qualified personnel.
The Company's gross margin as a percentage of revenue was 49% in fiscal
1996 compared to 60% in fiscal 1995. Gross margin percentages were 75% and 78%
for software license and maintenance fees, 68% and 67% for professional
services--product related, and 8% and 31% for professional services--other,
respectively, for fiscal 1996 and fiscal 1995. The three percentage point
decline in gross margin percentage for software license and maintenance fees is
attributable to the mix of products sold and the varying royalty expenses
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<PAGE> 21
associated with the various products. The gross margin percentages for
professional services--product related were comparable in fiscal 1996 and fiscal
1995. The gross margin percentage for professional services--other declined by
23 percentage points from fiscal 1995 to fiscal 1996 as a result of the
increased costs incurred in fiscal 1996 of hiring and compensating qualified
personnel, as described above.
Sales and Marketing. Sales and marketing expenses were $237,000 in fiscal
1996, approximately equal to expenses of $236,000 in fiscal 1995. These expenses
did not increase between fiscal 1995 and fiscal 1996 due to the Company's
decision not to develop its internal sales infrastructure.
General and Administrative. General and administrative expenses were
$142,000 in fiscal 1996 compared to $132,000 in fiscal 1995, an increase of 8%.
This increase is due primarily to additional costs for accounting services.
Research and Development. Total expenditures for research and development
were $337,000 in fiscal 1996 compared to $407,000 in fiscal 1995, a decrease of
17%. The decline is primarily attributable to the Company's completion of
development of many of its year 2000 products and the COBOL maintenance and
redevelopment products, and to the resulting temporary reallocation of personnel
to providing professional services.
Interest Expense. Interest expense increased by 19%, to $75,000 in fiscal
1996 from $63,000 in fiscal 1995. The interest expense in fiscal 1996 and 1995
includes interest on various obligations, including indebtedness to ICICI, notes
and advances payable to certain directors and shareholders, and deferred
salaries of two officers. Such notes, advances and deferred salaries were
converted into shares of Common Stock during the second quarter of fiscal 1997.
See Notes 6, 8, 9 and 11 of Notes to Financial Statements.
COMPARISON OF FISCAL YEARS ENDED MARCH 31, 1995 AND MARCH 31, 1994
Revenues. The Company's total revenues were $961,000 in fiscal 1995
compared to $948,000 in fiscal 1994, an increase of 1%. Software license fees
were $463,000 in fiscal 1995 compared to $481,000 in fiscal 1994, a decrease of
4%. During fiscal 1994, the Company entered into a license agreement that
provided limited exclusive distribution rights to VIASOFT. As a result, the
Company deferred efforts to further develop its sales infrastructure. The
decline in direct sales of software licenses was partially offset by VIASOFT
distributor royalties in fiscal 1995 and 1994 of $257,000 and $86,000,
respectively. Maintenance revenue was $106,000 in fiscal 1995, an increase of
66% from $64,000 in fiscal 1994. Maintenance revenue is recognized ratably,
typically over a 12-month contract maintenance period following the license of
the software. As a result, the change in maintenance revenues during the current
fiscal year generally corresponds to the trend in software license fees,
excluding royalties, during the previous fiscal year. Professional
services--product related revenues increased by 5%, from $40,000 in fiscal 1994
to $42,000 in fiscal 1995, as the Company focused primarily on product
development, training and support during fiscal years 1995 and 1994.
Professional services--other revenues decreased by 4%, from $363,000 in fiscal
1994 to $350,000 in fiscal 1995. The Company did not actively pursue business in
this category, focusing its efforts instead on the areas detailed above.
Cost of Revenues. The Company's total cost of revenues was $384,000 in
fiscal 1995 compared to $373,000 in fiscal 1994, an increase of 3%. Royalty and
other fees for products and professional services were $127,000 in fiscal 1995
compared to $108,000 in fiscal 1994, an increase of 18%. The increase is
primarily attributable to increased royalty expenses. Professional
services--product related costs and expenses increased by 40%, to $14,000 in
fiscal 1995 from $10,000 in fiscal 1994. This increase is due to additional
professional staff costs. Professional services--other costs decreased by
$12,000 or 5% to $243,000 in fiscal 1995 from $255,000 in fiscal 1994. The
decline corresponds to the 4% decrease in revenue for this category.
The Company's gross margin as a percentage of revenue was 60% in fiscal
1995 compared to 61% in fiscal 1994. Gross margin percentages were 78% and 80%
for software license and maintenance fees, 67% and 75% for professional
services--product related and 31% and 30% for professional services--other,
respectively for fiscal 1995 and fiscal 1994. The two percentage point decline
in gross margin percentage for software license and maintenance fees is
attributable to the mix of products sold and the varying royalty expenses
associated
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with the various products. The gross margin percentage for professional
services--product related declined by eight percentage points, the result of
increased costs of $4,000 versus increased revenues of $2,000 from fiscal 1994
to fiscal 1995. The decline in gross margin percentage is due to the increased
costs of professional staff. The gross margin percentages for professional
services--other were comparable in fiscal 1995 and fiscal 1994.
Research and Development. Total expenditures for research and development
were $407,000 in fiscal 1995 as compared to $317,000 in fiscal 1994, an increase
of $90,000, or 28%. The Company focused on developing and introducing new
products and solutions during fiscal 1995, including those in the Smart Change
Factory year 2000 compliance package.
Sales and Marketing. Sales and marketing expenses were $236,000 in fiscal
1995 compared to $215,000 in fiscal 1994, an increase of 10%. The increase is
primarily attributable to management devoting additional time to sales and
marketing activities during fiscal 1995.
General and Administrative. General and administrative expenses were
$132,000 in fiscal 1995 as compared to $149,000 in fiscal 1994, a decrease of
11%. This decrease is due primarily to increased allocations of management time
to sales and marketing efforts.
Interest Expense. Interest expense increased by 26%, to $63,000 in fiscal
1995 from $50,000 in fiscal 1994. The interest expense in fiscal 1995 and 1994
includes interest on various obligations, including notes and advances payable
to certain directors and shareholders, and deferred salaries of two operating
officers and shareholders. Such notes, advances and deferred salaries were
converted into shares of Common Stock during the second quarter of fiscal 1997.
See Notes 6, 8, 9 and 11 of Notes to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Since its organization, the Company has funded its operations and its
product development from the following principal sources: (i) proceeds from the
sale of shares of Common Stock, (ii) the ICICI grants and loan described below,
(iii) payments received from the sale of products and services, including
$900,000 in advance royalties from VIASOFT, (iv) proceeds from the issuance of
subordinated and demand notes and (v) deferral of payments of salaries to the
Company's executive officers. Since June 30, 1996, $225,000 of the Company's 10%
Subordinated Notes, $220,000 of unsecured notes and advances payable to certain
directors and shareholders, and $127,106 of deferred salaries payable to two
officers, together with accrued interest, were converted into 157,779 shares of
Common Stock. In addition, since June 30, 1996, the Company sold 140,765 shares
of Common Stock for an aggregate of $747,440.
The Company's initial development of its COBOL maintenance products was
funded in part by grants totaling $255,000 from ICICI pursuant to a Cooperation
and Project Financing Agreement dated June 1, 1990 (the "Project Financing
Agreement") among ICICI, the Company and ERA. The Project Financing Agreement
requires the Company to pay royalties to ICICI equal to 10% of the Company's
gross revenues from product sales and 5% of gross revenues from maintenance and
services, up to a maximum royalty payment of $525,000. Through June 30, 1996,
the Company paid royalties of approximately $77,000 to ICICI and, with the
approval of ICICI, had accrued but not paid royalties of approximately $58,000.
All accrued and unpaid royalties bear interest at the prime rate (as announced
in The Wall Street Journal) plus 2.5% per annum, subject to a maximum rate of 9%
and minimum rate of 6%, and are payable by February 1, 1997. See Note 6 to
Financial Statements.
During fiscal 1995, the Company funded its operations in part through a
$300,000 term loan from ICICI. The loan is collateralized by the Company's
accounts receivable and certain of its tangible personal property. The loan
bears interest at the prime rate (as published in The Wall Street Journal) plus
2.5% per annum, subject to a maximum rate of 9% and a minimum rate of 6%. The
interest rate applicable to the loan was 9% at June 30, 1996 and March 31, 1996.
Interest is payable quarterly on the 15th of each January, April, July and
October. The principal amount of the loan is payable in quarterly installments
of $30,000 each on the 15th of each March, June, September and December,
commencing December 15, 1996, with the final payment due March 15, 1999. If the
Company is in default under the ICICI loan agreement, ICICI has the right to
convert all unpaid principal and interest into shares of Common Stock of the
Company at fair value as determined by
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an independent evaluator. In 1996, the Company was in default of certain payment
and other obligations under the ICICI Loan Agreement, but as of September 30,
1996 brought such payment obligations current and received a written waiver from
ICICI of all existing and prior defaults. The Company does not have any
indebtedness other than to ICICI and is not a party to a line of credit.
The Company's cash flows have been used primarily for general operating
expenses, equipment purchases and internal research and development funding. At
June 30, 1996 and June 30, 1995, the Company had cash and cash equivalents of
$107,000 and $310,000, respectively. The Company had a net deferred tax asset at
June 30, 1996 of approximately $548,000, offset by a valuation allowance of the
same amount since the Company has not determined that it is more likely than not
that it will be realized.
The Company intends to use the net proceeds of the Offering in order to
market its products and solutions, expand its property, plant and equipment,
hire personnel to market and perform year 2000 compliance services and for
working capital and general corporate purposes. Management believes that cash
flows from operations and the net proceeds of the Offering will be sufficient to
meet the Company's future cash flow needs for at least one year following the
Offering. In the longer term, the Company may require additional sources of
liquidity to fund future growth. Such sources of liquidity may include
additional equity offerings or debt financings.
IMPACT OF INFLATION
Increases in the inflation rate are not expected to affect the Company's
operating expenses. Although the Company has no current plans to borrow funds,
if it were to do so at variable interest rates, any increase in interest rates
would increase the Company's cost of borrowed funds.
SEASONALITY
The Company's operations are not affected by seasonal fluctuations,
although the Company's cash flows may at times be affected by fluctuations in
the timing of cash receipts from large contracts.
NEW ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." The Company has determined that
it will continue to account for stock-based compensation for employees under
Accounting Principles Board Opinion No. 25 and elect the disclosure-only
alternative under SFAS No. 123. The Company will be required to disclose the pro
forma net income or loss and per share amounts in the notes to the financial
statements using the fair-value-based method beginning in the year ending March
31, 1997, with comparable disclosures for the year ended March 31, 1996. The
Company has not determined the impact of these pro forma adjustments.
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BUSINESS
GENERAL
SEEC provides a suite of software products and business solutions for
maintaining and redeveloping legacy COBOL software applications and related
databases, including solutions for year 2000 compliance. SEEC also provides
solutions for the migration of existing COBOL applications from mainframe to
client/ server environments. The Company's software products and solutions are
designed to minimize the time and cost of maintenance and redevelopment by
automating various functions and utilizing well-defined and repeatable
processes.
The Company's software products, which are based on the Company's core
COBOL analysis technology, automate many of the procedures required for COBOL
application maintenance and redevelopment, including year 2000 compliance. In
1992, SEEC introduced the first PC Windows-based product for COBOL maintenance
and redevelopment as an alternative to existing mainframe-based tools. The
Company's products analyze and modify COBOL source code, which is downloaded
from the mainframe to a PC/LAN Microsoft Windows environment where it is stored
in application dictionaries for performance of maintenance and redevelopment
functions. SEEC has also developed software tools that enable customers to
extract business rules and functions from legacy COBOL applications for reuse in
object-oriented client/server environments. SEEC markets and sells its products
and solutions primarily to Fortune 1000 companies and similarly-sized business
and governmental organizations.
INDUSTRY BACKGROUND
GENERAL COBOL MAINTENANCE AND REDEVELOPMENT
Most large business and governmental organizations utilize large mainframe
computer systems for the informational requirements of their businesses. These
systems contain the core knowledge and processes that support the major
operations of these organizations. Examples of such systems include insurance
claims processing systems, airline reservation systems, on-line banking systems,
manufacturing systems and utility billing systems. These computer systems are
primarily run on large, mainframe computers using programs written in the COBOL
programming language. The organizations that rely on these legacy systems
typically have made enormous investments in their systems.
Organizations that rely on large mainframe systems must continually
maintain and redevelop their legacy applications to meet constantly changing
information requirements and to incorporate advances in technologies. The
maintenance and redevelopment process is time consuming and labor intensive.
Industry sources estimate that worldwide there are more than 10,000 IBM
mainframe sites and more than 150 billion lines of COBOL code currently in use.
Industry sources also indicate that a substantial portion of COBOL application
resources are dedicated to the maintenance and redevelopment of these systems.
An immediate maintenance requirement is caused by the inability of most legacy
applications to process accurately calculations and logic involving the year
2000 and beyond.
The use of substantial resources in the maintenance and redevelopment
process limits the resources available to large organizations for other
important informational tasks, such as developing new software applications.
Consequently, many large organizations are seeking to improve the maintenance
and redevelopment process in order to reduce costs, improve productivity and
preserve information systems investments. These trends have resulted in
increased demand for automated software tools for maintenance and redevelopment
that supplement traditional, mostly manual, methods that are often tedious, time
consuming and error-prone. Many organizations lack the internal resources to
incorporate new and developing technologies, train personnel, and develop
efficient methodologies to perform or improve legacy applications maintenance
and redevelopment. As a result, certain organizations have outsourced certain
functions to third-party service providers which have developed efficient,
state-of-the-art approaches to legacy system maintenance and redevelopment.
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YEAR 2000 OPPORTUNITY
Awareness and recognition of the year 2000 problem has been spreading
rapidly as the millennium approaches. The year 2000 problem relates to the
highly-publicized inability of many existing computer systems to process
information or logic completely or accurately involving the year 2000 and
beyond. The problem results from the traditional use of two-digit date fields to
perform computations and decision-making functions. For example, a program using
a two-digit date field may misinterpret "00" as the year 1900 rather than 2000.
As a result, many legacy systems are at risk. For example, unless year 2000
compliance is completed in certain systems, credit cards and ATM cards will
expire prematurely and insurance policies that span three to seven years cannot
be written. These date-dependent programs are ubiquitous in legacy software
applications used in many critical business operations.
Many organizations lack the internal resources to address adequately the
year 2000 problem in a timely manner. One industry source estimates that the
overall cost of solving the year 2000 problem worldwide will be in the range of
$300 to $600 billion. Another industry source estimates that for an average
company with 35,000 programs, it would take 75 to 150 person-years to complete
the necessary analysis and coding for year 2000 compliance, which translates
into a three-year period for a team of 25 to 50 programmers. A number of
solutions providers, including SEEC, have developed special programs to meet the
needs of year 2000 compliance.
SEEC believes that over the next three years most organizations will
attempt to acquire cost-effective solutions for the year 2000 problem. As a
result, SEEC anticipates that demand for year 2000 tools and solutions will grow
significantly. Since the problem requires a large number of programs and systems
to be corrected, it is anticipated that most organizations will not have
adequate internal resources to perform all the year 2000 conversion tasks.
Consequently, most organizations will attempt to utilize highly-automated
solutions and in many cases to outsource the conversion to service providers who
can achieve economies of scale by setting up procedures, or "factories", that
utilize automation tools and well-defined processes for year 2000 compliance. In
addition, SEEC believes that the year 2000 problem will cause many organizations
to explore further the possibility of migrating all or portions of their legacy
systems to client/server systems.
CLIENT/SERVER MIGRATION
As computing technology evolves and information processing requirements
expand, large organizations are seeking to preserve the investment in their
existing systems by integrating their mainframe computers with modern
distributed computer processing architectures, such as client/server systems.
Distributed computing refers to computer transactions that may take place among
different types of computers at one or more locations, thereby permitting
enterprise-wide information exchanges to occur that otherwise might not be
possible. In a client/server environment, a mid-range computer serves as a
network's hub or server. The server is connected to several desktop PC's or
workstations known as "clients" throughout an organization.
SEEC believes that the client/server approach has several benefits over
mainframe-based systems, including user friendliness, flexibility in creating
new applications in response to changes in an organization's informational
requirements, accessibility of corporate data from a variety of databases, and
the ability to present data in a variety of formats. Client/server architectures
are becoming more cost effective as a result of technological advances made in
PC's, networking, disk storage, operating systems and software applications.
SEEC expects many large organizations to adopt a strategy of retaining many
key COBOL applications on existing mainframe systems, migrating all or part of
other existing applications to a client/server environment and pursuing new
application development in both mainframe and client/server environments.
Although the year 2000 problem will require organizations to focus on mainframe
systems maintenance, SEEC anticipates that it will also provide an impetus to
replace some mainframe systems with client/server systems. SEEC anticipates that
many organizations that engage in client/server migration will attempt to reduce
their costs and risks by utilizing software tools that extract business rules
and functions from legacy COBOL applications for reuse in object-oriented
client/server environments. SEEC has developed software tools for this purpose
and intends to market and sell its solutions and tools to new and existing
customers engaged in client/server migration.
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COMPANY STRATEGY
SEEC's objective is to become a leading provider of software products and
business solutions for the maintenance and redevelopment of legacy software
applications and related databases. Key elements of the Company's strategy to
achieve its objective are the following:
Broad Based Distribution Strategy. SEEC intends to continue to pursue a
broad based distribution strategy for its software tools and solutions,
including selling directly to end-user customers, licensing to third-party
service providers such as Complete Business Solutions, Inc., IBM's Integrated
Systems and Solutions Corp. and Coopers & Lybrand, and utilizing product
distributors.
Customer Partnerships. A key element of the Company's strategy is to work
in partnership with its customers to minimize the time and cost of legacy
application maintenance and redevelopment. SEEC's Smart Change Factory combines
the Company's software tools with well-defined procedures to efficiently utilize
customer information resources. The Smart Change Factory provides a customer
with a complete end-to-end solution and an analytical approach to year 2000
conversion whereby appropriate solutions for different software applications may
be adopted and implemented in order to save the customer time and expense. The
Smart Change Factory approach provides a range of options that address customer
concerns regarding control over critical software applications. End user
customers have the option of implementing the Company's tools and solutions in
house or of outsourcing the maintenance work to SEEC or a licensed third party
service provider. See "Business--Products and Solutions--Smart Change Factory."
PC/LAN Microsoft Windows-Based Software Tools. SEEC introduced the first
PC-based COBOL maintenance and redevelopment tools in 1992. An element of the
Company's strategy is to provide customers with PC-based tools. SEEC believes
PC-based tools offer certain advantages over mainframe based tools, including
the ability to (i) utilize a graphical user interface that is easier to use and
learn, (ii) analyze source code in a high-performance, interactive PC
environment that conserves valuable mainframe resources and (iii) provide
cost-effective solutions for maintenance and redevelopment.
GROWTH STRATEGY
SEEC believes that year 2000 compliance will significantly increase the
awareness of issues regarding legacy COBOL system maintenance and redevelopment.
In addition, SEEC believes that the trend to outsource certain legacy
application maintenance and redevelopment functions by Fortune 1000 or
similarly-sized companies and government organizations will continue. The
following are key elements of the Company's growth strategy.
Increase Sales to Existing Customers. SEEC intends to increase its sales of
software tools and solutions to existing customers, including year 2000
compliance tools and solutions. Many of SEEC's existing customers are currently
examining the year 2000 problem or are engaged in year 2000 impact assessments
and planning. The Company will also continue to provide customers with tools and
solutions for year 2000 correction and testing.
Target New Customers with Year 2000 Products and Solutions. SEEC intends to
take advantage of the opportunity presented by the year 2000 problem by
vigorously marketing the Smart Change Factory approach to year 2000 compliance
and the benefits of PC-based solutions. In addition to expanding its direct
marketing and sales activities, SEEC intends to establish additional marketing
and distribution channels through additional distributors and strategic
relationships with third party service providers.
Leverage Expanded Customer Base. SEEC anticipates that the knowledge and
close working relationship it develops with its new and existing customers in
providing solutions for year 2000 compliance will provide additional
opportunities for SEEC to provide tools and solutions for on-going COBOL
maintenance and redevelopment and for the longer-term process of migration from
large mainframe to client/server environments. SEEC believes client/server
systems will be implemented in an object-oriented environment and will create
demand for extracting and reusing business objects. SEEC has already developed
products such as COBOL Slicer and SEEC Object Designer in furtherance of this
aspect of its business strategy.
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SEEC believes that these opportunities will sustain growth beyond the year 2000
although there can be no assurance that such growth will materialize.
Enhance Technological Leadership and Excellence. SEEC intends to continue
to expand the functionality of its products and solutions by developing new
products and solutions that build on both its core technology and its experience
with maintenance and redevelopment processes. SEEC also plans to pursue
opportunities for product and technology acquisitions or alliances that
complement its existing products or allow expansion into new product areas and
markets.
PRODUCTS AND SOLUTIONS
CORE SOFTWARE TECHNOLOGY
SEEC's software products, which are based on its core COBOL analysis
technology, provide a comprehensive and integrated approach to automating many
of the procedures required for COBOL application maintenance and redevelopment,
including year 2000 compliance. The diagram below depicts the process utilized
by SEEC's core COBOL analysis technology.
A diagram depicting the process utilized by SEEC's core COBOL analysis
technology.
Download. COBOL and related source code resides in libraries on the
mainframe. SEEC utilizes third party tools to download COBOL source code,
database definitions, screen definitions and job control language to a PC or LAN
server for capture into SEEC's application dictionary. SEEC provides interfaces
with source control software to synchronize the sources with the version stored
in the application dictionary.
The Application Capture Facility. The application capture facility
processes the downloaded source code to create an application dictionary that
stores all of the information that represents the data and business logic of
legacy COBOL systems. The Company's software utilizes proprietary parsing and
data flow technology to create the relationships between the entity-related
information reflected in a customer's files and databases, as well as the
processes that use them. Most organizations have very little documentation of
their legacy systems. The application dictionary enables users to understand the
business intent of the existing systems by providing
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documentation of the legacy programs. Information about the flow of control
among programs is also stored in the application dictionary, enabling users to
group the items by business function.
Application Dictionary. The application dictionary is a repository that
stores all key design objects in a COBOL application, such as COBOL source code,
database definitions, screen definitions and job control language.
The Application Analysis Facility. The application analysis facility
performs system and program, impact and logic analysis functions, each of which
is described below:
System and Program Analysis. The application analysis facility
generates several views of programs and systems that help customers
understand the logic of a program or the flow of control between programs
and systems. It provides an interactive graphical view of the logic and
data structures and enables a user to navigate through the application to
locate execution patterns relating to a particular function. Program
execution is simulated through a code walk-through feature whereby a user
can trace program logic without data. It also identifies data and program
anomalies such as dead code and dead data.
Three examples of system and program analysis are control flow, data
structure analysis and documentation. The control flow is based on job
flows or analysis of transaction flow among programs. This documents the
relationships between various program steps in a system and the files and
databases processed in each step. The information regarding the screen
dialog can also be obtained for on-line systems. The data structure
analysis derives graphical views of sequential files, IMS database segment
hierarchy and DB2 database tables. The user can view the data definitions
and obtain information regarding where a data structure is used and the
transformations performed on data by various programs. The application
analysis facility automatically generates documentation of programs and
systems. Most legacy systems have very little documentation. The
documentation generated by the Company's core COBOL analysis technology
increases the productivity of a programmer who is required to make changes
or enhancements to a system unfamiliar to the programmer. Industry standard
metrics to measure complexity of programs are also generated to assist in
estimating effort required to maintain a legacy COBOL system.
Impact Analysis. Impact analysis provides the ability to assess the
impact of making changes to an application by analyzing the data flow and
interrelationships between different components of an application. For
example, this facility assesses the impact of expanding a database from
two-digit date fields to four-digit fields. The impact analysis will
accurately identify the programs, affected items and affected logical
statements in the application. The application analysis facility supports a
wide range of databases such as IMS, IDMS, ADABAS, DB2, CICS and VSAM. The
impact analysis reports can be loaded into any relational database for
further analysis.
Logic Analysis. Logic analysis is used to derive several program views
which can be displayed or printed. Logic analysis is useful in conjunction
with data flow analysis to understand and extract business rules and is
useful in understanding and documenting programs.
PC Test Environment. Once COBOL applications are modified, they must be
tested to ensure proper performance. SEEC's goal is to provide an integrated
workgroup environment for COBOL maintenance in the PC/LAN setting. To facilitate
the programmer's task of using different tools that are customized for the
programmer's installation, the Company's software products interface with
testing tools from other software vendors.
Upload. Third party tools are used to upload the redeveloped COBOL source
code, database definitions, screen definitions and job control language from the
PC/LAN server to the mainframe where additional testing may be performed.
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PRODUCTS
The Company's current product offerings are:
SEEC COBOL Analyst. COBOL Analyst is based upon the Company's core COBOL
analysis technology. COBOL Analyst is a PC/LAN-based application maintenance and
redevelopment software tool that is used for performing system-wide change
impact analysis, program and system understanding, business rule extraction and
documentation. Organizations use COBOL Analyst either to enhance existing legacy
applications or to rewrite these applications in a client/server architecture
based on business rules extracted from the legacy application. COBOL Analyst
comes with several additional features to ease maintenance and redevelopment
tasks. COBOL Analyst's Code Walk-thru facility guides programmers through
multiple execution scenarios and records traversed paths for future analysis and
follow-up. The Synonym Processor detects and identifies redundant data across
programs, screens, files and databases in an application. COBOL Analyst's DB2
Analyzer loads and analyzes the DB2 data definitions and embedded SQL in an
application with drill-down capability to explore design details. The
Inventory/Analysis tool allows users to feed system-level cross reference
information into a relational database, enabling programmed and ad hoc queries.
SEEC COBOL Analyst 2000. COBOL Analyst 2000 is an enhanced version of COBOL
Analyst that contains all the capabilities of COBOL Analyst, as well as several
additional features designed to address year 2000 compliance. Currently, COBOL
Analyst 2000 assists in the assessment, planning and correction phases of year
2000 compliance. SEEC is currently enhancing the capabilities of COBOL Analyst
2000 to enable it to automate further the correction phase of year 2000
compliance. COBOL Analyst 2000 includes a feature to scan for date patterns in
order to locate date items and a synonym processing feature to identify indirect
references to date items.
SEEC COBOL Slicer. COBOL Slicer, which is derived from the core COBOL
analysis technology, utilizes "program slicing" technology to provide an
interactive PC-based slicing tool designed to increase productivity in
understanding program logic while redeveloping applications. COBOL Slicer
assists in the documentation of valuable business rules embedded in legacy COBOL
systems. SEEC's COBOL Slicer allows customers to understand the program, data
structures and input/output screens of an application. Business rules can then
be identified by locating appropriate slicing criteria and understanding the
code slice, control flow and the logical data model. COBOL Slicer is also being
used for testing, including testing for year 2000 compliance. SEEC is currently
enhancing COBOL Slicer to further automate the generation of test cases.
SEEC Date Analyzer. Date Analyzer is a stand-alone product which provides
year 2000 impact analysis for non-COBOL applications. Date Analyzer examines the
various programs or source files across languages using a pattern-matching
scheme, and then analyzes the language rules to detect the items and statements
which are potentially affected by the year 2000. Pre-defined language rules can
be extended, and rules may be defined for languages not included as a part of
the product. Date Analyzer can be used to perform year 2000 analysis on ten
programming languages, including NATURAL and FOCUS. The Company intends to
enhance Date Analyzer to analyze other languages as market opportunities present
themselves.
SEEC Object Designer. Object Designer is a stand-alone product that
interfaces with the Company's core COBOL analysis technology. Object Designer
utilizes an object modeling technique to represent the business model and
generate the database design for relational databases such as Oracle and Sybase.
Object Designer allows the user to specify methods in C++ language, and generate
objects which are reusable by applications in PC-based visual languages such as
Visual Basic and Power Builder. The object model can be populated by mapping
objects to entities in the legacy application using the application dictionary.
Object Designer may be utilized in conjunction with COBOL Analyst and COBOL
Slicer and/or third party software tools to extract business rules to build
reusable objects for client/server migration. Object Designer is currently in
the beta testing stage of development and has not been marketed and sold to
date. SEEC expects that its first sales of Object Designer will be in the first
half of 1997.
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SMART CHANGE FACTORY
The year 2000 problem presents a significant marketing opportunity for
SEEC. SEEC provides year 2000 compliance solutions through its Smart Change
Factory, a repeatable process that combines the Company's proprietary software
tools with certain third-party software tools and well-defined procedures
designed to efficiently utilize customer information resources. The Company's
Smart Change Factory products and solutions may be integrated with a customer's
existing organization, allowing the customer to retain control of critical
software applications. The Company's products and solutions may also be used for
complete application outsourcing by the customer to SEEC or to licensed
third-party solution providers.
The year 2000 compliance process involves four phases: (1) inventory and
impact assessment, (2) planning, (3) source correction and (4) testing. The
inventory and impact assessment and source correction phases can be automated to
a greater extent using software tools than the planning and testing phases,
which tend to be more labor intensive and require more expert intervention. The
Company's approach to each of these phases is discussed below.
Inventory and Impact Assessment Phase. This phase, which is highly
automatable, involves identification of the applications, programs, files,
databases and external interfaces that are or may be affected by the use of
two-digit date fields, assessment of potential program or system failures that
may occur, identification of programs that must be corrected, and a preliminary
estimate of the timing and cost of implementing required corrections. SEEC's
COBOL Analyst 2000 automates various functions, including identification of date
items, synonyms and year 2000 affected source code. That information is then
imported to Microsoft Access or other relational databases, and is used to
create a set of technical assessment reports identifying in detail affected
programs, data items and logic statements, as well as a preliminary estimate of
source correction and testing budgets.
Planning Phase. The planning phase involves analysis of the data generated
in the impact assessment phase in order to generate a comprehensive plan for
implementation of the correction process, including tools and procedures to be
used, sequencing of programs for the correction phase, and test procedures to be
followed. This phase is critical to developing an efficient correction and test
phase plan to minimize customer expenses and maximize utilization of customer
information resources. On an outsourced project, SEEC will work very closely
with the customer during this phase to develop a plan that takes into
consideration the nature of the organization, its informational requirements and
budget constraints. It is during this phase that the Smart Change Factory
approach described below will be applied analytically to determine the most
appropriate correction for each application, which may be program logic changes
for certain applications and date field expansion for others. During the
planning phase SEEC may also recommend phasing out particular programs,
replacement of particular programs, redevelopment of programs, or no correction
at all. COBOL Analyst 2000 is used as an assistance tool in the planning
process, but this process necessarily involves a significant amount of judgment
and decision-making.
Source Correction Phase. This phase involves implementation of the
corrective steps decided upon in the planning phase. Software tools can
significantly improve productivity in this phase, and SEEC is enhancing COBOL
Analyst 2000 and related tools to further automate source code correction. In
the Smart Change Factory process, this phase is a well defined, assembly
line-like process, with repeatable steps. The Company's tools for implementing
procedural application changes utilize a rule-based editing scheme in which
program logic changes can be implemented by SEEC or the customer.
Testing Phase. In this phase, all corrected and functionally related
programs must be tested to ensure proper functionality and continued operation
using the year 2000 and beyond. SEEC and industry sources estimate that this
phase of the year 2000 compliance process will be the most time consuming, the
most labor intensive and the least susceptible to automation. SEEC is enhancing
its software tools to add features that will automate certain steps in the
testing phase. Testing parameters will vary for each customer, depending on
industry and legacy applications in place.
The Smart Change Factory approach to year 2000 compliance may be
distinguished from the so-called "mass change" approach which involves the
automatic expansion of all two digit date fields in all applications
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to four digit date fields. The Smart Change Factory approach, on the other hand,
involves analysis of the impact of the year 2000 on each application and a
determination of the most appropriate solution for each application. Under the
Smart Change Factory approach, the Company's tools are utilized to help
determine the technical feasibility of implementing program logic changes to
particular applications that enable the applications to become year 2000
compliant without expanding date fields. The Company's tools are then utilized
to assist in implementing date field expansion where appropriate and program
logic changes where appropriate. The Smart Change Factory approach typically
involves more time and effort in the planning phase of the process, while the
mass change approach typically involves considerably more time and effort in the
correction and testing phases. Since the source correction and testing phases
tend to be much larger and more labor intensive than the planning phase, the
mass change approach can result in significantly higher costs to the customer.
SEEC'S CLIENT-SERVER MIGRATION SOLUTION
SEEC's client/server migration solution is based on SEEC's redevelopment
process which leverages the entity information and the business rules embedded
in legacy COBOL software applications. SEEC's tools avoid the re-creation of
entity information and business rules, a costly and time consuming process.
SEEC's methodology enables the user to rapidly build an object model utilizing
SEEC's Object Designer product, which reuses information from the legacy COBOL
systems stored in the COBOL Analyst Application Dictionary.
SEEC's client/server solutions are based on a three-tiered architecture
where the business objects created from the legacy COBOL systems in conjunction
with visual and database objects enable a user to build an application rapidly.
SEEC's redevelopment process enables an information systems organization to
extract business rules for reuse in the client/server environment using the
COBOL Slicer tool.
PRICING OF PRODUCTS AND PROFESSIONAL SERVICES
SEEC's software products are typically licensed to customers. License
agreements generally limit the use of products to a user or number of users. The
LAN license will permit concurrent use which is monitored by the LAN server
component of the product. Some of the software components are licensed for use
on designated servers or a number of servers at a specified site. The price for
a typical workgroup license for COBOL Analyst is approximately $25,000, and for
COBOL Analyst 2000 is approximately $35,000.
The Company's professional services are generally priced on a time and
materials basis. Year 2000 impact assessments are conducted for a fixed price
based on the number of lines of code in a customer's legacy system. A typical
assessment for a Fortune 1000 company is priced in the $100,000 to $150,000
range. Year 2000 planning and conversion projects, which typically represent a
significantly larger share of the total cost of year 2000 compliance, are priced
either on a time and material or fixed price basis. System integration testing
and implementation support is done on a time and materials basis. Customers
generally pay travel and living expenses for SEEC's personnel working at the
customer site.
CUSTOMER AND TECHNICAL SUPPORT
SEEC offers maintenance for each of its products, which entitles the
customer to receive technical support and advice, including problem resolution
services, installation assistance, error corrections and any product
enhancements released during the maintenance period. Maintenance and support
services are provided primarily by telephone or e-mail from SEEC's Pittsburgh,
Pennsylvania headquarters.
SEEC's standard license agreement does not require SEEC to provide
maintenance for any period of time and does not provide express or implied
warranties for SEEC's product software. In connection with the sale of its
products, SEEC offers optional annual maintenance support, including major
program updates and technical support.
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CUSTOMERS
SEEC's products and services are used by information systems departments of
Fortune 1000 companies and similarly sized business and governmental
organizations. Customers for which SEEC has provided products and/or services
include the following:
YEAR 2000 SOLUTIONS
Wheeling Pittsburgh Corporation
Mack Trucks
Rockwell International
Corporation
Northern Illinois Gas
Foremost Insurance Company
(through IBM's Integrated
Systems and Solutions Corp.)
Aluminum Company of America
Weirton Steel Corporation
University of Pittsburgh
Susquehanna Pfalzgraff
GENERAL COBOL MAINTENANCE
AND REDEVELOPMENT
Sallie Mae
American Savings Bank
Mellon Bank, N.A.
Securities Industry
Automation Corporation
Deere & Co.
Pershing Division of Donaldson,
Lufkin & Jenrette Securities
Corporation
Illinois Department of
Employment Security
Columbia Gas
SERVICE PROVIDERS
Complete Business
Solutions, Inc.
IBM's Integrated Systems and
Solutions Corp.
Coopers & Lybrand
Unisys Corporation
Silverline Industries
During fiscal 1996, revenues from Complete Business Solutions, Inc.,
VIASOFT and ASD International accounted for 26%, 25% and 11%, respectively, of
SEEC's total revenues. During the three months ended June 30, 1996, revenues
from those same customers accounted for 27%, 15% and 5%, respectively, of SEEC's
total revenues. No other customer during such periods accounted for more than
10% of SEEC's total revenues.
SALES, MARKETING AND DISTRIBUTION
SEEC markets its products and services primarily to Fortune 1000 companies
and similarly-sized business and governmental organizations. SEEC's marketing
efforts are implemented through its direct sales force utilizing a direct mail
campaign supported by promotion through trade articles and trade shows that
address the software maintenance market. SEEC's marketing efforts are also
implemented through software licenses and other arrangements with service
providers that provide solutions to COBOL maintenance. SEEC sells and supports
its products and services from its Pittsburgh, Pennsylvania headquarters. As of
October 1, 1996, SEEC had four employees engaged in sales and marketing.
Prior to fiscal 1996, SEEC deferred efforts to further develop its sales
and marketing infrastructure due to VIASOFT's limited exclusive distribution
rights, which expired in May 1995, and the limited resources available to SEEC.
SEEC intends to use a substantial portion of the proceeds of the Offering to
expand the sales and marketing of its products and services. See "Use of
Proceeds."
SEEC intends to continue to pursue a broad-based distribution strategy for
its software tools and solutions. In addition to making direct sales to end-user
customers, SEEC licenses its products and solutions to several third-party
solutions providers such as Complete Business Solutions, Inc., IBM's Integrated
Systems and Solutions Corp. and Coopers & Lybrand. These third-party solutions
providers utilize the Company's tools and solutions in connection with COBOL
maintenance and redevelopment engagements, including year 2000 compliance, with
their own customers. SEEC also intends to utilize product distributors for sales
of its products. SEEC has product distribution agreements with ERA Software
Systems Private Limited, SEEC's product distributor in India, and VIASOFT.
In November 1993, SEEC entered into a five-year International Software
Marketing and License Agreement (the "VIASOFT Agreement") with VIASOFT, pursuant
to which SEEC granted VIASOFT a worldwide license to use and market all of
SEEC's products that address the COBOL maintenance market, including the COBOL
Analyst product line, under VIASOFT's private label "ESW/PC". The license
granted to VIASOFT limited exclusive marketing rights through June 1, 1995 and
non-exclusive rights thereafter.
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Pursuant to the VIASOFT Agreement, VIASOFT pays SEEC a royalty of 30% of all
license or maintenance fees related to its distribution of SEEC's products up to
a maximum of $2 million and thereafter a royalty of 25% of license fees and 30%
of maintenance fees related to SEEC's products. During fiscal 1994, 1995 and
1996, and for the first three months of fiscal 1997, revenue from VIASOFT
accounted for approximately 9%, 29%, 25% and 15%, respectively, of SEEC's total
revenue.
SEEC may terminate the VIASOFT Agreement after the third or fourth
anniversaries of the commencement of the VIASOFT Agreement if VIASOFT does not
make minimum payments of at least $1 million during the 12 months preceding the
third or fourth anniversaries. The VIASOFT Agreement, which expires in December
1998, is subject to automatic renewal for five successive one-year periods if
VIASOFT has made minimum payments of at least $1 million during the 12 months
preceding the applicable expiration date.
The VIASOFT Agreement permitted SEEC to use VIASOFT's proprietary COBOL
Parser Validation Suite to test SEEC's products. In exchange for such use, SEEC
agreed to pay to VIASOFT a royalty of 5% of SEEC's sales of products which
contain or use a COBOL parser, subject to a maximum royalty payment of $1
million and a minimum royalty payment of $100,000, during the five-year period
ending November 30, 1998.
SEEC has granted several organizations the non-exclusive right to market
SEEC's products in connection with COBOL maintenance and redevelopment
solutions, including year 2000 solutions. SEEC intends to enter into additional
distribution, license and/or marketing agreements, particularly with service
providers or strategic systems integrators, for its software products.
COMPETITION
The market for SEEC's software products and solutions, including its
solutions for the year 2000 problem and client/server migration, is intensely
competitive and is characterized by rapid change in technology and user needs
and the frequent introduction of new products. SEEC's principal competitors in
the software tools market include VIASOFT, Micro-Focus Group Public Limited
Company and Computer Associates International, Inc. The Company also competes
with large service providers such as IBM's Integrated Systems and Solutions
Corp., Cap Gemini America, Computer Horizons Corp. and the Big Six accounting
firms. Certain of these service providers have developed or acquired proprietary
software tools.
SEEC believes that the principal factors affecting competition in the
software tools market include product performance and reliability, product
functionality, ability to respond to changing customer needs, ease of use,
training, quality of support and price. The primary competitive factors in the
solutions markets, including the year 2000 compliance market, are price,
service, the expertise and experience of the service personnel and the ability
of such personnel to provide solutions to applications problems. Other than
technical expertise and, with respect to the year 2000 compliance market, the
limited time available until the year 2000 arrives, there are no significant
proprietary or other barriers to entry that could prevent potential competitors
from developing or acquiring similar tools or providing competing solutions in
the Company's market.
The Company's ability to compete successfully in the sale of products and
solutions will depend in large part upon its ability to attract new customers,
deliver and support product enhancements to its existing and new customers and
respond effectively to continuing technological change by developing new
products and solutions. SEEC believes that its PC-based tools should enable it
to compete effectively in certain segments of the year 2000 market with various
other tool vendors, including those that offer mainframe solutions. SEEC's
PC-based tools provide a graphical user interface, are easy to use and are
offered at a lower price than mainframe solutions, while providing similar
functionality. PC-based tools also enable valuable mainframe resources to be
conserved by moving maintenance and redevelopment functions to the PC.
RESEARCH AND DEVELOPMENT
SEEC plans to continue significant research and development to enhance the
functionality and performance of its COBOL Analyst product line. In fiscal 1997,
the emphasis will be on enhancing the automation in source correction for year
2000 compliance for COBOL systems, enhancement of COBOL
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Slicer for test coverage analysis, and increased support for non-COBOL
languages. In fiscal 1998, the Company intends to enhance its Object Designer
product for client/server migration based on customer feedback and technology
trends in the industry.
SEEC's development of new products has been accomplished primarily with
in-house development personnel and resources in conjunction with ERA. The
initial development of SEEC's COBOL maintenance products was funded in part by a
grant from ICICI pursuant to the Project Financing Agreement among ICICI, SEEC
and ERA. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
The Project Financing Agreement provided for joint ownership by SEEC and
ERA of all products developed with funds provided thereunder. In March 1996,
SEEC and ERA entered into a Product Purchase Agreement (the "Product Purchase
Agreement"), pursuant to which ERA transferred its ownership interest in SEEC's
products and technologies to SEEC and agreed to assist SEEC in developing new
products and technologies. Pursuant to the Product Purchase Agreement, ERA has
the nonexclusive right to perform design and development work with respect to
SEEC's products pursuant to specified development schedules. In addition, ERA
has agreed to maintain in India the necessary infrastructure and personnel to
support such design and development work. ERA has also agreed to transfer to
SEEC the necessary manpower for product support and to maintain a team of
personnel in India for maintenance of SEEC's products.
SEEC has the right to purchase ERA's research and development facility,
including personnel, equipment and information utilized by ERA for design,
development and maintenance of products, upon the occurrence of certain events
including a change of control of ERA, a termination of the Product Purchase
Agreement by ERA upon 12 months notice, certain defaults by ERA, an initial
public offering by ERA or the failure by the parties to agree upon maintenance
fees after the first six years of the Product Purchase Agreement. See "Certain
Transactions."
As of October 1, 1996, SEEC had four employees engaged in product
development and ten employees of ERA were engaged in product development for
SEEC. All of SEEC's research and development employees are located at SEEC's
Pittsburgh, Pennsylvania headquarters. In addition to developing new products,
SEEC continually updates its existing products through enhancements and new
releases.
During fiscal 1994, 1995 and 1996, and the three months ended June 30, 1995
and 1996, research and development expenditures, including research and
development fees paid to ERA, were $317,000, $407,000, $337,000, $109,000 and
$68,000, respectively.
PRODUCT PROTECTION
SEEC relies on a combination of copyright, trade secret and trademark laws,
and contractual provisions to establish and protect its rights in its software
products and proprietary technology. SEEC protects the source code version of
its products as a trade secret and as an unpublished copyrighted work. Despite
these precautions, it may be possible for unauthorized parties to copy certain
portions of SEEC's products or reverse engineer or obtain and use information
that SEEC regards as proprietary. SEEC has no patents and existing copyright and
trade secret laws offer only limited protection. Certain provisions of the
license and distribution agreements generally used by SEEC, including provisions
protecting against unauthorized use, copying, transfer and disclosure, may be
unenforceable under the laws of certain jurisdictions, and SEEC is required to
negotiate limits on these provisions from time to time. In addition, the laws of
some foreign countries do not protect SEEC's proprietary rights to the same
extent as do the laws of the United States. SEEC has been and may be required
from time to time to enter into source code escrow agreements with certain
customers and distributors, providing for release of source code in the event
SEEC breaches its support and maintenance obligations, files bankruptcy or
ceases to continue doing business. SEEC licenses its products for PCs pursuant
to "shrink-wrap" license agreements that are not negotiated with or signed by
licensees and may therefore be unenforceable in certain jurisdictions.
SEEC's competitive position may be affected by its ability to protect its
proprietary information. However, because the software industry is characterized
by rapid technological change, SEEC believes that
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patent, trademark, copyright, trade secret and other legal protections are less
significant to SEEC's success than other factors such as the knowledge, ability
and experience of SEEC's personnel, new product and service development,
frequent product enhancements, customer service and ongoing product support.
While SEEC has no knowledge that it is infringing the proprietary rights of
any third party, there can be no assurance that such claims will not be asserted
in the future with respect to existing or future products. Any such assertion by
a third party could require SEEC to pay royalties, to participate in costly
litigation and defend licensees in any such suit pursuant to indemnification
agreements, or to refrain from selling an alleged infringing product or service.
EMPLOYEES
SEEC had 22 employees as of October 1, 1996, including four in sales and
marketing, four in research, development and support, ten in professional
services and four in corporate operations and administration. In light of SEEC's
plans for rapid expansion and growth in order to capture a significant share of
the year 2000 compliance market, the future success of SEEC will depend in large
part upon its continued ability to attract and retain highly skilled and
qualified personnel. Competition for such personnel is intense in the computer
software industry, particularly for talented software developers, service
consultants and sales and marketing personnel. None of SEEC's employees is
represented by a collective bargaining agreement. SEEC believes that its
relations with its employees are good.
FACILITIES
SEEC's principal administrative, research and development, customer support
and marketing facilities are located in approximately 3,000 square feet of space
in Pittsburgh, Pennsylvania. SEEC occupies these premises under a lease
agreement expiring July 31, 1998. SEEC believes that its facilities are adequate
for its current needs and that suitable additional space will be available as
needed.
LEGAL PROCEEDINGS
As of the date of this Prospectus, SEEC is not a party to any litigation
and is not aware of any pending or threatened litigation.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of SEEC and their ages and positions
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Raj Reddy 59 Chairman and Director
Ravindra Koka 46 President, Chief Executive Officer, Treasurer and Director
John D. Godfrey 47 Vice President, Operations and Customer Services,
Secretary and Director
Richard J. Goldbach 41 Chief Financial Officer
Radha Ramaswami Basu 46 Director
Stanley A. Young 69 Director
Abraham Ostrovsky(1) 53 Director Elect
</TABLE>
- ---------
(1) Elected to serve as a director of SEEC effective immediately after the
consummation of the Offering.
Raj Reddy is a co-founder of SEEC and has served as a director since SEEC's
inception in 1988 and as Chairman since 1989. Dr. Reddy serves as a consultant
in a scientific or engineering capacity from time to time on projects for SEEC.
Dr. Reddy has been Dean of the Carnegie Mellon University School of Computer
Science since 1992 and is the Herbert A. Simon University Professor of Computer
Science and Robotics. Dr. Reddy joined Carnegie Mellon University's Department
of Computer Science in 1969 and served as Director of the Robotics Institute
from 1979 to 1992. Dr. Reddy is Chairman of the Board of Directors of Carnegie
Group, Inc., a member of the Board of Directors of Telxon Corporation and
Industry.Net, Inc. and a member of the Technical Advisory Board of Microsoft
Corporation.
Ravindra Koka is a co-founder of SEEC and has been President and Chief
Executive Officer and a director of SEEC since its inception in 1988. Mr. Koka
is a founding shareholder and director of ERA, a software consulting firm based
in India and a shareholder of SEEC, and a founding shareholder and director of
ACS Technologies Limited, an Indian company engaged in providing computer
hardware maintenance and service. Prior to founding SEEC, Mr. Koka was a program
analyst with System Development Corp., a senior systems analyst and mainframe
application developer for Roan Consolidated Mines and a visiting scientist and
Adjunct Associate Professor at Carnegie Mellon University's Department of
Computer Science.
John D. Godfrey has been Vice President, Operations and Customer Services,
and Secretary of SEEC since 1989, and was elected a director of SEEC in March
1996. Prior to joining SEEC, Mr. Godfrey served in various management positions
at Cimflex Teknowledge Corp., was director of engineering for American Auto-
Matrix, Inc. and PERQ Systems Corp. and served as manager of graphic information
systems for Mellon Bank, N.A.
Richard J. Goldbach joined SEEC in October 1996 as Chief Financial Officer.
Mr. Goldbach had previously served as Finance Director for ADVO, Inc., a direct
mail marketing company, from May 1991 to September 1996, and as Chief Financial
Officer and Treasurer of Scribe Systems, Inc., a computer software publishing
company, from January 1986 to December 1990. Prior to that time, Mr. Goldbach
was senior manager in the audit department of Arthur Andersen. He is a certified
public accountant.
Radha Ramaswami Basu was elected a director of SEEC in August 1996. Ms.
Basu is the general manager of Hewlett Packard Company's International Software
Operation, a position she has held since February 1994. Ms. Basu has held
various positions since joining Hewlett Packard in 1978, including worldwide
account manager for international programming from 1990 to 1994.
Stanley A. Young has been a director of SEEC since it was founded in 1988.
Mr. Young has been active as a consultant and venture capital investor for the
past five years and is Chairman, President and Chief Executive Officer of Young
Management Group, Inc., a management consulting firm. Mr. Young is a director
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<PAGE> 37
of JetForm Corporation, Andyne Computer, Inc. and Cable-Sat Systems, Inc. Mr.
Young was formerly a director and seed investor in Parametric Technology
Corporation.
Abraham Ostrovsky has been elected to serve as a director of SEEC effective
immediately after the consummation of the Offering. Mr. Ostrovsky has been
Chairman and Chief Executive Officer of Cable-Sat Systems, Inc. since February
1996. Mr. Ostrovsky is also Chairman of JetForm Corporation, a provider of
forms-based workflow automation software, a position he has held since 1993. He
joined JetForm in 1991 as Chief Operating Officer and was Chief Executive
Officer from 1991 to 1995. Prior to joining JetForm, Mr. Ostrovsky was
concurrently the Senior Vice President of Erskine House PLC, an office equipment
dealership, and the Chairman of Savin Florida, a subsidiary of Erskine House,
from 1988 to 1990.
TERMS OF DIRECTORS AND OFFICERS
The Company's directors are elected by the shareholders. Effective upon the
closing of the Offering, the Company's Board of Directors will be divided into
three classes, with the members of each class serving staggered three-year
terms. The Board of Directors will consist of two Class I directors (Abraham
Ostrovsky and Stanley A. Young), two Class II directors (Radha R. Basu and John
D. Godfrey), and two Class III directors (Ravindra Koka and Raj Reddy), whose
terms will expire at the 1997, 1998 and 1999 Annual Meeting of Shareholders,
respectively. SEEC's Bylaws provide that the number of directors shall be fixed
from time to time by a majority of the Board of Directors and that vacancies on
the Board of Directors (including vacancies created by an increase in the number
of directors) may be filled by a majority of the Board of Directors then in
office or by the sole remaining director, or, if the Board of Directors or the
sole remaining director fails to act, by the shareholders.
Upon the occurrence of a default under the ICICI Loan Agreement, it has the
right to appoint one director of SEEC. In 1996, the Company was in default of
certain payment and other obligations under the ICICI Loan Agreement, but as of
September 30, 1996 brought such payment obligations current and received a
written waiver from ICICI of all existing and prior defaults. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources".
Officers are appointed by the Board of Directors and, except for those
officers with which SEEC has entered into employment agreements, serve at the
pleasure of the Board. See "Management--Employment Agreements."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established two standing committees: a
Compensation Committee and an Audit Committee. SEEC's bylaws provide that all
committees must have two or more members and that the Audit Committee must have
at least two members who are not employees of SEEC. The members of the
Compensation and Audit Committees serve at the pleasure of the Board of
Directors.
The Compensation Committee is responsible for administering the Stock
Option Plan, to the extent provided in the authorizing Board resolutions for
such plan, and for reviewing and making recommendations to the Board with
respect to the salaries, bonuses and other compensation of executive officers,
including the terms and conditions of their employment, and other compensation
matters. The members of the Compensation Committee are Radha R. Basu and Raj
Reddy.
The Audit Committee is responsible, to the extent provided in the
authorizing Board resolutions, for making an annual recommendation, based on a
review of qualifications, to the Board for the appointment of independent public
accountants to audit the financial statements of SEEC and to perform such other
duties as the Board may from time to time prescribe. The Audit Committee will
also be responsible for reviewing and making recommendations to the Board with
respect to (i) the scope of audits conducted by SEEC's independent public
accountants and (ii) the accounting methods and the system of internal control
used by SEEC. In addition, the Audit Committee will review reports from SEEC's
independent public accountants concerning compliance by management with
governmental laws and regulations and with SEEC's policies
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<PAGE> 38
relating to ethics, conflicts of interest and disbursements of funds. The
members of the Audit Committee are Raj Reddy and Stanley A. Young.
STRATEGIC ADVISORY BOARD
In 1996, the Company appointed a Strategic Advisory Board comprised of Mr.
Glen Chatfield and Ms. Radha R. Basu. The Strategic Advisory Board advises the
Company's Board of Directors and management on business and product strategy.
Mr. Chatfield is a director of Carnegie Group, Inc. Mr. Chatfield was
President of Chatfield Enterprises from April 1990 to November 1992, and has
been President of Optimum Power Technology, Inc. since December 1992, Chairman
of Emprise Technologies, Inc. since December 1992, and General Partner of CEO
Venture Fund since January 1986. He was a founder of Duquesne Systems, Inc., a
predecessor of LEGENT Corporation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors was formed in
September 1996. Radha R. Basu and Raj Reddy, who were not at any time during the
year ended March 31, 1996, or at any other time, officers or employees of SEEC,
are the only members of the Compensation Committee. No executive officer of SEEC
serves as a member of the board of directors or compensation committee of
another entity which has one or more executive officers serving as a member of
the Company's Board of Directors or Compensation Committee.
COMPENSATION OF DIRECTORS
Following completion of the Offering, SEEC intends to pay its non-employee
directors $2,000 per Board meeting attended in person and $1,000 per Board
meeting attended by telephone. Directors who are employees do not receive any
compensation for services performed in their capacity as directors. SEEC
reimburses each director for reasonable out-of-pocket expenses incurred in
attending meetings of the Board of Directors and any of its committees.
In connection with their agreeing to serve on the Board of Directors, on
September 30, 1996, SEEC granted to each of Radha R. Basu and Abraham Ostrovsky
ten-year options to purchase 3,013 shares of Common Stock at $5.44 per share.
The options vest 50% each on the first and second anniversaries of their
commencement of service as directors.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by SEEC during the
fiscal year ended March 31, 1996 to Ravindra Koka, the Company's Chief Executive
Officer. No executive officer received total salary and bonus in excess of
$100,000 during the fiscal year ended March 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
NAME AND PRINCIPAL POSITION SALARY
- --------------------------- ------------
<S> <C>
Ravindra Koka................................................................. $ 86,980
(President and Chief Executive Officer)
</TABLE>
No stock options were granted to Mr. Koka during the fiscal year ended
March 31, 1996. As of March 31, 1996, SEEC had not awarded stock appreciation
rights to any employee. Also, SEEC currently has no defined benefit or actuarial
plans.
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<PAGE> 39
The following table sets forth certain information with respect to the
value of stock options held by Mr. Koka at March 31, 1996. Mr. Koka did not
exercise any options to purchase Common Stock during the fiscal year ended March
31, 1996.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END (#) AT FISCAL YEAR-END ($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ravindra Koka................................ 3,616 -- $15,360 --
</TABLE>
- ---------
(1) Represents the difference between the fair market value of the Common Stock
underlying the options as of March 31, 1996 and the exercise price of the
options.
EMPLOYMENT AGREEMENTS
Effective October 1, 1996, SEEC entered into a two-year employment
agreement with Ravindra Koka pursuant to which he agreed to serve as SEEC's
President and Chief Executive Officer at a base annual salary of $98,000, which
will increase to $107,800 upon the closing of this Offering. The agreement
renews automatically at the end of the initial two year term and each renewal
term for a one year period unless either party gives 30 days notice of intent
not to renew. The agreement is terminable by SEEC immediately for cause. The
agreement prohibits Mr. Koka from directly or indirectly selling products that
compete with SEEC's products for two years following termination under specified
circumstances of his employment with SEEC, and from improperly disclosing or
using SEEC's proprietary information. Mr. Koka's employment agreement also
includes the provisions relating to severance described below. SEEC has also
entered into employment agreements with Messrs. Godfrey and Goldbach.
The employment agreements with each of Messrs. Koka, Godfrey and Goldbach
provide that if, on or after the date of a "Change in Control" (as defined
below), SEEC, for any reason, terminates the employee's employment or the
employee resigns "for good reason" (as defined below), then SEEC shall pay to
the employee within five days following the date of termination or date of
resignation: (i) the employee's salary and benefits through the termination date
or resignation date, both as in effect on the date prior to the date of the
Change in Control, and (ii) the amount of any bonus payable to the employee for
the year in which the Change in Control occurred, pro rated to take into account
the number of days that have elapsed in such year prior to the termination date
or resignation date. In addition, during a specified period following the
termination or resignation date, SEEC shall continue to pay to the employee his
annual salary, as in effect on the day prior to the date of the Change in
Control on the dates when such salary would have been payable had the employee
remained employed by SEEC and shall continue to provide to the employee during
such specified period, at no cost to the employee, the benefits the employee was
receiving on the day prior to the date of the Change in Control, or benefits
substantially similar thereto. The specified period is twelve months for Mr.
Koka and nine months for Messrs. Godfrey and Goldbach.
For purposes of the employment agreements, a "Change in Control" is deemed
to occur upon any of the following events: (i) any individual, corporation,
partnership, association, trust or other entity becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of SEEC representing 50% or more of the combined voting power of
SEEC's then outstanding voting securities; (ii) the individuals who as of the
date of the agreements are members of the Board of Directors of SEEC (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board of Directors of SEEC (provided, however, that if the election, or
nomination for election by SEEC's shareholders, of any new director was approved
by a vote of at least a majority of the Incumbent Board, such new director will,
for purposes of such agreements, be considered as a member of the Incumbent
Board); (iii) an agreement by SEEC to consolidate or merge with any other entity
pursuant to which SEEC will not be the continuing or surviving corporation or
pursuant to which shares of the Common Stock of SEEC would be converted into
cash, securities or other property, other than a merger of SEEC in which holders
of the Common Stock of
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<PAGE> 40
SEEC immediately prior to the merger would have the same proportion of ownership
of Common Stock of the surviving corporation immediately after the merger; (iv)
an agreement of SEEC to sell, lease, exchange or otherwise transfer in one
transaction or a series of related transactions substantially all of the assets
of SEEC; (v) the adoption of any plan or proposal for a complete or partial
liquidation or dissolution of SEEC; or (vi) an agreement to sell more than 50%
of the outstanding voting securities in one or a series of related transactions
other than an initial public offering of voting securities registered with the
Securities and Exchange Commission.
The term "good reason" means (i) a material diminution by SEEC of the
employee's title or responsibilities, as that title and those responsibilities
existed on the day prior to the date of a Change in Control; (ii) a material
diminution by SEEC in the employee's salary, benefits or incentive or other
forms of compensation, all as in effect on the day prior to the date of a Change
in Control; or (iii) any reassignment of the employee or relocation of SEEC's
principal executive offices outside of the greater Pittsburgh area.
STOCK OPTION PLAN
On September 12, 1994, the Board of Directors adopted, and the shareholders
of SEEC approved, the SEEC, Inc. 1994 Stock Option Plan (the "Stock Option
Plan"). Under the Stock Option Plan, a committee designated by the Board of
Directors or, if no committee is designated, the full Board (the "Committee") is
authorized to grant stock options. The Stock Option Plan has a 10-year term and,
subject to anti-dilution adjustments, a maximum of 150,679 shares of Common
Stock may be awarded under the Stock Option Plan. Employees of SEEC who, in the
opinion of the Committee, are responsible for the continued growth, development
and financial success of SEEC are eligible to receive stock options under the
Stock Option Plan. The Committee has the discretion to determine the persons to
whom grants of options shall be made and, subject to the terms of the Stock
Option Plan, the terms and conditions of each stock option grant. All options
will be fully vested upon a Change of Control (as defined in the Stock Option
Plan) of SEEC.
Options. The Committee will establish the exercise price of options at the
time of each grant. The exercise price of incentive stock options must be no
less than 100% of the fair market value of a share of Common Stock on the grant
date. The exercise price of incentive stock options granted to a shareholder of
SEEC that owns more than 10% of the total combined voting power of all classes
of stock of SEEC (a "Significant Shareholder"), must be no less than 110% of the
fair market value of a share of Common Stock on the grant date. Options become
exercisable at such times and in such installments as the Committee shall
provide at the date of grant. Options have a maximum term of 10 years (5 years
for an incentive stock option granted to a Significant Shareholder). The option
exercise price may be paid (i) in cash, (ii) with the Committee's approval, in
stock held by the optionee for at least six months prior to the exercise date or
(iii) otherwise as the Committee may approve. Options may be designated by the
Committee as incentive stock options for which the amount of option "spread" at
the time of exercise, assuming no disqualifying disposition, is generally not to
be taxable income to the grantee (except for possible alternative minimum tax
liability) and is not deductible by SEEC for federal income tax purposes.
Exercise after Termination of Employment. If an optionee's employment by
SEEC is terminated for cause, all unvested or unexercised options will terminate
and be forfeited. In the event an optionee ceases to be an employee because of
death or disability, all options will vest and any unexercised option may be
exercised for twelve months following the date of his or her death or
disability. If an optionee's employment terminates by reason of retirement under
SEEC's normal retirement policy, all vested and unexercised options may be
exercised for three months following such termination in the case of an
incentive stock option or twelve months in the case of a nonqualified stock
option. If an optionee's employment terminates for any other reason, any portion
of an option then unexercisable will be forfeited and the then-exercisable
portion of any unexercised option may be exercised for 30 days following such
termination. The Committee has the discretion to extend such post-termination
exercisability.
Company's Right to Purchase Shares. The Stock Option Plan provides SEEC
with certain rights to repurchase shares acquired through the exercise of stock
options granted under the Stock Option Plan and a
39
<PAGE> 41
right of first refusal with respect to shares acquired through exercise of stock
options granted under the Stock Option Plan. Such rights will terminate upon the
closing of this Offering.
Amendments. The Stock Option Plan may be amended by the Board of Directors
without shareholder approval except as may be required to permit incentive stock
options to continue to be issued under the Stock Option Plan.
As of October 1, 1996, SEEC had granted options to purchase an aggregate of
59,356 shares of Common Stock under the Stock Option Plan, of which 57,096
remained outstanding and unexercised.
CERTAIN TRANSACTIONS
The following is a summary of certain transactions to which SEEC was or is
a party and in which certain executive officers, directors or shareholders of
SEEC had or have a direct or indirect material interest.
ERA RELATIONSHIP
SEEC has certain relationships and has engaged in certain transactions with
ERA, an Indian software development company. SEEC owns approximately 8%,
Ravindra Koka, the President, a director and a principal shareholder of SEEC,
approximately 14% and Shankar Krish, an employee of SEEC, approximately 8% of
the outstanding capital stock of ERA. Mr. Koka and Mr. Krish are also directors
of ERA. In addition, ERA owns 150,679 shares of Common Stock of SEEC and the ERA
Foundation for the Administration of the SEEC, Inc. Stock Option Plan (the "ERA
Foundation") owns 180,815 shares of Common Stock of SEEC. Of the shares held by
the ERA Foundation, 150,679 shares are held for the benefit of ERA and will be
distributed to ERA or to ERA's shareholders (other than Mr. Koka) upon
termination of the ERA Foundation, which will occur upon the consummation of
this Offering. The other 30,136 shares of Common Stock held by the ERA
Foundation are held in trust for the employees of ERA. The trustees of the ERA
Foundation, one of whom is Mr. Koka, may grant ERA employees options to purchase
some or all of the 30,136 shares. SEEC issued the 180,815 shares of Common Stock
to the ERA Foundation in 1992 in consideration for shares of stock of ERA
representing a 10% interest in ERA and cash in the amount of $1,000.
Since SEEC's inception in 1988, ERA has provided certain research and
development services to SEEC. SEEC's initial development of its COBOL
maintenance products was funded in part by a grant from ICICI pursuant to the
Project Financing Agreement among ICICI, SEEC and ERA. The Project Financing
Agreement provided that SEEC and ERA would each have an ownership interest in
all products developed with funds provided thereunder. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Notes 5 and 6 to Financial
Statements.
In March 1996, SEEC and ERA entered into the Product Purchase Agreement,
pursuant to which ERA transferred to SEEC its 35% ownership interest in
jointly-owned products and technologies, including COBOL Analyst, COBOL Slicer,
Object Designer, Date Analyzer and related derivative and add-on products, all
products developed pursuant to the Project Financing Agreement and all products
covered by the VIASOFT Agreement. In consideration of ERA's transfer of its
ownership interest in the products and technology, SEEC issued 150,679 shares of
Common Stock to ERA.
ERA also agreed to assist SEEC in developing new products and technologies.
Pursuant to the Product Purchase Agreement, ERA has the non-exclusive right to
perform design and development work with respect to SEEC's products pursuant to
specified development schedules. In addition, ERA has agreed to maintain in
India the necessary infrastructure and personnel to support such design and
development work. ERA has also agreed to transfer to SEEC the necessary manpower
for product support and to maintain a team of personnel in India for maintenance
of SEEC's products.
In consideration of ERA's developmental obligations under the Product
Purchase Agreement, SEEC agreed to pay ERA certain research and development
fees. SEEC is obligated to pay ERA, through December 31, 1996, a research and
development fee equal to 10% of its gross receipts from the products so
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<PAGE> 42
developed by ERA prior to the date of the Product Purchase Agreement, but not
less than $12,000 per quarter, and thereafter on mutually agreed terms. SEEC
also agreed to pay to ICICI on behalf of ERA 5% of its gross receipts from
products and services derived from COBOL redevelopment, and from all data-base
reengineering and reverse engineering products and services. As of June 30,
1996, the balance of the maximum royalty payable to ICICI on behalf of ERA was
$133,855. In addition, during the first three years of the Product Purchase
Agreement, SEEC has agreed to pay ERA a maintenance fee at a flat rate of $5,000
per month, and, in the next three years, $6,000 per month as long as the Product
Purchase Agreement remains in effect. Each party has the right to terminate the
Product Purchase Agreement upon certain events of default, upon the change of
control of the other party or upon 12 months notice. SEEC incurred a total of
$108,000, $104,000, $103,000 and $26,000 in royalties and fees due to ERA during
fiscal 1994, 1995 and 1996 and the three months ended June 30, 1996,
respectively. See "Business--Research and Development".
Pursuant to the Product Purchase Agreement, upon a change of control of
ERA, SEEC has the right to repurchase some or all of the shares of Common Stock
owned by ERA. SEEC also has the right to purchase ERA's research and development
facilities upon the occurrence of certain events including a change of control
of ERA, a termination of the Product Purchase Agreement by ERA upon 12 months
notice, certain defaults by ERA, an initial public offering by ERA or the
failure by the parties to agree upon maintenance fees after the first six years
of the Product Purchase Agreement. In the event SEEC does not purchase ERA's
facilities, ERA has agreed to maintain those facilities at a minimum of the same
size and quality as prior to the change of control. In the event of a change of
control of SEEC, ERA has the right to request a renegotiation of any or all of
the research and development provisions of the Product Purchase Agreement.
Pursuant to a Marketing Agreement dated March 1, 1996, SEEC granted ERA the
non-exclusive right to distribute SEEC's products in India only. Under such
agreement, ERA pays SEEC a royalty of 50% (40% during the first six months of
the agreement) of SEEC's suggested international list price for all products
distributed by ERA. During fiscal 1996 and the first three months of fiscal
1997, ERA paid $11,500 and $13,520, respectively, in royalties to SEEC. The
agreement is for a term of three years. SEEC may terminate the agreement (i) for
cause; (ii) at any time after the first 12 months by paying ERA an amount equal
to 150% of ERA's gross revenues for the previous 12 months from sales of SEEC's
products; (iii) at any time after the first 18 months upon failure of the
parties to agree upon minimum sales by ERA or upon a business plan for ERA's
marketing of the products; or (iv) upon failure of ERA to achieve the agreed
upon minimum sales of SEEC's products.
SEEC, ERA and certain of the shareholders of SEEC have entered into a
Shareholders Agreement dated March 31, 1996. The agreement prohibits ERA from
transfering any of its shares of Common Stock without the prior written consent
of SEEC. Further, SEEC and the other parties to the Agreement have the right to
purchase the shares of Common Stock held by ERA in the event ERA wishes to sell
such shares. The Shareholders Agreement will terminate upon consummation of this
Offering.
SEEC anticipates that in the future decisions must be made with respect to
various categories of transactions between SEEC and ERA, such as the terms and
conditions under which ERA may provide research and development for SEEC
following December 31, 1996, whether SEEC will acquire ERA's research and
development facilities and whether SEEC and ERA will enter into a business
combination. All future transactions between SEEC and its officers, directors
and principal shareholders and their affiliates, including future transactions
between SEEC and ERA outside the ordinary course, will be approved by a majority
of the Board of Directors, including a majority of the disinterested directors,
and will be on terms no less favorable to SEEC than could be obtained from
unaffiliated third parties.
STOCK PURCHASES
In March 1996, Dr. Reddy, Chairman of the Board of SEEC, and Mr. Koka and
Mr. Godfrey, each an officer and director of SEEC, purchased from SEEC 22,602,
23,066 and 15,238 shares of Common Stock, respectively, at a price of $0.03 per
share, pursuant to the exercise of warrants issued to them in April 1993.
In July 1996, Dr. Reddy purchased from SEEC 20,097 shares of Common Stock
at a price of $4.98 per share by converting $75,000 in advances, plus accrued
interest, made by Dr. Reddy to SEEC from
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<PAGE> 43
August 1990 to September 1992. The advances were deemed to have accrued interest
at a rate of 7% per annum.
In July 1996, Mr. Koka and Mr. Godfrey purchased from SEEC 21,246 and
13,927 shares of Common Stock, respectively, at a price of $4.98 per share. Mr.
Koka and Mr. Godfrey paid for their shares by converting demand notes issued to
them by SEEC in March 1992 to evidence deferred salaries owed to them. The
demand notes bore interest at a rate of 7% per annum and were in the respective
principal amounts of $76,541 and $50,565.
In July 1996, Stanley Young, a director of SEEC, purchased from SEEC 20,355
shares of Common Stock at a price of $4.98 per share by converting two demand
notes issued to him by SEEC in August 1990 and June 1991 in connection with two
$25,000 loans by Mr. Young to SEEC, and by converting the principal and accrued
interest of a $25,000 10% Subordinated Note purchased by Mr. Young in September
1992.
In July 1996, Amar Foundation, a shareholder of SEEC, purchased from SEEC
25,892 shares of Common Stock at a price of $4.98 per share by converting a
demand note issued by SEEC in June 1991 in connection with a $95,000 loan by
Amar Foundation to SEEC. The note bore interest at a rate of 7% per annum.
In July 1996, Abraham Ostrovsky, who will become a director of SEEC
following the closing of the Offering, purchased from SEEC 1,771 shares of
Common Stock at a price of $4.98 per share by converting a $6,250 10%
Subordinated Note purchased by Mr. Ostrovsky in April 1992.
In September 1996, Radha R. Basu, a director of the Company, purchased
2,756 shares of Common Stock at a price of $5.44 per share.
In September 1996, Shyamala Reddy and Geetha Reddy, each of whom is a
daughter of Dr. Raj Reddy, purchased 21,697 and 7,232 shares of Common Stock,
respectively, at a price of $5.44 per share.
REGISTRATION RIGHTS AGREEMENT
SEEC has entered into a Registration Rights Agreement, dated as of August
15, 1996 (the "Registration Rights Agreement"), with certain holders of its
Common Stock. The Registration Rights Agreement provides that each of the
parties will have the right, commencing on the date which is 270 days following
the date of this Prospectus, to demand registration of some or all of their
shares under the Securities Act in connection with the offering thereof on a
firm commitment underwritten basis, subject to the demand being made by the
holders of at least a majority of the securities registerable thereunder. As of
the date of this Prospectus, the aggregate number of shares of Common Stock
outstanding as to which such demand registration rights may be exercised is
298,584. The Registration Rights Agreement also provides that each of the
parties has the right, whenever SEEC proposes to register any of its securities,
to require that SEEC include in such registration some or all of each of the
parties' shares. The expenses of such registrations (other than underwriting
discounts and commissions) will be borne by SEEC. SEEC has agreed to indemnify
the parties to the Registration Rights Agreement for losses caused by (i) any
untrue or alleged untrue statement or omission of material fact in any
registration statement and (ii) with certain exceptions, any violation by SEEC
of the Securities Act or any rule or regulation thereunder in connection with a
registration.
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PRINCIPAL SHAREHOLDERS AND HOLDINGS OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of SEEC's Common Stock at October 1, 1996, by each person
known by SEEC to be the beneficial owner of more than 5% of the outstanding
Common Stock, by each director and director-elect of SEEC, by the Chief
Executive Officer of SEEC and by all directors, director nominees and executive
officers of SEEC as a group.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF SHARES PERCENT OF SHARES
COMMON STOCK OUTSTANDING OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) PRIOR TO OFFERING(2) AFTER OFFERING(3)
------------------------------------ --------------------- -------------------- -----------------
<S> <C> <C> <C>
Ravindra Koka (4).......................... 530,102 28.3% 18.5%
Raj Reddy (5).............................. 344,058 18.4 12.0
Adam D. Young (6).......................... 303,619 16.3 10.6
Amar Foundation (7)........................ 205,201 10.8 7.1
ERA Foundation for the Administration of
the SEEC, Inc. Stock Option Plan (8)..... 180,815 9.7 6.3
John D. Godfrey (9)........................ 152,963 8.2 5.3
ERA Software Systems Private Limited
(10)..................................... 150,679 8.1 5.3
Adam D. Young Qualified Annuity Trust
(11)..................................... 100,453 5.4 3.5
Ravindra Koka Retained Annuity Trust
(12)..................................... 100,000 5.4 3.5
Stanley A. Young (13)...................... 42,956 2.3 1.5
Radha R. Basu (14)......................... 2,756 .2 .1
Abraham Ostrovsky (15)..................... 3,654 .2 .1
All directors, directors-elect and
executive officers as a group (6 persons)
(16)..................................... 1,076,489 56.7 37.1
</TABLE>
- ---------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Shares of Common Stock subject to
options or warrants exercisable within 60 days are deemed outstanding for
computing the percentage of the person or group holding such options or
warrants, but are not outstanding for computing the percentage of any other
person. Except as noted, each shareholder has sole voting power and sole
investment power with respect to all shares beneficially owned by such
shareholder.
(2) Based upon 1,868,505 shares outstanding prior to the Offering.
(3) Based upon 2,868,505 shares outstanding after the Offering. Does not
reflect shares, if any, to be purchased by any such individual in the
Offering.
(4) Includes 3,616 shares of Common Stock issuable upon the exercise of
outstanding options and 100,000 shares of Common Stock owned by Ravindra
Koka Retained Annuity Trust of which Mr. Koka is trustee. Also includes
180,815 shares of Common Stock owned by ERA Foundation, of which Mr. Koka
is a co-Trustee, with respect to which Mr. Koka disclaims any financial
interest. Does not include 150,679 shares of Common Stock owned by ERA, of
which Mr. Koka is a director and stockholder, with respect to which Mr.
Koka disclaims any beneficial interest. Mr. Koka's address is in care of
SEEC, Inc., 5001 Baum Boulevard, Pittsburgh, Pennsylvania 15213.
(5) Mr. Reddy's address is in care of SEEC, Inc., 5001 Baum Boulevard,
Pittsburgh, Pennsylvania 15213.
(6) Includes 100,453 shares of Common Stock owned by Adam D. Young Qualified
Annuity Trust, of which Mr. Young's wife is trustee. Adam D. Young's
address is 10 Riverside Drive, Marblehead, Massachusetts 01945.
(7) Includes 28,629 shares of Common Stock issuable upon the exercise of
outstanding warrants. Amar Foundation's address is 630 Los Trancos Road,
Portola Valley, California 94025.
43
<PAGE> 45
(8) ERA Foundation's address is in care of Ravindra Koka, Trustee, SEEC, Inc.
5001 Baum Boulevard, Pittsburgh, Pennsylvania 15213.
(9) Includes 3,254 shares of Common Stock issuable upon the exercise of
outstanding options. Mr. Godfrey's address is in care of SEEC, Inc., 5001
Baum Boulevard, Pittsburgh, Pennsylvania 15213.
(10) ERA's address is 4 Motilal Nehru Nagar, 1st Floor, Begumpet Road, Hyderabad
500 016 India.
(11) The address of Adam D. Young Qualified Annuity Trust is in care of Dana
Young, Trustee, 10 Riverside Drive, Marblehead, Massachusetts 01945.
(12) The address of Ravindra Koka Retained Annuity Trust is in care of Ravindra
Koka, Trustee, SEEC, Inc., 5001 Baum Boulevard, Pittsburgh, Pennsylvania
15213.
(13) Includes 22,601 shares of Common Stock issuable upon the exercise of
outstanding warrants. Stanley Young's address is in care of Young
Management Group, Inc., 24 New England Executive Park, Burlington,
Massachusetts 01803.
(14) Ms. Basu's address is c/o Hewlett Packard Company, International Software
Operation, 1266 Kifer Road, Sunnyvale, California 94086.
(15) Includes 1,883 shares issuable upon the exercise of outstanding warrants.
Mr. Ostrovsky's address is in care of Cable-Sat Systems, Inc., 2105
Hamilton Avenue, Suite 140, San Jose, California 95125.
(16) Includes 6,870 shares issuable upon exercise of outstanding options and
24,484 shares issuable upon exercise of outstanding warrants.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of SEEC consists of (i) 20,000,000 shares of
Common Stock, par value $.0l per share and (ii) 10,000,000 shares of Preferred
Stock, without par value (the "Preferred Stock"). The following description of
the capital stock of SEEC does not purport to be complete or to give full effect
to the provisions of statutory or common law and is subject in all respects to
the provisions of SEEC's Articles of Incorporation (the "Articles") as in effect
from time to time.
COMMON STOCK
As of October 1, 1996, SEEC had issued and outstanding 1,868,505 shares of
Common Stock. All outstanding shares of Common Stock are, and the shares offered
hereby will be, fully paid and nonassessable. The holders of Common Stock are
entitled to one vote for each share held of record on all matters voted upon by
shareholders and may not cumulate votes for the election of directors. Thus, the
owners of a majority of the shares of Common Stock outstanding may elect all of
the directors, if they choose to do so, and the owners of the balance of such
shares would not be able to elect any directors. Subject to preferences that may
be applicable to any outstanding shares of Preferred Stock, each share of
outstanding Common Stock is entitled to participate equally in any distribution
of net assets made to the shareholders upon liquidation, dissolution or winding
up of SEEC and is entitled to participate equally in dividends as and when
declared by SEEC's Board of Directors. There are no redemption, sinking fund,
conversion or preemptive rights with respect to the shares of Common Stock. All
shares of Common Stock have equal rights and preferences.
PREFERRED STOCK
SEEC's Board of Directors is authorized by the Articles to fix or alter the
rights, preferences, privileges and restrictions of any series of Preferred
Stock, including the dividend rights, original issue price, conversion rights,
voting rights, terms of redemption, liquidation preferences and sinking fund
terms thereof, and the number of shares constituting any such series and the
designation thereof, and to increase or decrease the number of shares of such
series subsequent to the issuance of shares of such series (but not below the
number of shares then outstanding). As the terms of the Preferred Stock can be
fixed by the Board of Directors without shareholder action, the Board may issue
Preferred Stock with terms calculated to defeat a proposed takeover of SEEC or
to make the removal of management more difficult. The Board of Directors,
without
44
<PAGE> 46
shareholder approval, could issue Preferred Stock with dividend, voting,
conversion and other rights which could adversely affect the rights of the
holders of Common Stock. SEEC's Board of Directors currently has no plans to
issue shares of Preferred Stock.
WARRANTS AND CONVERSION RIGHTS
Stanley A. Young, a director of SEEC, and Amar Foundation, a shareholder of
SEEC, hold warrants to purchase 22,601 and 28,629 shares of Common Stock,
respectively, at an exercise price of $.03 per share. The warrants were issued
in April 1993 in connection with loans to SEEC made by Mr. Young and Amar
Foundation in the amounts of $50,000 and $95,000, respectively, and in
connection with Mr. Young's purchase of a $25,000 10% Subordinated Note. The
warrants are currently exercisable, and expire on December 31, 1999.
Certain other purchasers of SEEC's 10% Subordinated Notes, all of which
were converted into shares of Common Stock in August 1996, hold warrants to
purchase an aggregate of 60,264 shares of Common Stock at an exercise price of
$.03 per share. The warrants were issued in April, September and October 1992 in
connection with the holders' purchases of SEEC's 10% Subordinated Notes, are
exercisable upon the effectiveness of the Offering, and expire on April 1, 1997
(30,132 shares) and September 28, 1997 (30,132 shares). Abraham Ostrovsky, who
will become a director of SEEC upon consummation of the Offering, is a holder of
warrants to purchase 1,883 shares of Common Stock which will expire on April 1,
1997. See "Certain Transactions."
SEEC will also issue the Representative's Warrant to the Representative
upon consummation of the Offering. See "Underwriting."
SEEC's loan agreement with ICICI provides that upon a default by SEEC under
such agreement, ICICI has the right to convert the unpaid principal and interest
of such loan into shares of Common Stock at fair value as determined by an
independent evaluator. In 1996, the Company was in default of certain payment
and other obligations under the ICICI Loan Agreement, but as of September 30,
1996 brought such payment obligations current and received a written waiver from
ICICI of all existing and prior defaults. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources".
REGISTRATION RIGHTS
SEEC has granted registration rights to certain shareholders of SEEC. See
"Certain Transactions-- Registration Rights Agreement." SEEC also has granted
certain registration rights to the Representative in connection with the
issuance of the Representative's Warrant. See "Underwriting".
TRANSFER AGENT
The transfer agent for the Common Stock will be
.
CERTAIN ANTI-TAKEOVER CONSIDERATIONS
SEEC's Articles will authorize the Board of Directors to issue, from time
to time, without any further action on the part of SEEC's shareholders, up to
10,000,000 shares of Preferred Stock in one or more series, with such
preferences, limitations and relative rights as are determined by the Board of
Directors at the time of issuance. The issuance of shares of Preferred Stock
could be used by SEEC to discourage or make more difficult a merger, tender
offer or similar transaction involving SEEC and may encourage any party seeking
to acquire control of SEEC to negotiate the transaction, in advance, with the
Board of Directors and to present any proposed transaction to all of the
shareholders. The Board of Directors believes that an arms'-length negotiation
of the terms of any takeover of control of SEEC is likely to result in more
favorable terms for all shareholders than the terms of a takeover that is
initiated without advance negotiations with the Board of Directors.
45
<PAGE> 47
SEEC has elected not to be governed by certain "anti-takeover" provisions
that had been added to the Pennsylvania Business Corporation Law (the "BCL"),
including provisions that (i) strip voting rights from "control shares," (ii)
require disgorgement of short-term profits upon disposition of stock by certain
controlling persons and (iii) require severance payments and protection of
collective bargaining agreements following certain control share acquisitions.
SEEC's Bylaws divide the Board of Directors into three classes, each class
to be as nearly equal in number of directors as possible. At each annual meeting
of shareholders, directors in each class will be elected for three-year terms to
succeed the directors of that class whose terms are expiring. Abraham Ostrovsky
and Stanley A. Young are Class I directors whose terms of office will expire in
1997. Radha R. Basu and John D. Godfrey are Class II directors whose terms will
expire in 1998. Ravindra Koka and Raj Reddy are Class III directors whose terms
will expire in 1999. This provision could, under certain circumstances, operate
to delay, defer or prevent a change in control of SEEC.
The VIASOFT Agreement provides that, if SEEC (or its principals) receives
an unsolicited offer to enter into a transaction or series of transactions
involving the sale of substantially all of its business or product line, whether
through the sale or exchange of capital stock, merger, consolidation, or sale or
other transfer of assets, or a transaction or series of transactions that would
result in a change in control of SEEC (any of the foregoing being a "significant
transaction"), VIASOFT will have an exclusive right for a period of seven days
to negotiate with SEEC with respect to accomplishing a mutually acceptable
significant transaction. During the exclusive period, the Company is obligated
to negotiate in good faith exclusively with VIASOFT and not negotiate with or
solicit any offers or discussions from any third party with respect to a
significant transaction.
LIMITATION OF DIRECTORS' LIABILITY
As permitted by the provisions of the BCL, the Bylaws limit the personal
liability of directors of SEEC for monetary damages for actions taken as a
director, except to the extent that the director has breached or failed to
perform his or her duties to SEEC and the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness.
INDEMNIFICATION
As permitted by the BCL, SEEC's Bylaws require SEEC to indemnify all
directors and officers of SEEC. Under such provisions, any director or officer
who, in his or her capacity as such, is made or threatened to be made a party to
any suit or proceeding must be indemnified if such director or officer acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of SEEC. The Bylaws and the BCL further provide that such
indemnification is not exclusive of any other rights to which such individuals
may be entitled under the Articles, any agreement, insurance policies, vote of
shareholders or disinterested directors or otherwise. SEEC has not purchased
directors' and officers' insurance.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering and assuming no exercise of outstanding
warrants and options, SEEC will have outstanding 2,868,505 shares of Common
Stock. Of such shares, the 1,000,000 shares sold in this Offering, and any of
the 150,000 shares which may be sold upon exercise of the Underwriters'
over-allotment option, will be freely tradable by persons other than
"affiliates" of SEEC, as that term is defined in Rule 144 under the Securities
Act. The remaining 1,868,505 shares of Common Stock are "restricted securities"
within the meaning of Rule 144 (the "Restricted Shares"). The Restricted Shares
may not be sold unless they are registered under the Securities Act or sold
pursuant to an applicable exemption from registration, including an exemption
pursuant to Rule 144 under the Securities Act. Holders of approximately 298,584
Restricted Shares have certain registration rights pursuant to the Registration
Rights Agreement. See "Certain Transactions--Registration Rights Agreement."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, including persons who may be deemed to be
46
<PAGE> 48
"affiliates" of SEEC, as that term is defined under Rule 144, may sell within
any three-month period a number of Restricted Shares that does not exceed the
greater of one percent of the then outstanding shares of the Common Stock
(estimated to be 28,685 shares after completion of this Offering, or 30,185
shares if the Underwriters' over-allotment option is exercised in full) or the
average weekly trading volume of the Common Stock on the open market during the
four calendar weeks preceding such sale. Sales under Rule 144 are also subject
to certain manner-of-sale limitations, notice requirements, and the availability
of current public information about SEEC. Pursuant to Rule 144(k), a person (or
persons whose shares are aggregated) who is deemed not to have been an
"affiliate" of SEEC at any time during the three months preceding a sale, and
who has beneficially owned Restricted Shares for at least three years, would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations, manner-of-sale provisions or notice requirements. Restricted Shares
properly sold in reliance upon Rule 144 are thereafter freely tradable without
restrictions or registration under the Securities Act, unless thereafter held by
an "affiliate" of SEEC.
An employee, officer or director of or consultant to SEEC who purchased or
was awarded shares or options to purchase shares pursuant to a written
compensatory plan or contract is entitled to rely on the resale provisions of
Rule 701 under the Securities Act, which permits affiliates and non-affiliates
to sell their Rule 701 shares without having to comply with Rule 144's holding
period restrictions, in each case commencing 90 days after the effectiveness of
the Offering (the "Effective Date"). In addition, non-affiliates may sell Rule
701 shares without complying with the public information, volume and notice
provisions of Rule 144.
As of the Effective Date, approximately of the Restricted Shares
are eligible for sale without restriction in the public market in reliance on
Rule 144(k) under the Securities Act, subject, however, to the 270-day lock-up
agreements described below. Beginning 270 days after the Effective Date, upon
the expiration of the lock-up agreements described below, or earlier in the
discretion of the Representative, approximately additional Restricted
Shares will become eligible for sale in the public market. In addition,
outstanding options and warrants to purchase approximately and
shares of Common Stock, respectively, will be fully vested as of the
Effective Date, of which options to purchase approximately shares and
all such warrants are subject to the 270-day lock-up agreements described below.
All directors, officers and employees and substantially all shareholders,
who hold in the aggregate approximately shares of Common Stock,
options to purchase approximately shares of Common Stock, and warrants
to purchase approximately shares of Common Stock have agreed, pursuant
to agreements with the Representative, that they will not, without the prior
written consent of the Representative, sell or otherwise dispose of any shares
of Common Stock or options to acquire shares of Common Stock during the 270-day
period following the Effective Date.
Prior to this Offering there has been no market for the Common Stock, and
no prediction can be made as to the effect, if any, that sales of Restricted
Shares, or the availability of Restricted Shares for sale, by existing
shareholders in reliance upon Rule 144, pursuant to registration or otherwise
will have on the market price of Common Stock. The sale by SEEC or the
shareholders referred to above of a substantial number of shares of Common Stock
after this Offering could adversely affect the market price for the Common
Stock.
47
<PAGE> 49
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
(the "Underwriting Agreement"), each of the Underwriters has severally agreed to
purchase from SEEC, and SEEC has agreed to sell to the Underwriters, the number
of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ---------
<S> <C>
H.C. Wainwright & Co., Inc. .....................................................
---------
Total....................................................................... 1,000,000
=========
</TABLE>
The Underwriting Agreement provides that the several Underwriters, subject
to the terms and conditions set forth therein, will purchase all of the shares
of Common Stock offered hereby if any of the shares are purchased. In the event
of a default by an Underwriter, the Underwriting Agreement provides that, under
certain circumstances, the purchase commitments of each nondefaulting
Underwriter may be increased or the Underwriting Agreement may be terminated.
The Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to the approval of certain legal matters by counsel and
various other conditions.
The Underwriters, for whom H.C. Wainwright & Co., Inc. is acting as the
representative (the "Representative"), have advised the Company that they
propose to offer the shares of Common Stock, other than some or all of the
Reserved Shares (as defined below), to the public initially at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at that price less a concession not in excess of $ per share. The
Underwriters may allow, and the dealers may reallow, a discount not in excess of
$ per share on sales to other dealers. After the initial public offering,
the offering price, concession and reallowance may be changed by the
Underwriters.
At the request of SEEC, the Underwriters have reserved up to approximately
50,000 shares (the "Reserved Shares") of Common Stock for sale to certain
directors, officers, employees and friends of SEEC, and certain relatives of
such directors, officers, employees and friends of SEEC, who have expressed an
interest in purchasing shares of Common Stock in this Offering. The Reserved
Shares will be sold to such persons through brokerage accounts opened
specifically for such purpose through H.C. Wainwright & Co., Inc. The price for
such Reserved Shares will be the public offering price. The number of shares
available to the general public will be reduced to the extent such persons
purchase the Reserved Shares. Any Reserved Shares that are not so purchased by
such persons at the initial closing of this Offering will be sold by the
Underwriters to the general public on the same terms as the other shares of
Common Stock offered hereby.
SEEC has granted an option to the Underwriters, exercisable within 30 days
after the date of this Prospectus, to purchase up to 150,000 additional shares
of Common Stock at the initial public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriters may
exercise the option solely for the purpose of covering over-allotments, if any,
in connection with the sale of shares of Common Stock.
48
<PAGE> 50
SEEC has agreed to pay the Representative a non-accountable expense
allowance of three percent (3%) of the gross proceeds of the Offering, which
will include proceeds from the over-allotment option, if exercised. The
Representative's expenses in excess of the non-accountable expense allowance,
including its legal expenses, will be borne by the Representative.
In the Underwriting Agreement, SEEC has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
SEEC has agreed to sell to the Representative, for nominal consideration, a
warrant to purchase from SEEC up to 100,000 shares of Common Stock (115,000
shares if the Underwriters' overallotment option is exercised in full) at an
exercise price per share equal to 120% of the initial public offering price (the
"Representative's Warrant"). The Representative's Warrant is exercisable for a
period of four years beginning one year from the date of this Prospectus, and is
not transferable for a period of one year except to officers of the
Representative or to any successor to the Representative. SEEC has granted
certain registration rights to the holder of the Representative's Warrant. The
Representative's Warrant contains anti-dilution provisions providing for
appropriate adjustment upon the occurrence of certain events.
SEEC and its directors, executive officers, and certain other employees and
the holders of substantially all of the Common Stock and options and warrants to
purchase Common Stock outstanding prior to the offering have agreed that they
will not offer, contract, sell or otherwise dispose of directly or indirectly
any shares of Common Stock for a period of 270 days following the date of this
Prospectus, without the prior written consent of the Representative except, in
the case of SEEC, for the shares of Common Stock offered hereby and the issuance
of shares of Common Stock upon the exercise of stock options granted under the
Stock Option Plan and, in the case of the shareholders, for gifts of the Common
Stock provided the donee agrees in writing to be bound by the same restrictions.
Prior to this Offering, there has been no public market for the Common
Stock. Accordingly, the public offering price will be determined by negotiation
between SEEC and the Representative. Among the factors to be considered in
determining the public offering price will be the preliminary demand for the
Common Stock, prevailing market and economic conditions, SEEC's revenues and
earnings, estimates of the business potential and prospects of SEEC, the present
state of SEEC's business operations, an assessment of SEEC's management, and the
consideration of these factors in relation to the market valuation of comparable
companies in related businesses and the current condition of the markets in
which SEEC operates.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each agreement which is filed as an exhibit to the Registration Statement of
which this Prospectus is a part. See "Additional Information."
LEGAL MATTERS
Certain legal matters in connection with the shares of Common Stock offered
herein will be passed upon for SEEC by Cohen & Grigsby, P.C., Pittsburgh,
Pennsylvania and for the Underwriters by Morse, Barnes-Brown & Pendleton, P.C.,
Waltham, Massachusetts.
EXPERTS
The financial statements and schedule included in this Prospectus and in
the Registration Statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their reports appearing elsewhere herein and in the Registration Statement, and
are included in reliance upon such reports given upon the authority of said firm
as experts in accounting and auditing.
49
<PAGE> 51
ADDITIONAL INFORMATION
SEEC has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
pursuant to this Prospectus. This Prospectus does not contain all of the
information set forth in the Registration Statement or the exhibits thereto,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to SEEC and the Common
Stock offered hereby, reference is made to the Registration Statement, including
the exhibits thereto. Such information may be reviewed at, or obtained by mail
at prescribed rates from, the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, such information may
also be reviewed at the regional offices of the Commission at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven
World Trade Center, New York, New York 10007. Statements made in this Prospectus
concerning the provisions of such documents are summaries of such documents and
each such statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
Prior to this Offering, SEEC has not been required to file reports under
the Exchange Act. However, following the completion of this Offering, SEEC will
be required to file reports and other information with the Commission pursuant
to the Exchange Act. Such reports and other information may be inspected at, and
copies thereof obtained from, the offices of the Commission as set forth in the
preceding paragraph.
SEEC intends to furnish its shareholders with annual reports containing
audited financial statements reported on by independent public accountants
following the end of each fiscal year, and quarterly reports containing
unaudited financial statements for the first three quarters of each fiscal year
following the end of each such fiscal quarter.
50
<PAGE> 52
SEEC, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Certified Public Accountants............................... F-2
Balance Sheets................................................................... F-3
Statements of Operations......................................................... F-4
Statements of Changes in Capital Deficit......................................... F-5
Statements of Cash Flows......................................................... F-6
Notes to Financial Statements.................................................... F-7
</TABLE>
F-1
<PAGE> 53
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
(The following is the form of opinion that BDO Seidman, LLP will be in a
position to issue upon completion of the recapitalization described in Note 1.)
To the Shareholders and
Board of Directors
SEEC, Inc.
Pittsburgh, Pennsylvania
We have audited the accompanying balance sheets of SEEC, Inc. as of March
31, 1995 and 1996, and the related statements of operations, changes in capital
deficit, and cash flows for each of the three years in the period ended March
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 opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SEEC, Inc. as of March 31,
1995 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended March 31, 1996, in conformity with generally
accepted accounting principles.
BDO Seidman, LLP
August 30, 1996, except for Notes 15
and 16(d), (e) and (f), as to which
the date is October 1, 1996, and the
recapitalization described in Note 1,
as to which the date is October , 1996
Boston, Massachusetts
F-2
<PAGE> 54
SEEC, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
--------------------------- -----------
1995 1996 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 327,718 $ 110,841 $ 106,507
Accounts receivable:
Trade--less allowance for doubtful accounts of
$3,935 and $7,776 at March 31, 1995 and 1996,
respectively and $7,776 at June 30, 1996
(Notes 3 and 9).............................. 189,276 244,679 312,412
Affiliate--ERA (Notes 5 and 6)................. 16,734 992 --
Prepaid expenses.................................. 5,862 5,515 10,028
----------- ----------- -----------
Total current assets......................... 539,590 362,027 428,947
EQUIPMENT, NET (NOTES 4 AND 9)...................... 26,009 27,693 29,055
INVESTMENT IN AFFILIATE (Note 5).................... 5,000 5,000 5,000
----------- ----------- -----------
$ 570,599 $ 394,720 $ 463,002
=========== =========== ===========
LIABILITIES AND CAPITAL DEFICIT
CURRENT LIABILITIES:
Accounts payable
Trade.......................................... $ 46,938 $ 66,930 $ 84,958
Affiliate--ERA (Notes 5 and 6)................. -- -- 12,124
Current portion of notes payable to related
parties (Note 8)............................... 125,650 -- --
Accrued payroll, related taxes and withholdings... 34,800 45,660 50,507
Accrued royalties (Notes 5 and 6)................. 39,272 65,077 85,817
Accrued interest payable (Note 9)................. 13,075 20,250 27,000
Deferred maintenance revenue and current portion
of advance royalty (Note 6).................... 309,984 311,246 300,521
Customer advance.................................. 31,645 21,330 1,790
Current maturities of long-term debt (Note 9)..... 60,000 60,000 90,000
----------- ----------- -----------
Total current liabilities.................... 661,364 590,493 652,717
Due to officers/shareholders (Notes 10 and 11)...... 163,580 172,477 174,702
Notes payable to related parties, less current
portion (Notes 8 and 10).......................... 436,837 599,638 608,925
Long-term debt, less current maturities (Note 9).... 240,000 240,000 210,000
Advance royalty, less current portion (Note 6)...... 180,000 42,857 --
Accrued royalties (Note 6).......................... 17,452 29,040 31,914
----------- ----------- -----------
Total liabilities............................ 1,699,233 1,674,505 1,678,258
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTES 2, 5, 6, 7, 10,
12, 13, 15 AND 16)
CAPITAL DEFICIT
(NOTES 2, 5, 7, 8, 9, 10, 11 AND 16):
Preferred stock--no par value; 10,000,000 shares
authorized; none outstanding
Common stock--$.01 par value; 20,000,000 shares
authorized; 1,358,376, 1,569,961 and 1,569,961
shares issued and outstanding at March 31, 1995
and 1996, and June 30, 1996, respectively...... 13,584 15,700 15,700
Additional paid-in capital........................ 38,787 38,692 38,692
Accumulated deficit............................... (1,181,005) (1,334,177) (1,269,648)
----------- ----------- -----------
Total capital deficit........................ (1,128,634) (1,279,785) (1,215,256)
----------- ----------- -----------
$ 570,599 $ 394,720 $ 463,002
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 55
SEEC, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE
YEARS ENDED MARCH 31 30
-------------------------------------- ------------------------
1994 1995 1996 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE (Note 3):
Software license fees
(Notes 5 and 6)............ $ 480,933 $ 462,929 $ 505,555 $ 99,678 $ 151,378
Software maintenance fees..... 63,808 105,399 101,868 26,476 41,877
Professional services--product
related.................... 40,735 42,355 181,395 8,500 120,044
Professional services--other
(Note 5)................... 362,975 349,898 476,413 101,993 195,669
---------- ---------- ---------- ---------- ----------
Total revenues............. 948,451 960,581 1,265,231 236,647 508,968
---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Cost of software license and
maintenance fees
(Notes 5 and 6)............ 108,081 126,652 149,184 25,959 44,995
Professional services--product
related.................... 9,853 13,952 58,542 433 49,148
Professional services--other
(Note 5)................... 254,826 242,921 439,545 79,450 148,572
General and administrative
(Note 12).................. 148,981 132,358 142,058 29,858 30,217
Sales and marketing........... 215,087 235,977 236,788 60,150 88,103
Research and development (Note
5)......................... 317,471 407,231 336,954 108,680 67,722
---------- ---------- ---------- ---------- ----------
Total operating expenses... 1,054,299 1,159,091 1,363,071 304,530 428,757
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS... (105,848) (198,510) (97,840) (67,883) 80,211
---------- ---------- ---------- ---------- ----------
OTHER EXPENSE, NET:
Interest expense
(Notes 6, 8, 9 and 11)..... (50,066) (62,866) (74,712) (18,318) (18,328)
Other income.................. 1,105 5,818 19,380 7,213 2,646
---------- ---------- ---------- ---------- ----------
Total other expense, net... (48,961) (57,048) (55,332) (11,105) (15,682)
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS)............... $ (154,809) $ (255,558) $ (153,172) $ (78,988) $ 64,529
========== ========== ========== ========== ==========
Net income (loss) per common
share......................... $ (.09) $ (.14) $ (.09) $ (.04) $ .03
========== ========== ========== ========== ==========
Weighted average number of
common and common equivalent
shares outstanding............ 1,792,028 1,792,480 1,796,624 1,794,288 1,986,130
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 56
SEEC, INC.
STATEMENTS OF CHANGES IN CAPITAL DEFICIT
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
AND THE THREE MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL TOTAL
NUMBER OF PAID-IN ACCUMULATED CAPITAL
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
---------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance--April 1, 1993
(Note 1)................... 1,356,116 $13,561 $ 37,160 $ (770,638) $ (719,917)
Net loss for year............ -- -- -- (154,809) (154,809)
--------- ------- -------- ----------- -----------
Balance--March 31, 1994...... 1,356,116 13,561 37,160 (925,447) (874,726)
Exercise of stock options.... 2,260 23 1,627 -- 1,650
Net loss for year............ -- -- -- (255,558) (255,558)
--------- ------- -------- ----------- -----------
Balance--March 31, 1995...... 1,358,376 13,584 38,787 (1,181,005) (1,128,634)
Exercise of warrants (Note
10)........................ 60,906 609 1,412 -- 2,021
Acquisition of software
rights from affiliate (Note
5)......................... 150,679 1,507 (1,507) -- --
Net loss for year............ -- -- -- (153,172) (153,172)
--------- ------- -------- ----------- -----------
Balance--March 31, 1996...... 1,569,961 15,700 38,692 (1,334,177) (1,279,785)
Net income--three months
ended June 30, 1996
(Unaudited)................ -- -- -- 64,529 64,529
--------- ------- -------- ----------- -----------
Balance--June 30, 1996
(Unaudited)................ 1,569,961 $15,700 $ 38,692 $(1,269,648) $(1,215,256)
========= ======= ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 57
SEEC, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31 THREE MONTHS ENDED
----------------------------------- JUNE 30
1994 1995 1996 ---------------------
--------- --------- --------- 1995 1996
--------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................... $(154,809) $(255,558) $(153,172) $ (78,988) $ 64,529
Adjustments to reconcile net income
(loss) to net cash used by
operating activities:
Depreciation....................... 7,941 13,389 14,351 2,819 2,426
Provision for doubtful accounts.... -- -- 6,836 -- --
Amortization of deferred revenue... (85,714) (257,143) (257,143) (64,286) (64,286)
Accrued non-current interest....... 46,048 46,046 46,048 11,512 11,512
Accrued non-current royalty........ 6,667 10,785 11,588 3,655 2,874
Changes in operating assets and
liabilities:
Accounts receivable.............. (93,339) (26,262) (62,239) 58,464 (67,733)
Accounts receivable--affiliate... -- (16,734) 15,742 (3,634) 992
Prepaid expenses................. 15,991 (4,717) 347 2,224 (4,513)
Accounts payable................. (11,345) (48,942) 19,992 (23,371) 18,028
Accounts payable--affiliate...... 43,923 (43,923) -- -- 12,124
Accrued payroll, related taxes
and withholdings.............. 30,812 (27,794) 10,860 10,371 4,847
Accrued royalties................ 9,448 22,641 25,805 (44,179) 20,740
Accrued interest payable......... -- 13,075 7,175 (6,325) 6,750
Deferred maintenance revenue..... 29,721 (2,174) 1,262 (4,524) 10,704
Customer advance................. 32,671 (43,355) (10,315) (4,530) (19,540)
--------- --------- --------- --------- --------
Net cash used by operating activities... (121,985) (620,666) (322,863) (140,792) (546)
--------- --------- --------- --------- --------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchase of equipment................. (19,033) (18,564) (16,035) -- (3,788)
--------- --------- --------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.......... -- 300,000 -- -- --
Proceeds from advance royalty......... 160,000 620,000 120,000 120,000 --
Exercise of common stock warrants and
options............................ -- 1,650 2,021 -- --
--------- --------- --------- --------- --------
Net cash provided by financing
activities............................ 160,000 921,650 122,021 120,000 --
--------- --------- --------- --------- --------
Net increase (decrease) in cash and cash
equivalents........................... 18,982 282,420 (216,877) (20,792) (4,334)
CASH AND CASH EQUIVALENTS:
Beginning of year..................... 26,316 45,298 327,718 327,718 110,841
--------- --------- --------- --------- --------
End of year........................... $ 45,298 $ 327,718 $ 110,841 $ 306,926 $106,507
========= ========= ========= ========= ========
Cash paid during the period for
interest.............................. $ -- $ -- $ 19,825 $ 13,075 $ --
========= ========= ========= ========= ========
Non-cash financing activity--purchase of
software rights from affiliate (Note
5).................................... $ -- $ -- $ 5,000 $ -- $ --
========= ========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 58
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 1--BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business. SEEC, Inc. (the Company) provides a suite of software products
and related services to assist primarily Fortune 1000 companies and
similarly-sized business and governmental organizations in the maintenance and
redevelopment of existing legacy COBOL software applications and related
databases for large mainframe systems. The Company also provides solutions for
the system redevelopment required for year 2000 compliance and to support the
migration of existing COBOL applications from a mainframe to a client/server
environment.
The Company's PC-Windows-based products for COBOL application maintenance
and redevelopment are designed to be alternatives to existing mainframe-based
tools. Marketing efforts are conducted through the Company's direct sales force,
product distributors, and relationships with third-party service providers under
non-exclusive marketing licenses. The Company sells and supports its products
and services from its Pittsburgh, Pennsylvania headquarters.
The Company has a strategic software research and development alliance with
ERA Software Systems Private, Limited (ERA), a software consulting and
development group based in India. The Company and ERA are affiliated through
common ownership (see Notes 5 and 6).
Recapitalization. On October , 1996, the Board of Directors effected a
1-for-3.3183 reverse stock split in connection with a proposed public offering
of the Company's common stock. All shares, options, warrants and per share
amounts in the accompanying financial statements have been adjusted to reflect
the effects of this recapitalization.
Basis of Presentation. The accompanying balance sheet as of June 30, 1996,
the related statements of operations, changes in capital deficit, and cash flows
for the three months ended June 30, 1996, and the statements of operations and
cash flows for the three months ended June 30, 1995, have not been audited.
However, in the opinion of management, they include all adjustments necessary
for a fair presentation of the financial position, results of operations, and
cash flows for the periods presented. The results of operations for the three
months ended June 30, 1996 are not necessarily indicative of results to be
realized for any other interim period or for the full year.
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 revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash, Cash Equivalents and Concentrations of Credit Risk. The statements of
cash flows classify changes in cash and cash equivalents (short-term,
highly-liquid investments readily convertible into cash with an original
maturity of three months or less) according to operating, investing or financing
activities. Financial instruments which potentially expose the Company to
concentrations of credit risk consist principally of cash, temporary cash
investments and accounts receivable.
The Company places its cash and temporary cash investments with a financial
institution which management considers to be of high quality; however, at times
such deposits may be in excess of the Federal Deposit Insurance Corporation
insurance limit.
Concentrations of credit risk with respect to accounts receivable result
from a significant portion of revenues being derived from a small number of
entities (see Notes 3 and 6); however, the Company's customer base is dispersed
across many different industries and geographic areas. The Company generally
extends credit to its customers without requiring collateral; however, it
closely monitors extensions of credit and has not experienced significant credit
losses.
F-7
<PAGE> 59
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 1--BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition. Revenues are derived from the license of software
products, customer support and maintenance contracts, and COBOL maintenance and
redevelopment contracts. Revenue from product sales is recognized upon shipment.
Customer support and maintenance contract revenue is recognized ratably over the
term of the related agreement. The Company provides programming and
reengineering services under time and materials and fixed price contracts.
Revenues from time and materials contracts are recognized as the services are
provided. Revenues from fixed price contracts, which are all less than six
months in duration, are recognized on achievement of specified performance
milestones negotiated with customers. This method is used because management
considers milestones to be the best available measure of progress on these
contracts.
Equipment. Equipment is stated at cost. Maintenance and repairs which are
not considered to extend the useful life of assets are charged to operations as
incurred.
Depreciation of equipment is calculated using the declining balance method.
Estimated useful lives of assets are as follows: computer equipment-3 to 5
years; software and other equipment-5 years; and, furniture and fixtures-5 to 7
years.
Investment in Affiliate. The Company's investment in ERA, which represents
an ownership interest of less than 10%, is accounted for at cost.
Research and Development Costs. Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed" (FAS 86), establishes criteria for capitalization of
software development costs beginning upon the establishment of product
technological feasibility and concluding when the product is available for
general release to customers.
Management believes that in applying the above criteria capitalizable costs
must be carefully evaluated in conjunction with certain factors including, among
other things, costs reimbursed by the ICICI grant (see Notes 5 and 6),
anticipated future revenues, estimated economic product life, amortization
methodologies, and frequency of changes in software and hardware technologies.
After carefully evaluating these factors, management concluded that the amounts
which should have been capitalized pursuant to FAS 86 were immaterial and
therefore no software development costs have been capitalized to date.
Advertising Costs. The Company expenses advertising costs as incurred.
Stock-Based Compensation. The Financial Accounting Standards Board has
issued Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS No. 123), which establishes financial accounting
and reporting standards for stock-based employee compensation plans. The Company
intends to adopt this statement during its year ending March 31, 1997. Other
than additional disclosures regarding stock options granted pursuant to the
Company's 1994 Stock Option Plan, this statement will not have an effect on the
Company's financial statements. The Company does not intend to adopt the expense
recognition provision of FAS No. 123.
Income Taxes. Deferred federal and state income taxes arise from temporary
differences and are accounted for using the asset and liability method to
recognize their tax consequences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
effect on deferred taxes of a change in tax rates is recognized in the period
that includes the enactment date (see Note 13).
Net Income (Loss) per Common Share. Net income (loss) per common and common
equivalent share, using the weighted average number of common and common
equivalent shares outstanding, was computed in accordance with Securities and
Exchange Commission Staff Accounting Bulletin No. 83 (SAB 83) by
F-8
<PAGE> 60
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 1--BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
applying the treasury stock method. Pursuant to SAB 83, common and common
equivalent shares issued by the Company during the 12 months immediately
preceding a proposed public offering at prices substantially below the initial
public offering price together with common share equivalents which result from
the grant of common stock options having exercise prices substantially below the
initial public offering price during the same period have been included in the
calculation of the shares used in computing net income (loss) per share as if
they were outstanding for all periods prior to the initial public offering.
Common equivalent shares, consisting of warrants and stock options, issued
12 months prior to the Company's proposed initial filing date of its
registration statement (October 11, 1996) have not been included in the
computation of net loss per common share because their effect was antidilutive
for the year ended March 31, 1994 and 1995 and the three months ended June 30,
1995.
NOTE 2--LIQUIDITY AND CAPITAL RESOURCES
Since its inception the Company has been dependent upon external sources of
financing and has not generated sufficient revenue to finance continuing
operations. Management recognizes that continuation of the Company is dependent
upon its ability to generate sufficient revenues, and/or obtain additional
financing to support continuance of operations and satisfy obligations.
Management has taken positive actions to reduce debt and increase working
capital.
During July 1996 long-term liabilities to officers/shareholders totaling
$172,477 (see Note 11) and notes payable to related parties totaling $599,638
(see Note 8) were converted to common stock. Further, since July 1, 1996 and
through September 30, 1996, 140,765 shares of common stock have been sold
through private placements to raise additional cash of $747,440 (see Note 16).
The Company is also planning an initial public offering of its common stock
which is expected to close in December 1996. The Company intends to use the
proceeds of the offering to expand sales and marketing, hire new personnel,
increase capital expenditures and for working capital and other general
corporate purposes. Although the Company believes that the proceeds from its
proposed offering will be adequate to meet its working capital needs, there can
be no assurance that the Company will not continue to experience liquidity
problems because of adverse market conditions or other unfavorable events.
NOTE 3--MAJOR CUSTOMERS
VIASOFT has been a significant customer of the Company as described in Note
6. During the years ended March 31, 1994, 1995 and 1996, a significant
percentage of the Company's revenues, was derived from a few other customers.
Sales to Complete Business Solutions, Inc. (CBSI) represented approximately 19%,
33% and 26% of revenues, respectively, for such periods. Additionally, sales to
WI State Materials Center represented 15% of revenues in 1994, and sales to ASD
International (ASD) represented 11% of revenues in 1996. Accounts receivable
from such customers aggregated $86,741 and $81,492 at March 31, 1995 and 1996,
respectively.
During the three months ended June 30, 1995 and 1996, CBSI accounted for
34% and 27% of revenues, respectively. Also, during the three months ended June
30, 1995, ASD and W-P accounted for 12% and 11% of revenues, respectively.
Accounts receivable from CBSI at June 30, 1996 totaled $86,337.
F-9
<PAGE> 61
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 4--EQUIPMENT
Equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
-------------------- --------
1995 1996 1996
-------- -------- --------
<S> <C> <C> <C>
Computer equipment.............................. $ 43,708 $ 52,393 $ 56,181
Software and other equipment.................... 8,707 8,707 8,707
Furniture and fixtures.......................... 6,113 10,427 10,427
-------- -------- --------
Total equipment................................. 58,528 71,527 75,315
Accumulated depreciation........................ (32,519) (43,834) (46,260)
-------- -------- --------
Equipment, net.................................. $ 26,009 $ 27,693 $ 29,055
======== ======== ========
</TABLE>
NOTE 5--TRANSACTIONS WITH AFFILIATE
The Company and ERA developed certain COBOL analysis software products (the
Products) through their cooperative research and development efforts which were
funded in part through grants from the Industrial Credit and Investment
Corporation of India, Ltd. (ICICI), an investment bank that administers an
agreement between the governments of the United States of America and the
Republic of India. The ongoing process of development of the Products commenced
in 1990 and has been undertaken pursuant to the terms of various agreements
among the Company, ERA, and ICICI, which have been amended from time to time to
reflect their evolving relationships.
Until March 31, 1996, the Company had a 65% ownership interest in the
Products and paid a royalty to ICICI (see Note 6), a 10% royalty to ERA based on
revenues from sales or licensing of Products and a monthly research and
development fee of $5,000 to ERA.
Pursuant to a product purchase agreement (the Product Purchase Agreement)
dated March 31, 1996, the Company acquired ERA's 35% interest in the Products in
exchange for 150,679 shares of the Company's common stock. The transaction was
assigned a nominal value of $1,507 to reflect the predecessor basis of ERA in
the Products by applying the Company's accounting policy of expensing all
research and development costs.
Pursuant to the Product Purchase Agreement, the Company has agreed to pay
the following to:
- ERA--a research and development fee equal to 10% of gross Product
revenues (in no event will quarterly payments be less than $12,000)
through December 31, 1996, and thereafter on terms to be mutually
determined;
- ICICI on behalf of ERA--5% of gross Product revenues until such aggregate
payments (see Note 6) satisfy ERA's obligation to ICICI (the ERA
Obligation) after which such payments shall cease; and,
- ERA--a monthly maintenance fee of $5,000 for the first three years,
$6,000 for the next three years, and thereafter in amounts to be mutually
determined.
Upon a change in control in ERA, as defined in the Product Purchase
Agreement, the Company has the right to repurchase some or all of its common
stock owned by ERA. In the event of a change in control in the Company, as
defined, ERA has the right to request a renegotiation of any or all of the
research and development provisions of the Product Purchase Agreement. Further,
under certain circumstances, the Company has the right to purchase ERA's
research and development facilities at which time the Company will assume
responsibility for repayment of any unpaid ERA Obligation under the June 1, 1990
ICICI Agreement (see Note 6).
F-10
<PAGE> 62
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 5--TRANSACTIONS WITH AFFILIATE--CONTINUED
The Product Purchase Agreement will continue in effect until terminated by
either party and places certain restrictions on ERA's ability to design or
develop similar products for itself or any third party for a period of two years
subsequent to termination. The agreement also provides that all work performed
subsequent to March 31, 1996 by ERA will be done on a work for hire basis; any
products developed will be owned by the Company and will not result in any
ownership rights to ERA.
The Company also has an informal arrangement with ERA to administer the
billing and related collection function for a contract (to provide consulting
services to a corporation operating in the United States) for which the Company
retains 10% of the collected revenues.
Effective March 1, 1996, the Company formalized its marketing arrangements
with ERA by entering into a marketing agreement to distribute the Company's
products on a non-exclusive basis in India. The agreement, which can be
terminated by either party after eighteen months, provides for royalties to be
paid by ERA to the Company based on 40% of revenues (using the suggested
international list prices established by the Company) from customers in India
through September 1, 1996, and 50% thereafter. Royalties received under the
terms of the marketing agreement for the year ended March 31, 1996 and the
quarter ended June 30, 1996, amounted to $11,500 and $13,520, respectively.
The Company incurred the following expenses in connection with its
activities with ERA during the periods presented below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED MARCH 31 JUNE 30
----------------------------- ------------------
1994 1995 1996 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Royalty expense...................... $48,093 $44,144 $42,538 $ 9,118 $10,681
======= ======= ======= ======= =======
Research and development fees........ $60,000 $60,000 $60,000 $15,000 $15,000
======= ======= ======= ======= =======
Fees applicable to professional
services provided by ERA
employees.......................... $25,250 $ 5,636 $72,429 $10,518 $18,887
======= ======= ======= ======= =======
</TABLE>
NOTE 6--ROYALTY AGREEMENTS
VIASOFT, Inc.--Effective December 1, 1993, the Company entered into a
five-year license agreement (the License Agreement) with VIASOFT, Inc. (the
Licensee) which generally grants to Licensee a worldwide license to use and
market certain of the Company's products on a private label basis. The License
Agreement provides, among other things, for royalties of up to 30% of any
license or maintenance fees related to licensed products and minimum advance
royalty payments totaling $900,000 during the 18-month exclusivity period which
expired on May 31, 1995.
The Company may terminate the License Agreement after December 1, 1996 or
1997, if the Licensee does not make annual minimum royalty payments of
$1,000,000 during the twelve-month period preceding the respective anniversary
date. The termination will become effective six months following the Company's
written notice to the Licensee. The License Agreement may be renewed for five
successive one-year periods after the end of the five-year initial term, if the
Licensee continues to meet the $1,000,000 annual minimum royalty target.
To date, the Company has not received any royalty payments beyond the
minimum advance royalty of $900,000, which is being amortized to income ratably
over the License Agreement's initial 42 month period. Software license fees as
presented in the accompanying statements of operations includes advance royalty
F-11
<PAGE> 63
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 6--ROYALTY AGREEMENTS--CONTINUED
amortization of $85,714, $257,143 and $257,143 for the years ended March 31,
1994, 1995 and 1996, respectively, and $64,286 for each of the three months
ended June 30, 1995 and 1996.
Total revenues from VIASOFT including amortization of the advance royalty
represented 9%, 29% and 25% of the Company's total revenues for the years ended
March 31, 1994, 1995 and 1996, and 31% and 15% for the three months ended June
30, 1995 and 1996, respectively.
The License Agreement also requires the Company to pay a royalty of 5% of
sales of its products which contain or use a COBOL parser, up to $1,000,000, but
in no event less than $100,000, over five-years. Any unpaid royalties will be
paid in twelve monthly installments following the conclusion of the license
term.
ICICI--Pursuant to the terms of the June 1, 1990 ICICI agreement, as
amended (the ICICI Agreement), the Company received a $255,000 grant to
partially fund research and development costs to develop the Products in
association with ERA. The grant program administered by ICICI was designed to
accelerate the pace and quality of technological innovation through the
promotion and financing of Indo-U.S. cooperative technology development ventures
(see Note 5). ERA received a grant of Indian Rs. 4,000,000 ($116,448 at March
31, 1996) under the ICICI Agreement for similar purposes.
The ICICI Agreement requires the Company and ERA to make royalty payments
based on Product revenues up to a maximum of $525,000 and Indian Rs. 8,000,000
($232,897 at March 31, 1996), respectively. Both the Company and ERA are jointly
and severally obligated for payment of the royalties; however, subsequent to
March 31, 1993, ICICI agreed to accept total royalties of 10% of Product
revenues and 5% of revenues from Product maintenance and Product related
services in satisfaction of future royalties due from the Company and ERA. Total
royalty expense under the ICICI Agreement for the years ended March 31, 1994,
1995 and 1996, amounted to $53,320, $51,532 and $57,602, and totaled $10,867 and
$19,352 for the three months ended June 30, 1995 and 1996, respectively.
Effective February 1, 1996, ICICI agreed to defer payment of royalties for
one year, and the Company agreed to pay interest to ICICI on the amount of
unpaid royalties at the same rate of interest charged under the term loan
agreement described in Note 9.
At March 31 and June 30, 1996, the balance of the maximum royalty, after
deducting accrued royalties at such dates, to be paid by the Company pursuant to
the ICICI Agreement was $402,885 and $390,054, and the amount of the ERA
Obligation (see Note 5) was Indian Rs. 4,702,457 ($136,898) and Rs. 4,559,109
($133,855), respectively. Future royalty payments to ICICI are based solely on
Product revenues.
As of March 31, 1996 and June 30, 1996, the Company was in violation of
certain terms and covenants of the ICICI Agreement and term loan agreement
described in Note 9 for which waivers and modification of terms have been
received from ICICI.
NOTE 7--STOCK OPTION PLAN
On September 12, 1994, the Company's shareholders approved the SEEC, Inc.
1994 Stock Option Plan (the Plan) under which a maximum of 150,679 common
shares, subject to anti-dilution adjustments, may be awarded during the Plan's
10-year term. The purpose of the Plan is to promote the interests of the Company
and its shareholders by providing key employees with additional incentives to
continue the success of the Company.
Under the Plan, options are awarded by a committee designated by the
Company's Board of Directors or, if no committee is designated, the full Board.
Incentive stock options and non-qualifying stock options may be granted to
purchase a specified number of shares of common stock at a price not less than
the fair market
F-12
<PAGE> 64
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 7--STOCK OPTION PLAN--CONTINUED
value on the date of grant and for a term not to exceed 10 years. Options become
exercisable at such times and in such installments as determined at the date of
grant subject to continued employment and certain other conditions including a
limited ability to sell or otherwise transfer shares issued pursuant to the
Plan.
The following table summarizes the activity in stock options since the
Plan's inception:
<TABLE>
<CAPTION>
EXERCISE PRICE
SHARES PER SHARE
------- --------------
<S> <C> <C>
September 12, 1994--Inception................................ -- $ --
Granted.................................................... 20,703 .66 - .73
Exercised.................................................. (2,260) .73
Cancelled, expired or terminated........................... -- --
------- ============
Balance--March 31, 1995...................................... 18,443 $ .66 - .73
============
Granted.................................................... 14,545 $ .66
Exercised.................................................. -- --
Cancelled, expired or terminated........................... -- --
------- ============
Balance--March 31, 1996...................................... 32,988 $ .66 - .73
============
Granted.................................................... 3,013 $ 4.98
Exercised.................................................. -- --
Cancelled, expired or terminated........................... -- --
------- ============
Balance--June 30, 1996....................................... 36,001 $ .66 - 4.98
======= ============
</TABLE>
At March 31 and June 30, 1996, options totaling 14,194 shares were
exercisable at prices of $.66 to $.73 per share (see Note 16).
NOTE 8--NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties consisted of the following:
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
-------------------- --------
1995 1996 1996
-------- -------- --------
<S> <C> <C> <C>
Unsecured note payable to a director with interest
at 7% due June 1996............................. $ 50,000 $ 50,000 $ 50,000
Unsecured note payable to shareholder with
interest at 7% due June 1996.................... 95,000 95,000 95,000
Unsecured advance from shareholder with imputed
interest at 7%.................................. 75,000 75,000 75,000
10% subordinated notes due April 1997--Series I... 100,000 100,000 100,000
10% subordinated notes due September 1997--Series
II (including $25,000 to a director)............ 125,000 125,000 125,000
Accrued interest.................................. 117,487 154,638 163,925
-------- -------- --------
562,487 599,638 608,925
Less current maturities of principal and
interest........................................ 125,650 -- --
-------- -------- --------
$436,837 $599,638 $608,925
======== ======== ========
</TABLE>
F-13
<PAGE> 65
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 8--NOTES PAYABLE TO RELATED PARTIES--CONTINUED
In connection with negotiating the terms of the notes and advances payable,
the Company issued warrants, on the basis of one warrant (pre-split) for each
dollar of the loan principal, to purchase 134,105 shares of common stock at $.03
per share (see Note 10).
The Series I and II notes are subordinate to all of the Company's
borrowings and are subject to prepayment upon the closing of any venture funding
of as least $1,000,000 or a public offering under the Securities Act of 1933.
Interest on the Series I and II notes is due quarterly; however, pursuant
to the note terms, all payments have been deferred until the Company has
positive cash flow, at which time scheduled quarterly payments of interest shall
commence. Interest previously deferred is payable at maturity.
Interest charged to expense on the notes payable to related parties for the
years ended March 31, 1994, 1995 and 1996 totaled $37,152, $37,150 and $37,152,
respectively, and $9,288 for each of the three months ended June 30, 1995 and
1996.
Effective July 1996, all of the outstanding principal and accrued interest
due to the related parties was converted into 122,606 shares of the Company's
common stock at a value of $4.98 per share. Accordingly, the entire balance of
notes and advance payable has been classified as long-term at March 31 and June
30, 1996.
NOTE 9--LONG-TERM DEBT
The Company is a party to a term loan agreement with ICICI pursuant to
which ICICI made a loan of $300,000 to the Company. The loan bears interest at
the prime rate plus 2.5% (limited to a floor of 6% and ceiling of 9%) and
requires quarterly principal payments of $30,000 commencing December 1996. The
loan is secured by the Company's trade accounts receivable and equipment. Upon
any event of default, the Company may not declare dividends and ICICI has the
option to convert the then outstanding principal balance and accrued interest
into shares of the Company's common stock at a fair value to be determined by an
independent appraiser.
Principal payments were originally scheduled to commence December 15, 1995.
On July 23, 1996, the ICICI term loan agreement was amended to defer principal
payments until December 15, 1996.
At March 31, 1996, the aggregate maturities of notes payable to related
parties (see Note 8) and long-term debt for each of the next three fiscal years
are presented below:
<TABLE>
<CAPTION>
NOTES
PAYABLE TO
YEARS ENDING RELATED
MARCH 31 PARTIES TERM LOAN TOTAL
- ------------ ----------- --------- --------
<S> <C> <C> <C> <C>
1997............................................ $ -- $ 60,000 $ 60,000
1998............................................ 599,638 120,000 719,638
1999............................................ -- 120,000 120,000
---------- -------- --------
$ 599,638 $300,000 $899,638
========= ======== ========
</TABLE>
As of March 31, 1996 and June 30, 1996, the Company was in violation of
certain terms and covenants of the ICICI term loan agreement and the ICICI
Agreement described in Note 6 for which waivers and modification of terms have
been received from ICICI.
F-14
<PAGE> 66
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 10--COMMON STOCK WARRANTS
At March 31, 1994, 1995 and 1996, the Company had outstanding warrants to
purchase 172,400, 172,400 and 111,494 shares of the Company's common stock,
respectively, at $.03 per share (see Notes 8 and 11). Warrants for 60,906 shares
were exercised as of March 18, 1996. Warrants for 111,494 shares are exercisable
(51,230 shares are exercisable at March 31, 1996) and expire at various dates
from April 1997 through December 1999, or on the closing of a sale of the
Company's common shares in a public offering registered under the Securities Act
of 1933, whichever is first to occur. At March 31, 1994, 1995 and 1996 and June
30, 1996, 172,400, 172,400, 111,494 and 111,494 shares of common stock,
respectively, were reserved for issuance upon the exercise of outstanding
warrants.
NOTE 11--DUE TO OFFICERS/SHAREHOLDERS
A portion of the annual salary of two officers and shareholders,
aggregating $127,106, was deferred. Interest at 7% has also been accrued on the
deferred salaries. The Company also issued warrants, on the basis of one warrant
(pre-split) for each dollar of deferred salary, to purchase 38,503 shares of
common stock at a value of $.03 per share (see Note 10). Interest of $8,896 was
charged to expense during each of the years ended March 31, 1994, 1995 and 1996,
and $2,224 for the three months ended June 30, 1995 and 1996, respectively.
Effective July 1996, the entire balance of principal and accrued interest was
converted into 35,173 shares of the Company's common stock at a value of $4.98
per share.
NOTE 12--OPERATING LEASES
The Company's headquarters are occupied under an operating lease agreement
which expires July 31, 1998. The Company also rents two apartments in
Pittsburgh, Pennsylvania under terms of operating leases which have remaining
terms of twelve months or less. Management intends to renew or replace these
leases during the normal course of business. Total rent expense incurred for all
leases during the years ended March 31, 1994, 1995, and 1996 amounted to
$11,832, $20,350 and $23,710, and was $4,807 and $8,969 for the three months
ended June 30, 1995 and 1996, respectively.
Future minimum rental payments required under non-cancelable leases with
terms of one year or more, as of March 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
MARCH 31 AMOUNT
- ------------ -------
<S> <C> <C>
1997.................................................. $37,726
1998.................................................. 33,926
1999.................................................. 10,992
-------
$82,644
=======
</TABLE>
NOTE 13--INCOME TAXES
No provision for income taxes was recorded for the years ended March 31,
1994, 1995 and 1996, due to the Company's significant net operating loss
position. As presented below, the Company has calculated a deferred tax benefit;
however, a corresponding valuation allowance has been recorded to offset the
deferred benefit of net operating loss carryforwards and reversing temporary
differences since management could not determine that it is more likely than not
that the benefit can be realized in the foreseeable future.
F-15
<PAGE> 67
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 13--INCOME TAXES--CONTINUED
The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
--------------------- --------
1995 1996 1996
-------- -------- --------
<S> <C> <C> <C>
Net deferred tax asset resulting from using the
cash method of accounting for tax reporting.... $341,886 $311,606 $277,295
Tax effect of federal and state net operating
loss carryforwards............................. 174,097 263,301 270,987
-------- -------- --------
Net deferred tax asset........................... 515,983 574,907 548,282
Valuation allowance.............................. 515,983 574,907 548,282
-------- -------- --------
Deferred tax asset, net.......................... $ -- $ -- $ --
======== ======== ========
</TABLE>
The Company has available at March 31, 1996, unused net operating loss
carryforwards that may be applied to reduce future taxable income and expire as
follows:
<TABLE>
<CAPTION>
NET OPERATING LOSS
EXPIRES DURING CARRYFORWARDS
YEAR ENDING ----------------------
MARCH 31 FEDERAL STATE
- -------------- -------- --------
<S> <C> <C> <C>
1998.............................................. $ -- $600,584
2006.............................................. 65,955 --
2007.............................................. 70,111 --
2008.............................................. 230,949 --
2010.............................................. 53,743 --
2011.............................................. 225,416 --
-------- --------
$646,174 $600,584
======== ========
</TABLE>
Changes in the Company's ownership, if considered substantial, may result
in an annual limitation on the amount of carryforwards that could be utilized.
The expected statutory tax benefit of the Company's financial accounting
losses for the years ended March 31, 1994, 1995, 1996 and the three months ended
June 30, 1995, have not been recorded due to the uncertainty of their ultimate
realization. During the three months ended June 30, 1996, an overall decrease in
the temporary differences comprising the net deferred tax asset eliminated
taxable income.
NOTE 14--FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Values of Financial Instruments", requires disclosure of the following
information about the fair value of certain financial instruments for which it
is practicable to estimate that fair value. The amounts disclosed represent
management's best estimates of fair value.
The carrying value of financial instruments (none of which are held or
issued for trading purposes) including cash and cash equivalents, accounts
receivable, accounts payable, and notes payable to related parties approximated
fair value as of March 31, 1995 and 1996, and at June 30, 1996, because of the
relatively short maturity of these instruments.
F-16
<PAGE> 68
SEEC, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Information for June 30, 1995 and 1996 is Unaudited)
NOTE 14--FAIR VALUE OF FINANCIAL INSTRUMENTS--CONTINUED
The Company has not estimated the fair value of the loan described in Note
9, or the amount due to officers/shareholders described in Note 11 (for which
quoted market prices are not available) because it has not yet obtained or
developed the valuation model necessary to make the estimate, and the cost of
obtaining an independent valuation appears excessive considering the materiality
of the instruments to the Company.
NOTE 15--COMMITMENTS AND CONTINGENCIES
The Company has entered into employment/severance (change in control)
agreements with three executive officers, effective October 1, 1996, and has
employment agreements with certain key employees which provide for minimum
annual salaries and automatic annual renewal at the end of the initial two year
term. The agreements generally contain, among other things, confidentiality
agreements, assignment to the Company of inventions made during employment (and
under certain circumstances for two years following termination of employment)
and non-competition agreements for the term of the agreements plus two years.
The executive employment/severance agreements provide for payments of up to
one year's compensation if there is a change of control in the Company, as
defined, and a termination of employment. The maximum contingent liability under
these agreements was approximately $228,000 at October 1, 1996.
NOTE 16--SUBSEQUENT EVENTS
(a) On July 5, 1996 the Company's board of directors approved an increase
in the number of authorized shares of common stock to 20,000,000 shares.
(b) In July 1996 the Company sold, to an unrelated investor, 40,181 shares
of common stock at a purchase price of $4.98 per share, for an aggregate
purchase price of $200,000.
(c) Pursuant to a private placement stock purchase agreement dated August
15, 1996, the Company sold, to unrelated investors, 68,899 shares of common
stock at a value of $5.44 per share, for an aggregate purchase price of
$375,000.
(d) During September 1996, the Company sold 2,756 shares of common stock to
a director, and 28,929 shares to family members of a director at a value of
$5.44 per share, for an aggregate purchase price of $172,440.
(e) On September 30, 1996, the Board of Directors authorized the following:
- Preparation of a registration statement on Form S-1 with respect to the
Company's common stock for filing with the Securities and Exchange
Commission (SEC) under the Securities Act of 1933;
- The amendment of the Company's Articles of Incorporation, subject to
shareholder approval, to authorize the issuance of 10,000,000 shares of
preferred stock without par value, which are issuable in series, from time
to time by the Board of Directors; and,
- A reverse split of the Company's common stock, to be effective prior to
the time at which the registration statement is declared effective by the
SEC. See Note 1.
(f) On October 1, 1996, the Company granted a newly hired executive officer
an option to purchase 21,095 shares of common stock at an exercise price of
$5.44 per share.
F-17
<PAGE> 69
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
THE PROSPECTUS.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 6
The Company.......................... 12
Use of Proceeds...................... 12
Dividend Policy...................... 12
Dilution............................. 13
Capitalization....................... 14
Selected Financial Data.............. 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 16
Business............................. 23
Management........................... 35
Certain Transactions................. 40
Principal Shareholders and Holdings
of Management...................... 43
Description of Capital Stock......... 44
Shares Eligible for Future Sale...... 46
Underwriting......................... 48
Legal Matters........................ 49
Experts.............................. 49
Additional Information............... 50
Index to Financial Statements........ F-1
</TABLE>
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,000,000 SHARES
LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
H.C. WAINWRIGHT & CO., INC.
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 70
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses which will be incurred in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions. All fees and
expenses are estimated other than the Securities and Exchange Commission
registration fee, NASD filing fee and Nasdaq filing fee.
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Securities and Exchange Commission registration fee....................... $ 4,362
NASD filing fee........................................................... 1,000
Blue Sky fees and expenses................................................ 10,000
Nasdaq filing fee......................................................... 10,000
Transfer agent fees....................................................... 10,000
Printing and engraving expenses........................................... 60,000
Legal fees and expenses................................................... 100,000
Accounting fees and expenses.............................................. 150,000
Nonaccountable expense allowance.......................................... 300,000
Miscellaneous expenses.................................................... 29,638
--------
Total................................................................... $675,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 1741 through 1750 of Subchapter D, Chapter 17, of the Pennsylvania
Business Corporation Law of 1988 (the "BCL") contain provisions for mandatory
and discretionary indemnification of a corporation's directors, officers and
other personnel, and related matters.
Under Section 1741, subject to certain limitations, a corporation has the
power to indemnify directors and officers under certain prescribed circumstances
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with an action or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of his being a representative, director or
officer of the corporation or serving at the request of the corporation as a
representative of another corporation, partnership, joint venture, trust or
other enterprise, 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 proceeding, had no reasonable cause to believe his
conduct was unlawful. Under Section 1743, indemnification is mandatory to the
extent that the officer or director has been successful on the merits or
otherwise in defense of any action or proceeding if the appropriate standards of
conduct are met.
Section 1742 provides for indemnification in derivative actions except in
respect of any claim, issue or matter as to which the person has been adjudged
to be liable to the corporation unless and only to the extent that the proper
court determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.
Section 1744 provides that, unless ordered by a court, any indemnification
under Section 1741 or 1742 shall be made by the corporation only as authorized
in the specific case upon a determination that the representative met the
applicable standard of conduct, and such determination will be made (i) by the
board of directors by a majority vote of a quorum of directors not parties to
the action or proceeding; (ii) if a quorum is not obtainable, or if obtainable
and a majority of disinterested directors so directs, by independent legal
counsel; or (iii) by the shareholders.
II-1
<PAGE> 71
Section 1745 provides that expenses incurred by an officer, director,
employee or agent in defending a civil or criminal action or proceeding may be
paid by the corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the corporation.
Section 1746 provides generally that, except in any case where the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness, the
indemnification and advancement of expenses provided by Subchapter 17D of the
BCL shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding that office.
Section 1747 also grants to a corporation the power to purchase and
maintain insurance on behalf of any director or officer against any liability
incurred by him or her in his or her capacity as officer or director, whether or
not the corporation would have the power to indemnify him or her against the
liability under Subchapter 17D of the BCL.
Sections 1748 and 1749 extend the indemnification and advancement of
expenses provisions contained in Subchapter 17D of the BCL to successor
corporations in fundamental changes and to representatives serving as
fiduciaries of employee benefit plans.
Section 1750 provides that the indemnification and advancement of expenses
provided by, or granted pursuant to, Subchapter 17D of the BCL, shall, unless
otherwise provided when authorized or ratified, 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 and personal representative of such person.
Reference is made to Article VII of the Company's Amended and Restated
Bylaws, which provide in general for the indemnification of the Company's
officers and directors to the fullest extent authorized by law.
Section 1713 of Subchapter B, Chapter 17, of the BCL permits a corporation
to provide in its bylaws that, subject to certain exceptions, a director shall
not be personally liable, as such, for monetary damages for any action taken,
unless the director has breached or failed to perform the duties of his office
under Subchapter B and the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness. Article 7 of the Company's
Amended and Restated Articles of Incorporation and Section 3.10 of the Company's
Amended and Restated Bylaws provide in general that to the fullest extent that
the laws of the Commonwealth of Pennsylvania, as amended, permit elimination or
limitation of the liability of directors, a director of the Company shall not be
personally liable for monetary damages for any action taken or for failure to
take any action as a director.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following sets forth information as of October 1, 1996 regarding all
sales of unregistered securities of the Registrant during the past three years.
All such sales were deemed exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), by reason of Section 4(2) or 3(b) of
the Securities Act. In connection with each of these transactions, the
securities were sold to a limited number of persons, such persons were provided
access to all relevant information regarding the Registrant and/or represented
to the Registrant that they were "accredited" investors, and such persons
represented to the Registrant that the securities were purchased for investment
purposes only and not with a view toward distribution. The share and per share
amounts set forth below have not been adjusted to reflect the reverse split of
the Registrant's Common Stock to be effected prior to consummation of the
Offering.
(a) In January 1995, the Registrant sold 2,260 shares of Common Stock for
$.73 per share to one individual who was an existing shareholder and employee of
the Company, pursuant to the exercise of an incentive stock option issued under
the Stock Option Plan.
II-2
<PAGE> 72
(b) In March 1996, the Registrant sold an aggregate of 60,906 shares of its
Common Stock upon exercise of outstanding warrants at a price of $.03 per share
to three individuals, each of whom was an existing shareholder of the Registrant
and a director and/or officer of the Registrant.
(c) In July 1996, the Registrant issued 20,097 shares of Common Stock to
its Chairman upon conversion of the principal and accrued interest on an
aggregate of $75,000 of loans made to the Registrant from August 1990 to
September 1992.
(d) In July 1996, the Registrant issued an aggregate of 137,682 shares of
its Common Stock for $4.98 per share to a total of 17 accredited investors, upon
the conversion of demand notes and 10% Subordinated Notes, previously issued by
the Company, and deferred salaries payable to two officers.
(e) In July 1996, the Registrant sold 40,181 shares of Common Stock to one
individual who is an accredited investor at a price of $4.98 per share.
(f) In August and September 1996, the Registrant sold 100,584 shares of
Common Stock to a total of 14 individuals, all of whom are accredited investors,
at a price of $5.44 per share.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ ---------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 The Registrant's Articles of Incorporation
3.2 The Registrant's Bylaws
3.3 Form of the Registrant's Amended and Restated Articles of Incorporation
3.4 Form of the Registrant's Amended and Restated Bylaws.
4.1 Specimen Certificate for Common Stock of the Registrant*
4.2 Form of Representative's Warrant*
5.1 Opinion of Cohen & Grigsby, P.C. (including the consent of such firm) regarding
the legality of the shares of Common Stock being registered*
10.1 SEEC, Inc. 1994 Stock Option Plan*
10.2 Cooperation and Project Financing Agreement dated June 1, 1990, as supplemented
and amended, among the Industrial Credit and Investment Corporation of India,
Limited, ("ICICI"), Era Software Systems Private Limited ("ERA") and the
Registrant
10.3 Loan Agreement dated June 20, 1994 between ICICI and the Registrant, as amended
10.4 International Software Marketing and License Agreement dated November 29, 1993
between VIASOFT, Inc. and the Registrant, as amended*
10.5 Product Purchase Agreement dated as of March 31, 1996 between the Registrant and
ERA*
10.6 Marketing Agreement dated as of March 1, 1996 between the Registrant and ERA*
10.7 Stock Purchase Agreement dated as of July 15, 1996 among the Registrant, Glen
Chatfield and certain former noteholders of the Registrant
10.8 Stock Purchase Agreement dated as of August 15, 1996 among the Registrant and
certain purchasers of its Common Stock
10.9 Registration Rights Agreement dated as of August 15, 1996 among the Registrant
and
certain of its shareholders
10.10 Employment Agreement dated October 1, 1996 between the Registrant and Ravindra
Koka
10.11 Employment Agreement dated October 1, 1996 between the Registrant and John D.
Godfrey
10.12 Employment Agreement dated October 1, 1996 between Registrant and Richard J.
Goldbach
</TABLE>
II-3
<PAGE> 73
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ ---------------------------------------------------------------------------------
<S> <C>
10.13 Agreement dated July 16, 1996 between the Registrant and Raj Reddy*
10.14 Trust Agreement dated August 2, 1992 among the Registrant, Ravindra Koka and
Dr. K. Buddhiraju*
11.1 Statement re computation of pro forma earnings per share
23.1 Consent of Cohen & Grigsby, P.C. (included in legal opinion filed as Exhibit
5.1)*
23.2 Consent of independent certified public accountants
24.1 Power of Attorney (See Page II-5)
</TABLE>
- ---------
* To be filed by Amendment
(b) Schedules
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the BCL, the Articles of Incorporation and Bylaws, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling,
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 74
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh, Commonwealth
of Pennsylvania, on October 11, 1996.
SEEC, INC.
By /s/ RAVINDRA KOKA
------------------------------
Ravindra Koka
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ravindra Koka and John D. Godfrey, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and re substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully and to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ----------------------------------- ------------------
<S> <C> <C>
/S/ RAJ REDDY Chairman and Director October 11, 1996
- -----------------------------------
Raj Reddy
/S/ RAVINDRA KOKA President, Chief Executive Officer October 11, 1996
- ----------------------------------- and Director (Principal Executive
Ravindra Koka Officer)
/S/ RICHARD GOLDBACH Chief Financial Officer (Principal October 11, 1996
- ----------------------------------- Financial and Accounting Officer)
Richard Goldbach
/S/ JOHN D. GODFREY Vice President and Director October 11, 1996
- -----------------------------------
John D. Godfrey
/S/ STANLEY A. YOUNG Director October 11, 1996
- -----------------------------------
Stanley A. Young
/S/ RADHA RAMASWAMI BASU Director October 11, 1996
- -----------------------------------
Radha Ramaswami Basu
</TABLE>
II-5
<PAGE> 75
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE II
The audit referred to in our report to SEEC, Inc., dated August 30, 1996,
except for Notes 15 and 16(d), (e) and (f), as to which the date is October 1,
1996, and the recapitalization described in Note 1, as to which the date is
October , 1996, which is contained in the Prospectus constituting part of this
Registration Statement included the audit of the schedule listed under Item
16(b) for each of the three years in the period ended March 31, 1996. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based upon our audit.
In our opinion, such schedule presents fairly, in all material respects,
the information set forth therein.
BDO Seidman, LLP
Boston, Massachusetts
August 30, 1996
<PAGE> 76
SEEC, INC.
VALUATION AND QUALIFYING ACCOUNTS--SCHEDULE II
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ---------- ----------- --------
ADDITIONS DEDUCTIONS
BALANCE AT CHARGED TO CREDITED TO BALANCE
BEGINNING COSTS AND ACCOUNTS AT END
DESCRIPTION OF YEAR EXPENSES RECEIVABLE OF YEAR
- ----------- ---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
MARCH 31, 1994
Allowance deducted from related balance
sheet account--Accounts receivable......... $ 6,760 $ -- $ 998 $5,762
======== ====== ======= ======
MARCH 31, 1995
Allowance deducted from related balance
sheet account--Accounts receivable......... $ 5,762 $ -- $ 1,827 $3,935
======== ====== ======= ======
MARCH 31, 1996
Allowance deducted from related balance
sheet account--Accounts receivable......... $ 3,935 $6,836 $ 2,995 $7,776
======== ====== ======= ======
</TABLE>
<PAGE> 77
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 The Registrant's Articles of Incorporation
3.2 The Registrant's Bylaws
3.3 Form of the Registrant's Amended and Restated Articles of Incorporation
3.4 Form of the Registrant's Amended and Restated Bylaws.
4.1 Specimen Certificate for Common Stock of the Registrant*
4.2 Form of Representative's Warrant*
5.1 Opinion of Cohen & Grigsby, P.C. (including the consent of such firm) regarding
the legality of the shares of Common Stock being registered*
10.1 SEEC, Inc. 1994 Stock Option Plan*
10.2 Cooperation and Project Financing Agreement dated June 1, 1990, as supplemented
and amended, among the Industrial Credit and Investment Corporation of India,
Limited, ("ICICI"), Era Software Systems Private Limited ("ERA") and the
Registrant
10.3 Loan Agreement dated June 20, 1994 between ICICI and the Registrant, as amended
10.4 International Software Marketing and License Agreement dated November 29, 1993
between VIASOFT, Inc. and the Registrant, as amended*
10.5 Product Purchase Agreement dated as of March 31, 1996 between the Registrant and
ERA*
10.6 Marketing Agreement dated as of March 1, 1996 between the Registrant and ERA*
10.7 Stock Purchase Agreement dated as of July 15, 1996 among the Registrant, Glen
Chatfield and certain former noteholders of the Registrant
10.8 Stock Purchase Agreement dated as of August 15, 1996 among the Registrant and
certain purchasers of its Common Stock
10.9 Registration Rights Agreement dated as of August 15, 1996 among the Registrant
and
certain of its shareholders
10.10 Employment Agreement dated October 1, 1996 between the Registrant and Ravindra
Koka
10.11 Employment Agreement dated October 1, 1996 between the Registrant and John D.
Godfrey
10.12 Employment Agreement dated October 1, 1996 between Registrant and Richard J.
Goldbach
10.13 Agreement dated July 16, 1996 between the Registrant and Raj Reddy*
10.14 Trust Agreement dated August 2, 1992 among the Registrant, Ravindra Koka and
Dr. K. Buddhiraju*
11.1 Statement re computation of pro forma earnings per share
23.1 Consent of Cohen & Grigsby, P.C. (included in legal opinion filed as Exhibit
5.1)*
23.2 Consent of independent certified public accountants
24.1 Power of Attorney (See Page II-5)
</TABLE>
- ---------
* To be filed by Amendment
<PAGE> 1
Exhibit 1.1
1,000,000 SHARES(1)
SEEC, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
UNDERWRITING AGREEMENT
_______________, 1996
H.C. Wainwright & Co., Inc.
One Boston Place
Boston, Massachusetts 02108
as Representative of the several
Underwriters named in SCHEDULE 1
attached hereto
Gentlemen:
1. INTRODUCTION. SEEC, Inc., a Pennsylvania corporation (the "Company"),
proposes to sell to the several underwriters named in SCHEDULE 1 attached
hereto (the "Underwriters"), for which H.C. Wainwright & Co., Inc. is acting as
representative (the "Representative"), an aggregate of 1,000,000 shares of the
Company's Common Stock, $.01 par value per share (the "Common Stock"). The
1,000,000 shares of Common Stock to be sold by the Company are referred to as
the "Firm Shares." The respective amounts of the Firm Shares to be purchased by
the several Underwriters are set forth opposite their names in SCHEDULE 1
hereto.
The Company also proposes to issue and sell an aggregate of not more than
150,000 additional shares of Common Stock if requested by the Representative in
accordance with Section 9 hereof. Such additional shares are referred to as the
"Additional Shares." The Firm Shares and the Additional Shares are collectively
referred to herein as the "Shares." The words "you" and "your" refer to the
Representative of the Underwriters.
The Company hereby confirms as follows its arrangements for the purchase
of the Shares by the Underwriters.
2. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents, warrants and agrees with each of the
Underwriters that, except as disclosed in the Effective Prospectus and the
Final Prospectus (each as hereinafter defined):
- --------------
(1) Together with an option to purchase from the Company up to 150,000
additional shares to cover over allotments.
<PAGE> 2
(i) A registration statement on Form S-1 (File No. __________) under
the Securities Act of 1933, as amended (the "Act"), with respect to the Shares,
including a preliminary form of prospectus, has been prepared by the Company in
conformity in all material respects with the requirements of the Act and the
Rules and Regulations (as hereinafter defined) of the Securities and Exchange
Commission (the "Commission") thereunder and has been filed with the Commission
under the Act. Such registration statement, as amended and revised at the time
it becomes effective, or, if a post-effective amendment to such registration
statement has been or is filed, at the time such post-effective amendment
becomes effective, including financial statements and exhibits, is hereinafter
referred to as the "Registration Statement," and the prospectus included as
part of the Registration Statement on file with the Commission when it became
or shall become effective, or, if the procedure in Rule 430A of the Rules and
Regulations is followed, the prospectus that discloses all the information that
was omitted from the prospectus on the effective date of the Registration
Statement pursuant to such Rule and, in either case, together with any changes
contained in any prospectus filed with the Commission by the Company under Rule
424(b) of the Rules and Regulations with your consent after the effective date
of the Registration Statement, is referred to herein as the "Final Prospectus."
If the procedure in Rule 430A is followed, the prospectus included as part of
the Registration Statement on the date when the Registration Statement became
effective is referred to herein as the "Effective Prospectus." Any prospectus
included in the Registration Statement and in any amendments thereto prior to
the effective date of the Registration Statement is referred to herein as the
"Pre-Effective Prospectus." For purposes hereof, "Rules and Regulations" means
the rules and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934 (the "Exchange Act"), as applicable. For
purposes hereof, all references to the Registration Statement, the
Pre-Effective Prospectus, the Effective Prospectus or the Final Prospectus, or
any amendment or supplement to any of the foregoing, shall be deemed to include
the respective copies thereof filed with the Commission pursuant to the
Commission's Electronic Data Gathering, Analysis and Retrieval System
("EDGAR").
(ii) The Commission has not issued any order preventing or suspending
the use of any Pre-Effective Prospectus and has not instituted or, to the
knowledge of the Company, threatened to institute any proceedings with respect
to such an order (a "Stop Order"); each Pre-Effective Prospectus, when filed
with the Commission, conformed in all material respects to the requirements of
the Act and the Rules and Regulations; when the Registration Statement became
or shall become effective and at all times subsequent thereto up to and
including the Closing Date and the Option Closing Date (each as hereinafter
defined), the Registration Statement, the Effective Prospectus, the Final
Prospectus and each amendment and each supplement thereto, if any, will conform
in all material respects to the requirements of the Act and the Rules and
Regulations; any request of the Commission for additional information (to be
included in the Registration Statement, the Effective Prospectus, the Final
Prospectus or otherwise) has been complied with; no part of the Registration
Statement, nor any amendment thereto, included or will include any untrue
statement of a material fact or omitted or will omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; and none of the Effective Prospectus, the Final Prospectus or any
Pre-Effective Prospectus (or any supplement thereto) as of their respective
dates, and, in the case of the Final Prospectus (or any supplement thereto) at
all times subsequent thereto up to and including the Closing Date and
2
<PAGE> 3
Option Closing Date, included or will include any untrue statement of a
material fact or omitted or will omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any statements in or
omissions from any Pre-Effective Prospectus, the Registration Statement, the
Effective Prospectus or the Final Prospectus, or any such amendment or
supplement, made in reliance upon, and in conformity with, information
furnished in writing to the Company by or on behalf of the Underwriters
expressly for use therein. As used in this Agreement, the term "knowledge"
means actual knowledge by any officer or director of the Company after
reasonable inquiry.
(iii) The Company (A) is a duly incorporated and validly existing
corporation in good standing under the laws of the Commonwealth of
Pennsylvania, with full power and authority (corporate and other), and all
necessary consents, authorizations, approvals, orders, licenses, certificates,
and permits of and from, and declarations and filings with, all federal, state,
local and other governmental authorities and all courts and other tribunals
(collectively, the "Consents") to own or lease its properties and to conduct
its business as described in the Effective Prospectus and the Final Prospectus;
and (B) is duly qualified to do business as a foreign corporation in each
jurisdiction (x) in which the conduct of its business or (y) in which the
character of the property owned or leased by it requires such qualification,
except for those jurisdictions in which the failure so to qualify has not had
and will not have in the aggregate a material and adverse effect on the
Company. As used in this Agreement, the phrase "material and adverse effect on
the Company" or similar phrase means any material and adverse effect, directly
or indirectly, currently or prospectively, on the Company's financial
condition, results of operations, properties or prospects on business in
general.
(iv) The Company has no subsidiaries.
(v) The Company has a duly authorized and validly outstanding
capitalization as set forth in the Effective Prospectus and the Final
Prospectus and will have the adjusted capitalization set forth therein on the
Closing Date, based on the assumptions set forth therein; the capital stock of
the Company conforms to the descriptions thereof contained in the Effective
Prospectus and the Final Prospectus; the outstanding shares of capital stock
have been duly authorized and validly issued by the Company and are fully paid
and nonassessable, without any personal liability attaching to the ownership
thereof; the outstanding shares of capital stock have been issued in compliance
with all applicable federal and state securities laws; and the Company has duly
authorized the issuance and sale of the Shares to be issued and sold by the
Company in accordance with this Agreement. Except as created hereby or referred
to in the Registration Statement, the Effective Prospectus and the Final
Prospectus, there are no outstanding options, warrants, rights or other
arrangements (including without limitation preemptive rights) requiring the
Company at any time to issue any capital stock. The Shares are not and will not
be subject to any preemptive or other similar rights of any shareholder, which
have not been waived, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof will be validly issued, fully
paid and non-assessable and have been issued in compliance with all applicable
federal and state securities laws; and the holders thereof will not be subject
to any liability solely as such holders. Upon the issuance and delivery
pursuant to the terms hereof of the
3
<PAGE> 4
Shares, the Underwriters will acquire good and marketable title to such Shares
free and clear of any lien, encumbrance, equity, claim, security interest, or
other restriction whatsoever.
(vi) The financial statements and the related notes and schedules
thereto filed with and as part of the Registration Statement, the Effective
Prospectus and the Final Prospectus (collectively, the "Financial Statements")
fairly present the financial condition, results of operations, stockholders'
equity and cash flows of the Company at the respective dates of such
statements, notes and schedules and for the respective periods to which they
apply. The Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, are correct and complete and are in accordance with the books and
records of the Company. Certain of the Financial Statements have been audited
by BDO Seidman, LLP, who are independent public accountants within the meaning
of the Act and the Rules and Regulations, as indicated in their reports filed
therewith. No other financial statements are required by Form S-1 or otherwise
to be included in the Registration Statement, the Effective Prospectus or the
Final Prospectus. The financial information and statistical data set forth in
the Effective Prospectus and the Final Prospectus under the captions
"Prospectus Summary -- Summary Financial Data," Capitalization," "Selected
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" have been prepared on a basis consistent
with the Financial Statements.
(vii) The Company has filed all necessary federal and state income and
franchise tax returns and has paid all taxes shown as due thereunder, and the
Company has no knowledge of any tax deficiency which might be assessed against
the Company which, if so assessed, might have a material and adverse effect on
the Company.
(viii) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are, in the
opinion of the Company's management, customary and adequate for the businesses
in which it is engaged, including, but not limited to, general liability
insurance and insurance covering real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against by any company that is comparable to the
Company in terms of its financial condition, all of which insurance is in full
force and effect. The Company has no reason to believe that it will not be able
to renew existing insurance coverage with respect to the Company as and when
such coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business at a cost that would not now have,
individually or in the aggregate, a material and adverse effect on the Company.
(ix) Except as disclosed in the Effective Prospectus and the Final
Prospectus, there is no pending or, to the knowledge of the Company, threatened
action, suit, proceeding or investigation before or by any court, regulatory
body or administrative agency or any other governmental agency or body,
domestic or foreign, which (A) questions the validity of the capital stock of
the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement, (B) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the
4
<PAGE> 5
Registration Statement, if any, are accurately summarized in all respects), or
(C) would have a material and adverse effect on the Company.
(x) The Company has full legal right, power and authority to enter
into this Agreement and to consummate the transactions provided for herein; and
this Agreement has been duly authorized by the Company's Board of Directors and
executed and delivered by the Company. This Agreement, assuming it is a binding
agreement of yours, constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, or other similar laws relating to creditors' rights generally,
and general equitable principles relating to the availability of remedies, and
as rights to indemnity or contribution may be limited by state or federal
securities laws and the public policy underlying such laws), and none of the
Company's execution or delivery of this Agreement, its performance hereunder,
or its consummation of the transactions contemplated herein, conflicts or will
conflict with, or results or will result, in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute a default under,
or result in the creation or imposition of any lien, charge, or encumbrance
upon, any property or assets of the Company pursuant to the terms of (A) the
articles of organization or by-laws of the Company, (B) any contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note agreement or other agreement or instrument to which the Company
is a party or by which it may be bound or to which any of its properties is or
may be subject, or any indebtedness, or (C) any statute, judgment, decree,
order, rule or regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of their
activities or properties.
(xi) All executed agreements or copies of executed agreements filed as
exhibits to the Registration Statement to which the Company is a party or by
which it may be bound or to which any of its assets, properties or business may
be subject have been duly and validly authorized, executed and delivered by the
Company, constitute the legal, valid and binding agreements of the Company,
enforceable against it in accordance with their respective terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to enforcement of creditors'
rights generally, and general equitable principles relating to the availability
of remedies, and as rights to indemnity or contribution may be limited by state
or federal securities laws and the public policy underlying such laws) and, to
the knowledge of the Company, no default has occurred under such agreements by
the parties with whom the Company has entered into such agreements. The
descriptions in the Registration Statement of contracts and other documents are
accurate and fairly present the information required to be shown with respect
thereto by Form S-1, and there are no contracts or other documents which are
required by the Act or the Rules and Regulations to be described in the
Registration Statement or filed as exhibits to the Registration Statement which
are not described or filed as required, and the exhibits which have been filed
are complete and correct copies of the documents of which they purport to be
copies. Each transaction with ERA Software Systems Private Limited ("ERA") has
been made at arm's length and has been evidenced by a formal agreement.
5
<PAGE> 6
(xii) Subsequent to the most recent respective dates as of which
information is given in the Effective Prospectus and the Final Prospectus and
except as expressly contemplated in the Effective Prospectus and the Final
Prospectus, the Company has not incurred, other than in the ordinary course of
its business, any material liabilities or obligations, direct or contingent,
paid or declared any dividends or other distributions on its capital stock or
entered into any material transactions not in the ordinary course of business,
and there has been no material change in capital stock or debt or any material
adverse change in the condition (financial or other), net worth or results of
operations of the Company. The Company is not in breach or violation of, or in
default under, any term or provision of (A) its articles of organization or
by-laws, (B) any contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note agreement or other agreement or
instrument to which the Company is a party or by which it is bound or to which
any of its property is subject, or any indebtedness, which breach, violation or
default would have a material and adverse effect on the Company, or (C) any
statute, judgment, decree, order, rule or regulation applicable to the Company
of any arbitrator, court, regulatory body, administrative agency or any other
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its activities or properties and the effect of which breach
or default would be material and adverse to the Company.
(xiii) No labor disturbance by the employees of the Company exists or,
to the knowledge of the Company, is imminent which could reasonably be expected
to have a material and adverse effect on the Company.
(xiv) Since its inception, the Company has not incurred any material
liability arising under or as a result of the application of the provisions of
the Act or applicable state securities laws.
(xv) The Company does not maintain an "employee pension benefit plan"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")).
(xvi) The Company owns or possesses adequate rights to use, license
and sublicense all material patents, patent applications, trademarks, service
marks, trade names, licenses, copyrights and proprietary or other confidential
information (together, "Proprietary Rights") currently employed by it in
connection with its business. The Company has all Proprietary Rights necessary
to carry out the Company's current, former and anticipated future activities,
including without limitation, rights to make, use, exclude others from using,
reproduce, modify, adapt, create derivative works based on, translate,
distribute (directly and indirectly), transmit, display and perform publicly,
license, rent, lease, assign, and sell the Proprietary Rights, and to
sublicense any or all such rights to third parties, including the right to
grant further sublicenses. The Company is not, nor as a result of the execution
and delivery of this Agreement, or performance of the Company's obligations
hereunder, will the Company be, in material violation of any license,
sublicense or agreement to which the Company is a party or otherwise bound. The
Company has not received any notice of infringement, misuse or misappropriation
of or conflict with asserted rights of any third party with respect to any of
the foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result
6
<PAGE> 7
in a material and adverse effect on the Company. There is no pending or, to the
knowledge of the Company, threatened or potential claim, challenge or
proceeding by the Company against any third party for infringement, misuse or
misappropriation or interference with any Proprietary Right owned, licensed or
controlled by the Company. The Company has not disclosed any material
confidential information developed or utilized by the Company to any third
party except on a confidential basis and pursuant to a confidentiality
agreement and with no intention to entitle such third party to use such
information other than for the purposes set forth in such confidentiality
agreement, nor, to the knowledge of the Company, has any third party disclosed
confidential information developed or utilized by the Company to any person not
an employee of the Company or of the third party. The Company has nondisclosure
and confidentiality agreements with respect to the Proprietary Information with
all employees of the Company.
(xvii) The Company is not in violation of any laws, ordinances or
governmental rules or regulations to which it or its property is subject, which
violation would have a material and adverse effect on the Company and, without
limiting the generality of the foregoing, the Company has not violated any
applicable safety or similar law applicable to the business of the Company (or
to its respective properties, whether owned or leased), or any federal or state
law relating to discrimination in the hiring, promotion, or pay of employees,
or any applicable federal or state wages and hours law, or any provisions of
ERISA or the rules and regulations promulgated thereunder, which violation
would have a material and adverse effect on the Company.
(xviii) No consent, approval, authorization or order of any court,
regulatory body, administrative agency or any other governmental agency or
body, domestic or foreign, is required for the performance by the Company of
this Agreement or the consummation by the Company of the transactions
contemplated hereby, except such as have been or may be obtained under the Act
or may be required under state securities or Blue Sky laws in connection with
the Underwriters' purchase and distribution of the Shares to be sold hereunder.
(xix) There are no holders of securities of the Company having rights
(exercisable currently or in the future) to the registration of such securities
under the Registration Statement who have not waived such rights with respect
to the Registration Statement and the transactions provided for herein.
(xx) Neither the Company nor, to the knowledge of the Company, any of
its officers, directors or affiliates (within the meaning of the Rules and
Regulations) has taken or will take, directly or indirectly, any action
designed to stabilize or manipulate the price of any security of the Company,
or which might in the future reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company, to
facilitate the sale or resale of the Shares or otherwise.
(xxi) The Company has good and marketable title to all properties and
assets owned by it free and clear of all liens, encumbrances, restrictions,
equity, claims and defects, except such as are described in the Registration
Statement, the Effective Prospectus and the Final Prospectus or such as do not
materially adversely affect the value of any of such properties or
7
<PAGE> 8
assets taken as a whole and do not interfere with the use made and proposed to
be made of any of such properties or assets; all of the material leases and
subleases of the Company, and under which the Company holds properties or
assets as lessee or sublessee, constitute the binding obligations of the
Company free and clear of any lien, encumbrance, claim or defect, are in full
force and effect, and the Company is not in default in respect of any of the
material terms or provisions of any of such leases or subleases, and the
Company has not received notice of any material claim which has been asserted
by anyone adverse to the rights of the Company as lessee or sublessee under any
of such leases or subleases, or affecting or questioning the right of the
Company to the continued possession of the leased or subleased premises or
property under any such material lease or sublease, which would have a material
and adverse effect on the Company; and the Company owns or leases all such
premises and properties as are necessary to its operations as now conducted,
and as proposed to be conducted as set forth in the Registration Statement and
the Effective Prospectus and the Final Prospectus; and the properties and
business of the Company conform to the descriptions thereof contained in the
Registration Statement, the Effective Prospectus and the Final Prospectus.
(xxii) The Company holds all franchises, licenses, governmental
approvals, permits, certificates and other authorizations from state, federal
and other regulatory authorities necessary to the ownership, leasing and
operation of its properties or required for the present conduct of its
business, and such franchises, licenses, governmental approvals, permits,
certificates and other authorizations are in full force and effect and the
Company is in all material respects in compliance therewith except where the
failure so to obtain, maintain or comply with would not have a material and
adverse effect on the Company.
(xxiii) The Company maintains books, records and accounts which in
reasonable detail accurately and fairly reflect the transactions and
dispositions of its assets, and maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific authorization; (B)
transactions are executed as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and to
maintain accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and (D) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xxiv) The Company has filed a registration statement pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to register the Common Stock, has filed an application to list the
Securities on the [National Association of Securities Dealers, Inc. Automated
Quotation System (the "NASDAQ System"), and has received notification that the
listing has been approved, subject to notice of issuance of the Shares.]
(xxv) Neither the Company nor, to the knowledge of the Company, any
director, officer, agent, employee or other person associated with, or acting
on behalf of, the Company has, directly or indirectly at any time since the
inception of the Company: used any Company funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political
activity; made any unlawful payment to foreign or domestic government officials
or employees or
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<PAGE> 9
to foreign or domestic political parties or campaigns from Company funds;
violated any provision of the Foreign Corrupt Practices Act of 1977 (the
"FCPA"), as amended; or made any unlawful payment. The Company's internal
accounting controls and procedures are sufficient to cause the Company to
comply in all material respects with the Exchange Act and the FCPA.
(xxvi) The Company has obtained from each of its directors and
officers (as defined in the Rules and Regulations), and from each holder of
outstanding shares of Common Stock (or any security or other instrument which
by its terms is convertible into, exercisable for, or exchangeable for, shares
of Common Stock), his, her or its enforceable written agreement, in form and
substance satisfactory to the Representative and its counsel, that for a period
of 270 days from the date of the Final Prospectus he, she or it will not,
without your prior written consent, directly or indirectly, register, issue,
offer, sell, offer to sell, contract to sell, hypothecate, pledge or otherwise
dispose of any shares of Common Stock (or any security or other instrument
which by its terms is convertible into, exercisable for, or exchangeable for,
shares of Common Stock, including, without limitation, any shares of Common
Stock issuable under any employee or director stock options).
(xxvii) The Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment company" as
defined in Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(xxviii) Except as described in the Final Prospectus, the Company has
not incurred any liability for a fee, commission or other compensation on
account of the employment of a broker or finder in connection with the
transactions contemplated by this Agreement.
(xxix) The Company is in compliance with any and all applicable
federal, state and local environmental laws, rules, regulations, treaties,
statutes and codes promulgated by all governmental authorities relating to the
protection of human health and safety, the environment or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"). The Company has
received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business. The Company is in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, license or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not,
individually or in the aggregate, have a material and adverse effect on the
Company. No action, proceeding, revocation proceeding, writ, injunction or
claim is pending or threatened (nor, to the knowledge of the Company, is there
any basis therefor) relating to the Environmental Laws or to the Company's
activities involving Hazardous Material. "Hazardous Material" means any
material or substance that is prohibited or regulated by any Environmental Law,
or that has been designated or regulated by any governmental authority as
radioactive, toxic, hazardous or otherwise a danger to health, reproduction or
the environment. There have been no costs or liabilities, to the knowledge of
the Company, associated with the effect of or compliance with the Environment
Laws on the business, operations, properties or assets of the Company that
would, individually or in the aggregate, have a material and adverse effect on
the Company.
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<PAGE> 10
(xxx) To the knowledge of the Company, no officer, director or
stockholder of the Company [other than Adam Young] has any affiliation or
association with the National Association of Securities Dealers, Inc. (the
"NASD") or any member thereof, except as described in the Prospectus.
(xxxi) The Company has not distributed and will not distribute any
prospectus or other offering material in connection with the offer and sale of
the Shares, other than any Pre-Effective Prospectus, the Effective Prospectus
or the Final Prospectus or other materials permitted by the Act and the Rules
and Regulations to be distributed.
(xxxii) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the Company
further agrees that if it commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Commission or
with the Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported or incorporated by
reference in the Prospectus, if any, concerning the Company's business with
Cuba or with any person or affiliate located in Cuba changes in any material
way, the Company will provide the Department notice of such business or change,
as appropriate, in a form acceptable to the Department.
(b) Each Underwriter hereby represents and warrants to the Company as
follows:
(i) Such Underwriter is registered as a broker dealer with the
Commission and is registered with and holds all required authorizations from
any jurisdiction in which such Underwriter's activities in connection with this
Agreement require such registration or authorization.
(ii) There is not now pending or, to the knowledge of such
Underwriter, threatened against such Underwriter any action or proceeding of
which such Underwriter has been advised, either in any court of competent
jurisdiction, before the Commission or before any state securities commission,
concerning such Underwriter's activities as a broker or dealer, nor has such
Underwriter been named in any action or proceeding which may be expected to
have a material adverse effect upon such Underwriter's ability to act as
contemplated herein.
3. PURCHASE, SALE AND DELIVERY OF THE SHARES. On the basis of the
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company agrees to
sell to the several Underwriters, and each Underwriter, severally and not
jointly, agrees to purchase from the Company at $_____ per share (the "Purchase
Price"), the number of Shares set forth opposite the respective name of such
Underwriter on Schedule 1 hereto (and such number of Additional Shares as set
forth in Section 9 hereof), subject to such adjustments to eliminate any
fractional shares as the Representative in its sole discretion shall make.
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<PAGE> 11
Delivery of certificates for the Shares, and payment of the purchase price
for the Shares, shall be made at the offices of H.C. Wainwright & Co., Inc.,
One Boston Place, Boston, Massachusetts 02108, or such other location as the
Representative shall determine and advise the Company by at least two full
business days' notice in writing. Such delivery and payment shall be made at
10:00 a.m., Boston time, on the third business day following the Effective Date
(as defined in Section 11) unless postponed in accordance with the provisions
of Section 13, or at such other time as shall be agreed upon between you and
the Company. The time and date of such delivery and payment are herein called
the "Closing Date." Delivery of the certificates for the Shares shall be made
to the Representative for the respective accounts of the several Underwriters
against payment in Boston Clearing House Funds by the several Underwriters
through the Representative to the order of the Company for the Shares. The
certificates for the Shares to be so delivered will be in definitive, fully
registered form, will bear no restrictive legends and will be in such
denominations and registered in such names as the Representative shall request,
not less than two full business days prior to the Closing Date. The
certificates for the Shares will be made available to the Representative at
such office or such other place as the Representative may designate for
inspection, checking and packaging not later than 9:30 a.m., Boston time on the
business day prior to the Closing Date. The Company shall not be obligated to
sell any Firm Shares, unless all Firm Shares to be sold pursuant to this
Agreement are purchased hereunder.
4. PUBLIC OFFERING OF THE SHARES. As soon after the Registration Statement
becomes effective as the Representative deems advisable, it is understood that
the Underwriters propose to make a public offering (the "Offering") of the
Shares (other than to residents of or in any jurisdiction in which
qualification of the Shares is required and has not become effective) at the
price (the "Public Offering Price") and upon the other terms set forth in the
Effective Prospectus and the Final Prospectus relating to the Shares.
5. COVENANTS OF THE COMPANY.
(a) The Company covenants and agrees with each of the Underwriters that:
(i) The Company will use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and, if the procedure in Rule 430A of the Rules and Regulations is
followed, to comply with the provisions of and make all requisite filings with
the Commission pursuant to such Rule and to notify you promptly of all such
filings. The Company will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Effective Prospectus or the Final
Prospectus before termination of the offering of the Shares by the Underwriters
of which the Representative shall not previously have been advised and
furnished with a copy, or to which the Representative shall have reasonably
objected or which is not in compliance with the Act or the Rules and
Regulations.
(ii) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representative (x) when the Registration Statement,
as amended, has become effective, if the provisions of Rule 430A will be relied
upon, when the Final Prospectus has been filed in accordance with said Rule
430A and when any post-effective amendment to the
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<PAGE> 12
Registration Statement becomes effective, (y) of any request made by the
Commission for amending the Registration Statement, for supplementing any
Pre-Effective Prospectus, the Effective Prospectus or the Final Prospectus or
for additional information, or (z) of the issuance by the Commission of any
Stop Order or the institution or threat of any investigation or proceeding for
that purpose, and will use its best efforts to prevent the issuance of any such
Stop Order and, if issued, to obtain the lifting thereof as soon as possible.
(iii) The Company will cooperate with the Representative to qualify
the Shares for offer and sale under the state securities or Blue Sky laws of
such jurisdictions as the Representative may reasonably request and will make
such applications, file such documents and furnish such information as may be
required for such purpose; provided, however, that the Company shall not be
required to qualify as a foreign corporation or file a general or unlimited
consent to service of process in any such jurisdiction.
(iv) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of which
the Effective Prospectus, the Final Prospectus, or the Effective Prospectus or
the Final Prospectus as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading, or if it becomes necessary at any time
to amend or supplement the Effective Prospectus or the Final Prospectus to
comply with the Act or the Rules and Regulations, the Company promptly will so
notify the Representative and prepare and file with the Commission an amendment
or supplement which will correct such statement or omission or an amendment or
supplement which will effect such compliance, each such amendment or supplement
to be reasonably satisfactory to Morse, Barnes-Brown & Pendleton, P.C. (the
"Underwriters' Counsel").
(v) As soon as practicable, but in any event not later than 45 days
after the end of the 12 month period beginning on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company will make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the
Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
(vi) During a period of five years after the date hereof, the Company
will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants and
prepared in accordance with generally accepted accounting principles) and
unaudited quarterly reports of earnings, and will deliver to the
Representative:
(A) concurrently with furnishing such
quarterly reports to its stockholders, a copy thereof in the form furnished to
the Company's stockholders;
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<PAGE> 13
(B) concurrently with furnishing such
annual reports to its stockholders, a balance sheet of the Company as at the
end of the preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for the fiscal year then
ended, accompanied by a copy of the report thereon of independent public
accountants;
(C) concurrently with mailing, copies of all reports (financial
or other) mailed to stockholders;
(D) concurrently with mailing, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD any
securities exchange;
(E) every press release and every material
news item or article of interest to the financial community in respect of the
Company or its affairs which was released or prepared by the Company; and
(F) any additional information of a public
nature concerning the Company or its business which the Representative may
reasonably request.
During such five-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company as its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(vii) The Company will maintain a Transfer Agent and, if necessary
under the jurisdiction of incorporation of the Company, a Registrar (which may
be the same as the Transfer Agent) for its Common Stock.
(viii) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Pre-Effective Prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto (two of which copies
will be signed and will include all financial statements and exhibits), the
Effective Prospectus and the Final Prospectus, and all amendments and
supplements thereto, including any prospectus prepared after the effective date
of the Registration Statement, in each case as soon as available and in such
quantities as the Representative may reasonably request. To the extent
applicable, the printed copies of the Registration Statement and each amendment
thereto (including all exhibits filed therewith), any Pre-Effective Prospectus,
Effective Prospectus or Final Prospectus (in each case, as amended or
supplemented) furnished to the Representative will be identical to the
electronic copies filed with the Commission pursuant to EDGAR except to the
extent permitted by Regulation S-T.
(ix) The Company will not, directly or indirectly, without the prior
written consent of the Representative, offer, sell, grant any option to
purchase or otherwise dispose (or announce any offer, sale, grant of any option
to purchase or other disposition) of any shares of Common Stock or any
securities convertible into, or exchangeable or exercisable for, shares of
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<PAGE> 14
Common Stock for a period of 270 days after the date hereof, except pursuant to
this Agreement and except for (a) grants of stock options at exercise prices
equal to the fair market value of the Common Stock under the Stock Option Plan
described in the Effective Prospectus and the Final Prospectus or (b) issuances
pursuant to the exercise of stock options and warrants outstanding on the date
hereof and described in the Effective Prospectus and the Final Prospectus.
(x) Neither the Company nor any of its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(xi) As soon as the Company is advised or obtains knowledge thereof,
the Company will promptly advise the Representative of any change in the
information set forth in the certificate delivered by the Company pursuant to
Section 7(vii) below.
(xii) The Company will apply the net proceeds of the offering
substantially in the manner set forth under the caption "Use of Proceeds" in
the Effective Prospectus and the Final Prospectus.
(xiii) The Company will timely file all such reports, forms or other
documents as may be required, from time to time, under the Act, the Exchange
Act, or the Rules and Regulations, and all such reports, forms and documents
filed will comply as to form and substance with the applicable requirements
under the Act, the Exchange Act and the Rules and Regulations.
[(xiv) The Company will cause the Shares to be duly included for
quotation on the NASDAQ System prior to the Closing Date. The Company will use
its best efforts to ensure that the Shares remain included for quotation on the
NASDAQ System following the Closing Date.]
(xv) The Company will not, without the prior written consent of the
Representative, (i) grant to any holder of securities of the Company any right
to request registration of his securities under the Act or any related rights
unless such registration rights may be exercised only after six months
following the effective date of the Registration Statement or (ii) file with
the Commission any Registration Statements covering any equity securities of
the Company within six months following the effective date of the Registration
Statement, except that the Company, at any time, may file a Registration
Statement on Form S-8 to register options and shares of Common Stock issuable
under the plans described in the Effective Prospectus and the Final Prospectus.
(xvi) The Company will not, without the prior written consent of the
Representative, grant to any person who is not subject to an agreement
described in Section 7(x) below any stock options or other rights to acquire
Common Stock which would be exercisable within six months following the
effective date of the Registration Statement.
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(xvii) The Company will comply with all provisions of all undertakings
contained in the Registration Statement.
(xviii) Prior to the Closing Date, the Company will not issue any
press release or other communication, directly or indirectly, or hold any press
conference with respect to the Company, the financial conditions, results of
operations, business, properties, assets or liabilities thereof, or this
offering, without the Representative's prior written consent, which consent
will not be unreasonably withheld.
(xix) The Company will file timely with the Commission accurate
reports on Form SR in accordance with Rule 463 of the Rules and Regulations or
any successor provision.
(xx) The Company will deliver to you, without charge, within a
reasonable period after the expiration of the period in which the Underwriters
may exercise the over-allotment option (but in no event later than six months
from the date of the Prospectus), such bound volumes of the Registration
Statement and all related materials as you may reasonably request.
(xxi) The Company will execute a letter addressed to the transfer
agent for the Company which instructs the transfer agent to note stop transfer
instructions with respect to all of the shares of Common Stock which are
subject to lock up agreements.
(xxii) The Company will do and perform all things reasonably required
or necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Shares.
(xxiii) All transactions to be entered into by the Company with ERA
shall be at arm's length and shall be approved by an independent committee of
the Board of Directors of the Company.
6. FEES AND EXPENSES.
(a) Regardless of whether the transactions contemplated in this Agreement
are consummated, and regardless of whether for any reason this Agreement is
terminated, the Company will pay and hereby agrees to indemnify each
Underwriter against, all fees and expenses incident to the performance of the
obligations of the Company under this Agreement, including, but not limited to,
(i) the fees and expenses of accountants and counsel for the Company, (ii) all
costs and expenses incurred in connection with the preparation, duplication,
printing, filing, delivery, shipping and mailing of copies of the Registration
Statement and any pre-effective or post-effective amendments thereto, each
Pre-Effective Prospectus, the Effective Prospectus and the Final Prospectus and
any amendments or supplements thereto (including postage costs related to the
delivery by the Underwriters of any Pre-Effective Prospectus, the Effective
Prospectus or the Final Prospectus, or any amendment or supplement thereto),
this Agreement, the Agreement Among Underwriters, any Selected Dealer
Agreement, Underwriters' Questionnaire, and all other documents in connection
with the transactions contemplated herein, including the cost of all copies
thereof, (iii) fees and expenses relating to qualification of the Shares under
state securities
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<PAGE> 16
or Blue Sky laws, including the cost of preparing and mailing the preliminary
and final "Blue Sky Memorandum" and disbursements and reasonable fees of
counsel in connection therewith, (iv) fees and expenses relating to all filings
and negotiations with the NASD, including disbursements and reasonable fees of
counsel in connection therewith, (v) the filing fees payable to the Commission,
the NASD and state securities authorities, (vi) all expenses (including any
applicable transfer taxes) incurred in connection with the issuance and
delivery to the Underwriters of the Shares to be sold in accordance with the
Agreement, (vii) any costs or fees incurred in connection with the quotation of
the Shares on the [Nasdaq System], and (viii) all other costs and expenses
incident to the performance of the Company's obligations hereunder which are
not specifically provided for in this Section.
(b) If the Firm Shares are purchased and sold on the Closing Date, then
the Company shall pay to the Representative an amount equal to 7% of the
aggregate Public Offering Price of all Firm Shares sold in the Offering, which
amount shall represent the underwriting discount. If any Additional Shares are
purchased and sold on the Option Closing Date, then the Company shall pay to
the Representative an additional amount equal to 7% of the aggregate Public
Offering Price of all Additional Shares sold in the Offering, which amount
shall represent an additional underwriting discount as aforesaid.
(c) If the Firm Shares are purchased and sold on the Closing Date, then
the Company shall pay to the Representative an amount equal to 3% of the
aggregate Public Offering Price of all Firm Shares sold in the Offering, which
amount shall represent a non-accountable allowance for the expenses incurred by
the Representative in connection with its duties and activities under this
Agreement. If any Additional Shares are purchased and sold on the Option
Closing Date, then the Company shall pay to the Representative an additional
amount equal to 3% of the aggregate Public Offering Price of all Additional
Shares sold in the Offering, which amount shall represent an additional
non-accountable allowance for the expenses incurred by the Representative as
aforesaid.
(d) The Company agrees that if the Firm Shares are purchased and sold on
the Closing Date then it will issue to the Representative individually, and not
in its capacity as Representative, a warrant to purchase up to 100,000 shares
of Common Stock (115,000 shares if the Underwriters' over-allotment option is
exercised) at a price per share equal to 120% of the Public Offering Price (the
"Underwriter's Warrant"). The Underwriter's Warrant shall not be exercisable
for a period of one year from the date of issuance thereof and shall be
exercisable thereafter for a period of four years. The Underwriter's Warrant
shall be evidenced by a certificate in the form and contain the terms and
conditions as set forth in the exhibits to the Registration Statement. The
Underwriter's Warrant certificate shall be delivered in such denominations and
in such names as may be requested by the Representative.
(e) If the purchase of the Shares as herein contemplated is not
consummated because this Agreement is terminated pursuant to Sections 12(a) or
12(b) hereof or because of the failure, refusal or inability on the part of the
Company to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder other than by reason of a default by any of
the Underwriters, the Company shall reimburse the several Underwriters for
their documented
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<PAGE> 17
out-of-pocket expenses (including counsel fees and disbursements up to a
maximum of $100,000) in connection with any investigation made by them, and any
preparation made by them in respect of marketing of the Shares or in
contemplation of the performance by them of their obligations hereunder. The
Company shall not in any event be liable to any of the Underwriters for the
loss of anticipated profits from the transactions covered by this Agreement.
(f) In the event that the Company abandons the offering contemplated by
the Registration Statement because (i) the Company is acquired by merger,
purchase of assets or otherwise; or (ii) the Company reorganizes with another
entity; or (ii) the Company completes a financing (other than normal bank
debt), then the Company shall hire the Representative under the provisions of
Section 6(g). Any such fees payable under Section 6(g) shall be in addition to
the reimbursement of expenses described in paragraph (e) above.
(g) During the Exclusivity Period (as defined below), if the Company
determines to engage a financial advisor or investment bank to advise the
Company with respect to (i) the issuance and public sale of equity securities
of the Company, the Representative shall have the right, but not the
obligation, to act as a placement agent or managing underwriter, as the case
may be, or (ii) the sale or disposition of the Company or any of its assets or
the acquisition by the Company of any securities or assets of any other
business entity, the Representative shall have the right, but not the
obligation, to act as the Company exclusive financial advisor. In connection
with any such engagements, the Company and the Representative shall enter into
agreements, appropriate under the circumstances, containing provisions for
compensation, indemnification, and other matters that are usual and customary
for other similar circumstances in which the Representative is engaged. The
"Exclusivity Period" refers to the two year period commencing from the date of
this agreement regardless of whether or not the offering is consummated,
PROVIDED, HOWEVER, that in the event that the Representative abandons the
offering for any reason, the Exclusivity Period shall terminate as of the date
of any such abandonment.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligation of each
Underwriter to purchase and pay for the Shares to be purchased by such
Underwriter hereunder is subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date as if they had been made on and as of the Closing Date;
the accuracy on and as of the Closing Date of the statements of officers of the
Company made pursuant to the provisions hereof; the performance by the Company
on and as of the Closing Date of its covenants and agreements hereunder, and
the following additional conditions:
(i) The Registration Statement has become effective not later than 5:00
p.m., Boston time, on the date of this Agreement, or such later time and date
as to which the Representative has consented and any and all filings required
by Rule 424 and Rule 430A of the Rules and Regulations have been made; no Stop
Order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or, to the
knowledge of the Company or to the Representative's knowledge, have been
threatened or are contemplated by the Commission; and any request of the
Commission for additional information to be included in the Registration
Statement or the Effective Prospectus or the Final Prospectus or otherwise has
been complied with or otherwise satisfied.
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(ii) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state
a fact which, in the Representative's opinion, is material and is required to
be stated therein or is necessary to make the statements therein not
misleading, or that the Effective Prospectus or the Final Prospectus, or any
amendment or supplement thereto, contains an untrue statement of fact which, in
the Representative's opinion, is material, or omits to state a fact which, in
the Representative's opinion, is material and is required to be stated therein
or is necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(iii) On or prior to the Closing Date, the Representative shall have
received from Underwriters' Counsel such opinion or opinions with respect to
the issuance and sale of the Shares, the Registration Statement, the Effective
Prospectus and the Final Prospectus and other related matters as the
Representative reasonably may request and such counsel shall have received such
papers and information as they request to enable them to pass upon such
matters.
(iv) On the Closing Date and the Option Closing Date, as the case may be,
the Underwriters shall have received the opinion, dated at the Closing Date, of
Cohen & Grigsby, P.C., counsel to the Company to the effect set forth below:
(A) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Pennsylvania
and is duly qualified to transact business as a foreign corporation and is in
good standing under the laws of all other jurisdictions where the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material and adverse effect on the Company;
(B) The Company has corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement,
the Effective Prospectus and the Final Prospectus, and the Company has the
power to enter into this Agreement and to carry out all the terms and
provisions hereof to be carried out by it;
(C) To the knowledge of such counsel, there are no holders of
securities of the Company, who, by reason of the filing of the Registration
Statement, have the right (and have not waived such right) to request the
Company to register under the Act, or to include in the Registration Statement,
securities held by them;
(D) To the knowledge of such counsel, no default exists, and no event
has occurred which, with notice or lapse of time or both, would constitute a
default in the due performance and observance of any term, covenant or
condition of any contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note agreement or other agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of its property is subject;
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(E) The Company has an authorized capitalization as set forth in the
Effective Prospectus and the Final Prospectus; all of the issued shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable, have been issued in compliance with all
applicable federal and state securities laws and were not issued in violation
of or subject to any preemptive rights or other rights to subscribe for or
purchase securities (provided that such counsel's opinion as to any agreements
that might confer any such rights shall be based upon such counsel's
knowledge); the Shares have been duly authorized by all necessary corporate
action of the Company and, when issued and delivered to and paid for by the
Underwriters pursuant to this Agreement, will be validly issued fully paid and
nonassessable; the Shares have been duly authorized for quotation on the
[Nasdaq System]; and no holders of outstanding shares of capital stock of the
Company are entitled as such to any preemptive or other rights to subscribe for
any of the Shares (provided that such counsel's opinion as to any agreements
that might confer any such rights shall be based upon such counsel's
knowledge);
(F) The statements set forth under the heading "Description of
Securities" in the Effective Prospectus and the Final Prospectus, insofar as
such statements purport to summarize certain provisions of the capital stock of
the Company, provide a fair summary of such provisions;
(G) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action of the Company and this
Agreement has been duly executed and delivered by the Company; and this
Agreement, assuming it is a binding agreement of the Underwriters, constitutes
a legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, or other similar
laws relating to creditors' rights generally, and general equitable principles
relating to the availability of remedies, and as rights to indemnity or
contribution may be limited by state or federal securities laws and the public
policy underlying such laws);
(H) To the knowledge of such counsel, (A) no legal or governmental
proceedings are pending to which the Company is a party or to which the
property of the Company is subject that are required to be described in the
Registration Statement, the Effective Prospectus or the Final Prospectus and
are not described therein, and no such proceedings have been threatened against
the Company or with respect to any of its properties and (B) no contract or
other document is required to be described in the Registration Statement, the
Effective Prospectus or the Final Prospectus or to be filed as an exhibit to
the Registration Statement that is not described therein or filed as required;
(I) The issuance, offering and sale of the Shares to the Underwriters
by the Company pursuant to this Agreement, the compliance by the Company with
the other provisions of this Agreement and the consummation of the other
transactions herein contemplated do not (A) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained and such as may be required under
state securities or Blue Sky laws, or (B) conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, any indenture, mortgage, deed of trust,
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<PAGE> 20
lease or other agreement or instrument, known to such counsel, to which the
Company is a party or by which the Company or any of its properties are bound,
or the charter documents or by-laws of the Company, or any statute or any
judgment, decree, order, rule or regulation of any court or other governmental
authority or any arbitrator known to such counsel and applicable to the Company
(assuming, for purposes of this paragraph, the due qualification of the Shares
for public offering by the Underwriters under state securities laws, and
compliance with all applicable federal and state securities laws);
(J) The Registration Statement is effective under the Act; any
required filing of the Final Prospectus pursuant to Rule 424(b) has been made
in the manner and within the time period required by Rule 424(b); and, to such
counsel's knowledge, no Stop Order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to the
knowledge of such counsel, are contemplated by the Commission; and
(K) The registration statement originally filed with respect to the
Shares and each amendment thereto and the Effective Prospectus and the Final
Prospectus (in each case, other than the financial statements and other
financial and statistical information contained therein, as to which such
counsel need express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the Rules and Regulations;
(L) The Company is not now an "investment company" as defined in
Section 3(a) of the Investment Company Act; and
(M) All issuances and sales of currently issued and outstanding
securities by the Company were exempt from registration under the Act and
complied in all respects with the provisions of all applicable federal and
state securities laws.
In addition to the matters set forth above, the opinion shall also include
a statement to the effect that such counsel has participated in conferences
with representatives of the Company, counsel to the Underwriters,
representatives of the independent public accountants for the Company and
representatives of the Underwriters at which the contents of the Registration
Statement and any Pre-Effective Prospectus and related matters were discussed,
and that no facts have come to such counsel's attention which would cause such
counsel to believe that the Registration Statement at the time it became
effective contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or that, on the Closing Date, the Effective
Prospectus, the Final Prospectus and the Registration Statement contained any
untrue statement of material fact or omitted to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading (except that such counsel need express no
comment as to the information provided by the Underwriters, the financial
statements and schedules or other financial or statistical data included
therein). With respect to such statement, such counsel may state that their
belief is based on the procedures set forth therein, but is without independent
check and verification except as otherwise expressly stated.
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In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deem proper, on certificates of responsible
officers of the Company and public officials. References to the Registration
Statement, Effective Prospectus and the Final Prospectus in this subparagraph
(iv) of Section 7 shall include any amendment or supplement thereto at the date
of such opinion.
(v) On or prior to the Closing Date, Underwriters' Counsel shall have been
furnished such documents, certificates and opinions as they may reasonably
require for the purposes of enabling them to review or pass upon the matters
referred to in paragraph (iii) of this Section 7, or in order to evidence the
accuracy, completeness or satisfaction of any of the representations or
warranties of the Company, or conditions herein contained.
(vi) At the time that this Agreement is executed by the Company, the
Underwriters shall have received from BDO Seidman, LLP a letter as of the date
of this Agreement in form and substance satisfactory to you (the "Original
Letter"), and on the Closing Date, the Underwriters shall have received from
BDO Seidman, LLP a letter dated the Closing Date stating that, as of a
specified date not earlier than five (5) days prior to the Closing Date,
nothing has come to the attention of BDO Seidman, LLP to suggest that the
statements made in the Original Letter are not true and correct.
(vii) On the Closing Date, the Underwriters shall have received a
certificate, dated the Closing Date, of the principal executive officer and the
principal financial or accounting officer of the Company to the effect that
each of such persons has carefully examined the Registration Statement, the
Effective Prospectus and the Final Prospectus, and any amendments or
supplements thereto and this Agreement, and that:
(A) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date, and
the Company has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or satisfied
at or prior to the Closing Date;
(B) No Stop Order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or are pending or, to the each such person's knowledge, are
contemplated or threatened under the Act, and any and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations have been timely made;
(C) The Registration Statement, the Effective Prospectus and the Final
Prospectus and, if any, each amendment and each supplement thereto, contain all
statements and information required to be included therein, and neither the
Registration Statement nor any amendment thereto includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and none of
the Effective Prospectus or the Final Prospectus or any Pre-Effective
Prospectus (or any amendment or supplement thereto) included any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
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(D) Subsequent to the respective dates as of which information is
given in the Registration Statement, the Effective Prospectus and the Final
Prospectus, the Company has not incurred, up to and including the Closing Date,
other than in the ordinary course of its business or as contemplated in the
Effective Prospectus and the Final Prospectus, any material liabilities or
obligations, direct or contingent; the Company has not paid or declared any
dividends or other distributions on its capital stock; the Company has not
entered into any transactions not in the ordinary course of business or as
contemplated in the Effective Prospectus and the Final Prospectus, and there
has not been any change in the capital stock (other than change resulting from
the grant or exercise of options under stock option plans or agreements in
effect as of the date of this Agreement) or long-term debt or any increase in
the short-term borrowings (other than as disclosed in the Effective Prospectus
and the Final Prospectus or any increase in short-term borrowings in the
ordinary course of business) of the Company or any material adverse change in
the present or prospective business condition (financial or other), net worth
or results of operations of the Company; the Company has not sustained any
material loss or damage to its property or assets, whether or not insured;
there is no litigation which is pending or, to each such person's knowledge,
threatened against the Company which is required to be set forth in the
Effective Prospectus or Final Prospectus which has not been so set forth; and
there has occurred no event required to be set forth in an amended or
supplemented Effective Prospectus or Final Prospectus which has not been so set
forth.
References to the Registration Statement, the Effective Prospectus and the
Final Prospectus in this paragraph (vii) are to such documents as amended and
supplemented at the date of the certificate.
(viii) Subsequent to the respective dates as of which information is given
in the Registration Statement, the Effective Prospectus and the Final
Prospectus up to and including the Closing Date there has not been any material
adverse change, or any development involving a prospective material adverse
change, in the business or properties of the Company which change or
development makes it impractical or inadvisable in the Representative's
judgment to proceed with the public offering or the delivery of the Shares as
contemplated by the Effective Prospectus and the Final Prospectus.
(ix) No order suspending the sale of the Shares prior to the Closing Date
in any jurisdiction designated by you pursuant to Section 5(iii) hereof has
been issued on or prior to the Closing Date and no proceedings for that purpose
have been instituted or, to your knowledge or that of the Company, have been or
are contemplated.
(x) The Representative shall have received from each person who is a
director or officer of the Company or who is the holder of outstanding shares
of Common Stock (or any security or other instrument which by its terms is
convertible into, exerciseable for, or exchangeable for, shares of Common
Stock) an agreement to the effect that such person will not, directly or
indirectly, without the prior written consent of the Representative, offer,
sell, grant, any portion to purchase or otherwise dispose (or announce any
offer, sale, grant of an option to purchase or other disposition) of any shares
of Common Stock or any securities convertible into,
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or exchangeable or exercisable for, shares of Common Stock for a period of 270
days after the date of this Agreement.
(xi) The Company shall have furnished the Underwriters with such further
opinions, letters, certificates and documents as the Representative or
Underwriters' Counsel may reasonably request in order to effectuate the
provisions of this Agreement. All opinions, certificates, letters and documents
to be furnished by the Company will comply with the provisions hereof only if
they are reasonably satisfactory in all material respects to the Representative
and to the Underwriters' Counsel. The Company shall furnish the Underwriters
with conformed copies of such opinions, certificates, letters and documents in
such quantities as you reasonably request. The certificates delivered under
subsections (vii) and (xi) of this Section 7 shall constitute representations,
warranties and agreements of the Company, as to all matters set forth therein
as fully and effectively as if such matters had been set forth in Section 2 of
this Agreement.
(xii) The NASD, upon review of the terms of the public offering of the
Shares, shall not have objected to the Underwriters' participation in such
offering.
(xiii) Prior to or on the Closing Date, the Company shall have provided to
the Representative copies of the agreements referred to in Section 2(a)(xvi).
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Underwriter,
its officers, directors, partners, employees, agents and counsel, and each
person, if any, who controls such Underwriter within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against any and all losses,
claims, damages, expenses or liabilities whatsoever (which shall include, for
all purposes of this Section 8, but not limited to, attorneys' fees and any and
all expense whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever
whether or not in connection with any litigation in which an indemnified party
is a party and whether or not involving a third party claim and any and all
amounts paid in settlement of any claim or litigation), joint or several (and
actions in respect thereof), to which such Underwriter or such persons may
become subject, under the Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
damages, expenses, liabilities or actions arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, the Effective Prospectus or the Final Prospectus
or any Pre-Effective Prospectus, or any amendment or supplement thereto, or any
Blue Sky application or other document executed by the Company specifically for
that purpose or based upon written information furnished by the Company filed
in any state or other jurisdiction in order to qualify any or all of the Shares
under the state securities or Blue Sky laws thereof (any such application,
document or information being hereinafter called a "Blue Sky Application"), or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such Underwriter or
person for any legal or other expenses incurred by such Underwriter or person
in connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the
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Company will not be liable in any such case to any such Underwriter, to the
extent that any such loss, claim, damage, liability or action arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in any of such document in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter expressly for use therein, and PROVIDED, FURTHER, that such
indemnity with respect to any Pre-Effective Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) from whom the person asserting any such loss, claim, damage or
liability purchased Shares which are the subject thereof if such Underwriter
failed to send or give a copy of the Effective Prospectus or the Final
Prospectus (or the Effective Prospectus or the Final Prospectus as amended or
supplemented) to such person at or prior to confirmation of the sale of such
Shares to such person in any case where such delivery is required by the Act
and the untrue statement or omission of a material fact contained in such
Pre-Effective Prospectus was corrected in the Effective Prospectus or Final
Prospectus (or the Effective Prospectus or the Final Prospectus as amended and
supplemented); or (ii) any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement. The indemnity agreement
in this subparagraph shall be in addition to any liability which the Company
may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act against any and all losses, claims, damages, expenses
or liabilities (and actions in respect thereof) to which the Company or any
such director, officer, or controlling person may become subject, under the Act
or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or the
Effective Prospectus or the Final Prospectus or any Pre-Effective Prospectus,
or an amendment or supplement thereto or any Blue Sky Application, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished by that Underwriter expressly for use therein; and will reimburse all
legal or other expenses reasonably incurred by the Company or any such
director, officer, or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that any obligation of any Underwriter to provide indemnification under the
provisions of this Section 8(b) shall not be in excess of the underwriting
discount and commission applicable to the Shares purchased by such Underwriter
hereunder. The Company acknowledges that the statements with respect to the
public offering of the Shares set forth under the heading "Underwriting" and
the stabilization legend in the Prospectus have been furnished by the
Underwriters expressly for use therein and constitute the only information
furnished in writing by or on behalf of the Underwriters for inclusion in the
Effective Prospectus and the Final Prospectus. The indemnity agreement in this
subparagraph (b) shall be in addition to any liability which each of the
Underwriters may have at common law or otherwise.
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(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against one or more indemnifying parties
under this Section 8, notify such indemnifying party or parties of the
commencement thereof; but the omission so to notify an indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8 or to the extent that the indemnifying
party was not adversely affected by such omission. In case any such action is
brought against an indemnified party and it notifies an indemnifying party or
parties of the commencement thereof, the indemnifying party or parties against
which a claim is to be made will be entitled to participate therein and, to the
extent that it or they may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however, that if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party has reasonably concluded that
there may be legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and otherwise to participate in the
defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from any indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party has employed such counsel in
connection with the assumption of such different or additional legal defenses
in accordance with the proviso to the immediately preceding sentence, (ii) the
indemnifying party has not employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, or (iii) the indemnifying party has
authorized in writing the employment of counsel for the indemnified party at
the expense of the indemnifying party. The indemnifying party, in defense of
any action assumed by it, shall not, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement of such
action which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such action. The indemnified party shall not agree to
settle any action or claim for which it intends to seek indemnification
hereunder without the prior written consent of the indemnifying party.
(d) If the indemnification provided for in this Section 8 is unavailable
to hold harmless an indemnified party under subparagraphs (a) or (b) above in
respect of any losses, claims, damages, expenses or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid as a result of such losses, claims, damages,
expenses or liabilities (or actions in respect thereof) (i) in such proportion
as is appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of the Shares or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of each of the contributing parties, on
the one hand, and the party to be indemnified on the other hand in connection
with the statements or omissions that resulted in such losses,
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claims, damages, expenses or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand, and the Underwriters on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Shares (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the Cover Page of the Final Prospectus. 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 by the Underwriters on the other, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions in respect thereof) referred to above in
this subparagraph (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
subparagraph (d), the Underwriters shall not be required to contribute any
amount in excess of the underwriting discount applicable to the Shares
purchased by the Underwriters hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person, if any who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who has signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to this subparagraph (d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any other
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not
adversely affected by such omission. Anything in this Section 8(d) to the
contrary notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its written
consent. This Section 8(d) is intended to supersede any right to contribution
under the Act, the Exchange Act or otherwise. The contribution agreement set
forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
9. RIGHT TO INCREASE OFFERING. At any time and from time to time during a
period of 30 days from the effective date of the Final Prospectus, the
Representative, by no less than two business days' prior notice to the Company,
may designate a closing (which may be concurrent with, and part of, the closing
on the Closing Date with respect to the Firm Shares or may be a second closing
and which shall be referred to as the "Option Closing Date") at which the
Underwriters shall purchase from the Company in the manner described below, for
the sole purpose of covering over-allotments by the Underwriters during the
public offering, such number
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of Additional Shares as are specified in the notice. The maximum number of
Additional Shares to be sold by the Company is 150,000 shares of Common Stock.
Except to the extent waived by the Underwriters, all the provisions of this
Agreement applicable with respect to the transactions contemplated on the
Closing Date shall apply to such later closing (with such changes as are
necessary) and the Additional Shares purchased at such closing hereunder shall
be deemed Shares for all purposes of this Agreement.
If any Additional Shares are to be purchased, each Underwriter, severally
and not jointly, agrees to purchase from the Company, at the Purchase Price,
the respective number of Additional Shares which bears the same proportion to
the number of Additional Shares to be sold by the Company as the total number
of Firm Shares set forth opposite the name of such Underwriter in SCHEDULE 1
hereto bears to the total number of Firm Shares to be sold hereunder, subject
to such adjustments to eliminate any fractional shares as the Representative in
its sole discretion shall make.
10. REPRESENTATIONS, ETC. TO SURVIVE DELIVERY. The respective representations,
warranties, agreements, covenants, indemnities and statements of, and on behalf
of, the Company and its officers, and the Underwriters, respectively, set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Underwriters, and
will survive delivery of and payment for the Shares. Any successors to the
Underwriters shall be entitled to the indemnity, reimbursement and contribution
agreements contained in this Agreement.
11. EFFECTIVE DATE. This Agreement shall become effective at 10:00 a.m., Boston
time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Shares for the sale to the
public, provided, however, that the provisions of Sections 6, 8 and 12 of this
Agreement shall at all times be effective. For purposes of this Section 11, the
Shares to be purchased hereunder shall be deemed to have been so released upon
the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such Shares for offering or the release by the Representative
for publication of the first newspaper advertisement which is subsequently
published relating to the Shares.
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12. TERMINATION.
(a) This Agreement (except for the provisions of Sections 6 and 8 hereof)
may be terminated by the Company or at any time before this Agreement becomes
effective in accordance with Section 11 hereof, by notice to the
Representative.
(b) This Agreement (except for the provisions of Sections 6 and 8 hereof)
may also be terminated by the Representative by notice to the Company (i) at
any time before it becomes effective in accordance with Section 11 hereof; (ii)
in the event that the Company terminates this Agreement under Section 12(a)
hereof; (iii) in the event that the Company has failed to comply in any
material respect with any of the provisions of this Agreement on its part to be
performed at or prior to the Closing Date or the Option Closing Date, or if any
of the representations or warranties herein or therein are not accurate, or if
the covenants, agreements or conditions of, or applicable to, the Company
herein or therein contained have not been complied with in any material respect
or satisfied within the time specified; (iv) if prior to the Closing Date or
the Option Closing Date, the Company has sustained a loss by strike, fire,
flood, accident or other calamity of such a character as to interfere
materially with the conduct of the business and operations of the Company; (v)
if prior to the Closing Date or the Option Closing Date, trading in securities
in the New York Stock Exchange, the American Stock Exchange or the Nasdaq Stock
Market is suspended or a general banking moratorium has been declared by
federal or state authorities; (vi) if there has been a declaration of war by
the United States, or if the United States has become engaged in a major
outbreak of armed hostilities with a foreign government; or (vii) if there has
been such a material adverse change in general economic, political or financial
conditions or if there has been a material and adverse change to the Company
as, in the Representative's judgment, makes it impracticable or inadvisable to
make or consummate a public offering of the Shares on the terms and in the
manner contemplated in the Final Prospectus and in the Registration Statement.
(c) Termination of this Agreement shall be without liability of any party
to any other party other than as provided in Sections 6 and 8 hereof.
13. SUBSTITUTION OF UNDERWRITERS. If one or more of the Underwriters shall fail
or refuse (otherwise than pursuant to Section 7 or for a reason sufficient to
justify the termination of this Agreement under the provisions of Section 12
hereof) to purchase and pay for the number of Shares agreed to be purchased by
such Underwriter or Underwriters upon tender to you of such Shares in
accordance with the terms hereof, and the number of such Shares shall not
exceed 10% of the Shares, then each of the non-defaulting Underwriters shall
purchase and pay for (in addition to the number of such Shares which it has
severally agreed to purchase hereunder) that proportion of the number of Shares
which the defaulting Underwriter or Underwriters shall have so failed or
refused to purchase which the number of Shares agreed to be purchased by such
non-defaulting Underwriter bears to the aggregate number of Shares so agreed to
be purchased by all such non-defaulting Underwriters. In such case, you shall
have the right to postpone each Closing Date specified in Sections 3 and 9
hereof to a date not exceeding seven full business days after the date
originally fixed as such Closing Date pursuant to said Sections 3 and 9 in
order that any necessary
28
<PAGE> 29
changes in the Registration Statement, the Final Prospectus or any other
documents or arrangement may be made.
If one or more of the Underwriters shall fail or refuse (otherwise than
pursuant to Section 7 or for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 12 hereof) to purchase and pay
for the number of Shares agreed to be purchased by such Underwriter or
Underwriters upon tender to you of such Shares in accordance with the terms
hereof and the number of such Shares shall exceed 10% of the total Shares, then
(unless within 48 hours after such default arrangements to your satisfaction
shall have been made for the purchase of the defaulted Shares by an Underwriter
or Underwriters) this Agreement will terminate without liability on the part of
any non-defaulting Underwriter or on the part of the Company or the Selling
Shareholders except as otherwise provided in this Agreement. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this paragraph. Nothing in this Section 13, and no action
taken hereunder, shall relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
14. NOTICES. All communications hereunder shall be in writing and if sent to
the Representative shall be mailed or delivered or telecopied and confirmed to
H.C. Wainwright & Co., Inc., One Boston Place, Boston, Massachusetts 02108,
Attention: Corporate Finance Department, with a copy to Morse, Barnes-Brown &
Pendleton, P.C., 1601 Trapelo Road, Waltham, Massachusetts 02154, Attention:
Jeffrey P. Somers, Esq., or, if sent to the Company, shall be mailed or
delivered or telecopied and confirmed to the Company at 5001 Baum Boulevard,
Pittsburgh, Pennsylvania 15213, Attention: President, with a copy to Cohen &
Grigsby, P.C., 2900 CNG Tower, 625 Liberty Avenue, Pittsburgh, Pennsylvania
15222, Attention: Daniel L. Wessels, Esq.
15. SUCCESSORS. This Agreement shall inure to the benefit of and be binding
upon the Company and each Underwriter and their respective successors, legal
representatives, heirs and assigns, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person, except that the
representations, warranties, indemnities and contribution agreements of the
Company contained in this Agreement shall also be for the benefit of each
Underwriter's officers, directors, partners, employees, agents and counsel and
any person or persons who control any Underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, and except that the
Underwriters' indemnity and contribution agreements shall also be for the
benefit of the directors of the Company, the officers of the Company who have
signed the Registration Statement, and any person or persons who control the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act. No purchaser of Shares from the Underwriters will be deemed a
successor because of such purchase.
16. APPLICABLE LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the conflict of law principles thereof.
29
<PAGE> 30
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
18. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any
section, paragraph or provision of this Agreement shall not effect the validity
or enforceability of any other section, paragraph or provision hereof. If any
section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as is necessary to make it valid and
enforceable.
If the foregoing correctly sets forth our understanding, please indicate
the Underwriters' acceptance thereof in the space provided below for the
purpose, whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
SEEC, Inc.
By: __________________________
Name:
Title:
The foregoing Underwriting
Agreement is confirmed and accepted as of
the date first above written:
H.C. Wainwright & Co., Inc.,
acting on its own behalf and as
the Representative of the several
Underwriters referred to in the
foregoing Agreement
By H.C. Wainwright & Co., Inc.
By:--------------------------
Name:
Title:
<PAGE> 31
SCHEDULE 1
UNDERWRITERS
Number of
Firm Shares
UNDERWRITER TO BE PURCHASED
H.C. Wainwright & Co., Inc....................................................
Total 1,000,000
---------
N:\DATA\CLIENTS\WAINWRIG\SEEK\CONTRACT\UA4.DOC
<PAGE> 1
Exhibit 3.1
<TABLE>
<S> <C>
Microfilm Number Filed with the Department of State on April 23, 1992
----------------------------- --------------
Entity Number 1528382 ----------------------------------------------------
----------------------------- Secretary of the Commonwealth
</TABLE>
ARTICLES OF DOMESTICATION
FOREIGN CORPORATION
DSCB:15-4161/6161 (Rev 90)
Indicate type of corporation (check one):
X Foreign business Corporation (15 Pa.C.S. Section 4161)
___
Foreign Nonprofit Corporation (15 Pa.C.S. Section 6161)
___
In compliance with the requirements of the applicable provisions of 15
Pa.C.S. (relating to corporations and unincorporated associations), the
undersigned qualified foreign corporation, desiring to become a domestic
business or domestic nonprofit corporation, hereby states that:
1. The name of the corporation is: SEEC, Inc.
----------------------------------------
------------------------------------------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 5001 Baum Boulevard, Pittsburgh PA 15213 Allegheny
---------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o
-----------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. Upon the domestication the corporation will be subject to the domestic
corporation provisions of the Business Corporation Law of 1988 or the
Nonprofit Corporation Law of 1988.
4. (Strike out if inapplicable; otherwise check and, if applicable, complete,
one or more of the following):
X The purposes for which the corporation is to be domesticated in the
--- Commonwealth of Pennsylvania include unlimited power to engage in and
to do any lawful act concerning any and all lawful business for which
business corporations may be incorporated under the Business Corporation
Law of 1988.
X The purposes for which the corporation is to be domesticated in the
--- Commonwealth of Pennsylvania consists of unlimited power to engage in
and to do any lawful act concerning any and all lawful business for
which business corporations may be incorporated under the Business
Corporation Law of 1988.
<PAGE> 2
DSCB: 15-4161/6161 (Rev 90)-2
5. (Strike out inapplicable paragraph):
The filing of these Articles of Domestication and, if desired, the
renunciation of the original charter or articles of the corporation has been
authorized by a majority vote of the votes cost by all shareholders (or
members) entitled to vote thereon and, if any class of shares (or members)
is entitled to vote thereon as a class, a majority of the votes cast in each
class vote, or by any greater vote required by its charter.
The filing of these Articles of Domestication and, if desired, the
renunciation of the original charter or articles has been authorized by a
majority vote of the votes cast by all members, if any, entitled to vote
thereon and, if any class of members is entitled to vote thereon as a class,
the majority of the votes cast in each class vote, or by any greater vote
required by its charter.
5. (Strike out if inapplicable):
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Domestication to be executed this day of ,
19 .
SEEC, Inc.
--------------------------------
(Name of Corporation)
BY: /s/ RAVINDRA KOKA
-----------------------------
(Signature)
TITLE: President
-------------------------
<PAGE> 1
Exhibit 3.2
BYLAWS
OF
SEEC, INC.
ADOPTED JULY 15, 1996
<PAGE> 2
ARTICLE I
NOTICE OF MEETINGS
1.01. NOTICE OF SHAREHOLDER MEETINGS. Written notice of every
meeting of the shareholders shall be given by or at the direction of the
Secretary to each shareholder of record entitled to vote at such meeting at
least five days prior to the date of such meeting or, in the case of a meeting
called to consider a fundamental change under Chapter 19 of the Pennsylvania
Business Corporation Law of 1988, 15 Pa. C.S. Section 101 et seq., as amended
(as so amended, and as the same may be further amended, the "BCL"), at least 10
days prior to the date of such meeting. Each such notice shall specify the
place, date and time of such meeting. Notice of a special meeting of the
shareholders shall also specify the general nature of the business to be
transacted at such meeting. Except as otherwise expressly provided herein or
by law, notices of shareholder meetings need not contain any additional
information.
1.02. NOTICE OF BOARD OF DIRECTORS MEETINGS. Notice of meetings of
the Board of Directors of the Corporation (the "Board") is not required;
provided, that in the case of a special meeting of the Board, the Secretary or
his designee shall use his reasonable best efforts to give prior notice of the
place, date and time of such meeting, either verbally or in writing, to each
director.
1.03. MANNER OF GIVING WRITTEN NOTICE. Whenever written notice is
required to be given to any director or shareholder pursuant to any provision
of these By-Laws or the Articles of Incorporation of the Corporation (the
"Articles"), or pursuant to any provision of the BCL:
(a) such notice may be given either by delivering a copy
thereof personally or by sending a copy by first class or express mail, postage
prepaid, or by telegram (with messenger service specified), telex or TWX (with
answerback received) or courier service, charges prepaid, or by telecopier;
(b) notices sent by one of the means designated in paragraph
(a) above shall be sent to the address (or the telex, TWX or telecopier number)
of (i) a shareholder appearing on the books of the Corporation or (ii) a
director supplied by such director to the Corporation for purposes of notice;
and
(c) notices shall be deemed to have been given (i) upon
receipt, if delivered personally, (ii) when deposited in the United States mail
or with an express mail service, telegraph office or courier service, if sent
by first class mail, express mail, telegram or courier service or (iii) when
dispatched, if sent by telex, TWX or telecopier.
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<PAGE> 3
1.04. WAIVER OF NOTICE. Whenever written notice is required to be
given to any director or shareholder pursuant to any provision of these By-Laws
or the Articles, or pursuant to any provision of the BCL, the requirement of
such notice shall be deemed to be waived:
(a) upon receipt by the Corporation, whether before or after
the date of the meeting with respect to which such notice was required to have
been given, of a written waiver of such notice specifying the date, place and
time of such meeting and executed by the person entitled to receive such
notice; or
(b) upon attendance by the person entitled to receive such
notice at the meeting with respect to which such notice was required to have
been given, unless such person attends such meeting for the express purpose of
objecting, at the beginning of such meeting, to the transaction of any business
because the meeting was not lawfully called or convened.
A written waiver of a notice required to have been given in connection with a
special meeting of the shareholders shall specify the general nature of the
business to be, or which was, transacted at such meeting. Except as otherwise
expressly provided herein or by law, written waivers of notice need not contain
any additional information.
ARTICLE II
SHAREHOLDERS
2.01. SHAREHOLDER MEETINGS.
(a) ANNUAL MEETINGS. At least one meeting of the
shareholders shall be held in each calendar year for the purpose of electing
directors and conducting such other business as may properly come before such
meeting. The Board shall fix the place, date and time of each such meeting and
shall direct the Secretary to give the required notice of the same.
(b) SPECIAL MEETINGS. A special meeting of the shareholders
may be called at any time by (i) the Board or (ii) shareholders entitled to
cast at least 20% of the votes that all shareholders are entitled to cast at
such meeting. The persons calling any such meeting shall fix the place, date
and time thereof and shall direct the Secretary to give the required notice of
the same.
(c) USE OF CONFERENCE TELEPHONE. One or more persons may
participate in any meeting of the shareholders by means of a conference
telephone or similar communications equipment which permits all persons
participating in the meeting to hear each other. Participation in a meeting by
such means shall constitute presence in person at such meeting.
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<PAGE> 4
2.02. QUORUM. The presence at a meeting of shareholders entitled to
cast at least a majority of the votes that all shareholders are entitled to
cast on a particular matter shall constitute a quorum for purposes of
consideration and action on such matter.
2.03. ACTION BY SHAREHOLDERS.
(a) ACTION AT MEETINGS. No corporate action shall be taken
at any meeting of the shareholders unless such meeting is duly organized. A
meeting of the shareholders shall be "duly organized" for the purposes of these
By-Laws if (i) such meeting is called in accordance with the provisions of
these By-Laws, (ii) notice of such meeting is given in accordance with these
By-Laws, or the requirement of such notice is waived (either before, during or
after such meeting) in accordance with these By-Laws and (iii) a quorum is
present. Any corporate action which is authorized by a majority of the votes
cast at a duly organized meeting of the shareholders shall constitute action by
the shareholders, notwithstanding the withdrawal from such meeting of enough
shareholders to leave less than a quorum.
(b) ACTION BY UNANIMOUS CONSENT. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if, prior or subsequent to the action, a written consent or consents
thereto by all of the shareholders who would be entitled to vote at a meeting
for such purpose shall be filed with the Secretary.
(c) ACTION BY PARTIAL CONSENT. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting upon the written consent of shareholders who would have been entitled
to cast the minimum number of votes necessary to authorize such action at a
meeting at which all shareholders entitled to vote thereon were present and
voting, which consent or consents shall be filed with the Secretary; provided,
that no such action shall become effective until 10 days' prior written notice
of the action has been given to each shareholder entitled to vote thereon who
has not consented thereto.
2.04. VOTING RIGHTS OF SHAREHOLDERS. Unless otherwise provided in
the Articles, every shareholder shall be entitled to one vote for every share
standing in his name on the books of the Corporation. Unless otherwise
provided in the Articles, in each election of directors every shareholder
entitled to vote shall have the right to multiply the number of votes to which
he may be entitled by the total number of directors to be elected and he may
cast the whole number of his votes for one candidate or he may distribute them
among any two or more candidates.
-3-
<PAGE> 5
ARTICLE III
BOARD OF DIRECTORS
3.01. POWERS. Except as otherwise expressly provided herein or by
law, all powers vested by law in the Corporation shall be exercised by or under
the authority of, and the business affairs of the Corporation shall be managed
by or under the direction of, the Board.
3.02. NUMBER AND TERM OF OFFICE OF DIRECTORS. The number of
directors which shall constitute the full Board of Directors shall be fixed by
the Board of Directors. A full Board shall be elected by the shareholders at
each annual meeting of the shareholders. Each director shall hold office for a
term of one year and thereafter until his successor has been elected by the
shareholders, or until his earlier death, resignation or removal.
3.03. VACANCIES. Vacancies in the Board, including vacancies
resulting from an increase in the number of directors, may be filled by a
majority vote of the remaining directors, even if such remaining directors
constitute less than a quorum. Each director so elected shall hold office only
until his successor has been elected by the shareholders.
3.04. REMOVAL OF DIRECTORS. Any director may be removed from office,
with or without assigning any cause, upon the affirmative vote of shareholders
holding shares representing at least a majority of all votes entitled to be
cast for the election of directors; provided, that an individual director shall
not be removed (unless the entire Board is removed) if sufficient votes are
cast against the resolution for his removal which, if cumulatively voted at a
regular election of directors, would be sufficient to elect one or more
directors.
3.05. BOARD OF DIRECTORS MEETINGS.
(a) REGULAR MEETINGS. The Board shall hold an annual meeting
immediately after the annual meeting of shareholders, and may hold such
additional regular meetings at such places, dates and times as it shall
determine.
(b) SPECIAL MEETINGS. A special meeting of the Board may be
called at any time by the President or any two directors. The persons calling
any such meeting shall fix the place, date and time thereof and shall direct
the Secretary to give the required notice of the same.
(c) USE OF CONFERENCE TELEPHONE. One or more persons may
participate in any meeting of the Board by means of a conference telephone or
similar communications equipment which permits all persons participating in the
meeting to hear each other. Participation in a meeting by such means shall
constitute presence in person at such meeting.
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<PAGE> 6
3.06. QUORUM. The presence at a meeting of the Board of a majority
of directors then in office shall constitute a quorum for the transaction of
business
3.07. ACTION BY DIRECTORS.
(a) ACTION AT MEETINGS. Any corporate action which is
authorized by a majority of the directors present and voting at a meeting of
the Board at which a quorum is present shall constitute action by the Board.
(b) ACTION BY UNANIMOUS CONSENT. Any action required or
permitted to be taken at a meeting of the Board may be taken without a meeting
if, prior or subsequent to the action, a written consent or consents thereto by
all of the directors then in office shall be filed with the Secretary.
3.08. INTERESTED DIRECTORS AND OFFICERS. A contract or transaction
between the Corporation and one or more of its directors or officers (or any
entity of which one or more of its directors or officers is a director, officer
or principal or in which one or more of its directors or officers has a
financial or other interest) shall not be void or voidable solely for that
reason, or solely because such director or officer is present at or
participates in any meeting of the Board that authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(a) the material facts as to the relationship or interest and
as to the contract or transaction are disclosed to or otherwise known by the
Board and the Board authorizes the same by the affirmative votes of a majority
of the disinterested directors, even if such disinterested directors constitute
less than a quorum;
(b) the material facts as to the relationship or interest and
as to the contract or transaction are disclosed to or otherwise known by the
shareholders entitled to vote thereon and the contract or transaction is
specifically approved in good faith by a vote of such shareholders; or
(c) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board or the
shareholders.
For the purpose of determining the presence of a quorum at a meeting of the
Board described in paragraph (a) above, interested directors may be counted.
3.09. COMMITTEES. The Board may, by a resolution adopted by a
majority of the directors then in office, establish one or more committees.
Each committee shall consist of one or more directors who shall serve at the
discretion of the Board. The
-5-
<PAGE> 7
Executive Committee, if one shall be created, shall have the full power and
authority of the Board, and each other committee which may be created shall
have the power and authority specified in the resolution creating the same;
provided, that no committee shall:
(a) submit to the shareholders any action requiring approval of the
shareholders;
(b) create or fill any vacancies in the Board;
(c) adopt, amend or repeal any provision of these By-Laws;
(d) amend or repeal any resolution of the Board that by its
terms is amendable or repealable only by the Board; or
(e) take action on any matter which by these By-Laws or a
resolution of the Board is committed to another committee of the Board.
The provisions of Article I and this Article III dealing with notice to
directors, meetings of the Board and quorums shall be applicable to all
committee meetings.
3.10. PERSONAL LIABILITY OF DIRECTORS. To the fullest extent that
the laws of the Commonwealth, as the same may be amended from time to time,
permit elimination or limitation of the liability of directors, no director
shall be personally liable for monetary damages for any action taken, or any
failure to take any action, in his capacity as a director. The provisions of
this Section (a) shall be deemed to be a contract with each person who serves
as a director at any time while this Section is in effect, and each such
director shall be deemed to be serving in reliance on the provisions of this
Section, (b) shall continue as to each person who has ceased to be a director
which respect to the periods when he was a director and (c) shall inure to the
benefit of each director's heirs and legal representatives. Any amendment or
repeal of this Section, and any amendment to the Articles or any other
provision of these By-Laws, which has the effect of increasing the personal
liability of directors shall operate prospectively only and shall not have any
effect with respect to any action taken, or any failure to act, by a director
prior to the effective date of such amendment or repeal.
- 6 -
<PAGE> 8
ARTICLE IV
OFFICERS
4.01. ELECTION OF OFFICERS. At its annual meeting the Board shall
elect a President, a Secretary and a Treasurer, and may elect such Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers as
it deems necessary or advisable. Unless sooner removed by the Board of
Directors, all such officers shall hold office for the term of the Board by
which they are elected and until their successors are elected. Any number of
offices may be held by the same person.
4.02. REMOVAL OF OFFICERS; VACANCIES. Any officer may be removed by
the Board whenever, in its judgment, the best interest of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. The Board shall have the power to
fill any vacancies in any office occurring in any manner.
4.03. PRESIDENT AND VICE PRESIDENTS. The President shall be the
chief executive officer of the Corporation, shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect. The Vice Presidents shall
perform such duties as shall be assigned to them by the Board or the President
and, in the absence or disability of the President, shall perform the duties of
the President in order of their seniority.
4.04. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall
attend the meetings of the shareholders and the Board and keep minutes thereof
in suitable books kept for that purpose. He shall have custody of the stock
books and stock ledgers of the Corporation and shall give, or cause to be
given, all notices as are required by law, the Articles or these By-Laws. He
shall perform such other duties as may be prescribed by the Board or the
President, as well as all the usual duties incident to the office of Secretary.
Assistant Secretaries shall perform such duties as may be assigned to them by
the Board, the President or the Secretary and, in the absence or disability of
the Secretary, shall perform the duties of the Secretary in the order of their
seniority.
4.05. TREASURER AND ASSISTANT TREASURERS. The Treasurer shall have
custody of the corporate funds and securities and shall keep, or cause to be
kept, full and accurate accounts of receipts and disbursements in books kept
for that purpose. He shall deposit all monies and other valuable effects in
the name and to the credit of the Corporation, in such depository as the Board
shall designate. As directed by the Board or the President, he shall disburse
monies of the Corporation, taking proper vouchers for such disbursements, and
shall render to the Board and the President an account of all his transactions
as Treasurer and of the financial condition of the Corporation. In
-7-
<PAGE> 9
addition, he shall perform all the usual duties incident to the office of
Treasurer. Assistant Treasurers shall perform such duties as may be assigned to
them by the Board, the President or the Treasurer and, in the absence or
disability of the Treasurer, shall perform the duties of the Treasurer in the
order of their seniority.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
5.01. CERTAIN DEFINITIONS. As used in this Article V the following
terms shall have the following meanings:
(a) "Action," with respect to any Indemnitee, shall mean
any action or proceeding, whether civil, criminal, administrative or
investigative, and including without limitation any action or proceeding by or
in the right of the Corporation, in which such Indemnitee is involved or
threatened to be involved as a party, witness or otherwise by reason of the
same relationship with the Corporation as gives rise to his status as an
Indemnitee, but shall exclude any such action or proceeding initiated by or for
the benefit of such Indemnitee.
(b) "Expenses" shall mean all costs and expenses
(including without limitation attorneys' fees and court costs) actually and
reasonably incurred by an Indemnitee in connection with any Action.
(c) "Indemnitee" shall mean (i) any director or officer
of the Corporation in his capacity as such and in such other capacities as the
Corporation may request him to serve in from time to time, including without
limitation as an officer, director, partner, trustee, fiduciary, employee or
agent of another corporation or of a partnership, joint venture, trust,
employee benefit plan or other enterprise, and (ii) such other persons as the
Board may by resolution determine from time to time are entitled to the
benefits of this Article, so long as such persons are employees or agents of
the Corporation, or are serving in another capacity at the request of the
Corporation, including without limitation as an officer, director, partner,
trustee, fiduciary, employee or agent of another corporation or of a
partnership, joint venture, trust, employee benefit plan or other enterprise.
(d) "Liabilities" shall mean all judgments, fines,
penalties and settlement amounts for which an Indemnitee is liable as a result
of an Action.
(e) "Prohibited Conduct", with respect to any Indemnitee,
shall mean any act or omission by such Indemnitee which (i) is performed in bad
faith or with actual knowledge that it is not in the best interests of the
Corporation or that it is
-8-
<PAGE> 10
unlawful, (ii) constitutes willful misconduct or recklessness within the meaning
of BCL Section Section 513(b) or 1746(b) or (iii) results in the receipt by such
Indemnitee from the Corporation of a personal benefit to which he is not legally
entitled.
5.02. RIGHT TO INDEMNIFICATION. The Corporation shall indemnify each
Indemnitee against all Liabilities and Expenses unless the Action out of which
such Liabilities and Expenses arise discloses, or it is determined pursuant to
Section 5.03, that such Indemnitees engaged in Prohibited Conduct.
5.03. PROCEDURE FOR INDEMNIFICATION. If, following the conclusion of
any Action, an Indemnitee believes that he is entitled to indemnification under
Section 5.02, he shall submit a written request to be so indemnified to the
Corporation. Promptly after the Corporation's receipt of such request, a
determination shall be made as to whether such Indemnitee is entitled to
indemnification, which determination shall be made by the Board by a majority
vote of a quorum consisting of directors who were not party to such Action or,
if such a quorum is not obtainable or if a majority vote of a quorum of such
disinterested directors directs, by the shareholders. If it is determined that
such indemnification is proper, in whole or in part, then the funds requested
by such Indemnitee for such indemnification or portion thereof shall promptly
be forwarded to such Indemnitee. If it is determined that such indemnification
is not proper, in whole or in part, then the Corporation shall promptly forward
to such Indemnitee a written explanation of the reason(s) why such
indemnification was denied. The foregoing determination procedure shall not be
applicable if, and to the extent that, indemnification is ordered by a court.
5.04. RIGHT TO ADVANCEMENT OF EXPENSES. Each Indemnitee shall be
entitled to have his Expenses paid by the Corporation in advance of the final
disposition of the Action out of which such Expenses arose upon the receipt by
the Corporation of a written request therefor and an undertaking by or on
behalf of such Indemnitee to repay the amount advanced if it is ultimately
determined that he is not entitled to indemnification against such Expenses.
5.05. RIGHT OF INDEMNITEE TO INITIATE ACTION. If the amount set
forth in an Indemnitee's written request under Section 5.03 or 5.04 is not paid
in full by the Corporation within 30 days after the same (together with such
evidence that the amounts requested have been or will be incurred as the
Corporation may reasonably request) has been received by the Corporation then,
subject to Section 5.06, the Indemnitee may initiate an action against the
Corporation to recover the amount requested. If an Indemnitee is successful,
in whole or in part, in any such action, then the Corporation shall reimburse
such Indemnitee for all costs and expenses (including without limitation
attorneys' fees and court costs) actually and reasonably incurred by such
Indemnitee in connection with such action. In any such action
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<PAGE> 11
the Corporation shall have the burden of proving that an Indemnitee is not
entitled to the requested indemnification or advancement of expenses. The only
defenses available to the Corporation (a) with respect to an action seeking
indemnification under Section 5.02 shall be that the Indemnitee engaged in
Prohibited Conduct, that the Liabilities and Expenses for which indemnification
is sought do not come within the definitions of those terms as set forth in
Section 5.01 or that the Indemnitee did not provide the Corporation with the
evidence it requested with respect to the incurrence of such Liabilities and
Expenses and (b) with respect to an action seeking advancement of Expenses
under Section 5.04 shall be that the Indemnitee failed to provide the
Corporation with the undertaking required by Section 5.04 or with the evidence
it requested with respect to the incurrence of such Expenses.
5.06. ARBITRATION. Any dispute related to the right to
indemnification or advancement of expenses as provided under this Article,
except with respect to indemnification for liabilities arising under the
Securities Act of 1933 that the Corporation has undertaken to submit to a court
for adjudication, shall be decided only by arbitration in the metropolitan area
in which the principal executive offices of the Corporation are located at the
time, in accordance with the commercial arbitration rules then in effect of the
American Arbitration Association, before a panel of three arbitrators, one of
which shall be selected by the Corporation, the second of which shall be
selected by the Indemnitee and the third of whom shall be selected by the other
two arbitrators. In the absence of the American Arbitration Association, or if
for any reason arbitration rules of the American Arbitration Association cannot
be initiated, or if one of the parties fails or refuses to select an arbitrator
or if the arbitrators selected by the Corporation and the Indemnitee cannot
agree on the selection of the third arbitrator within 30 days after such time
as the Corporation and the Indemnitee have each been notified of the selection
of the other's arbitrator, the necessary arbitrator or arbitrators shall be
selected by the presiding judge of the court of general jurisdiction in such
metropolitan area. Any award entered by the arbitrators shall be final,
binding and nonappealable and judgment may be entered thereon by any party in
accordance with applicable law in any court of competent jurisdiction.
5.07. INSURANCE AND FUNDING. The Corporation may purchase and
maintain insurance on behalf of any Indemnitee to protect itself and such
Indemnitee against any Liabilities or Expenses, whether or not the Corporation
has the power to indemnify such Indemnitee against the same under the
provisions of this Article. The Corporation may create a trust fund, grant a
security interest, cause a letter of credit to be issued or use other means,
whether or not similar to the foregoing, to ensure the payment of such sums as
the Board may reasonably determine to be necessary or desirable in order to
effect the provisions of this Article.
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5.08. NON-EXCLUSIVITY; NATURE AND EXTENT OF RIGHTS. The rights to
indemnification and advancement of expenses provided for in this Article shall
not be deemed exclusive of any other rights to which an Indemnitee may be
entitled under any bylaw, agreement, vote of shareholders, vote of
disinterested directors or otherwise. The provisions of this Article (a) shall
be deemed to be a contract with each person who serves the Corporation in any
capacity which grants him Indemnitee status at any time while this Article is
in effect, and each such person shall be deemed to be serving in reliance on
the provisions of this Article, (b) shall continue as to each Indemnitee who
has ceased to have such status with respect to periods when he had such status
and (c) shall inure to the benefit of each Indemnitee's heirs and legal
representatives. Any amendment or repeal of this Article, and any amendment to
the Articles or any other provision of these By-Laws, which has the effect of
limiting in any way the rights to indemnification or advancement of expenses
granted in this Article shall operate prospectively only and shall not have any
effect with respect to any action taken, or any failure to act, by an
Indemnitee prior to the effective date of such amendment or repeal.
ARTICLE VI
SHARE CERTIFICATES AND TRANSFERS
6.01. SHARE CERTIFICATES. Share certificates shall be in such form
as the Board may from time to time determine. Share certificates shall be
numbered and shall be entered in the books of the Corporation as they are
issued. Every share certificate shall exhibit the holder's name and the number
of shares, shall be signed by the President or any Vice President and
countersigned by the Treasurer or an Assistant Treasurer or by the Secretary or
an Assistant Secretary and sealed with the corporate seal, which may be an
engraved or printed facsimile.
6.02. TRANSFERS. Subject to any restriction on transfer imposed by
law or contained in the Articles or any agreement between the Corporation and
any shareholder, shares of the Corporation's capital stock shall, upon
surrender and cancellation of the certificate or certificates representing the
same, be transferred upon the books of the Corporation at the request of the
holder thereof named in the surrendered certificate or certificates, in person,
by his legal representative or by his attorney duly authorized by a written
power of attorney filed with the Corporation.
6.03. RECORD HOLDER OF SHARES. The Corporation shall be entitled to
treat the record holder of any shares of the Corporation's capital stock, as
set forth in the books of the Corporation, as the absolute owner thereof, and
shall not be
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required to recognize any equitable or other claim to or interest in any of
such shares.
6.04. LOSS OR DESTRUCTION OF CERTIFICATES. In case of loss or
destruction of a share certificate, another may be issued in lieu thereof in
such manner and upon such terms as the Board shall authorize in each particular
case.
ARTICLE VII
MISCELLANEOUS
7.01. FINANCIAL REPORT TO SHAREHOLDERS. Within 100 days after the
close of each fiscal year of the Corporation, the Corporation shall mail or
otherwise furnish to each shareholder its financial statement as of the end of
such fiscal year. Each such financial statement shall be prepared in
accordance with generally accepted accounting principles and shall (a) include,
at a minimum, a balance sheet as of the end of such fiscal year and a statement
of income and expenses for such fiscal year and (b) be accompanied by the
report of the accountant who audited or reviewed the same or, if such financial
statement was not audited or reviewed by an accountant, by a statement of the
Treasurer or other person in charge of the financial records of the Corporation
(i) stating that he reasonably believes that such financial statement was
prepared in accordance with generally accepted accounting principles and (ii)
describing any material respects in which such financial statement was not
prepared on a basis consistent with the financial statement for the previous
year.
7.02. AMENDMENT OF BY-LAWS. These By-Laws may be amended or
repealed, and additional provisions may be adopted, by the Board (except as
otherwise provided in BCL Section 1504(b)) or the shareholders at any regular
or special meeting thereof. If such change is to be effected at a meeting of
the shareholders, the notice of such meeting shall state that a purpose of such
meeting is to consider such change, and a copy of the proposed change or a
summary thereof shall be included with such notice.
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ARTS.DOC
Exhibit 3.3
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SEEC, INC.
1. CORPORATE NAME. The name of the Corporation is SEEC, Inc.
2. REGISTERED OFFICE. The address of the
Corporation's registered office in this Commonwealth (which is located in
Allegheny County) is 5001 Baum Boulevard, Pittsburgh, Pennsylvania 15213.
3. ORIGINAL INCORPORATION. The Corporation was
domesticated in Pennsylvania under the Pennsylvania Business Corporation
Law of 1988, Act of December 21, 1988 (P.L. 1444 No. 177), as amended, on April
23, 1992.
4. AUTHORIZED CAPITAL STOCK.
(a) The Corporation shall have the authority to issue a total
of thirty million (30,000,000) shares of capital stock which shall be divided
into twenty million (20,000,000) shares of common stock, par value $.01 per
share, and ten million (10,000,000) shares of preferred stock, without par
value.
(b) The holders of common stock shall have one vote per share.
The common stock shall be subject to the prior rights of holders of any one or
more series of preferred stock outstanding, according to the rights and
preferences, if any, of such series.
(c) The preferred stock shall be divided into one or more
series as the Board of Directors may determine as hereinafter provided. Each
series of preferred stock may have full, limited, multiple, fractional or no
voting rights, and such designations, preferences, qualifications, privileges,
limitations, restrictions, options, conversion rights and other special or
relative rights as determined by the Board of Directors. The division of the
preferred stock into series, the determination of the designation and the
number of shares of each such series and the determination of the voting
rights, preferences, qualifications, privileges, limitations, restrictions,
options, conversion rights and other special or relative rights of the shares
of each such series may be accomplished by an amendment to this Article 4
solely by action of the Board of Directors which shall have the full authority
permitted by law to make such divisions and determinations.
(d) Unless otherwise required by law or in a resolution or
resolutions establishing any particular series of preferred stock, the
aggregate number of authorized shares of preferred stock may be increased by an
amendment to the Articles of Incorporation approved solely by the holders of
common stock and
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ARTS.DOC
any preferred stock entitled pursuant to its voting rights designated by the
Board to vote thereon, voting together as a class.
5. TERM. The term of the existence of the Corporation shall be
perpetual.
6. POWER. The Corporation shall have unlimited
power to engage in and do any lawful business for which corporations may be
incorporated under the Business Corporation Law of 1933 and the Business
Corporation Law of 1988, each as amended.
7. PERSONAL LIABILITY OF DIRECTORS. To the fullest extent
permitted by law, a director of the Corporation shall not be personally liable,
as such, for monetary damages (including, without limitation, any judgment,
amount paid in settlement, penalty, punitive damages or expense of any nature
(including, without limitation, attorneys' fees and disbursements)) for any
action taken, or any failure to take any action, unless (a) the director has
breached or failed to perform the duties of his or her office under these
Articles of Incorporation, the bylaws of the Corporation or applicable
provisions of law and (b) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.
8. Subchapters G, H, I and J of Chapter 25 of the
Business Corporation Law of 1988, as amended, 15 Pa. C.S.A. Sections 2561-2567,
2571-2575, 2581-2583 and 2585-2588 shall not be applicable to the Corporation
or its shareholders.
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<PAGE> 1
Exhibit 3.4
SEEC, INC.
BY-LAWS
ARTICLE I
OFFICES AND FISCAL YEAR
Section 1.01. REGISTERED OFFICE. The registered office of the corporation
in Pennsylvania shall be at 5001 Baum Boulevard, Pittsburgh, Pennsylvania,
until otherwise established by an amendment of the articles or by the board of
directors and a record of such change is filed with the Department of State in
the manner provided by law.
Section 1.02. OTHER OFFICES. The corporation may also have offices at such
other places within or without Pennsylvania as the board of directors may from
time to time appoint or the business of the corporation may require.
Section 1.03. FISCAL YEAR. The fiscal year of the corporation shall begin
on the 1st day of April in each year.
ARTICLE II
Notice - Waivers - Meetings Generally
Section 2.01. MANNER OF GIVING NOTICE.
(a) GENERAL RULE. Whenever written notice is required to be given to any
person under the provisions of the Business Corporation Law or by the articles
or these bylaws, it may be given to the person either personally or by sending
a copy thereof by first class or express mail, postage prepaid, or by telegram
(with messenger service specified), telex or TWX (with answerback received) or
courier service, charges prepaid, or by telecopier, to the address (or to the
telex, TWX, telecopier or telephone number) of the person appearing on the
books of the corporation or, in the case of directors, supplied by the director
to the corporation for the purpose of notice. If the notice is sent by mail,
telegraph or courier service, it shall be deemed to have been given to the
person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person or, in the case
of telex or TWX, when dispatched or, in the case of telecopier, when received.
A notice of meeting shall specify the place, day and hour of the meeting and
any other information required by any other provision of the Business
Corporation Law, the articles or these bylaws.
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(b) ADJOURNED SHAREHOLDER MEETINGS. When a meeting of shareholders is
adjourned, it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other than
by announcement at the meeting at which the adjournment is taken, unless the
board fixes a new record date for the adjourned meeting.
Section 2.02. NOTICE OF MEETINGS OF BOARD OF DIRECTORS. Notice of a
regular meeting of the board of directors need not be given. Notice of every
special meeting of the board of directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
telex, TWX or telecopier) or 48 hours (in the case of notice by telegraph,
courier service or express mail) or five days (in the case of notice by first
class mail) before the time at which the meeting is to be held. Every such
notice shall state the time and place of the meeting. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
board need be specified in a notice of the meeting.
Section 2.03. NOTICE OF MEETINGS OF SHAREHOLDERS.
(a) GENERAL RULE. Written notice of every meeting of the shareholders
shall be given by, or at the direction of, the secretary to each shareholder of
record entitled to vote at the meeting at least 20 days prior to the day named
for the meeting. If the secretary neglects or refuses to give notice of a
meeting, the person or persons calling the meeting may do so. In the case of a
special meeting of shareholders, the notice shall specify the general nature of
the business to be transacted.
(b) NOTICE OF ACTION BY SHAREHOLDERS ON BYLAWS. In the case of a meeting
of shareholders that has as one of its purposes action on the bylaws, written
notice shall be given to each shareholder that the purpose, or one of the
purposes, of the meeting is to consider the adoption, amendment or repeal of
the bylaws. There shall be included in, or enclosed with, the notice a copy of
the proposed amendment or a summary of the changes to be effected thereby.
Section 2.04. WAIVER OF NOTICE.
(a) WRITTEN WAIVER. Whenever any written notice is required to be given
under the provisions of the Business Corporation Law, the articles or these
bylaws, a waiver thereof in writing, signed by the person or persons entitled
to the notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of the notice. Except as otherwise required by this
subsection, neither the business to be transacted at, nor the purpose of, a
meeting need be specified in the waiver of notice of the meeting. In the case
of a special meeting of shareholders, the waiver of notice shall specify the
general nature of the business to be transacted.
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(b) WAIVER BY ATTENDANCE. Attendance of a person at any meeting shall
constitute a waiver of notice of the meeting except where a person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or convened.
Section 2.05. MODIFICATION OF PROPOSAL CONTAINED IN NOTICE. Whenever the
language of a proposed resolution is included in a written notice of a meeting
required to be given under the provisions of the Business Corporation Law or
the articles or these bylaws, the meeting considering the resolution may
without further notice adopt it with such clarifying or other amendments as do
not enlarge its original purpose.
Section 2.06. EXCEPTION TO REQUIREMENT OF NOTICE.
(a) GENERAL RULE. Whenever any notice or communication is required to be
given to any person under the provisions of the Business Corporation Law or by
the articles or these bylaws or by the terms of any agreement or other
instrument or as a condition precedent to taking any corporate action and
communication with that person is then unlawful, the giving of the notice or
communication to that person shall not be required.
(b) SHAREHOLDERS WITHOUT FORWARDING ADDRESSES. Notice or other
communications shall not be sent to any shareholder with whom the corporation
has been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder has
otherwise failed to provide the corporation with a current address. Whenever
the shareholder provides the corporation with a current address, the
corporation shall commence sending notices and other communications to the
shareholder in the same manner as to other shareholders.
Section 2.07. USE OF CONFERENCE TELEPHONE AND SIMILAR EQUIPMENT. One or
more persons may participate in a meeting of the board of directors or the
shareholders of the corporation by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at the meeting.
ARTICLE III
Shareholders
Section 3.01. PLACE OF MEETING. All meetings of the shareholders of the
corporation shall be held at the registered office of the corporation unless
another place is designated by the board of directors in the notice of a
meeting.
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Section 3.02. ANNUAL MEETING. The board of directors shall fix the date
and time of the annual meeting of the shareholders, and at said meeting the
shareholders then entitled to vote shall elect directors and shall transact
such other business as may properly be brought before the meeting. If the
annual meeting shall not have been called and held within six months after the
designated time, any shareholder may call the meeting at any time thereafter.
Section 3.03. SPECIAL MEETINGS. Special meetings of the shareholders may
be called at any time by resolution of the board of directors, which may fix
the date, time and place of the meeting. If the board does not fix the date,
time or place of the meeting, it shall be the duty of the secretary to do so. A
date fixed by the secretary shall not be more than 60 days after the date of
the adoption of the resolution of the board calling the special meeting.
Section 3.04. QUORUM AND ADJOURNMENT.
(a) GENERAL RULE. A meeting of shareholders of the corporation duly called
shall not be organized for the transaction of business unless a quorum is
present. The presence of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast on a particular matter to
be acted upon at the meeting shall constitute a quorum for the purposes of
consideration and action on the matter. Shares of the corporation owned,
directly or indirectly, by it and controlled, directly or indirectly, by the
board of directors of this corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes at any
given time.
(b) WITHDRAWAL OF A QUORUM. The shareholders present at a duly organized
meeting can continue to do business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
(c) ADJOURNMENTS GENERALLY. Any regular or special meeting of the
shareholders, including one at which directors are to be elected and one which
cannot be organized because a quorum has not attended, may be adjourned for
such period and to such place as the shareholders present and entitled to vote
shall direct.
(d) ELECTING DIRECTORS AT ADJOURNED MEETING. Those shareholders entitled
to vote who attend a meeting called for the election of directors that has been
previously adjourned for lack of a quorum, although less than a quorum as fixed
in this section, shall nevertheless constitute a quorum for the purpose of
electing directors.
(e) OTHER ACTION IN ABSENCE OF QUORUM. Those shareholders entitled to vote
who attend a meeting of shareholders that has been previously adjourned for one
or more periods aggregating at least 15 days because of an absence of a quorum,
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although less than a quorum as fixed in this section, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set forth in the
notice of the meeting if the notice states that those shareholders who attend
the adjourned meeting shall nevertheless constitute a quorum for the purpose of
acting upon the matter.
Section 3.05. ACTION BY SHAREHOLDERS.
(a) GENERAL RULE. Except as otherwise provided in the Business Corporation
Law or the articles or these bylaws, whenever any corporate action is to be
taken by vote of the shareholders of the corporation, it shall be authorized by
a majority of the votes cast at a duly organized meeting of shareholders by the
holders of shares entitled to vote thereon.
(b) INTERESTED SHAREHOLDERS. Any merger or other transaction authorized
under 15 Pa.C.S. Subchapter 19C between the corporation or subsidiary thereof
and a shareholder of this corporation, or any voluntary liquidation authorized
under 15 Pa.C.S. Subchapter 19F in which a shareholder is treated differently
from other shareholders of the same class (other than any dissenting
shareholders), shall require the affirmative vote of the shareholders entitled
to cast at least a majority of the votes that all shareholders other than the
interested shareholder are entitled to cast with respect to the transaction,
without counting the vote of the interested shareholder. For the purposes of
the preceding sentence, interested shareholder shall include the shareholder
who is a party to the transaction or who is treated differently from other
shareholders and any person, or group of persons, that is acting jointly or in
concert with the interested shareholder and any person who, directly or
indirectly, controls, is controlled by or is under common control with the
interested shareholder. An interested shareholder shall not include any person
who, in good faith and not for the purpose of circumventing this subsection, is
an agent, bank, broker, nominee or trustee for one or more other persons, to
the extent that the other person or persons are not interested shareholders.
(c) EXCEPTIONS. Subsection (b) shall not apply to a transaction:
(1) that has been approved by a majority vote of the board of
directors without counting the vote of directors who:
(i) are directors or officers of, or have a material equity
interest in, the interested shareholder; or
(ii) were nominated for election as a director by the interested
shareholder, and first elected as a director, within 24 months of the
date of the vote on the proposed transaction; or
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(2) in which the consideration to be received by the shareholders for
shares of any class of which shares are owned by the interested shareholder
is not less than the highest amount paid by the interested shareholder in
acquiring shares of the same class.
(d) ADDITIONAL APPROVALS. The approvals required by subsection (b) shall
be in addition to, and not in lieu of, any other approval required by the
Business Corporation Law, the articles or these bylaws, or otherwise.
Section 3.06. ORGANIZATION. At every meeting of the shareholders, the
chairman of the board, if there be one, or, in the case of vacancy in office or
absence of the chairman of the board, one of the following officers present in
the order stated: the vice chairman of the board, if there be one, the
president, the vice presidents in their order of rank and seniority, or a
person chosen by vote of the shareholders present, shall act as chairman of the
meeting. The secretary or, in the absence of the secretary, an assistant
secretary, or, in the absence of both the secretary and assistant secretaries,
a person appointed by the chairman of the meeting, shall act as secretary.
Section 3.07. VOTING RIGHTS OF SHAREHOLDERS. Unless otherwise provided in
the articles, every shareholder of the corporation shall be entitled to one
vote for every share standing in the name of the shareholder on the books of
the corporation.
Section 3.08. VOTING AND OTHER ACTION BY PROXY.
(a) GENERAL RULE.
(1) Every shareholder entitled to vote at a meeting of shareholders
may authorize another person to act for the shareholder by proxy.
(2) The presence of, or vote or other action at a meeting of
shareholders by a proxy of a shareholder shall constitute the presence
of, or vote or action by the shareholder.
(3) Where two or more proxies of a shareholder are present, the
corporation shall, unless otherwise expressly provided in the
proxy, accept as the vote of all shares represented thereby the vote
cast by a majority of them and, if a majority of the proxies cannot
agree whether the shares represented shall be voted or upon the manner
of voting the shares, the voting of the shares shall be divided equally
among those persons.
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(b) MINIMUM REQUIREMENTS. Every proxy shall be executed in writing by the
shareholder or by the duly authorized attorney-in-fact of the shareholder and
filed with the secretary of the corporation. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other agreement or
any provision in the proxy to the contrary, but the revocation of a proxy shall
not be effective until written notice thereof has been given to the secretary
of the corporation. An unrevoked proxy shall not be valid after three years
from the date of its execution unless a longer time is expressly provided
therein. A proxy shall not be revoked by the death or incapacity of the maker
unless, before the vote is counted or the authority is exercised, written
notice of the death or incapacity is given to the secretary of the corporation.
(c) EXPENSES. The corporation shall pay the reasonable expenses of
solicitation of votes, proxies or consents of shareholders by or on behalf of
the board of directors or its nominees for election to the board, including
solicitation by professional proxy solicitors and otherwise.
Section 3.09. VOTING BY FIDUCIARIES AND PLEDGEES. Shares of the
corporation standing in the name of a trustee or other fiduciary and shares
held by an assignee for the benefit of creditors or by a receiver may be voted
by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are
pledged shall be entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the pledgee, but
nothing in this section shall affect the validity of a proxy given to a pledgee
or nominee.
Section 3.10. VOTING BY JOINT HOLDERS OF SHARES.
(a) GENERAL RULE. Where shares of the corporation are held jointly or as
tenants in common by two or more persons, as fiduciaries or otherwise:
(1) if only one or more of such persons is present in person or by
proxy, all of the shares standing in the names of such persons
shall be deemed to be represented for the purpose of determining a
quorum and the corporation shall accept as the vote of all the shares
the vote cast by a joint owner or a majority of them; and
(2) if the persons are equally divided upon whether the shares held by
them shall be voted or upon the manner of voting the shares, the
voting of the shares shall be divided equally among the persons
without prejudice to the rights of the joint owners or the beneficial
owners thereof among themselves.
(b) EXCEPTION. If there has been filed with the secretary of the
corporation a copy, certified by an attorney at law to be correct, of the
relevant portions of the agreement under which the shares are held or the
instrument by which the trust or estate was created or the order of court
appointing them or of an order of court directing the voting of the shares, the
persons specified as having such voting power in the document latest in date of
operative effect so filed, and only those persons, shall be entitled to vote
the shares but only in accordance therewith.
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Section 3.11. VOTING BY CORPORATIONS.
(a) VOTING BY CORPORATE SHAREHOLDERS. Any corporation that is a
shareholder of this corporation may vote by any of its officers or agents, or
by proxy appointed by any officer or agent, unless some other person, by
resolution of the board of directors of the other corporation or a provision of
its articles or bylaws, a copy of which resolution or provision certified to be
correct by one of its officers has been filed with the secretary of this
corporation, is appointed its general or special proxy in which case that
person shall be entitled to vote the share.
(b) CONTROLLED SHARES. Shares of this corporation owned, directly or
indirectly, by this corporation and controlled, directly or indirectly, by the
board of directors of this corporation, as such ("treasury shares"), shall not
be voted at any meeting and shall not be counted in determining the total
number of outstanding shares for voting purposes at any given time.
Section 3.12. DETERMINATION OF SHAREHOLDERS OF RECORD.
(a) FIXING RECORD DATE. The board of directors may fix a time prior to the
date of any meeting of shareholders as a record date for the determination of
the shareholders entitled to notice of, or to vote at, the meeting, which time,
except in the case of an adjourned meeting, shall be not more than 90 days
prior to the date of the meeting of shareholders. Only shareholders of record
on the date fixed shall be so entitled notwithstanding any transfer of shares
on the books of the corporation after any record date fixed as provided in this
subsection. The board of directors may similarly fix a record date for the
determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the board fixes a new record date for the adjourned
meeting.
(b) DETERMINATION WHEN A RECORD DATE IS NOT FIXED. If a record date is not
fixed:
(1) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of
business on the day next preceding the day on which notice is given.
(2) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
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(c) CERTIFICATION BY NOMINEE. The board of directors may adopt a procedure
whereby a shareholder of the corporation may certify in writing to the
corporation that all or a portion of the shares registered in the name of the
shareholder are held for the account of a specified person or persons. Upon
receipt by the corporation of a certification complying with the procedure, the
persons specified in the certification shall be deemed, for the purposes set
forth in the certification, to be the holders of record of the number of shares
specified in place of the shareholder making the certification.
Section 3.13. VOTING LISTS.
(a) GENERAL RULE. The officer or agent having charge of the transfer books
for shares of the corporation shall make a complete list of the shareholders
entitled to vote at any meeting of shareholders, arranged in alphabetical
order, with the address of and the number of shares held by each. The list
shall be produced and kept open at the time and place of the meeting and shall
be subject to the inspection of any shareholder during the whole time of the
meeting for the purposes thereof except that, if the corporation has 5,000 or
more shareholders, in lieu of the making of the list the corporation may make
the information therein available at the meeting by any other means.
(b) EFFECT OF LIST. Failure to comply with the requirements of this
section shall not affect the validity of any action taken at a meeting prior to
a demand at the meeting by any shareholder entitled to vote thereat to examine
the list. The original share register or transfer book, or a duplicate thereof
kept in this Commonwealth, shall be prima facie evidence as to who are the
shareholders entitled to examine the list or share register or transfer book or
to vote at any meeting of shareholders.
Section 3.14. JUDGES OF ELECTION.
(a) APPOINTMENT. In advance of any meeting of shareholders of the
corporation, the board of directors may appoint judges of election, who need
not be shareholders, to act at the meeting or any adjournment thereof. If
judges of election are not so appointed, the presiding officer of the meeting
may, and on the request of any shareholder shall, appoint judges of election at
the meeting. The number of judges shall be one or three. A person who is a
candidate for office to be filled at the meeting shall not act as a judge.
(b) VACANCIES. In case any person appointed as a judge fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
board of directors in advance of the convening of the meeting or at the meeting
by the presiding officer thereof.
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(c) DUTIES. The judges of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes, determine the result and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. The judges of
election shall perform their duties impartially, in good faith, to the best of
their ability and as expeditiously as is practical. If there are three judges
of election, the decision, act or certificate of a majority shall be effective
in all respects as the decision, act or certificate of all.
(d) REPORT. On request of the presiding officer of the meeting, or of any
shareholder, the judges shall made a report in writing of any challenge or
question or matter determined by them, and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated therein.
Section 3.15. CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. Any action
required or permitted to be taken at a meeting of the shareholders or of a
class of all shareholders may be taken without a meeting only upon the
unanimous written consent of all shareholders who would have been entitled to
vote thereon at a meeting of the shareholders called to consider the matter.
Section 3.16. MINORS AS SECURITY HOLDERS. The corporation may treat a
minor who holds shares or obligations of the corporation as having capacity to
receive and to empower others to receive dividends, interest, principal and
other payments or distributions, to vote or express consent or dissent and to
make elections and exercise rights relating to such shares or obligations
unless, in the case of payments or distributions on shares, the corporate
officer responsible for maintaining the list of shareholders or the transfer
agent of the corporation or, in the case of payments or distributions on
obligations, the treasurer or paying officer or agent has received written
notice that the holder is a minor.
ARTICLE IV
Board of Directors
Section 4.01. POWERS; PERSONAL LIABILITY.
(a) GENERAL RULE. Unless otherwise provided by statute, all powers vested
by law in the corporation shall be exercised by or under the authority of, and
the business and affairs of the corporation shall be managed under the
direction of, the board of directors.
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(b) STANDARD OF CARE; JUSTIFIABLE RELIANCE. A director shall stand in a
fiduciary relation to the corporation and shall perform his or her duties as a
director, including duties as a member of any committee of the board upon which
the director may serve, in good faith, in a manner the director reasonably
believes to be in the best interests of the corporation and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances. In performing his or her
duties, a director shall be entitled to rely in good faith on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by any of the following:
(1) One or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented.
(2) Counsel, public accountants or other persons as to matters which
the director reasonably believes to be within the professional or expert
competence of such person.
(3) A committee of the board upon which the director does not serve,
duly designated in accordance with law, as to matters within its designated
authority, which committee the director reasonably believes to merit
confidence.
A director shall not be considered to be acting in good faith if the director
has knowledge concerning the matter in question that would cause his or her
reliance to be unwarranted.
(c) CONSIDERATION OF FACTORS. In discharging the duties of their
respective positions, the board of directors, committees of the board and
individual directors may, in considering the best interests of the corporation,
consider the effects of any action upon employees, upon suppliers and customers
of the corporation and upon communities in which offices or other
establishments of the corporation are located, and all other pertinent factors.
The consideration of those factors shall not constitute a violation of
subsection (b).
(d) PRESUMPTION. Absent breach of fiduciary duty, lack of good faith or
self-dealing, actions taken as a director or any failure to take any action
shall be presumed to be in the best interests of the corporation.
(e) PERSONAL LIABILITY OF DIRECTORS. To the fullest extent permitted by
law, a director shall not be personally liable, as such, for monetary damages
(including, without limitation, any judgment, amount paid in settlement,
penalty, punitive damages
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or expense of any nature (including, without limitation, attorneys' fees
and disbursements)) for any action taken, or any failure to take any
action, unless:
(i) the director has breached or failed to perform the duties of
his or her office under these By-laws, the Articles of Incorporation
or applicable provisions of law; and
(ii) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.
(f) NOTATION OF DISSENT. A director who is present at a meeting of the
board of directors, or of a committee of the board, at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his or her dissent is entered in the minutes of the meeting or
unless the director files a written dissent to the action with the secretary of
the meeting before the adjournment thereof or transmits the dissent in writing
to the secretary of the corporation immediately after the adjournment of the
meeting. The right to dissent shall not apply to a director who voted in favor
of the action. Nothing in this section shall bar a director from asserting that
minutes of the meeting incorrectly omitted his or her dissent if, promptly upon
receipt of a copy of such minutes, the director notifies the secretary, in
writing, of the asserted omission or inaccuracy.
Section 4.02. QUALIFICATIONS AND SELECTION OF DIRECTORS.
(a) QUALIFICATIONS. Each director of the corporation shall be a natural
person of full age who need not be a resident of Pennsylvania or a shareholder
of the corporation.
(b) ELECTION OF DIRECTORS. Except as otherwise provided in these bylaws,
directors of the corporation shall be elected by the shareholders. In elections
for directors, voting need not be by ballot, except upon demand made by a
shareholder entitled to vote at the election and before the voting begins. The
candidates receiving the highest number of votes from each class or group of
classes, if any, entitled to elect directors separately up to the number of
directors to be elected by the class or group of classes shall be elected. If
at any meeting of shareholders, directors of more than one class are to be
elected, each class of directors shall be elected in a separate election.
Section 4.03. NUMBER AND TERM OF OFFICE.
(a) NUMBER. The board of directors shall consist of such number of
directors, not fewer than 3 nor more than 15, as may be determined from time to
time by resolution of the board of directors.
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(b) TERM OF OFFICE. Each director shall hold office until the expiration
of the term for which he or she was selected and until a successor has been
selected and qualified or until his or her earlier death, resignation or
removal. A decrease in the number of directors shall not have the effect of
shortening the term of any incumbent director.
(c) RESIGNATION. Any director may resign at any time upon written notice
to the corporation. The resignation shall be effective upon receipt thereof by
the corporation or at such subsequent time as shall be specified in the notice
of resignation.
(d) CLASSIFIED BOARD OF DIRECTORS. The directors shall be classified in
respect of the time for which they shall severally hold office as follows:
(1) Each class shall be as nearly equal in number as possible.
(2) The term of office of at least one class shall expire in each year.
(3) Except as provided in paragraph (4), the members of each
class shall be elected for a period of three years.
(4) At the 1997 Annual Meeting of Shareholders, two directors
of the first class will be elected to serve a one-year term, two
directors of the second class will be elected to serve a two-year term
and the directors of the third class will be elected to serve a three-year
term.
Section 4.04. VACANCIES.
(a) GENERAL RULE. Vacancies in the board of directors, including vacancies
resulting from an increase in the number of directors, may be filled by a
majority vote of the remaining members of the board though less than a quorum,
or by a sole remaining director, and each person so selected shall be a
director to serve until the next selection of the class for which such director
has been chosen, and until a successor has been selected and qualified or until
his or her earlier death, resignation or removal.
(b) ACTION BY RESIGNED DIRECTORS. When one or more directors resign from
the board effective at a future date, the directors then in office, including
those who have so resigned, shall have power by the applicable vote to fill the
vacancies, the vote thereon to take effect when the resignations become
effective.
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Section 4.05. REMOVAL OF DIRECTORS.
(a) REMOVAL BY THE SHAREHOLDERS. The entire board of directors, or any
class of the board, or any individual director may be removed from office by
vote of the shareholders entitled to vote thereon only for cause. In case the
board or a class of the board of any one or more directors are so removed, new
directors may be elected at the same meeting. The repeal of a provision of the
articles or these bylaws prohibiting, or the addition of a provision to the
articles or bylaws permitting, the removal by the shareholders of the board, a
class of the board or a director without assigning any cause shall not apply to
any incumbent director during the balance of the term for which the director
was selected.
(b) REMOVAL BY THE BOARD. The board of directors may declare vacant the
office of a director who has been judicially declared of unsound mind or who
has been convicted of an offense punishable by imprisonment for a term of more
than one year or if, within 60 days after notice of his or her selection, the
director does not accept the office either in writing or by attending a meeting
of the board of directors.
Section 4.06. PLACE OF MEETINGS. Meetings of the board of directors may be
held at such place within or without Pennsylvania as the board of directors may
from time to time appoint or as may be designated in the notice of the meeting.
Section 4.07. ORGANIZATION OF MEETINGS. At every meeting of the board of
directors, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the vice chairman of the board,
if there be one, the president, the vice presidents in their order of rank and
seniority, or a person chosen by a majority of the directors present, shall act
as chairman of the meeting. The secretary or, in the absence of the secretary,
an assistant secretary, or, in the absence of the secretary and the assistant
secretaries, any person appointed by the chairman of the meeting, shall act as
secretary.
Section 4.08. REGULAR MEETINGS. Regular meetings of the board of directors
shall be held at such time and place as shall be designated from time to time
by resolution of the board of directors.
Section 4.09. SPECIAL MEETINGS. Special meetings of the board of directors
shall be held whenever called by the chairman or by two or more of the
directors.
Section 4.10. QUORUM OF AND ACTION BY DIRECTORS.
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(a) GENERAL RULE. A majority of the directors in office of the corporation
shall be necessary to constitute a quorum for the transaction of business and
the acts of a majority of the directors present and voting at a meeting at
which a quorum is present shall be the acts of the board of directors.
(b) ACTION BY WRITTEN CONSENT. Any action required or permitted to be
taken at a meeting of the directors may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto by all of the directors
in office is filed with the secretary of the corporation.
Section 4.11. EXECUTIVE AND OTHER COMMITTEES.
(a) ESTABLISHMENT AND POWERS. The board of directors may, by resolution
adopted by a majority of the directors in office, establish one or more
committees to consist of one or more directors of the corporation. Any
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all of the powers and authority of the board of
directors except that a committee shall not have any power or authority as to
the following:
(1) The submission to shareholders of any action requiring approval of
shareholders under the Business Corporation law.
(2) The creation or filling of vacancies in the board of directors.
(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the board that by its
terms is amendable or repealable only by the board.
(5) Action on matters committed by a resolution of the board of
directors to another committee of the board.
(b) ALTERNATE COMMITTEE MEMBERS. The board 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 or for the purposes of any
written action by the committee. In the absence or disqualification of a member
and alternate member or members of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another director to act at the
meeting in the place of the absent or disqualified member.
(c) TERM. Each committee of the board shall serve at the pleasure of the
board.
(d) COMMITTEE PROCEDURES. the term "board of directors" or "board", when
used in any provision of these bylaws relating to the organization or
procedures of or
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the manner of taking action by the board of directors, shall be construed to
include and refer to any executive or other committee of the board.
Section 4.12. COMPENSATION. The board of directors shall have the
authority to fix the compensation of directors for their services as directors
and a director may be a salaried officer of the corporation.
ARTICLE V
Officers
Section 5.01. OFFICERS GENERALLY.
(a) NUMBER, QUALIFICATIONS AND DESIGNATION. The officers of the
corporation shall be a president, a secretary, a treasurer, and such other
officers as may be elected in accordance with the provisions of Section 5.03.
Officers may but need not be directors or shareholders of the corporation. The
president and secretary shall be natural persons of full age. The treasurer may
be a corporation, but if a natural person shall be of full age. The board of
directors may elect from among the members of the board a chairman of the board
and a vice chairman of the board who shall be officers of the corporation. Any
number of offices may be held by the same person.
(b) RESIGNATIONS. Any officer may resign at any time upon written notice
to the corporation. The resignation shall be effective upon receipt thereof by
the corporation or at such subsequent time as may be specified in the notice of
resignation.
(c) BONDING. The corporation may secure the fidelity of any or all of its
officers by bond or otherwise.
(d) STANDARD OF CARE. Except as otherwise provided in the articles, an
officer shall perform his or her duties as an officer in good faith, in a
manner he or she reasonably believes to be in the best interests of the
corporation and with such care, including reasonable inquiry, skill and
diligence, as a person of ordinary prudence would use under similar
circumstances. A person who so performs his or her duties shall not be liable
by reason of having been an officer of the corporation.
Section 5.02. ELECTION AND TERM OF OFFICE. The officers of the
corporation, except those elected by delegated authority pursuant to Section
5.03, shall be elected annually by the board of directors, and each such
officer shall hold office for a term of one year and until a successor has been
selected and qualified or until his or her earlier death, resignation or
removal.
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Section 5.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS. The board of
directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the corporation may
require, including one or more assistant secretaries, and one or more assistant
treasurers, each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine. The board of directors may
delegate to any officer or committee the power to elect subordinate officers
and to retain or appoint employees or other agents, or committees thereof and
to prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
Section 5.04. REMOVAL OF OFFICERS AND AGENTS. Any officer or agent of the
corporation may be removed by the board of directors with or without cause. The
removal shall be without prejudice to the contract rights, if any, of any
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section 5.05. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, shall be filled by
the board of directors or by the officer or committee to which the power to
fill such office has been delegated pursuant to Section 5.03, as the case may
be, and if the office is one for which these bylaws prescribe a term, shall be
filled for the unexpired portion of the term.
Section 5.06. AUTHORITY. All officers of the corporation, as between
themselves and the corporation, shall have such authority and perform such
duties in the management of the corporation as may be provided by or pursuant
to resolutions or orders of the board of directors or in the absence of
controlling provisions in the resolutions or orders of the board of directors,
as may be determined by or pursuant to these bylaws.
Section 5.07. THE CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The chairman of
the board or in the absence of the chairman, the vice chairman of the board,
shall preside at all meetings of the shareholders and of the board of directors
and shall perform such other duties as may from time to time be requested by
the board of directors.
Section 5.08. THE PRESIDENT. The president shall be the chief executive
officer of the corporation and shall have general supervision over the business
and operations of the corporation, subject however, to the control of the board
of directors. The president shall sign, execute, and acknowledge, in the name
of the corporation, deeds, mortgages, bonds, contracts or other instruments
authorized by the board of directors, except in cases where the signing and
execution thereof shall be expressly delegated by the board of directors, or by
these bylaws, to some other officer or agent of the corporation; and, in
general, shall perform all duties incident to the office of president and such
other duties as from time to time may be assigned by the board of directors.
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Section 5.09. THE VICE PRESIDENTS. The vice presidents shall perform the
duties of the president in the absence of the president and such other duties
as may from time to time be assigned to them by the board of directors or the
president.
Section 5.10. THE SECRETARY. The secretary or an assistant secretary shall
attend all meetings of the shareholders and of the board of directors and shall
record all the votes of the shareholders and of the directors and the minutes
of the meetings of the shareholders and of the board of directors and of
committees of the board in a book or books to be kept for that purpose; shall
see that notices are given and records and reports properly kept and filed by
the corporation as required by law; shall be the custodian of the seal of the
corporation and see that it is affixed to all documents to be executed on
behalf of the corporation under its seal; and, in general, shall perform all
duties incident to the office of secretary, and such other duties as may from
time to time be assigned by the board of directors or the president.
Section 5.11. THE TREASURER. The treasurer or an assistant treasurer shall
have or provide for the custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and
receipt of moneys earned by or in any manner due to or received by the
corporation; shall deposit all funds in his or her custody as treasurer in such
banks or other places of deposit as the board of directors may from time to
time designate; shall, whenever so required by the board of directors, render
an account showing all transactions as treasurer and the financial condition of
the corporation; and, in general, shall discharge such other duties as may from
time to time be assigned by the board of directors or the president.
Section 5.12. SALARIES. The salaries of the officers elected by the board
of directors shall be fixed from time to time by the board of directors or by
such officer as may be designated by resolution of the board. The salaries or
other compensation of any other officers, employees and other agents shall be
fixed from time to time by the officer or committee to which the power to elect
such officers or to retain or appoint such employees or other agents has been
delegated pursuant to Section 5.03. No officer shall be prevented from
receiving such salary or other compensation by reason of the fact that the
officer is also a director of the corporation.
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ARTICLE VI
Certificates of Stock, Transfer, Etc.
Section 6.01. SHARE CERTIFICATES. Certificates for shares of the
corporation shall be in such form as approved by the board of directors, and
shall state that the corporation is incorporated under the laws of
Pennsylvania, the name of the person to whom issued, and the number and class
of shares and the designation of the series (if any) that the certificate
represents. The share register or transfer books and blank share certificates
shall be kept by the secretary or by any transfer agent or registrar designated
by the board of directors for that purpose.
Section 6.02. ISSUANCE. The share certificates of the corporation shall be
numbered and registered in the share register or transfer books of the
corporation as they are issued. They shall be signed by the president or a vice
president and by the secretary or an assistant secretary or the treasurer or an
assistant treasurer, and shall bear the corporate seal, which may be a
facsimile, engraved or printed; but where such certificate is signed by a
transfer agent or a registrar the signature of any corporate officer upon such
certificate may be a facsimile, engraved or printed. In case any officer who
has signed, or whose facsimile signature has been placed upon, any share
certificate shall have ceased to be such officer because of death, resignation
or otherwise, before the certificate is issued, it may be issued with the same
effect as if the officer had not ceased to be such at the date of its issue.
The provisions of this Section 6.02 shall be subject to any inconsistent or
contrary agreement at the time between the corporation and any transfer agent
or registrar.
Section 6.03. TRANSFER. Transfers of shares shall be made on the share
register or transfer books of the corporation upon surrender of the certificate
therefor, endorsed by the person named in the certificate or by an attorney
lawfully constituted in writing. No transfer shall be made inconsistent with
the provisions of the Uniform Commercial Code, 13 Pa.C.S. Sections 8101 ET SEQ.,
and its amendments and supplements.
Section 6.04. RECORD HOLDER OF SHARES. The corporation shall be entitled
to treat the person in whose name any share or shares of the corporation stand
on the books of the corporation as the absolute owner thereof, and shall not be
bound to recognize any equitable or other claim to, or interest in, such share
or shares on the part of any other person.
Section 6.05. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of any
shares of the corporation shall immediately notify the corporation of any loss,
destruction or mutilation of the certificate therefor, and the board of
directors may, in its discretion, cause a new certificate or certificates to be
issued to such holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate or, in case of loss or destruction of
the certificate, upon satisfactory proof of such loss or destruction and, if
the board of directors shall so determine, the deposit of a bond in such form
and in such sum, and with such surety or sureties, as it may direct.
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ARTICLE VII
Indemnification of Directors, Officers and
Other Authorized Representatives
Section 7.01. SCOPE OF INDEMNIFICATION.
(a) GENERAL RULE. The corporation shall indemnify an indemnified
representative against any liability incurred in connection with any proceeding
in which the indemnified representative may be involved as a party or otherwise
by reason of the fact that such person is or was serving in an indemnified
capacity, including, without limitation, liabilities resulting from any actual
or alleged breach or neglect of duty, error, misstatement or misleading
statement, negligence, gross negligence or act giving rise to strict or
products liability, except:
(1) where such indemnification is expressly prohibited by applicable
law;
(2) where the conduct of the indemnified representative has been
finally determined pursuant to Section 7.06 or otherwise:
(i) to constitute willful misconduct or recklessness within the
meaning of 15 Pa.C.S. Sections 513(b) and 1746(b) and 42 Pa.C.S.
Sections 8365(b) or any superseding provision of law sufficient in the
circumstances to bar indemnification against liabilities arising from
the conduct; or
(ii) to be based upon or attributable to the receipt by the
indemnified representative from the corporation of a personal benefit
to which the indemnified representative is not legally entitled; or
(3) to the extent such indemnification has been finally determined in a
final adjudication pursuant to Section 7.06 to be otherwise unlawful.
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(b) PARTIAL PAYMENT. If an indemnification representative is entitled to
indemnification in respect of a portion, but not all, of any liabilities to
which such person may be subject, the corporation shall indemnify such
indemnified representative to the maximum extent for such portion of the
liabilities.
(c) PRESUMPTION. The termination of a proceeding by judgment, order,
settlement or conviction or upon a plea of NOLO CONTENDERE or its equivalent
shall not of itself create a presumption that the indemnified representative is
not entitled to indemnification.
(d) DEFINITIONS. For purposes of this Article:
(1) "indemnified capacity" means any and all past, present and future
service by an indemnified representative in one or more capacities as a
director, officer, employee or agent of the corporation, or, at the
request of the corporation, as a director, officer, employee, agent,
fiduciary or trustee or another corporation, partnership, joint venture,
trust, employee benefit plan or other entity or enterprise;
(2) "indemnified representative" means any and all directors and
officers of the corporation and any other person designated as an
indemnified representative by the board of directors of the corporation
(which may, but need not, include any person serving at the request of the
corporation, as a director, officer, employee, agent, fiduciary or trustee
of another corporation, partnership, joint venture, trust, employee
benefit plan or other entity or enterprise);
(3) "liability" means any damage, judgment, amount paid in settlement,
fine, penalty, punitive damages, excise tax assessed with respect to an
employee benefit plan, or cost or expense, of any nature (including,
without limitation, attorneys' fees and disbursements); and
(4) "proceeding" means any threatened, pending or completed action,
suit, appeal or other proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether
brought by or in the right of the corporation, a class of its security
holders or otherwise.
Section 7.02. PROCEEDINGS INITIATED BY INDEMNIFIED REPRESENTATIVES.
Notwithstanding any other provision of this Article, the corporation shall not
indemnify under this Article an indemnified representative for any liability
incurred in a proceeding initiated (which shall not be deemed to include
counter-claims or affirmative defenses) or participated in as an intervenor or
AMICUS CURIAE by the person seeking indemnification unless such initiation of
or participation in the proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors in office.
This section does not apply to reimbursement of expenses incurred in
successfully prosecuting or defending an arbitration under Section 7.06 or
otherwise successfully prosecuting or defending the rights of an indemnified
representative granted by or pursuant to this Article.
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Section 7.03. ADVANCING EXPENSES. The corporation shall pay the expenses
(including attorneys' fees and disbursements) incurred in good faith by an
indemnified representative in advance of the final disposition of a proceeding
described in Section 7.01 or the initiation of or participation in which is
authorized pursuant to Section 7.02 upon receipt of an undertaking by or on
behalf of the indemnified representative to repay the amount if it is
ultimately determined pursuant to Section 7.06 that such person is not entitled
to be indemnified by the corporation pursuant to this Article. The financial
ability of an indemnified representative to repay an advance shall not be a
prerequisite to the making of such advance.
Section 7.04. SECURING OF INDEMNIFICATION OBLIGATIONS. To further effect,
satisfy or secure the indemnification obligations provided herein or otherwise,
the corporation may maintain insurance, obtain a letter of credit, act as
selfinsurer, create a reserve, trust, escrow, cash collateral or other fund or
account, enter into indemnification agreements, pledge or grant a security
interest in any assets or properties of the corporation, or use any other
mechanism or arrangement whatsoever in such amounts, at such costs, and upon
such other terms and conditions as the board of directors shall deem
appropriate. Absent fraud, the determination of the board of directors with
respect to such amounts, costs, terms and conditions shall be conclusive
against all security holders, officers and directors and shall not be subject
to voidability.
Section 7.05. PAYMENT OF INDEMNIFICATION. An indemnified representative
shall be entitled to indemnification within 30 days after a written request for
indemnification has been delivered to the secretary of the corporation.
Section 7.06. ARBITRATION.
(a) GENERAL RULE. Any dispute related to the right to indemnification,
contribution or advancement of expenses as provided under this Article, except
with respect to indemnification for liabilities arising under the Securities
Act of 1933 that the corporation has undertaken to submit to a court for
adjudication, shall be decided only by arbitration in the metropolitan area in
which the principal executive offices of the corporation are located at the
time, in accordance with the commercial arbitration rules then in effect of the
American Arbitration Association, before a panel of three arbitrators, one of
whom shall be selected by the corporation, the second of whom shall be selected
by the indemnified representative and the third of whom shall be selected by
the other two arbitrators. In the absence of the American Arbitration
Association, or if for any reason arbitration under the arbitration rules of
the American Arbitration Association cannot be initiated, or if one of the
parties fails or refuses to select an arbitrator or if the arbitrators selected
by the corporation and the indemnified representative cannot agree on the
selection of the third arbitrator within 30 days after such time as the
corporation and the indemnified representative have each been notified of the
selection of the other's arbitrator, the necessary arbitrator or arbitrators
shall be selected by the presiding judge of the court of general jurisdiction
in such metropolitan area.
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<PAGE> 23
(b) QUALIFICATIONS OF ARBITRATORS. Each arbitrator selected as provided
herein is required to be or have been a director or executive officer of a
corporation whose shares of common stock were listed during at least one year
of such service on the New York Stock Exchange or the American Stock Exchange
or quoted on the National Association of Securities Dealers Automated
Quotations System.
(c) BURDEN OF PROOF. The party or parties challenging the right of an
indemnified representative to the benefits of this Article shall have the
burden of proof.
(d) EXPENSES. The corporation shall reimburse an indemnified
representative for the expenses (including attorneys' fees and disbursements)
incurred in successfully prosecuting or defending such arbitration.
(e) EFFECT. Any award entered by the arbitrators shall be final, binding
and nonappealable and judgment may be entered thereon by any party in
accordance with applicable law in any court of competent jurisdiction, except
that the corporation shall be entitled to interpose as a defense in any such
judicial enforcement proceeding any prior final judicial determination adverse
to the indemnified representative under Section 7.01(a)(2) in a proceeding not
directly involving indemnification under this Article. This arbitration
provision shall be specifically enforceable.
Section 7.07. CONTRIBUTION. If the indemnification provided for in this
Article or otherwise is unavailable for any reason in respect of any liability
or portion thereof, the corporation shall contribute to the liabilities to
which the indemnified representative may be subject in such proportion as is
appropriate to reflect the intent of this Article or otherwise.
Section 7.08. MANDATORY INDEMNIFICATION OF DIRECTORS, OFFICERS, ETC. To
the extent that an authorized representative of the corporation has been
successful on the merits or otherwise in defense of any action or proceeding
referred to in 15 Pa.C.S. ss.ss. 1741 or 1742 or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses (including
attorneys' fees and disbursements) actually and reasonably incurred by such
person in connection therewith.
Section 7.09. CONTRACT RIGHTS; AMENDMENT OR REPEAL. All rights under this
Article shall be deemed a contract between the corporation and the indemnified
representative pursuant to which the corporation and each indemnified
representative intend to be legally bound. Any repeal, amendment or
modification hereof shall be prospective only and shall not affect any rights
or obligations then existing.
-23-
<PAGE> 24
Section 7.10. SCOPE OF ARTICLE. The rights granted by this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of shareholders or disinterested directors or
otherwise both as to action in an indemnified capacity and as to action in any
other capacity. The indemnification, contribution and advancement of expenses
provided by or granted pursuant to this Article shall continue as to a person
who has ceased to be an indemnified representative in respect of matters
arising prior to such time, and shall inure to the benefit of the heirs,
executors, administrators and personal representatives of such a person.
Section 7.11. RELIANCE ON PROVISIONS. Each person who shall act as an
indemnified representative of the corporation shall be deemed to be doing so in
reliance upon the rights provided by this Article.
Section 7.12. INTERPRETATION. The provisions of this Article are intended
to constitute bylaws authorized by 15 Pa.C.S. Sections 513 and 1746 and 42
Pa.C.S. Sections 8365.
ARTICLE VIII
Miscellaneous
Section 8.01. CORPORATE SEAL. The corporation shall have a corporate seal
in the form of a circle containing the name of the corporation, the year of
incorporation and such other details as may be approved by the board of
directors.
Section 8.02. CHECKS. All checks, notes, bills of exchange or other orders
in writing shall be signed by such person or persons as the board of directors
or any person authorized by resolution of the board of directors may from time
to time designate.
Section 8.03. CONTRACTS. Except as otherwise provided in the Business
Corporation Law in the case of transactions that require action by the
shareholders, the board of directors may authorize any officer or agent to
enter into any contract or to execute or deliver any instrument on behalf of
the corporation, and such authority may be general or confined to specific
instances.
-24-
<PAGE> 25
Section 8.04. INTERESTED DIRECTORS OR OFFICERS; QUORUM.
(a) GENERAL RULE. A contract or transaction between the corporation and
one or more of its directors or officers or between the corporation and another
corporation, partnership, joint venture, trust or other enterprise in which one
or more of its directors or officers are directors or officers or have a
financial or other interest, shall not be void or voidable solely for that
reason, or solely because the director or officer is present at or participates
in the meeting of the board of directors that authorizes the contract or
transaction, or solely because his, her or their votes are counted for that
purpose, if:
(1) the material facts as to the relationship or interest and as to the
contract or transaction are disclosed or are known to the board of
directors and the board authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors even though
the disinterested directors are less than a quorum;
(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
shareholders entitled to vote thereon and the contract or transaction is
specifically approved in good faith by vote of those shareholders; 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 or
the shareholders.
(b) QUORUM. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the board which authorizes a contract
or transaction specified in subsection (a).
Section 8.05. DEPOSITS. All funds of the corporation shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the board of directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by
such one or more officers or employees as the board of directors shall from
time to time determine.
Section 8.06. CORPORATE RECORDS.
(a) REQUIRED RECORDS. The corporation shall keep complete and accurate
books and records of account, minutes of the proceedings of the incorporators,
shareholders and directors and a share register giving the names and addresses
of all shareholders and the number and class of shares held by each. The share
register shall be kept at either the registered office of the corporation in
Pennsylvania or at its principal place of business wherever situated or at the
office of its registrar or transfer
-25-
<PAGE> 26
agent. Any books, minutes or other records may be in written form or any
other form capable of being converted into written form within a
reasonable time.
(b) RIGHT OF INSPECTION. Every shareholder shall, upon written verified
demand stating the purpose thereof, have a right to examine, in person or by
agent or attorney, during the usual hours for business for any proper purpose,
the share register, books and records of account, and records of the
proceedings of the incorporators, shareholders and directors and to make copies
or extracts therefrom. A proper purpose shall mean a purpose reasonably related
to the interest of the person as a shareholder. In every instance where an
attorney or other agent is the person who seeks the right of inspection, the
demand shall be accompanied by a verified power of attorney or other writing
that authorizes the attorney or other agent to so act on behalf of the
shareholder. The demand shall be directed to the corporation at its registered
office in Pennsylvania or at its principal place of business wherever situated.
Section 8.07. AMENDMENT OF BYLAWS. These bylaws may be amended or
repealed, or new bylaws may be adopted, either (i) by vote of the shareholders
at any duly organized annual or special meeting of shareholders, or (ii) with
respect to those matters that are not by statute committed expressly to the
shareholders and regardless of whether the shareholders have previously adopted
or approved the bylaw being amended or repealed, by vote of 80% of the board of
directors of the corporation in office at any regular or special meeting of
directors. Any change in these bylaws shall take effect when adopted unless
otherwise provided in the resolution effecting the change.
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<PAGE> 27
<TABLE>
<CAPTION>
INDEX TO BY-LAWS
SECTION PAGE
- ------- ----
<S> <C>
ARTICLE I Offices and Fiscal Year .................................................. 1
Section 1.01. Registered office ................................................. 1
Section 1.02. Other offices ..................................................... 1
Section 1.03. Fiscal year ....................................................... 1
ARTICLE II Notice - Waivers - Meetings Generally ................................... 1
Section 2.01. Manner of giving notice ........................................... 1
Section 2.02. Notice of meetings of board of directors........................... 2
Section 2.03. Notice of meetings of shareholders ................................ 2
Section 2.04. Waiver of notice .................................................. 2
Section 2.05. Modification of proposal contained in notice ...................... 3
Section 2.06. Exception to requirement of notice ................................ 3
Section 2.07. Use of conference telephone and similar equipment ................. 3
ARTICLE III Shareholders ............................................................ 3
Section 3.01. Place of meeting .................................................. 3
Section 3.02. Annual meeting .................................................... 4
Section 3.03. Special meetings .................................................. 4
Section 3.04. Quorum and adjournment ............................................ 4
Section 3.05. Action by shareholders ............................................ 5
Section 3.06. Organization....................................................... 6
Section 3.07. Voting rights of shareholders ..................................... 6
Section 3.08. Voting and other action by proxy .................................. 6
Section 3.09. Voting by fiduciaries and pledgees ................................ 7
Section 3.10. Voting by joint holders of shares ................................. 7
Section 3.11. Voting by corporations ............................................ 8
Section 3.12. Determination of shareholders of record ........................... 8
Section 3.13. Voting lists ...................................................... 9
Section 3.14. Judges of election ................................................ 9
Section 3.15. Consent of shareholders in lieu of meeting ........................10
Section 3.16. Minors as security holders ........................................10
ARTICLE IV Board of Directors ......................................................10
Section 4.01. Powers; personal liability ........................................10
Section 4.02. Qualifications and selection of directors .........................12
Section 4.03. Number and term of office .........................................12
Section 4.04. Vacancies .........................................................13
Section 4.05. Removal of directors ..............................................14
Section 4.06. Place of meetings .................................................14
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
Section 4.07. Organization of meetings ..........................................14
Section 4.08. Regular meetings ..................................................14
Section 4.09. Special meetings ..................................................14
Section 4.10. Quorum of and action by directors .................................14
Section 4.11. Executive and other committees ....................................15
Section 4.12. Compensation ......................................................16
ARTICLE V Officers ................................................................16
Section 5.01. Officers generally ................................................16
Section 5.02. Election and term of office .......................................16
Section 5.03. Subordinate officers, committees and agents .......................17
Section 5.04. Removal of officers and agents ....................................17
Section 5.05. Vacancies .........................................................17
Section 5.06. Authority .........................................................17
Section 5.07. The chairman and vice chairman of the board .......................17
Section 5.08. The president .....................................................17
Section 5.09. The vice presidents ...............................................18
Section 5.10. The secretary .....................................................18
Section 5.11. The treasurer .....................................................18
Section 5.12. Salaries...........................................................18
ARTICLE VI Certificates of Stock, Transfer, Etc. ...................................19
Section 6.01. Share certificates ................................................19
Section 6.02. Issuance ..........................................................19
Section 6.03. Transfer ..........................................................19
Section 6.04. Record holder of shares ...........................................19
Section 6.05. Lost, destroyed or mutilated certificates .........................19
ARTICLE VII Indemnification of Directors, Officers and
Other Authorized Representatives .......................................20
Section 7.01. Scope of indemnification ..........................................20
Section 7.02. Proceedings initiated by indemnified representatives ..............21
Section 7.03. Advancing expenses ................................................22
Section 7.04. Securing of indemnification obligations ...........................22
Section 7.05. Payment of indemnification ........................................22
Section 7.06. Arbitration .......................................................22
Section 7.07. Contribution ......................................................23
Section 7.08. Mandatory indemnification of directors, officers, etc. ............23
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
Section 7.09. Contract rights; amendment or repeal ..............................23
Section 7.10. Scope of Article ..................................................24
Section 7.11. Reliance on provisions ............................................24
Section 7.12. Interpretation ....................................................24
ARTICLE VIII Miscellaneous ..........................................................24
Section 8.01. Corporate seal ....................................................24
Section 8.02. Checks ............................................................24
Section 8.03. Contracts .........................................................24
Section 8.04. Interested directors or officers; quorum ..........................25
Section 8.05. Deposits ..........................................................25
Section 8.06. Corporate records .................................................25
Section 8.07. Amendment of bylaws ...............................................26
</TABLE>
<PAGE> 30
EXHIBIT B
BY-LAWS
OF
SEEC, INC.
(A PENNSYLVANIA CORPORATION)
AMENDED AND RESTATED EFFECTIVE ______________, 1996
<PAGE> 1
Exhibit 10.2
30 Rs.
[Facsimile of Indian Rupee]
COOPERATION AND PROJECT FINANCING AGREEMENT
Agreement made this 1st day of June 1990 by and between The Industrial
Credit and Investment Corporation of India Limited (hereinafter referred to as
ICICI) acting for and on behalf of the President of India (hereinafter
referred to as Government of India or GOI) of the one part
AND
Era Software Systems Pvt. Ltd. having its Registered Office at 4, Motilal Nehru
Nagar, 1st floor, Begumpet Road, Hyderabad 500 016
AND
Seec Incorporated having its Registered Office at 5001 Baum Blvd, Pittsburgh,
Pennsylvania 15213, USA of the other part severally and jointly (hereinafter
collectively referred to as the 'Proposer' and separately as the
'Participants').
<PAGE> 2
: 2 :
W H E R E A S
- - - - - - - -
(1) An Agreement (hereinafter referred to as 'the PACT Agreement') has been
executed on 30th August, 1985 between the Government of India and the
Government of United States of America acting through United States Agency for
International Development )hereinafter referred to as 'AID') for undertaking a
Program for the Advancement of Commercial Technology (PACT) which is designed
to accelerate the pace and quality of technological innovation for products and
production processes having application in industry, agriculture, health and
other areas;
(2) Under the PACT Agreement, the Government of United States of America
acting through AID has agreed to contribute a certain sum for PACT (hereinafter
referred to as 'AID Grant Resources');
(3) The AID Grant Resources along with return flows therefrom are to be used
to promote and finance Indo-US joint technology development ventures and
towards achieving objectives of PACT in general;
(4) AID Grant Resources would be disbursed by AID to ICICI through GOI but
ICICI shall not have any present or future beneficial interest therein and ICICI
has agreed to manage and administer the same in accordance with the PACT
Agreement for the purpose of implementing PACT;
(5) The Proposer has heretofore submitted to ICICI a proposal (hereinafter
called 'the Proposal') entitled development of tools for data-bases
reengineering for applications in Relational Databases Management Systems
(RDBMS) environment and on the basis of the Proposal, has applied to ICICI for
certain financial assistance for the development of the product or process
therein described (hereinafter referred to as the 'Innovation'); and
<PAGE> 3
: 3 :
(6) In accordance with the provisions of the PACT Agreement, the appropriate
authority has examined and approved the Proposal for financing out of the AID
Grant Resources and ICICI has agreed on behalf of GOI to provide financing for
the implementation of the Proposal on the terms and conditions hereinafter set
forth.
NOW THEREFORE THE PARTIES HERETO AGREE AS FOLLOWS :
A. GENERAL
A1. The Participants shall be bound and obliged jointly and severally, as
herein provided;
A2. The Proposal dated the 30th day of January 1990 is incorporated by
reference and made a part of this Agreement. Provided that if any provision of
the said Proposal is inconsistent with any other provision of this Agreement,
the provisions otherwise set forth in this Agreement shall prevail.
B. PROJECT FINANCING
B1. ICICI hereby agrees to finance, by Conditional Grant, the implementation
of the Proposal up to the maximum sum of U.S. Dollars 205,000 and Rs 4.5 million
or 50% percent of the actual expenditure on the project, whichever is less. The
Approved Proposal Budget as contemplated is set forth in ANNEX A hereto.
B1.1 The portion of the actual expenditure on the project which ICICI provides
to the Proposer by way of Conditional Grant shall hereinafter be described as
'Conditional Grant'.
<PAGE> 4
: 4 :
B2. The Proposer shall provide in timely fashion his contribution as
budgeted in Annex A and any additional finance required for the development of
Innovation.
B3. ICICI shall disburse the Conditional Grant to the Proposer as described
in Annex B hereto.
B4. ICICI shall under no circumstances be liable for any loss, compensation
or damage to the Proposer or any third party in connection with such project
financing or Conditional Grant in any manner whatsoever.
C. PAYMENTS TO ICICI BY THE PROPOSER
C1. The Proposer shall inform ICICI in writing as soon as the Innovation is
developed but not later than two weeks from the date of such development.
C2.(1) The Proposer shall make payments to ICICI based on gross annual sales
(as hereinafter defined - see Explanation I) derived from the commercial
exploitation of the Innovation commencing with the first such commercial
transaction. Such payments shall be made on the following basis :
(a) An amount equivalent to one hundred percent of the Conditional
Grant referred to in Sub-Section B1 above, shall be paid to ICICI
at the rate of 5% royalty on gross annual sales of Seec
Incorporated and 80% on royalty income of Era Software Systems Pvt.
Ltd.
(b) When payment of Conditional Grant has been completed according to
sub-section (a) above,
<PAGE> 5
: 5 :
the rate of further payments shall be 5% royalty on gross annual
sales of Seec Incorporated and 80% on royalty income of Era
Software Pvt. Ltd. Such further payments to continue until a
further amount equivalent to one hundred percent of Conditional
Grant shall have been paid to ICICI.
EXPLANATION
The term 'Gross Annual Sales' means the gross sales income realized from the
commercial exploitation of the Innovation in India or abroad and shall include
all specific export incentives or bonuses received by the Proposer.
C2.(ii) All payments due to ICICI shall be calculated on a semiannual calendar
basis and payments shall be made on January 15, and July 15, in each year. Such
payments shall commence on January 15 or July 15 depending upon the semi-annual
period during which the first sale takes place.
C3.(i) The Proposer shall not, without the prior written permission of ICICI,
transfer by way of sale, lease, license or by conducting arrangement or any
other manner whatsoever the Innovation or any improvement, modification,
extension thereof, whether standing alone or incorporated into or co-joined with
other processes, to any third party including their subsidiary, holding company/
companies under the same management (collectively referred to as 'transferee').
C3.(ii) In the event mentioned in Sub Section C3(i) above, the Proposer shall
pay to ICICI the amount equivalent to 200 percent of the Conditional Grant on
the basis of the maximum market price of such Innovation (and not the gross
annual sals) as determined by ICICI.
<PAGE> 6
: 6 :
C3.(iii) If the Proposer receives a lumpsum payment from the transferee, then
the Proposer shall immediately, but not later than 7 days from the receipt of
such payment, pay the amount equivalent to 200 percent of the Conditional Grant.
C3.(iv) In the event of the Proposer receiving payment in instalments from
the transferee, the Proposer shall pay all such receipts to ICICI until a sum
equivalent to 200 percent of the Conditional Grant is paid to ICICI. ICICI may
require the Proposer to issue an irrevocable mandate or pay order to the
transferee to make payments directly to ICICI and a suitable term to this
effect will be incorporated by the Proposer in any arrangement to be entered
between the Proposer and the transferee.
C4. All payment referred to above shall be made in the respective
currencies in which the Conditional Grant was disbursed. Provided however, in
the event the marketing or exploitation or the transfer of the Innovation takes
place only in India such payments shall be made in equivalent Rupee (in respect
of that portion of the Conditional Grant which was disbursed in U.S. Dollars)
calculated at the rate of exchange quoted by State Bank of India for
telegraphic transfer of funds at the time of making such payment.
C5. The total liability of the Proposer under Sub-Sections C2 and C3 above
shall not exceed an amount equivalent to 200 percent of the Conditional Grant.
C6. Notwithstanding anything to the contrary contained hereinabove, the
Proposer hereby specifically undertakes that if any part of the Conditional
Grant or any goods or services financed therefrom are not supported by valid
documentation or are not made or used in accordance with this Agreement then
<PAGE> 7
: 7 :
notwithstanding the availability of any other remedies under this Agreement,
ICICI shall have the option to require the Proposer to refund the amount of
such Conditional Grant in the currencies in which the Conditional Grant has
been disbursed, within 30 days from the date of demand.
C7. All late payments shall bear interest at 1 percent above the prime
rate prevailing on the date payment is made at the State Bank of India (in case
of Rupees) and the Chase Manhattan Bank, New York (in case of U.S. Dollars).
D. APPLICATION OF FUNDS
D1. The Conditional Grant shall be utilized by the Proposer for acquiring
gods and services and for other purposes relating to the project in accordance
with the procurement source and other requirements contained in Annex C hereto.
D2. Machinery or equipment purchased in whole or in part with the
Conditional Grant shall belong to the Proposer, but shall nonetheless be
clearly identified and used only for Proposal purposes, unless ICICI otherwise
permits in writing. The Proposer shall insure and maintain all such equipment
and machinery, and shall exercise reasonable care in its use.
D2.(i) The Proposer shall not sell, give on lease, licence to conduct,
mortgage, charge or otherwise dispose off the said machinery or equipment
except with the prior permission in writing from ICICI.
D2(ii) In the event of the Proposer selling, giving on lease, licencing to
conduct, mortgaging, charging or otherwise disposing off the machinery and
equipment financed out of the Conditional Grant after obtaining such
<PAGE> 8
: 8 :
permission of ICICI, if so required by ICICI, the Proposer shall pay
immediately the proceeds of such transfer to ICICI to the extent of 200 percent
of the Conditional Grant.
D2.(iii) If the Proposer elects to retain the machinery and equipment financed
out of the Conditional Grant and intends to utilise the same for any purpose
other than specified in the Proposal (after prior written permission of ICICI),
if so required by ICICI, the Proposer shall be bound to pay to ICICI the fair
market value thereof to be determined by an independent surveyor up to the
maximum amount equivalent to 200 percent of the Conditional Grant.
D2.(iv) Payment to be made by the Proposer under Sub-Sections D2(ii) and
D2(iii) above shall be set off against the Proposer's obligations under
Sub-Sections C2 and/or C3 above.
D3. The Proposer shall make no long term financial commitments for
leases, salaries, purchase of long lead items or otherwise for the project
unless such proposed commitment has been clearly identified in the Proposal or
has been approved in writing by ICICI subsequent to approval of the Proposal
and prior to such commitment.
D4. The Proposer shall utilize the Conditional Grant only in accordance
with the Approved Proposal Budget (Annex A). Deviations in excess of 20 percent
between the budget line items will require prior written approval of ICICI.
<PAGE> 9
: 9 :
E. CONDUCT OF THE PROJECT
E1. The Proposer agrees to do the work set out in the Proposal in accordance
with god standards relevant to such undertakings, and shall spend funds
received hereunder only in accordance with such Proposal and the requirements
of this Agreement.
E2. The Proposer agrees to comply with the Program Plan for the Innovations
as formulated in consultation with ICICI.
E3. The Proposer agrees to appoint key persons for the implementation of the
Proposal in consultation with ICICI.
F. REPORTING REQUIREMENTS
F1. The Proposer shall submit to ICICI, in writing the following reports :
a. semiannual fiscal report and technical report for each year ending on
March 31, and September 30, in each year by April 30 and October 30
respectively.
b. Summary Report (Final Report) within 60 days from the development of the
Innovation and also following the Termination of this Agreement under
Section I.
F1.(1) The reports required in para F1 above shall be in form and substance to
be prescribed by ICICI.
<PAGE> 10
: 10 :
F1.(ii) The Proposer shall provide, at its expense, briefings on the progress
of the work hereunder within 15 days following request by ICICI.
F1.(iii) The annual sales arising out of the sale as defined in Explanation I
to Sub-Section C2 of this Agreement will be required to be certified by the
participants' auditors and semiannual sales shall be certified by the Principal
Officer of the Proposer.
G. PUBLICATIONS
G1. Any publications of data or other information derived from the work
hereunder, or any publication related to the work, but not including product
literature or manuals, shall contain the following legend or approved
equivalent:
"the work on which this (Article/Publication) is based was supported
in part by a grant from the Government of India pursuant to the
Agreement between India and United States of America for Program for
the Advancement of Commercial Technology. The views and information
contained herein are those of the authors and not necessarily those of
Government of India or ICICI. The Government of India or ICICI assume
no liability for the contents of this document by virtue of the
support given."
G2. To the extent so required to permit ICICI free dissemination of such
publication or information which ICICI is privileged to disseminate, the
Proposer shall be deemed hereby to waive any claim with respect to such
dissemination for infringement of any copyright it may have or may obtain.
G3. The Proposer shall furnish to ICICI tow (2) copies of all
publications resulting from work supported under this Agreement as soon as
possible after publication.
<PAGE> 11
: 11 :
H. PROPRIETORY INFORMATION
Proprietory information clearly identified as such submitted to ICICI in
the Proposal, in any report specifically marked as confidential or secret shall
be considered as confidential and ICICI shall make its best endeavor to
preserve its confidentiality subject to qualifications mentioned herein.
Provided, however, that the aforesaid provision shall not apply to any
information or material which is otherwise available in published literature or
is a matter of general or specific knowledge in trade, industry or technical
journal or which does not represent any proprietory information or ownership of
the Proposer or either of the Participants. Provided further that the
disclosure by ICICI of such information to the members of the PACT Screening
Committee or to its staff members or other persons having access thereto for
the purpose of evaluation or implementation of the Proposal shall not
constitute any breach or violation of the aforesaid but ICICI shall take
reasonable precaution to ensure the confidentiality and non-disclosure by such
person in their future dealings. Nothing contained in the foregoing shall
restrict the right of ICICI to make public the fact of ICICI's support for the
project, and the identification of the Participants therein.
I. REVOCATION OF AGREEMENT
I1. ICICI may revoke this Agreement for any breach or default of terms and
conditions of this Agreement by the Proposer. The Proposer/Participants shall
be bound by the decision of ICICI.
I2. Upon the expiry of 30 days period from the date of receipt of notice of
revocation, unless the Proposer/Participant has remedied the breach or default
to the satisfaction of ICICI, this Agreement shall stand revoked.
<PAGE> 12
: 12 :
I3. Notwithstanding any other provision in this Agreement to the contrary,
ICICI shall not be obliged to provide any further financing after notice of
revocation until and unless the said default is remedied and so demonstrated to
the reasonable satisfaction of ICICI.
I4. After this Agreement stands revoked as aforesaid, all funds given to the
Proposer as per sub-section B1 above shall forthwith become due and payable by
the Proposer to ICICI notwithstanding anything to the contrary and it will not
be necessary for ICICI to make a written demand for payment thereof. The
Proposer shall be bound to repay such funds immediately upon such revocation,
in US Dollars or Indian Rupees as the case may be depending upon the currency
in which the Conditional Grant was disbursed together with interest thereon at
the rate stipulated under sub-section C7.
I5. The Proposer shall not be entitled to terminate this Agreement on his
own account or to abandon or modify the Project without obtaining the prior
written consent of ICICI.
J. FINANCIAL RECORDS AND INSPECTION
J1. The Proposer shall maintain separate business and financial records and
books of account for the work contemplated hereunder. Such books and records
shall be maintained in accordance with generally accepted accounting principles
and practices.
J2. Books and records of the work contemplated hereunder shall show
Proposer's contribution. Upon request by ICICI, the Proposer shall provide
evidence of his compliance hereunder.
<PAGE> 13
: 13 :
J3. ICICI or any person designated by ICICI may examine or cause to be
examined through any agency the financial books, vouchers, records or any other
documents of the Proposer relating to this Agreement and the implementation
thereof at all reasonable times and intervals during the term of this Agreement
or for a period of three years following last disbursement of Conditional Grant
under this Agreement or so long as any payments are due by the Proposer to
ICICI, whichever is later. All expenses and fees in connection with such
examination will be borne by the Proposer and in case ICICI incurs any such
expenditure, the same shall be immediately reimbursed by the Proposer. Until
such reimbursement, the same shall carry interest at the rate stipulated in
sub-section C7. above.
J4. The right of ICICI for examination shall also extent to machinery and
equipment purchased by the Proposer out of the Conditional Grant and the
provision for expenses in sub-section J3 above will apply mutatis mutandis.
K. SUITS AGAINST ICICI BY THIRD PARTIES
K1. The Proposer shall defend all suits brought against ICICI and/or the
Government of India, its officers or personnel, indemnify them for all
liabilities and costs and otherwise hold them harmless on account of any and
all claims, actions, suits, proceedings and the like arising out of, or
connected with or resulting from the performance of this Agreement by the
Proposer or from the manufacture, sales distribution or use by the Proposer of
the Innovation.
K2. The Proposer agrees that persons employed by it in connection with the
Proposal shall be deemed to be solely its own employees and that no
relationship of master and servant shall be created between such employees and
ICICI, either for purposes of tort liability, social benefits or for any other
purpose. The Proposer shall indemnify ICICI and hold it harmless from
<PAGE> 14
: 14 :
court costs and legal fees, and for any payment which ICICI may be obliged to
make on a cause of action based upon an employee-employer relationship as
aforesaid.
L. MISCELLANEOUS CONDITIONS
L1. ICICI makes no representation, by virtue of its financing the work
hereunder or receiving any payments, as to the safety, value or utility of the
Innovation of the work undertaken, nor shall the fact of participation of
ICICI, its financing or exercise of its rights hereunder be deemed an
endorsement of the Innovation or of the Proposer, nor shall the name of ICICI
be used for any commercial purpose or be publicised in any way by the Proposer
except within the strict limits of this Agreement. ICICI assumes no obligation
or liability in connection with this Agreement or implementation thereof or the
project or Innovation.
L2. The Proposer may not assign this Agreement to any of the work undertaken
pursuant to it without the prior written consent of ICICI. No claim for
compensation, damages, or otherwise shall be entertained by ICICI from the
Proposer or any person claiming from or under them.
L.3 In the event that potentially useful products or processes are developed
as the result of work financed by ICICI hereunder, but neither participant
elects to commercialize or license such products or processes, then ICICI
reserves to itself the right to commercialize such products/processes through
any other agency at their discretion. If so required by ICICI, the Proposer
will execute a Disclaimer/Release Assignment in favour of ICICI or any other
Agency as ICICI may direct.
<PAGE> 15
: 15 :
L4. All monies due and payable by the Proposer to ICICI under or in terms of
this Agreement shall be paid by cheque or Bank Draft drawn in favour of ICICI
on a scheduled bank at Bombay.
L.5 This Agreement shall be construed and interpreted in accordance with the
laws of India.
L6. All disputes or differences whatsoever arising between the parties out
of or relating to the construction, meaning and operation or effect of this
Agreement or breach thereof shall be settled by arbitration in accordance with
the Rules of Arbitration of the Indian council of Arbitration and the award
made in pursuance thereof shall be binding on the parties. The venue of
arbitration will be Bombay.
L7. The Proposer undertakes to comply with all applicable laws, rules and
regulations as prevailing in India and United states of America as the case may
be and will also apply and obtain all necessary licenses, consents and permits
for the purposes of entering into and carrying out their obligations.
L8. Notices, communications and reports shall be hand delivered or mailed by
prepaid first-class mail (airmail if transmitted internationally) addressed to
a. The Industrial Credit and Investment
Corporation of India Limited
PACT Division
163, Backbay Reclamation
Bombay 400 020
b. Era Software Systems Pvt. Ltd.
4, Motilal Nehru Nagar
1st floor, Begumpet Main Road
Hyderabad 500 016
c. Seec Incorporated
5001, Baum Blvd.
Pittsburgh
Pennsylvania 15213
USA
<PAGE> 16
: 16 :
M. EFFECTIVE DATE
M1. This Agreement shall come into force from the date of execution hereof
and unless revoked or terminated by ICICI under Section I hereinabove, this
Agreement shall remain in force till all the obligations of the Proposer for
making payments hereinabove are fully and effectively discharged. In the event
of sooner termination or revocation, the obligations of the Proposer under
this Agreement shall continue in favour of ICICI till the same are fully
discharged by performance or payment by the Proposer as the case may be.
M2. The Proposer shall be responsible for the cost of all stamps of this
document as may be required by Indian Law.
Signed and delivered by )
of )
THE INDUSTRIAL CREDIT AND )
INVESTMENT CORPORATION OF )
INDIA LIMITED as )
Constitutional Attorney of )
President of India. )
Signed and delivered by )
Chrikishon B. V. Buddling of )
Era Software Systems Pvt. Ltd.)
Signed and delivered by )
Shri Koka Ravindra of )
Seec Incorporated )
<PAGE> 17
ANNEX A
-------
Quarterly Budget
----------------
Era Software
Quarter Systems Pvt. Ltd. Seec Incorporated
- ------- ----------------- -----------------
(Rs in '000) (US $ in '000)
1st 200 30
2nd 400 40
3rd 4100 45
4th 700 45
5th 800 50
6th 800 50
7th 1000 90
8th 1000 60
---- ---
9000 410
==== ===
<PAGE> 18
ANNEX B
-------
Quarterly Disbursements
-----------------------
Era Software
Quarter Systems Pvt. Ltd. Seec Incorporated
- ------- ----------------- -----------------
(Rs in '000) (US $ in '000)
1st 100 15
2nd 200 20
3rd 2050 23
4th 350 22
5th 400 25
6th 400 25
7th 500 45
8th 500 30
---- ---
4500 205
==== ===
<PAGE> 19
ANNEX C
PROCUREMENT SOURCE FOR GOODS AND SERVICES
FINANCED UNDER THE CONDITIONAL GRANT
A. FOREIGN EXCHANGE COSTS
The source and origin of goods and services to be financed in foreign
exchange out of the Conditional Grant will be the United States (Code 000),
except as ICICI may otherwise agree in writing.
B. LOCAL CURRENCY COSTS
The source and origin of local currency of goods and services to be
financed out of the Conditional Grant in local currency (Indian Rupees) shall
be India.
C. TRANSPORTATION BY AIR OF PROPERTY AND PERSONS
The Conditional Grant will be available to defray costs of
transportation of property and persons by air only when the air carriers holding
United States Certification are used. for international travel, the
transportation costs can be financed from the Conditional Grant only for economy
class on a U.S. flag air carrier. However, in the event a non-U.S. flag air
carrier is selected, the proposer will provide a certificate which is
essentially as follows:
"Certification of Unavailability of U.S. Flag Air Carriers"
I hereby certify that transportation service for personnel or property
by certificated U.S. air carrier was unavailable for the following reasons:
It may be noted that passenger service by a certificated air carrier
will be considered to be "unavailable"
<PAGE> 20
: C2 :
(1) When certificated air carriers offer only first class service, and
less than first class service is available from noncertificated air carrier, or
(2) When the traveller, while en route has to wait 6 hours or more to
transfer to a certificated air carrier to proceed to the intended destination,
or
(3) When any flight by a certificated air carrier is interrupted by a
stop anticipated to be 6 hours or more for refuelling, reloading, repairs,
etc., and no other flight by a certificated air carrier is available during the
6 hour period, or
(4) When by itself or in combination with other certificated or
noncertificated air carriers (if certificated air carrier are "unavailable") it
takes 12 or more hours longer from the original airport to the destination
airport to accomplish the mission than would service by a non-certificated air
carrier or carriers.
(5) When the elapsed travel time on a schedule flight from origin to
destination airports by noncertificated air carrier(s) would involve twice such
scheduled travel time.
D. CONTRACTING WITH GOVERNMENT OWNED ORGANISATIONS
Proposer will not until the Conditional Grant to contract/subcontract
with government owned firms or organisations (except public educational
institutions) unless he/they can demonstrate to ICICI that the services to be
rendered by such firms or organisations are not available by private sector
firms and obtains prior permission from ICICI before executing the Contract.
<PAGE> 21
: C3 :
The definitions of Source and Origin and other related terms relating
to Procurement Source are as follows:
PROCUREMENT SOURCE - DEFINITIONS
(1) SOURCE AND ORIGIN
With respect to equipment and materials, "source" is the country from
which such equipment and material is shipped to India or India itself if the
equipment and materials are located therein at the time of purchase. However,
where the equipment and materials are shipped to India from a free port or
bonded warehouse in the form in which received therein, "source" means the
country or territory from which the equipment or materials was shipped to such
free port or bonded warehouse. "Origin" is the country in which such equipment
or materials is mined, grown or produced. A commodity is produced when through
manufacturing, processing, or assembly, a commercially recognized new commodity
results that is substantially different in basic characteristics, or in
purpose, or utility from its components.
(2) GOODS AND SERVICES
Goods are considered as a produced commodity. Services are primarily
identified with professional, technical and procurement and construction service
contracts. Services are also commodity-related such as insurance, ocean freight
and/or incidental services. Insurance means a policy of insurance including
marine liability, or any performance or other bond eligible for financing.
Incidental services could be for such items as equipment installation and
personal training in connection with equipment.
The application of "source" and "origin" criteria to the three types of
commodity-related services is as follows. In the case of insurance, the
<PAGE> 22
: C4 :
"source" and "origin" is the country in which such insurance is placed. In
case of incidental service the "source" and "origin" is the country to which
the personnel or firm providing the services belong. In case of ocean freight
and "source" and "origin" is the country of the flag registry of the vehicle.
(3) INDIGENOUS GOODS
a) Goods that have been mined, grown, or produced in India through
manufacture, processing, or assembly are eligible for financing.
b) Goods produced with imported components, in order to qualify as
indigenous, must result in a commercially recognized new commodity that is
substantially different in basic characteristics or in purpose or utility from
its components. Any imported component from a non-free world country makes the
indigenous commodity ineligible for the Conditional Grant Financing.
(4) SHELF ITEM PROCUREMENT
a) Goods which are normally imported into India and kept in stock in
the form in which imported for commercial resale to meet a general demand in
India shall be deemed to be of Indian source for purposes of financing under
the Conditional Grant, subject to the following:
(i) SHELF ITEMS IMPORTED FROM CODE 941 COUNTRIES
Shelf items are eligible for financing under the Conditional Grant, if
they have their origin in the United States or in a country included in Code
941.
<PAGE> 23
: C5 :
(ii) SHELF ITEMS IMPORTED FROM OTHER FREE WORLD SOURCES
Shelf items having their source and origin in countries included in
Geographic Code 899 (any area or country in the Free World, excluding the
Cooperating Country itself) but not in Geographic Code 941, are eligible for
financing if the price of one unit does not exceed $ 5,000. For goods sold by
units of quantity, e.g., tons, barrels, etc., the unit to which the local
currency equivalent of $ 5,000 is applied is that which is customarily used in
quoting prices.
(iii) SHELF ITEMS IMPORTED FROM NON-FREE WORLD SOURCES
a) Imported shelf items produced in or imported from countries not
included in Geographic Code 899 are ineligible for financing under the
Conditional Grant.
b) Any imported component from a non-Free World country makes the
imported shelf item ineligible for financing under the Conditional Grant.
Exceptions from certain of the above requirements are available if
adequately justified to ICICI.
Lists of various Geographic Codes referred above are available with
ICICI.
<PAGE> 1
Exhibit 10.3
20 Rs
[Facsimile of Indian Rupee]
LOAN AGREEMENT
THIS AGREEMENT made this day of One Thousand Nine Hundred
and Ninety Four between Seec, Incorporated, a corporation domesticated in the
Commonwealth of Pennsylvania, having its Registered Office at 5001, Baum Blvd.,
Pittsburgh, Pennsylvania 15213, USA (hereinafter referred to as the "Borrower",
which expression shall, unless it be repugnant to the subject or context
thereof, include its successors and assigns);
AND
THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED, a public
company incorporated under the Indian Companies Act, 1913 (7 of 1913) and having
its registered office at 163, Backbay Reclamation, Bombay 400 020 (hereinafter
referred to as "the Lender", which expression shall, unless it be repugnant to
the subject or context thereof, include its successors and assigns);
<PAGE> 2
LOAN AGREEMENT
BETWEEN
SEEC, INCORPORATED
AS BORROWER
AND
THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED
AS LENDER
UNDER
PROGRAM FOR THE ADVANCEMENT OF COMMERCIAL TECHNOLOGY
<PAGE> 3
CONTENTS
Article Subject
- ------- -------
I DEFINITIONS: GENERAL CONDITIONS
II AGREEMENT AND TERMS OF LOAN
III SECURITY
IV APPOINTMENT OF NOMINEE DIRECTOR(S)
V SPECIAL CONDITIONS
VI EFFECTIVE DATE OF AGREEMENT
VII MISCELLANEOUS CONDITIONS
SCHEDULE I - THE PROJECT
SCHEDULE II - FINANCING PLAN
SCHEDULE III - AMORTIZATION SCHEDULE
SCHEDULE IV - SPECIAL CONDITIONS
<PAGE> 4
: 2 :
W H E R E A S
A. An Agreement (hereinafter referred to as "the PACT Agreement") has been
executed on 30th August, 1985 between the Government of India and the
Government of United States of America acting through United States
Agency for International Development (hereinafter referred to as ("AID")
for undertaking a Program for the Advancement of Commercial Technology
(PACT) which is designed to accelerate the pace and quality of
technological innovation for products and production processes having
applications in industry, agriculture, health and other areas, wherein The
Industrial Credit and Investment Corporation of India Limited (ICICI) has
been appointed as implementing agency for the PACT project;
B. Under the PACT Agreement, the Government of the United States of America
acting through AID has agreed to contribute a certain sum for PACT
(hereinafter referred to as "AID Grant Resources");
C. The AID Grant Resources alongwith return flows therefrom are to be used to
promote and finance Indo-US joint technology development ventures and
towards achieving objectives of PACT in general;
D. AID Grant Resources would be disbursed by AID to ICICI through GOI but ICICI
shall not have any present or future beneficial interest therein and ICICI
has agreed to manage and administer the same in accordance with the PACT
Agreement for the purpose of implementing PACT;
E. The Borrower was earlier provided financial assistance from PACT for
"Development of tools for data bases reengineering for applications in
Relational Databases Management Systems (RDBMS)". The Borrower with Era
Software Systems Pvt. Ltd. had jointly entered into Cooperation and Project
Financing (CPF) Agreement with ICICI dated 20th day of June, 1990, and
Supplemental Cooperation and Project Financing Agreement dated 25th day of
November, 1992. The Borrower has since completed the development.
F. The Borrower has heretofore submitted to PACT a loan proposal (hereinafter
called "the Proposal"). For and on the basis of the Proposal, the Borrower
has applied to ICICI for financial assistance out of the PACT resources for
commercialising the product; and
G. In accordance with the provisions of the PACT Agreement, the appropriate
authority has examined and approved the Proposal for financing out of the
AID Grant Resources and ICICI has agreed on behalf of GOI to provide
financing for the implementation of the Proposal on the terms and conditions
hereinafter set forth.
<PAGE> 5
: 3 :
NOW THEREFORE THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS: GENERAL CONDITIONS
I. DEFINITIONS
1.1 The following terms shall have the following meanings:--
(a) "General Conditions" means the GENERAL CONDITIONS APPLICABLE TO FOREIGN
CURRENCY LOANS PROVIDED BY financial institutions (GC-FC-88);
(b) "Project" means the project to be financed as described by "the Proposal"
dated the 17th day of December 1993, incorporated by reference and made a
part of this Agreement. Provided that if any of the said Proposal is
inconsistent with any other provision of this Agreement, the provision
otherwise set forth in this Agreement shall prevail. A brief description of
the project is included in SCHEDULE I hereto; and
(c) "Financing Plan" means the financing plan as described in SCHEDULE II
hereto.
1.2 GENERAL CONDITIONS
The Loan hereby agreed to be granted by the Lender shall be subject to the
Borrower complying with the terms and conditions set out herein and also the
General Conditions No. GC-FC-88, a copy of which has been attached hereto. The
General Conditions shall be deemed to form part of this Agreement and shall be
read as if they are specifically incorporated herein. As specified in Article I
of the General Conditions No. GC-FC-88, the provisions of this Loan Agreement
shall take precedence over any inconsistent provision in the General
Conditions.
<PAGE> 6
: 4 :
ARTICLE II
AGREEMENT AND TERMS OF LOAN
2.1 AMOUNT AND TERMS OF LOAN:
The Borrower agrees to borrow from the Lender and the Lender agrees to lend to
the Borrower, on the terms and conditions contained herein as also in the
General Conditions No. GC-FC-88, a sum to the maximum extent of US$ 300,000
(US$ Three Hundred Thousand Only).
2.2 INTEREST:
(i) The Borrower shall pay to the Lender interest at a rate based on a
spread of 2.5% above US prime rate on the principal amounts of the
Loan outstanding on a quarterly basis in each year, on January 15,
April 15, July 15 and October 15, subject to a cap of 9% and a floor
of 6%.
The prime rate as defined in this agreement refers to the US prime
rate (as published in The Wall Street Journal) for the first work day
of each quarter beginning January 1, April 1, July 1 and October 1
respectively of each year. This rate would be applicable for the next
3 months. The borrower shall inform ICICI by telefax within one week
after January 1, April 1, July 1 and October 1 respectively or each
year of such rate.
2.3 COSTS AND CHARGES:
The Borrower shall pay all taxes, duties, costs, charges and expenses in
connection with or relating to the Loan transaction (including costs of
investigation of title and protection of Lender's interests). In the event of
the Borrower failing to pay the aforesaid moneys, the Lender will be at liberty
but shall not be obliged to pay the same. All such sums shall be reimbursed
by the Borrower to the Lender within 30 days from the date of notice of demand
from the Lender and shall be debited to the Borrower's Loan Account and shall
carry interest at the highest lending rate of the lender from the date of
payment till such reimbursement.
2.4 LAST DATE OF WITHDRAWAL:
Unless the Lender otherwise agrees, the right to make withdrawals from the
Loan shall cease on September 30, 1994.
2.5 REPAYMENT:
The Borrower undertakes to repay the principal amounts of the Loan in
accordance with the Amortization Schedule set forth in SCHEDULE III hereto.
<PAGE> 7
: 5 :
2.6 REVIEW OF THE PROJECT
1. The Borrower shall implement the Project within the overall project cost of
US$ 600,000 (US$ Six Hundred Thousand Only) ("the Project Cost") and in
accordance with the financing plan ("the Financing Plan") both as agreed to
between the Borrower and the Lender and set out in SCHEDULE II hereto.
2. The Borrower agrees that the Lender shall have the right to conduct a
review of the Project before and after completion of the Project.
3. The Borrower agrees that :--
If, however, as a result of such review the Lender determines that the
Borrower has not implemented/nor is likely to implement the Project within
the Project Cost and/or in accordance with the Financing Plan, the Lender
shall have the right to revise the Repayment Schedule and stipulate such
additional conditions (including strengthening of management set up, change
in means of financing, raising of additional equity capital / other
interest-free unsecured funds from the Promoters) as the Lender in its
absolute discretion deem fit and to require the Borrower to take such other
measures as may be stipulated by the Lender in the light of the revised
cost of the Project/means of financing/date of commencement of commercial
production. Unless otherwise agreed to by the Lender and in such event, the
Loan shall become repayable on demand until the Borrower complies with the
stipulated terms and conditions to the satisfaction of the Lender and
commences commercial production. Upon such compliance of the conditions
and commencement of commercial production the Borrower shall repay the
Loan in accordance with the Repayment Schedule as may be stipulated by
the Lender, which Repayment Schedule shall be final and binding on
the Borrower.
<PAGE> 8
: 6 :
ARTICLE III
SECURITY
3.1 SECURITY FOR THE LOAN
(A) The Loan together with interest, additional interest, and other costs,
expenses and other moneys whatsoever stipulated in this Agreement shall be
secured by a first charge by way of hypothecation in favour of the Lender
of ALL THE BORROWER'S MOVEABLES (save and except book debts), including
movable machinery, machinery spares, tools and accessories, present and
future, pertaining to the project, subject to prior charges created and/or
to be created in favour of the Borrower's Bankers on the Borrower's stocks
of raw materials, semi-finished and finished goods, consumable stores and
such other moveables as may be agreed to by the Lender for securing the
borrowings for working capital requirements in the ordinary course of
business. The terms "moveables" and "immovables" as used herein do not
include source codes, copyrights and trademarks.
(B) The Borrower shall make out a good and marketable title to its properties
to the satisfaction of the Lender and comply with all such formalities as
may be necessary or required for the said purpose.
(C) The Borrower shall not sell, give on lease, license to conduct, mortgage,
charge or otherwise dispose off its immovable properties, the plant and
machinery or equipment or other assets purchased out of the loan or
otherwise except with the prior permission from ICICI and agree to furnish
suitable undertaking in this regard. Such equipment/machinery and other
assets purchased out of loan shall be clearly identified.
(D) SECURITY INTEREST IN ACCOUNTS RECEIVABLE. So long as there remains any
outstanding unpaid balance on the loan, the lender shall have a security
interest in the borrower's present and future accounts receivable up to
the loan amount. The lender hereby agrees that if the borrower should at
any time be in default of its loan obligations to the lender, and if the
lender collects any account receivable of the borrower, the lender will
retain not more than 30% of each account receivable on account of
borrower's unpaid balance, and lender will remit to borrower the remaining
70% of each account receivable which lender collects. Borrower will, at
the time this Loan Agreement is signed, sign and deliver to lender for
filing with the Commonwealth of Pennsylvania, a UCC -1 Financing Statement
which will enable lender to perfect its said security interest in
borrower's accounts receivable.
<PAGE> 9
: 7 :
3.2 CREATION OF ADDITIONAL SECURITY
If, at any time during the subsistence of this Agreement, the Lender is of the
opinion that the security provided by the Borrower has become inadequate to
cover the balance of the Loan then outstanding, then, on the Lender advising
the Borrower to that effect, the Borrower shall provide and furnish to the
Lender, to the satisfaction of the Lender such additional security as may be
acceptable to the Lender to cover such deficiency. The Borrower will not be
required to furnish security totaling more than one hundred and twenty (120%)
percent of the unpaid balance of principal and accrued interest on the loan.
3.3 ACQUISITION OF ADDITIONAL IMMOVABLE PROPERTIES
So long as any moneys remain due and outstanding to the Lender, the Borrower
undertakes to notify the Lender in writing of all its acquisitions of immovable
properties and as soon as practicable thereafter to make out a marketable title
to the satisfaction of the Lender and include the same in the undertaking as
mentioned in Section 3.1 (c).
<PAGE> 10
: 8 :
ARTICLE IV
APPOINTMENT OF NOMINEE DIRECTOR
In the event the borrower is in default under the terms of this Loan Agreement,
the Borrower agrees that the Lender shall be entitled to appoint and withdraw
from time to time one Director on the Board of Directors of the Borrower at any
time during the currency of this Agreement.
ARTICLE V
SPECIAL CONDITIONS
5.1 The Loan hereby granted shall also be subject to the Borrower complying
with the special conditions set out in SCHEDULE IV hereto.
5.2 CAP ON COSTS. As used in this paragraph, the term "costs" shall include any
and all payments due under this Loan Agreement and the General Conditions
GC-FC-88, other than payments of principal or interest made or due on the Loan.
The parties agree that any costs imposed on Borrower under the terms of this
Loan Agreement and General Conditions GC-FC-88, shall not exceed a maximum of
Five Thousand ($5000) US Dollars in the aggregate.
5.3 EXERCISE OF DISCRETION. In all instances in which the Loan Agreement and
General Conditions GC-FC-88 give the Lender the right to act unilaterally,
and/or at its sole discretion, the Lender covenants and agree that it will
exercise its discretion in a reasonable manner. Any dispute regarding the same
may be submitted to binding arbitration by either party.
ARTICLE VI
EFFECTIVE DATE OF AGREEMENT
This Agreement shall become binding on the Borrower and the Lender on and from
the date first above written. It shall be in force till all the moneys due and
payable under this Agreement are fully paid off.
<PAGE> 11
: 9 :
ARTICLE VII
1 MISCELLANEOUS CONDITIONS:
(i) This Agreement shall be construed and interpreted in accordance with the
laws of India and neither the Borrower or the Lender shall request the
Borrower to do anything contrary to any United States law or regulation.
(ii) BINDING ARBITRATION. Notwithstanding any provision in the Loan Agreement
and the General Conditions GC-FC-88 to the contrary, the parties agree
that all disagreements, claims and disputes between them arising from or
related to the Loan Agreement and the General Conditions GC-FC-88, shall
be decided by binding arbitration by arbitrators approved by the
Indo-American Chamber of Commerce. All such arbitration proceedings shall
be conducted under the auspices of, and in accordance with the rules of,
the Indo-American Chamber of Commerce, at a location to be mutually agreed
to by the parties, or failing agreement, to be decided by the arbitrators.
The decision of the arbitrators shall be final and binding on the parties.
(iii) All disputes or differences whatsoever arising between the parties out of
or relating to the construction, meaning and operation or effect of this
Agreement or breach thereof shall be settled by arbitration in accordance
with the Rules of Arbitration of the Indian council of Arbitration and the
award made in pursuance thereof shall be binding on the parties. The venue
of arbitration will be Bombay.
(iv) The Proposer undertakes to comply with all applicable laws, rules and
regulations as prevailing in India and United States of America as the
case may be and will also apply and obtain all necessary licenses,
consents and permits for the purposes of entering into and carrying out
their obligations.
<PAGE> 12
: 10 :
SCHEDULE I
THE PROJECT
The Borrower, an already existing company, proposes commercialisation of tools
for software reengineering. The cost of the project estimated at US $ 600,000
is proposed to be financed by Founder's contribution of US $ 300,000, and
foreign currency term loan from ICICI of US $ 300,000.
The Borrower has approached the Lender to provide term loan of US $ 300,000 to
finance a part of the cost of project. The lender has agreed to provide a
Foreign Currency Term Loan of US $ 300,000 to the borrower from PACT Resources.
<PAGE> 13
: 11 :
SCHEDULE II
COST OF PROJECT AND FINANCING PLAN
COST OF THE PROJECT
The cost of the project is estimated at US $ 600,000 as follows:
(US $ '000)
Capital equipment 50
Salaries and Wages 350
Brochures and Support material 10
Direct mail campaign 10
Trade and Road shows 50
Travel 40
Advertising & Tele marketing 90
---
600
===
<PAGE> 14
: 12 :
MEANS OF FINANCING
The above project cost estimated at US $ 600,000 is proposed to be financed as
follows :
(US $ '000)
SEEC Revenues & Reservers 300
Foreign Currency Term Loan
from PACT Resources 300
---
600
===
<PAGE> 15
: 13 :
SCHEDULE III
AMORTIZATION SCHEDULE
Name of the Lender : ICICI
Amount of Amount outstanding
Date of instalment after each payment
instalment Due (US$ '000) (US$ '000)
- ------------------ ---------- ------------------
December 15, 1995 30 270
March 15, 1996 30 240
June 15, 1996 30 210
September 15, 1996 30 180
December 15, 1996 30 150
March 15, 1997 30 120
June 15, 1997 30 90
September 15, 1997 30 60
December 15, 1997 30 30
March 15, 1998 30 0
<PAGE> 16
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SCHEDULE IV
SPECIAL CONDITIONS as listed herein below
1. Before the loan become effective
a) The Borrower shall make necessary arrangements for bringing in a part of
the funds agreed to for financing the project.
b) In the event the Borrower is in default under the terms of this loan
agreement it shall if required by ICICI, broadbase its Board of Directors
and finalise/strengthen its management set-up in consultation with and
to the satisfaction of the ICICI.
c) The company shall make arrangements with its bankers, satisfactory to
ICICI, for meeting its working capital requirements.
2. The company undertakes that during the currency of the loan it shall not
declare any dividend on its share capital, if it fails to meet its
obligations to pay interest and/or instalment of instalments and/or other
moneys payable to ICICI so long as it is in such default.
<PAGE> 17
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3. a) The company undertakes to maintain proper books of accounts for
utilisation of PACT funds and to submit auditors' certificate for the
same. It has to get them audited by a firm of chartered Accountants on
the approved list of AID/W, Regional Inspector General (RIG/A/S) and
submit a report in accordance with the guidelines issued by RIG/A/S.
b) The company shall also enable periodic visits by ICICI and United States
Agency for International Development (USAID) officers for assessing
progress of work and monitoring the project.
c) The company shall comply with such special conditions as may be
stipulated by ICICI at the time of disbursement of loan or subsequently.
4. In case of default under the terms of this loan agreement ICICI shall be
entitled to appoint one nominee on the Board of Directors of the company
during the currency of the ICICI assistance.
5. In case of default (set forth in General Conditions GC-FC-88), ICICI has an
option to convert moneys due to common stock of the borrower at fair value
to be decided by an independent evaluator.
6. The borrower shall provide ICICI with the opinion of the Borrower's counsel
that the Borrower is a validly existing organisation and is authorised to
enter into all aspects of the transaction, that no liens affecting the
Property other than these to which ICICI specifically consents exist and
that the Borrower is authorised and empowered to borrow the sum specified
herein and to create security in favour of ICICI.
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IN WITNESS WHEREOF the Borrower has caused its Common Seal to be affixed hereto
and to a duplicate hereof on the day, month and year first hereinabove written
and the Lender has caused the same to be executed by the head of authorised
official of the Lender as hereinafter appearing.
THE COMMON SEAL of SEEC, INC. was
pursuant to the Resolution of its Board
of Directors passed in that behalf on the
day of 1994 hereunto
affixed in the presence of
Ms. Keely O'Malley [SEAL]
who has signed these presents in token
thereof.
SIGNED AND DELIVERED BY the within named
Lender by the hand of Shri
an authorised official of the Lender.
<PAGE> 19
GENERAL CONDITIONS
NO. GC-FC-88
APPLICABLE TO FOREIGN CURRENCY LOANS PROVIDED BY
FINANCIAL INSTITUTIONS
<PAGE> 20
TABLE OF CONTENTS
Article Number Title Page No.
- -------------- ----- --------
I Applicability 01
II Definitions 01-02
III Approvals 02
IV Disbursement, Interest, Commitment 02-06
and other charges and Repayment
V Borrower's warranties 06-07
VI Predisbursement conditions 07-09
VII Conditions applicable during currency
of the Loan Agreement
1. Project 09-10
2. Utilisation of the Loans 10
3. General Covenants 10-14
4. Nominee Director 14
5. Management 14-16
VIII Reports 16
IX Inspection 16
X Events of default and remedies 17-20
XI Cancellation, suspension and termination 20-22
XII Waiver 22
XIII Applicability of other Statutes 22
XIV Miscellaneous 22
* * * * *
<PAGE> 21
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ARTICLE I
APPLICABILITY
The General Conditions set out herein shall, if the Loan Agreement so
provides, be applicable to the foreign currency loans provided singly or jointly
by The Industrial Development Bank of India (IDBI), The Industrial Finance
Corporation of India (IFCI) and The Industrial Credit and Investment Corporation
of India Limited (ICICI).
If there is any inconsistency between these General Conditions and the Loan
Agreement, the Loan Agreement will prevail.
All the provisions of these General Conditions and the Loan Agreement shall
have full force and effect till all monies due from the Borrower to the Lenders
under the Loan Agreement are paid/repaid in full.
ARTICLE II
DEFINITIONS
The following terms have the following meanings in these General Conditions
and in the Loan Agreement:
1. "Borrower" means the party to the Loan Agreement to which the Loans are
made.
2. "Foreign Lending Agency" means the Agency providing foreign currency funds
to the Lenders pursuant to terms of their Agreements.
3. "Lead Institution" means any one of the Lenders as may be designated by
them from time to time, as their attorney in a particular loan transaction. In
the event of any Lender granting Loan(s) to the Borrower singly (and not jointly
with other Lenders), the expression "Lead Institution" wherever it appears in
these General Conditions or in the Loan Agreement shall mean only the "Lender".
4. "Lenders" means IDBI, IFCI and ICICI or any one or more of them where the
subject or context so admits.
5. "Loan Agreement" means the particular loan agreement and includes these
General Conditions as applied thereto, and all schedules and amendments
supplemental to the Loan Agreement.
6. "Loan" or "Loans" means amounts of various foreign currencies or their
equivalents in other foreign currencies used for their purchase, agreed to be
provided by the Lenders under the Loan Agreement or (as the context requires)
so such thereof as may be outstanding from time to time.
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7. "Project" means the project for which the Loans are agreed to be granted,
as described in the Loan Agreement.
8. All other terms used in these General Conditions shall have the meanings
assigned to them under the Loan Agreement.
ARTICLE III
APPROVALS
Unless otherwise agreed to by the Lead Institution, the Borrower shall
approach the Lead Institution for obtaining all consents and approvals required
under the Loan Agreement. All acts and deeds done, and all consents and
approvals given, by the Lead Institution shall be deemed to have been done and
given by every Lender individually.
ARTICLE IV
DISBURSEMENT, INTEREST, COMMITMENT AND OTHER CHARGES AND REPAYMENT
SECTION 4.1 - TERMS OF DISBURSEMENT
(i) The Loans will be disbursed by the Lenders in such manner as may be
decided by the Lenders subject to the Borrower complying with the provisions of
the Loan Agreement and the disbursement procedure(s) stipulated by the Lenders
(including production/execution of evidences/documents required for
disbursement) and the expenditure incurred on the Project being in consonance
with the details mentioned in the Loan Agreement.
(ii) In the event of the Lenders agreeing to disburse any amount of the
Loans pending creation of final security as stipulated in the Loan Agreement,
the same may be disbursed on such terms as may be decided by the Lenders.
All disbursements shall be by authorisation(s) and the
collection/remittance charges will be borne by the Borrower. The interest on
the Loans will accrue as from the value date as specified in the authorisation.
SECTION 4.2 - INTEREST
(i) All interest on the Loans and on all other monies accruing due under
the Loan Agreement shall, in case the same be not paid on the respective due
dates, carry further interest at the applicable rate(s) under the Loan
Agreement, computed from the respective due dates and shall become payable upon
the footing of compound interest with quarterly/half yearly/yearly rests as
provided in the Loan Agreement.
<PAGE> 23
: 3 :
(ii) All interest and other monies which shall accrue under the provisions
of the Loan Agreement shall also be payable in the manner and on the dates as
mentioned in the Loan Agreement for payment of interest on the principal amounts
of the Loans.
SECTION 4.3 - COMMITMENT CHARGE
(i) Commitment charge shall be payable in the manner and on the dates
specified in the Loan Agreement.
(ii) Arrears of commitment charge shall carry interest at the lending
rate(s) of the Lenders for normal rupee term loans prevailing on the date of
default.
(iii) Commitment charge shall be payable even though the Loans are
ultimately cancelled or not availed of for any reason whatsoever.
(iv) In the event of such cancellation, the commitment charge in respect
of the Loans or any part thereof which has been cancelled, shall cease to accrue
from the day on which the Borrower's request for cancellation is received by the
Lenders.
SECTION 4.4 - REPAYMENT
(i) The Lenders may, in suitable circumstances, revise, vary or postpone
the repayment of the principal amounts of the Loans or the balance outstanding
for the time being or any instalment(s) of the said principal amounts of the
Loans or any part thereof upon such terms and conditions as may be decided by
the Lenders.
(ii) In the event of any default in the payment of instalment(s) of
principal, any interest, commitment charge or liquidated damages, postponement,
if any, allowed by the Lenders shall be at the rate of interest as may be
stipulated by the Lenders at the time of postponement.
(iii) If, for any reason, the amount finally disbursed by the Lenders out
of the Loans is less than the amount of the Loans, the instalment(s) of
repayment of the Loans shall stand reduced proportionately but shall be payable
on the due dates as specified in the amortization Schedule(s) in the Loan
Agreement.
SECTION 4.5 - LIQUIDATED DAMAGES ON DEFAULTED AMOUNTS
In case of default in payment of instalment(s) of principal, interest,
commitment charge and all other monies (except liquidated damages) on their
respective due dates, the Borrower shall pay on the defaulted amounts,
liquidated damages at the rate of 2% per annum for the period of default.
Liquidated damages shall be payable in the manner and
<PAGE> 24
: 4 :
on the dates as specified in the Loan Agreement for payment of interest.
Arrears of liquidated damages shall carry interest at the lending rate(s) of
the Lenders for normal rupee term loans prevailing on the date of default.
4.6 - INCREASED COSTS
In the event of the Lenders being called upon to pay any additional amount
by the Foreign Lending Agency, in terms of their respective agreements, or on
account of factors beyond the control of the Lenders, the Borrower shall
reimburse all such amounts to the Lenders.
SECTION 4.7 - REIMBURSEMENT OF EXPENSES
(i) The Borrower shall reimburse all sums paid by the Lead Institution/the
Lenders under Article IV - Sections 4.6 and 4.10(f), Article VII - Sections
7.3(B)(v), 7.3(B)(vii), 7.5(vii), Article IX - Section 9(b)(iii) and Article X -
Section 10.4 within 30 days from the date of notice of demand from the Lead
Institution/Lenders. All such sums shall be debited to the Borrower's Loan
Account and shall carry interest from the date of payment till such
reimbursement at the lending rate(s) of the Lenders for normal rupee term loans
prevailing on the date of payment.
(ii) In case of default in making such reimbursement within 30 days from
the date of notice of demand, the Borrower shall also pay on the defaulted
amounts, liquidated damages at the rate of 2% per annum from the expiry of 30
days from the date of notice of demand till reimbursement in accordance with the
provisions of Section 4.5.
SECTION 4.8 - APPROPRIATION OF PAYMENTS
a) Unless otherwise agreed to by the Lenders, any payments due and payable
under the Loan Agreement and made by the Borrower shall be appropriated towards
such dues in the following order, viz., -
(i) Premium on prepayment;
(ii) Costs, charges, expenses and other monies;
(iii) Interest on costs, charges, expenses and other monies;
(iv) Commitment charge;
(v) Interest on arrears of commitment charge;
(vi) Interest payable in terms of the Loan Agreement;
(vii) Further interest and liquidated damages on defaulted
amounts payable in terms of section 4.2(i) and 4.5;
(viii) Repayment of instalments of principal due and payable
under the Loan Agreement.
<PAGE> 25
: 5 :
b) Notwithstanding anything contained in clause(s) hereinabove, the
Lenders may, at their discretion, appropriate such payments towards the dues, if
any, payable by the Borrower in respect of earlier loan(s) availed of by the
Borrower from the Lenders in the order specified in the relative Loan
Agreement(s).
4.9 - ALTERATION IN SOURCE(S) OF THE LOANS/CURRENT/INTEREST SWAPS
The Lenders may, at any time, in their absolute discretion, alter the
sources from which the Loans or any part thereof is agreed to be
provided/provided under the Loan Agreement. In such an event, the liability of
the Borrower in respect of the Loans or such part thereof in respect of which
the source(s) has been altered as regards rate(s) of interest, repayment(s) of
principal and currencies and date(s) and mode of such payment/repayment shall
be as applicable to the loan(s) out of such altered source(s) as intimated by
the Lenders, which shall be final and binding on the Borrower.
The Lenders may, at any time, in their absolute discretion, effect
currency and/or interest rate swap for the Loans or any part thereof agreed to
be provided/provided herein. In such an event, the liability of the Borrower in
respect of which the Loans or such part thereof in respect of the currency or
currencies of repayment/payment of principal, interest and all other monies
payable hereunder/rate(s) of interest on principal of the Loans such part
thereof shall be as intimated by the Lenders, which shall be final and binding
on the Borrower.
SECTION 4.10 - PLACE AND MODE OF PAYMENT
Notwithstanding anything contained hereinbefore, the Borrower shall
make payments to each of the Lenders, whether of principal amount of the Loan,
interest, commitment charge, premium on prepayment or on redemption, if any, in
equivalent rupees in lieu of foreign currencies. for the purpose of this
section, the following conditions shall apply:-
a) The rupee sum shall be determined by the Lenders with reference to the
actual cost to the Lenders (including all commission or other bank charges and
out-of-pocket expenses) in remitting the foreign currencies on the due dates.
b) The rupees sum shall be paid by the Borrower to the Lenders 15 days in
advance of the due dates to enable the Lenders to remit the foreign currencies
on the due dates.
c) The rupees sum shall be paid by the Borrower to the Lenders by cheque
or bank draft drawn on a Scheduled Bank in Bombay/New Delhi and the
collection/remittance charges, if any, in respect thereof will be borne by the
Borrower.
<PAGE> 26
: 6 :
d) Credit for all payments made by the Borrower in terms of this Agreement
by cheque/bank draft will be given only on realisation or on the relative due
date, whichever is later.
e) For the purpose of sub-section (a) hereof a statement signed by a
designated officer of the Lenders shall be sufficient evidence of the costs,
commission, expenses, etc.
f) Any difference on account of exchange fluctuations in the rates of
foreign currencies involved between the payment made by the Borrower to the
Lenders and the actual cost to the Lenders as referred to in sub-section (a)
above shall be borne by or be given credit to the Borrower.
In the case of ICICI, if ICICI decides not to call for payment in
equivalent rupees in the manner provided above, ICICI shall have the right to
notify the Borrower the place or places where and the person or persons to whom
the payments in foreign currencies falling due thereafter shall be made and all
expenses involved in making payments in the manner so notified shall be borne by
the Borrower.
SECTION 4.11 - RUPEE TYING OF DEFAULTED AMOUNTS
Without prejudice to any of the obligations of the Borrower in terms
of the Loan Agreement, in the event of default by the Borrower in making payment
in discharge of any of its obligations under the Loan Agreement on the due dates
then, notwithstanding anything to the contrary contained in the Loan Agreement,
the liability of the Borrower thereafter in respect of such amounts shall be in
rupees, which shall be determined and notified by the Lenders to the Borrower in
accordance with the provisions of sub-section 4.10(a) hereinabove (hereinafter
referred to as "the rupee tied defaulted amounts').
Notwithstanding anything to the contrary contained in the Loan
Agreement, the rupee tied defaulted amounts will carry interest and further
interest from the respective due dates at the lending rate(s) of the Lenders
for normal rupee term loans prevailing on the date of default and shall be
payable on the dates specified in the Loan Agreement.
ARTICLE V
SECTION 5 - BORROWER'S WARRANTIES
Except to the extent already disclosed in writing by the Borrower to
the Lenders, the borrower shall be deemed to have assured, confirmed and
undertaken as follows:
<PAGE> 27
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(a) DUE PAYMENT OF PUBLIC AND OTHER DEMANDS
The Borrower is not in arrears of any public demands such as
income-tax, corporation tax and all other taxes and revenues or any other
statutory dues payable to the Central or State Government(s) or any local or
other authority.
(b) SELLING AND PURCHASING ARRANGEMENTS
The Borrower has entered into requisite selling and purchasing
arrangements to the satisfaction of the Lead Institution.
(c) MANAGEMENT AGREEMENT
The terms and conditions of appointment of Managing Director or any
other person holding substantial powers of management, by whatever name called,
shall be subject to the approval of the Lead Institution.
(d) CONFLICT WITH MEMORANDUM AND ARTICLES OF ASSOCIATION
Nothing in the Loan Agreement conflicts with the Memorandum and
Articles of Association of the Borrower.
(e) IMPORT LICENCE
The Borrower has obtained import licence(s) with list of
equipment/necessary information about eligibility, scope and validity of
imports under Open General Licence for equipment to be imported for the
Project, and final quotation therefor. The Borrower further undertakes to
obtain information regarding changes in import policy, eligibility and scope of
import and shall advise the Lenders in this regard from time to time.
ARTICLE VI
PREDISBURSEMENT CONDITIONS
SECTION 6 - CONDITIONS PRECEDENT TO DISBURSEMENT
The obligation of the Lenders to make disbursements under the Loan
Agreement shall be subject to the Borrower performing all its obligations and
undertakings under the Loan Agreement besides compliance by the Borrower with
the Disbursement Procedure stipulated by the Lenders, such as submission of
necessary information, documents, etc. to the satisfaction of the Lenders.
Before seeking disbursement the Borrower shall also comply with the following
conditions:
<PAGE> 28
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(a) RAISING OF SHARE CAPITAL
The Borrower shall raise share capital as stipulated in the Loan Agreement
and the promoters shall subscribe to such capital to the extent stipulated by
the Lenders.
(b) SECURITY IN FAVOUR OF THE LENDERS
The Borrower shall create security as stipulated in the Loan Agreement in
favour of the Lenders.
(c) BORROWING FROM OTHER INSTITUTIONS/BANKS
The Borrower shall enter into effective agreements with other institutions/
banks in the term and substance satisfactory to the Lenders for raising of funds
as per the Financing Plan.
(d) NON-EXISTENCE OF EVENT OF DEFAULT
The Borrower shall satisfy the Lenders that no event of default as defined
in Article X hereof and no event which with the lapse of time or notice and
lapse of time as specified in Article X would become an event of default, has
happened and been continuing.
(e) DRAW DOWN SCHEDULE
The Borrower shall, within a period of 30 days from the date of the Loan
Agreement or such extended period as may be agreed to by the Lenders, supply to
the Lenders full information regarding the orders for the equipment placed by
it with its foreign suppliers and the schedule showing the dates on which it
expects to establish Letters of Credit under the disbursement procedure and
the sites on which payments under those Letters of Credit are expected to be
made.
(f) LETTERS OF CREDIT
The Borrower shall open Letter(s) of credit for import of capital goods
approved under the financing plan only through the Lead Institution/the Lenders.
(g) COMPLIANCE WITH SPECIAL CONDITIONS
The Borrower shall comply with such special conditions as may be
stipulated by the Lenders at the time of communication of the sanction of the
Loan or subsequently.
(h) DETAILED REVIEW OF THE PROGRESS
The Lenders shall have the right to review the cost of the Project before
final disbursement of the Loan.
<PAGE> 29
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(i) UNDERTAKING FOR MEETING SHORTFALL
The Borrower shall procure undertaking(s) from such persons as may be
specified by the Lead Institution in the form required by the Lead Institution
whereby it/he/they shall take the responsibility for making arrangements
satisfactory to the Lead Institution for meeting the shortfall, if any, in the
resources of the Borrower for completing the Project and for working capital.
The Borrower shall join in such undertaking as a confirming party. The funds
brought in to meet the shortfall in the resources of the Borrower for completing
the Project and/or working capital shall be in such form and manner and on such
terms as may be required by the Lead Institution.
ARTICLE VII
CONDITIONS APPLICABLE DURING CURRENCY OF THE LOAN AGREEMENT
SECTION 7.1 - PROJECT
The Borrower shall,
(i) PROJECT IMPLEMENTATION
Carry out and operate the Project with due diligence and efficiency and in
accordance with sound engineering, technical, administrative, financial,
managerial and industrial standards and business practices with qualified and
experienced management and personnel and in accordance with the Financing Plan
and cause the financing specified in the Financing Plan to be applied
exclusively to the Project.
(ii) PROJECT CHANGES
Promptly notify the Lead Institution of any proposed change in the nature
or scope of the Project and of any event or condition which might materially
and adversely affect or delay completion of the Project or result in
substantial overrun in the original estimate of costs. Any proposed change in
the nature or scope of the Project shall not be implemented or funds committed
therefor without the prior approval of the Lead Institution.
(iii) CONTRACT CHANGES
Obtain prior concurrence of the Lead Institution to any material
modification or cancellation of the Borrower's agreements with its machinery
suppliers, collaborators, technical consultants and suppliers of raw
materials.
<PAGE> 30
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(iv) DELAY IN COMPLETING THE PROJECT
Promptly inform the Lead Institution of the circumstances and conditions
which are likely to disable the Borrower from implementing the Project or which
are likely to delay its completion or compel the Borrower to abandon the same.
SECTION 7.2 - UTILISATION OF THE LOANS
(i) The Borrower shall use the Loans solely for the purposes described
in the Loan Agreement and covenants that the capital goods and services
purchased from the Loan shall be used exclusively in the carrying out of
the Project.
(ii) The Borrower shall purchase the capital goods and services to be
financed out of the Loans at a reasonable price, account being taken also of
other relevant factors such as time of delivery, efficiency, reliability of the
goods, their suitability for the Project and availability of maintenance
facilities and spare parts therefor and in the case of services, their quality
and the competence of the parties rendering them.
(iii) The Borrower shall not use the proceeds of the Loan for the purpose
of trading in any other currency.
Section 7.3 - GENERAL COVENANTS
(A) Without the prior approval of the Lead Institution, the Borrower
shall not
(i) NEW PROJECT
Undertake any new project, diversification, modernisation or substantial
expansion of the Project described herein. The word 'substantial' shall have
the same meaning as under the Industries (Development and Regulation) Act
of 1951.
(ii) LOANS AND DEBENTURES
Issue any debentures, raise any loans, accept deposits from public, issue
equity or preference capital, change its capital structure, create any charge
on its assets or give any guarantees. This provision shall not apply to normal
trade guarantees or temporary loans and advances granted to staff or
contractors or suppliers in the ordinary course of business or to raising of
unsecured loans, overdrafts, cash credit or other facilities from banks in the
ordinary course of business.
(iii) PREMATURE REPAYMENT
Prepay any loan availed of by it from any other party.
<PAGE> 31
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(iv) COMMISSION
Pay any commission to its promoters, directors, managers or other persons
for furnishing guarantees, counter guarantees or indemnities or for undertaking
any other liability in connection with any financial assistance obtained for or
by the Borrower or in connection with any other obligation undertaken for or by
the Borrower for the purpose of the Project.
(v) DIVIDEND
Declare or pay any dividend t its shareholders during any financial year
unless it has paid all the dues to the Lenders upto the date on which the
dividend is proposed to be declared or paid or has made satisfactory provisions
therefor. Further, the Borrower shall not declare dividend to the equity
shareholders in excess of 15% or the average of the dividend paid in the three
preceding years, whichever is higher, without prior approval of the Lead
Institution, which may be given conditionally.
(vi) SUBSIDIARIES
Create any subsidiary or permit any company to become its subsidiary.
(vii) MERGER, CONSOLIDATION, ETC.
Undertake or permit any merger, consolidation, reorganisation, scheme of
arrangement or compromise with its creditors or shareholders or effect any
scheme of amalgamation or reconstruction.
(viii) INVESTMENTS BY BORROWER
Make any investments by way of deposits, loans, share capital, etc. in
any concern.
(ix) REVALUATION OF ASSETS
Revalue its assets at any time during the currency of the Loans.
(x) TRADING ACTIVITY
Carry on any general trading activity other than the sale of its own
products.
(B) Unless otherwise agreed to by the Lead Institution, the Borrower shall,
(i) ACCOUNTING AND COST CONTROL SYSTEMS
Promptly and diligently instal and thereafter maintain an accounting and
cost control system satisfactory to the Lenders and maintain
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books of accounts and other records adequate to reflect truly and fairly the
financial position of the Borrower and the results of its operations (including
the progress of the Project) in conformity with sound accounting principles
consistently applied. Such records and books shall be open to examination by
the Lenders and any authorised representative of the Foreign Lending Agency.
(ii) INFORMATION ON LOANS, GOODS, ETC.
Provide to the lenders all such information relating to the Loans, the
goods and services financed out of the Loans, the Project and its operations
and other related matters as the Lenders or the Foreign Lending Agency shall,
from time to time, at their discretion request, including information relating
to the administration, management and financial condition of the Borrower.
(iii) NOTICE OF WINDING UP OR OTHER LEGAL PROCESS
Promptly inform the Lenders if it has notice of any application for
winding up having been made or any statutory notice of winding up under the
provisions of the Companies Act, 1956, or any other notice under any other Act
or otherwise of any suit or other legal process intended to be filed or
initiated against the Borrower and affecting the title to the properties of the
Borrower or if a receiver is appointed of any of its properties or business or
undertaking.
(iv) ADVERSE CHANGES IN PROFITS AND PRODUCTION
Promptly inform the Lead Institution of the happening of any labour
strikes, lockouts, shut-downs, fires or any event likely to have a substantial
effect on the Borrower's profits or business and of any material changes in the
rate of production or sales of the Borrower with an explanation of the reasons
therefor.
(v) INSURANCE
a) Insure and keep insured against such risks as may be determined by
the Lenders all the goods to be imported for the purpose of the Project whether
financed out of the proceeds of the Loans or not and in particular the goods to
be financed out of the proceeds of the Loans as are of an insurable nature
against all marine, transit and other hazards incidental to the acquisition,
transportation and delivery of the goods to the place of use or installation
and for such insurance any indemnity shall be payable in a currency freely
usable by the Borrower to replace or repair such goods.
b) Keep insured upto the replacement value thereof as approved by the
Lead Institution (including surveyor's and architect's fees) the properties
charged/to be charged to the Lenders and such of its other properties as are of
an insurable nature against fire, theft, lightning, explosion, earthquake, riot,
strike, civil commotion, storm, tempest, flood, marine risks, erection risks,
war risks and such other risks as may be specified by the Lead Institution.
<PAGE> 33
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c) Duly pay all premia and other sums payable for that purpose. The insurance
in respect of the properties charged/to be charged to the Lenders shall be
taken in the joint names of the Borrower and the Lenders and any other person
or institution having an insurable interest in the properties of the Borrower
and acceptable to the Lead Institution. The Borrower shall keep deposited with
the Lead Institution the insurance policies and renewals thereof.
d) Agree that, in the event of failure on the part of the Borrower to insure
the properties or to pay the insurance premia or other sums referred to above,
the Lenders may get the properties insured or pay the insurance premia and
other sums referred to above, as the case may be.
(vi) LOSS OR DAMAGE BY UNCOVERED RISKS
Promptly inform the Lead Institution of any loss or damage which the
Borrower may suffer due to any force majeure circumstances or act of God such
as earthquake, flood, tempest or typhoon, etc. against which the Borrower may
not have insured its properties.
(vii) COSTS AND CHARGES
Pay all taxes, duties, cesses, costs, charges and expenses in
connection with or relating to the Loan transaction (including cost of
investigation of title and protection of the Lenders' interest). In the event
of the Borrower failing to pay the aforesaid monies, the Lenders/Lead
Institution shall be at liberty but shall not be obliged to pay the same.
(viii) ANNUAL ACCOUNTS
Submit to each of the Lenders its duly audited annual accounts within
six months from the close of its accounting year. In case statutory audit (if
required) is not likely to be completed during this period, the Borrower shall
get its accounts audited by an independent firm of Chartered Accountants and
furnish the same to the Lead Institution.
(ix) MEMORANDUM AND ARTICLES OF ASSOCIATION
Carry out such alterations to its Memorandum and Articles of Association
as may be deemed necessary in the opinion of the Lead Institution to safequard
the interests of the Lenders arising out of the Loan Agreement.
(x) SELLING AND PURCHASING ARRANGEMENTS
Undertake that if so required by the Lead Institution, the Borrower
shall take steps to suitably modify or terminate the existing
selling/purchasing arrangements in such manner as may be required by the Lead
Institution. The Borrower shall not enter into any fresh agreement for the
appointment of sole selling agents/sole purchasing agents without the
<PAGE> 34
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prior approval of the Lead Institution. Any such arrangement shall be subject
to such terms and conditions as may be stipulated by the Lead Institution.
SECTION 7.4 - NOMINEE DIRECTOR
(i) Each of the Lenders shall have the right to appoint and remove from
time to time, Director(s) on the Board of Directors of the Borrower as set out
in the Loan Agreement (such directors are hereinafter referred to as "Nominee
Director(s)").
(ii) The Nominee Director(s) shall not be required to hold qualification
shares and not be liable to retire by rotation.
(iii) The Nominee Director(s) shall be entitled to all the rights and
privileges of other Directors including the sitting fees and expenses as
payable to other Directors but if any other fees, commission, monies or
remuneration in any form is payable to the Directors, the fees, commission,
monies and remuneration in relation to such Nominee Director(s) shall accrue to
the Lenders and the same shall accordingly be paid by the Borrower directly to
the Lead Institution for the account of the concerned Lender. Provided that, if
any such Nominee Director(s) is an officer of the Lenders, the sitting fees in
relation to such Nominee Director(s) shall also accrue to the Lenders and the
same shall accordingly be paid by the Borrower directly to the Lead Institution
for the account of the concerned Lender.
Any expenditures incurred by the Lenders or the Nominee Director(s) in
connection with his appointment or directorship shall be borne by the
Borrower.
(iv) The Nominee Director(s) shall be appointed a Member of the
Management Committee or other Committees of the Board, if so desired by the
Lenders.
(v) The Nominee Director(s) shall be entitled to receive all notices,
agenda, etc. and to attend all General Meetings and Board Meetings and Meetings
of any Committees of the Board of which he is a member.
(vi) If, at any time, the Nominee Director(s) is not able to attend a
meeting of the Board of Directors or any of its Committees of which he is a
member, the Lenders may depute an observer to attend the meeting. The expenses
incurred by the Lenders in this connection shall be borne by the Borrower.
SECTION 7.5 - MANAGEMENT
Unless the Lead Institution otherwise agrees:
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(i) EXISTING MANAGEMENT
The Borrower shall not remove any person, by whatever name called,
exercising substantial power of management of the affairs of the Borrower at
the time of execution of the Loan Agreement.
(ii) PAYMENT OF REMUNERATION
The person(s) referred to in (i) above shall not be paid any commission in
any year unless all the dues of the Lenders in that year have been paid to the
satisfaction of the Lead Institution.
(iii) PAYMENT OF COMPENSATION
The Borrower shall not pay any compensation to any of the persons
mentioned in (i) above in the event of loss of his/their office(s) for any
reason whatsoever if there is a default in repayment of dues to the Lenders.
(iv) UNDERTAKINGS
The Borrower shall obtain suitable undertakings for giving effect
to (ii) and (iii) above from the persons mentioned in (i) above. The
appointment/reappointment including terms of appointment (or alteration in
such terms) of the persons mentioned in (i) above shall be subject to the
prior approval of the Lead Institution.
(v) FUTURE ARRANGEMENT
The Borrower shall, as and when required by the Lead Institution, appoint
and change to the satisfaction of the Lead Institution suitable technical,
financial and executive staff of proper qualifications and experience for the
key posts. The terms of such appointments including any changes therein, shall
be subject to prior approval of the Lead Institution.
(vi) REVIEW OF MANAGEMENT
In case of default in payment of any dues to the Lenders or if in the
opinion of the Lead Institution the business of the Borrower is conducted in a
manner opposed to the public policy or in a manner prejudicial to the Lenders'
interest, the Lead Institution shall have the right to review the management
set up or organisation of the Borrower and to require the Borrower to
restructure it as may be considered necessary by the Lead Institution,
including the formation of Management Committees with such powers and functions
as may be considered suitable by the Lead Institution.
(vii) APPOINTMENT OF TECHNICAL/MANAGEMENT CONSULTANTS/CHARTERED ACCOUNTANTS
The Lead Institution shall have the right to appoint, whenever it considers
<PAGE> 36
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necessary, any person, firm, company or association of persons engaged in
technical, management or any other consulting business to inspect and examine
the working of the Borrower and its factory and to report to the Lead
Institution. The Lead Institution shall have the right to appoint, whenever it
considers necessary, any Chartered Accountants/Cost Accountants as auditors for
carrying out any specific assignment(s) or to examine the financial or cost
accounting systems and procedures adopted by the Borrower for its working or as
concurrent or internal auditors, or for conducting a special audit of the
Borrower. The costs, charges and expenses including professional fees and
travelling and other expenses of such consultants or auditors shall be payable
by the Borrower.
(viii) COMMITTEES OF BOARD
The Borrower shall constitute such committees of the Board with such
composition and functions as may be required by the Lead Institution for close
monitoring of different aspects of its working.
(ix) UNDERTAKINGS FOR NON-DISPOSAL OF SHAREHOLDINGS
The Borrower shall not recognise or register any transfer of shares in the
Borrower's capital made or to be made by promoters, their friends or associates
as may be specified by the Lead Institution. The Borrower shall obtain and
furnish to the Lead Institution suitable undertakings from such person for
giving effect to the above.
ARTICLE VIII
REPORTS
SECTION 8 - The Borrower shall furnish to the Lenders such reports as may be
required by the Lenders.
ARTICLE IX
INSPECTION
SECTION 9 - The borrower shall,
a) PROJECT EXPENDITURE RECORDS
Maintain records and procedures adequate to record and monitor the progress of
the Project (including its cost and the benefits to be derived from it), to
identify the goods and services financed out of the Loan, to disclose their use
in the Project and the operations and financial condition of the
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Borrower and such records shall be open to examination by the Lenders, the
Foreign Lending Agency and their authorised representatives.
b) TECHNICAL, FINANCIAL AND LEGAL INSPECTIONS
(i) Permit the Lenders, by themselves or jointly with the Foreign Lending
Agency and their authorised representatives, to carry out technical, financial
and legal inspections of the goods purchased out of the Loans and to visit any
facilities and construction sites included in the Project and to examine any
plants, installations, sites, works, buildings, property, equipment, records and
documents relevant to the performance of the obligations of the Borrower under
the Loan Agreement. Any such representative of the Lenders and/or the Foreign
Lending Agency shall have free access at all reasonable times to the Borrower's
properties and shall receive full cooperation and assistance from the employees
of the Borrower.
(ii) Permit any whole-time officer of the Lenders or any authorised
representative of the Foreign Lending Agency or a qualified practising Auditor
to examine the Borrower's books and papers and will give all facilities to
enable any technically qualified person chosen by the Lenders or the Foreign
Lending Agency to report on the business of the Borrower at any time.
Provided that, if the technically qualified person is not a whole-time employee
of the Lenders or an authorised representative of the Foreign Lending Agency
such technically qualified person shall be reasonably acceptable to the
Borrower having regard to his other activities, if any.
(iii) The cost of inspection, including travelling and all other expenses,
shall be payable by the Borrower to the Lenders/the Foreign Lending Agency in
this behalf.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
SECTION 10.1 If one or more of the events specified in this Section
(hereinafter called 'events of default') happen(s), the Lead Institution or the
Lenders or any of them may, by a notice in writing to the Borrower, declare the
principal of and all accrued interest on the Loans to be due and payable
forthwith and the security created in terms of Article III of the Loan
Agreement shall become enforceable and the Lenders shall have the following
rights (anything in the Loan Agreement to the contrary notwithstanding) namely:-
(i) to enter upon and take possession of the assets of the Borrower; and
(ii) to transfer the assets of the Borrower by way of lease or leave and
licence or sale.
<PAGE> 38
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EVENTS OF DEFAULT
a) DEFAULT IN PAYMENT OF PRINCIPAL SUMS OF THE LOANS
Default has occurred in the payment of principal sums of the Loans on the due
dates.
b) DEFAULT IN PAYMENT OF INTEREST
Default has been committed by the Borrower in payment of any instalment of
interest on the Loans and such default has continued for a period of thirty
days.
c) ARREARS OF INTEREST
Interest amounting to at least Rs. 500 has been in arrears and unpaid for
thirty days after becoming due.
d) DEFAULT IN PERFORMANCE OF COVENANTS AND CONDITIONS
Default has occurred in the performance of any other covenant, condition or
agreement on the part of the Borrower under the Loan Agreement or any other
agreement and such default has continued for a period of thirty days after
notice in writing thereof has been given to the Borrower by the Lenders/Lead
Institution.
e) SUPPLY OF MISLEADING INFORMATION
Any formation given by the Borrower in its Loan Application, in the reports
and other information furnished by the Borrower in accordance with the
Reporting System and the warranties given/deemed to have been given by the
Borrower to the Lenders/Lead Institution is misleading or incorrect in any
material respect.
f) INABILITY TO PAY DEBTS
If, there is reasonable apprehension that the Borrower is unable to pay its
debts or proceedings for talking it into liquidation, either voluntarily or
compulsorily, may be or have been commenced.
g) INADEQUATE INSURANCE
If, the properties and assets offered to the Lenders as security for the Loans
have not been kept insured by the Borrower or depreciate in value to such an
extent that, in the opinion of the Lead Institution, further security to the
satisfaction of the Lead Institution should be given and on advising the
Borrower to that effect such security has not been given to the Lenders.
<PAGE> 39
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h) SALE, DISPOSAL AND REMOVAL OF ASSETS
If, without the prior approval of the Lead Institution any land, buildings,
structures or plant and machinery of the Borrower are sold, disposed of,
charged, encumbered or alienated or the said buildings, structures, machinery,
plant or other equipment are removed, pulled down or demolished.
i) REFUSAL TO DISBURSE LOANS BY OTHER FINANCIAL INSTITUTIONS
If the other financial institution(s) or bank(s) with whom the Borrower
has entered into agreements for financial assistance have refused to disburse
its/their loan(s) or any part thereof or have recalled its/their loan(s) under
their respective loan agreement(s) with the Borrower.
j) PROCEEDINGS AGAINST BORROWER
The Borrower has voluntarily or involuntarily become the subject of
proceedings under any bankruptcy or insolvency law or the Borrower is
voluntarily or involuntarily dissolved.
k) INABILITY TO PAY DEBTS ON MATURITY
The Borrower is unable or has admitted in writing its inability to pay
its debts as they mature.
l) LIQUIDATION OR DISSOLUTION OF THE BORROWER
The Borrower has taken or suffered to be taken any action for its
reorganisation, liquidation or dissolution.
m) APPOINTMENT OF RECEIVER OR LIQUIDATOR
A receiver or liquidator has been appointed or allowed to be appointed
of all or any part of the undertaking of the Borrower.
n) ATTACHMENT OR DISTRAINT OF MORTGAGED PROPERTIES
If, an attachment or distraint has been levied on the mortgaged
properties or any part thereof or certificate proceedings have been taken or
commenced for recovery of any debt from the Borrower.
o) EXTRA-ORDINARY CIRCUMSTANCES
If, extraordinary circumstances have occured which make it improbable
for the Project to be carried out and for the Borrower to fulfill its
obligations under the Loan Agreement.
SECTION 10.2 CONSEQUENCES OF DEFAULT
On the happening of any of the events of default, in addition to
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the rights specified in Section 10.1 hereof, each of the Lenders shall be
entitled to appoint and remove from time to time Whole-time Director(s) on the
Board of Directors of the Borrower (such Director(s) are hereinafter referred
to as "the Whole-time Nominee Director(s)"). Such Whole-time Nominee
Director(s) shall exercise such powers and duties as may be approved by the
Lenders and have such rights as are usually exercised by or are available to a
Whole-time Director in the management of the affairs of the Borrower. Such
Whole-time Nominee Director(s) shall not be required to hold qualification
shares nor be liable to retire by rotation and shall be entitled to receive
such remuneration, fees, commission and monies as may be approved by the Lead
Institution. Such Whole-time Nominee Director(s) shall have the right to
receive notices of and attend all General Meetings and Board Meetings or any
committee(s) of the Borrower of which they are members.
Any expense that may be incurred by the Lenders or such Whole-time
Nominee Director(s) in connection with their appointment or directorship shall
be paid or reimbursed by the Borrower to the Lenders or as the case may be, to
such Whole-time Nominee Director(s).
SECTION 10.3 NOTICE TO THE LENDERS ON THE HAPPENING OF AN EVENT OF DEFAULT
If, any event of default or any event which, after the notice, or lapse
of time, or both, would constitute an event of default has happened, the
Borrower shall forthwith give notice thereof to the Lead Institution in writing
specifying the nature of such event of default, or of such event.
SECTION 10.4 EXPENSES OF PRESERVATION OF ASSETS OF BORROWER AND OF COLLECTION
All expenses incurred by the Lenders after an event of default has
occurred in connection with:-
(i) preservation of the Borrower's assets (whether then or thereafter
existing); and
(ii) collection of amounts due under the Loan Agreement shall be payable
by the Borrower.
ARTICLE II
CANCELLATION, SUSPENSION AND TERMINATION
SECTION 11.1 CANCELLATION BY NOTICE TO THE LENDERS
The Borrower may, by notice in writing to the Lead Institution, cancel
the Loans or any part thereof which the Borrower has not withdrawn prior to the
giving of such notice. Provided that such cancellation shall be pro-rata for
each Lender.
<PAGE> 41
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SECTION 11.2 SUSPENSION
Further access by the Borrower to the use of the Loans may be suspended or
terminated by the Lenders/Lead Institution:
a) NON-COMPLIANCE OF TERMS AND CONDITIONS
Upon failure by the Borrower to carry out all or any of the terms of the
Loan Agreement or on the happening of any event of default referred to in
Article X hereof.
b) EXTRA-ORDINARY SITUATION
If, any extra ordinary situation makes it improbable that the Borrower
would be unable to perform its obligations under the Loan Agreement.
c) ASSIGNMENT OR TRANSFER OF PROPERTIES TO RECEIVER, ASSIGNEE, ETC.
If, the Borrower takes or permits to be taken any action or proceedings
whereby any or its properties shall or may be assigned or, in any manner,
transferred or delivered to any receiver, assignee, liquidator or other person,
whether appointed by the Borrower or by any Court of Law, where by such
property shall or may be distributed among the creditors of the Borrower or the
Borrower suffers any charge to be created over its properties in any legal
proceedings.
d) CHANGE IN THE BORROWER'S SET-UP
If, any change in the Borrower's set-up has taken place which, in the
opinion of the Lead Institution (which shall be final and binding on the
Borrower), would adversely affect the conduct of the Borrower's business or
financial position or the efficiency of the Borrower's management or personnel
or the execution of the Project.
e) DENIAL OF ACCESS
If, for any reason, the Lenders are denied further access to their loan(s)
facility from the Foreign Lending Agency.
SECTION 11.3 SUSPENSION TO CONTINUE TILL DEFAULT REMEDIED
The right of the Borrower to make withdrawals from the Loans shall
continue to be suspended until the Lead Institution has notified the Borrower
that the right to make withdrawals has been restored.
SECTION 11.4 TERMINATION
If any of the events described above or in Article X hereof has been
continuing or if the right of the Borrower to make withdrawals from the Loans
shall have been suspended with respect to any amount of the Loans
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for a continuous period of thirty days or if the Borrower has not withdrawn the
Loans by the date referred to in the Loan Agreement or such later date as may
be agreed to by the Lenders or if the Lenders are denied access to their
loan(s) by the Foreign Lending Agency, then, in such event, the Lead
Institution may, by notice in writing to the Borrower, terminate the right of
the Borrower to make withdrawals. Upon such notice, the undrawn amount of the
Loans shall stand cancelled. Notwithstanding any cancellation, suspension or
termination pursuant to the aforesaid provisions, all the provisions of the
Loan Agreement shall continue to be in full force and effect as herein
specifically provided.
ARTICLE XII
WAIVER
SECTION 12. WAIVER NOT TO IMPAIR THE RIGHTS OF THE LENDERS
No delay in exercising or omission to exercise any right, power or remedy
accruing to the Lenders/Lead Institution upon any default under the Loan
Agreement, security documents or any other agreement or document shall impair
any such right, power or remedy or shall be construed to be a waiver thereof or
any acquiescence in such default, nor shall the action or inaction of the
Lenders/Lead Institution in respect of any default or any acquiescence by them
in any default, affect or impair any right, power or remedy of the Lenders/Lead
Institution in respect or any other default.
ARTICLE XIII
APPLICABILITY OF OTHER STATUTES
SECTION 13. APPLICATION OF OTHER STATUTES
Nothing contained in the Loan Agreement shall prejudice or in any way
affect the rights vested in the Lenders under the Industrial Development Bank
of India Act, 1964 (18 of 1964), Industrial Financial Corporation Act, 1948
(15 of 1948), or any other statute.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 SERVICE OF NOTICE
Any notice or request to be given or made to the Lenders/Lead Institution
or to the Borrower or to any other party shall be in writing. Such notice or
request shall be deemed to have been given or made when it
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is delivered by hand or despatched by mail or telegram to the party to which it
is required to be given or made at such party's designated address.
SECTION 14.2 EVIDENCE OF DEBT
a) Each of the Lenders shall maintain, in accordance with their usual
practice, accounts evidencing the amounts from time to time lent by and owing
to them under the Loan Agreement.
b) In any legal action or proceedings arising out of or in connection
with the Loan Agreement, the entries made in the accounts maintained pursuant
to sub-clause (a) above shall be prima-facia evidence of the existence and
amount of obligations of the Borrower as therein recorded.
SECTION 14.3 BENEFIT OF THE LOAN AGREEMENT
The Loan Agreement shall be binding upon and enure to the benefit to each
party thereto and its successors and assigns.
SECTION 14.4 HEADINGS
The headings of various Article and Sections herein and in the Loan
Agreement are inserted for convenience of reference and are not deemed to
affect to construction of the relative provision.
<PAGE> 44
50 Rs.
[Facsimile of Indian Rupee]
DEED OF HYPOTHECATION
<PAGE> 45
20 Rs.
[Facsimile of Indian Rupee]
DEED OF HYPOTHECATION
THIS DEED OF HYPOTHECATION executed at Bombay this day
of , One Thousand Nine Hundred and Ninety Four by Seec, Inc., having its
Registered Office at 5001, Baum Blvd., Pittsburgh, Pennsylvania 15213, USA
(hereinafter referred to as "the Borrower" which expression shall, unless it be
repugnant to the subject or context thereof, include its successors and
assigns) in favour of THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA
LIMITED, a public company incorporated under the Indian Companies Act, 1913
(VII of 1913) and having its Registered Office at 163, Backbay Reclamation,
Bombay 400 020 (hereinafter referred to as " the Lender" which expression
shall, unless it be repugnant to the subject or context thereof include its
successors and assigns).
... 2
<PAGE> 46
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WHEREAS
(1) By an Agreement dated the day of , 1994, entered into between
the Borrower and the Lender (hereinafter referred to as "the Loan
Agreement") the Lender has agreed to lend and advance to the Borrower and
the Borrower has agreed to borrow from the Lender on the terms and
conditions contained in the Loan Agreement a sum to the maximum extent of
US $ 300,000 (US $ Three hundred thousand only) out of funds provided by
United States Agency for International Development (USAID) under the
Program for Advancement of Commercial Technology (PACT).
(2) One of the conditions of the Loan Agreement is that the Loan together with
all interest, liquidated damages, premia on prepayment or on redemption,
costs, expenses and other moneys whatsoever stipulated in the Loan
Agreement shall be secured, inter alia, by a first charge by way of
hypothecation of all the Borrower's moveables (save and except book debts)
including movable machinery, machinery spares, tools and accessories,
present and future, subject to prior charges created and/or to be created
in favour of the Borrower's Bankers on the Borrower's stocks of raw
materials, semi-finished and finished goods, consumable stores and such
other moveables as may be agreed to by the Lender (hereinafter referred to
as "the Bankers' Goods") for securing the borrowings for working capital
requirements in the ordinary course of business. The terms "moveables" and
"immoveables" as used herein do not include source codes, copyrights and
trademarks; and
(3) The Lender has called upon the Borrower to execute these presents which
the borrower has agreed to do in the manner hereinafter expressed.
NOW THEREFORE THESE PRESENTS WITNESSETH THAT :
1. In pursuance of the Loan Agreement and in consideration of the Lender
having lent and advanced and/or agreed to lend and advance the Loan to the
Borrower for the purposes and subject to the terms and conditions set out
in the Loan Agreement and in consideration of the premises, the Borrower
doth hereby covenant with the Lender that it shall repay the Loan to the
Lender and shall pay interest, additional
... 3
<PAGE> 47
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interest, premia on prepayment or on redemption, costs, charges and
expenses and all other moneys as stipulated and in the manner set out in
the Loan Agreement and shall duly observe and perform all the terms and
conditions of the Loan Agreement.
2. In pursuance of the Loan Agreement and for the consideration aforesaid, the
whole of the movable properties of the Borrower including its movable plant
and machinery, machinery spares, tools and accessories and other moveables,
both present and future, (save and except book debts) whether installed or
not and whether now lying loose or in cases or which are now lying or
stored in or about or shall hereafter from time to time during the
continuance of these presents be brought into or upon or be stored or be in
or about all the Borrower's factories, premises and godowns situated at
Pittsburgh, USA, or wherever else the same may be or be held by any party
to the order or disposition of the Borrower or in the course of transit or
on high seas or on order or delivery (hereinafter collectively referred to
as "the said Goods") short particulars whereof are given in Schedule
hereto, are hereby hypothecated as and by way of first charge to the Lender
as security for and be charged with the repayment of the Loan and repayment
or payment of other moneys including all interest, additional interest,
premia on prepayment or on redemption, costs, charges and expenses and all
other moneys due to the Lender under the Loan Agreement and these presents,
provided that the charge of the Lender thereon shall be subject to the
charges created and/or to be created by the Borrower in favour of its
bankers on the Bankers' Goods, to secure borrowings in the ordinary course
of the business of the Borrower for its working capital requirements. The
terms "moveables" and "immoveables" as used herein do not include source
codes, copyrights and trademarks;
3. In further pursuance of the Loan Agreement and for the consideration
aforesaid, the borrower doth hereby further agree, declare and covenant
with the Lender as follows:
... 4
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i) The Borrower shall at its expense keep the said Goods in marketable and good
condition and insure the same in the joint names of the Borrower and the
Lender as provided in the Loan Agreement against any loss or damage by
theft, fire, lightning, earthquake, explosion, riot, strike, civil
commotion, storm, tempest, flood, marine risk, erection risk, war risk, and
such other risks as the Lender shall, from time to time, require with an
insurance company or companies. The Borrower shall deliver to the Lender the
relevant policies of insurance dully assigned to the Lender and maintain
such insurance throughout the continuance of the security of these presents
and deliver to the Lender the renewal receipts therefor and shall duly and
punctually pay all premia and shall not do or suffer to be done or omit to
do or be done any act which may invalidate or avoid such insurance. In
default the Lender may (but shall not be bound to) keep in good condition
and render marketable the said Goods and take out/renew such insurance. Any
premium paid by the Lender and any costs, charges and expenses incurred by
the Lender shall, forthwith on receipt of a notice of demand from the
Lender, be reimbursed to the Lender together with interest thereon at the
applicable rate for the Normal Loan on the date of the Loan Agreement from
the date of payment and until such reimbursement by the Borrower the same
shall be debited to the Borrower's Loan Account and be a charge on the
said Goods.
ii) The nominees of the Lender and the UNITED STATES AGENCY FOR INTERNATIONAL
DEVELOPMENT shall, without any notice and at the risk and expense of the
Borrower, be entitled at all times to enter any place where the said Goods
mat be and inspect, value, insure, superintend the disposal of and take
particulars of all or any part of the said Goods and check any statement,
accounts, reports and information.
... 5
<PAGE> 49
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iii) In the event of any breach or default of the Borrower in the performance
of it obligations hereunder or any of the terms, covenants, obligations
and conditions stipulated in the Loan Agreement or the related security
documents or the deeds executed or that may hereafter be executed by the
Borrower in favour of the Lender or in the event of the Borrower failing
to pay either the interest or any instalment/s of the principal of the
Loan, or in the event of the charge or the security created in favour of
the Lender having become enforceable for any reason whatsoever, the Lender
or its nominees shall, in case such breach or default is not remedied by
the Borrower to the satisfaction of the Lender within a period of fifteen
days from the date of intimation by the Lender of such breach or default
or such extended time as may be granted by the Lender in writing, without
any notice and without assigning any reason and at the risk and expense of
the Borrower and if necessary as Attorney for and in the name of the
Borrower seize, recover, receive and remove them and/or sell by public
auction or by private contract, despatch or consign for realisation or
otherwise dispose of or deal with all or any part of said Goods and to
enforce, realise, settle, compromise and deal with any rights or claims
relating thereto without bound to exercise any of these powers or be
liable for any losses in the exercise or non-exercise thereof and without
prejudice to the Lender's rights and remedies or suit or otherwise.
Notwithstanding any pending suit or other proceeding, the Borrower
undertakes to give immediate possession to the nominees of the Lender on
demand of the said Goods and to transfer and to deliver to the Lender all
relative bills, contracts, securities and documents and the Borrower
hereby agrees to accept the Lender's account of sales and realisations as
sufficient proof of amounts realised and relative expenses and to pay on
demand by the Lender any shortfall or deficiency thereby shown Provided
however that the Lender shall not be in any way liable or responsible for
any loss, damage or depreciation that the said Goods may suffer or sustain
on any account whatsoever whilst the same are in possession of the Lender
or by reason of exercise or non-exercise of rights or remedies
... 6
<PAGE> 50
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available to the Lender as aforesaid and that all such loss, damage or
depreciation shall be wholly debited to the account of the Borrower
howsoever the same may have been caused.
iv) The Lender, at any time after the security hereby created has become
enforceable and whether or not the Lender shall then have entered into or
taken possession of and in addition to the powers hereinbefore conferred
upon the Lender after such entry into or taking possession of, may have a
receiver or receivers appointed of the said Goods or any part thereof. The
following provisions shall apply to such Receiver:
a) Unless otherwise directed by the Lender, such Receiver shall have and
exercise all powers and authorities vested in the Lender;
b) Such Receiver shall, in the exercise of his powers, authorities and
discretions, conform to the regulation and directions from time to
time made and given by the Lender;
c) The Lender may, from time to time, fix the remuneration of such
Receiver and shall direct payment thereof out of the said Goods, but
the Borrower alone shall be liable for the payment of such
remuneration;
d) The Lender may, from time to time and at any time, require such
Receiver to give security for the due performance of his duties as
such Receiver and may fix the nature and amount of the security to be
given to the Lender but the Lender shall not be bound to require such
security in any case;
e) The Lender may pay over to such Receiver any moneys constituting part
of the securities to the intent that the same may be applied for the
purpose hereof of such Receiver and the Lender may, from time to time,
determine what funds the Receiver shall be at liberty to keep in hand
with a view to the performance of his duties as such Receiver;
... 7
<PAGE> 51
: 7 :
f) Every such Receiver shall be the agent of the Borrower for all purposes
and the Borrower alone shall be responsible for his acts and defaults,
loss or misconduct and liable on any contract or engagement made or
entered into by him and for his remuneration and the Lender shall not
incur any liability or responsibility therefor by reason of its making
or consenting to his appointment as such Receiver.
v) All the said Goods and all sale realisations and insurance proceeds
thereof and all documents under this security shall always by kept
distinguishable and held as the exclusive property of the Lender
specifically appropriated to this security and be dealt with only under
the directions of the Lender and the Borrower shall not create any charge,
mortgage, lien or other encumbrance upon or over the same or any part
thereof except in favour of the Lender nor suffer any such charge,
mortgage, lien or other encumbrance or any attachment or distress to
affect the same or any part thereof nor do or allow anything that may
prejudice this security and the Lender shall be at liberty to incur all
costs and expenses as may be necessary to preserve this security and to
maintain the same undiminished and claim reimbursement thereof as
mentioned in Sub-clause (i) hereof PROVIDED that except to the extent
specifically permitted by the Lender, the borrower shall not sell all or
any of the said Goods. The borrower shall on any and every such sale pay
to the Lender, if so required by it, the net proceeds of the sale or
disposal in satisfaction, so far as the same shall extend, of the moneys,
due and payable by the Borrower to the Lender PROVIDED that the Borrower
may without payment to the Lender, if the Lender so agrees, replace the
outmoded equipment by equipment of equivalent or greater value.
vi) The Borrower shall, whenever required by the Lender, give full particulars
to the Lender of all the assets of the Borrower and of the said Goods and
shall furnish and verify all statements, reports, returns, certificates
and information from time to time and as required by the Lender and make
furnish and execute all necessary documents go give effect to this
security.
... 8
<PAGE> 52
: 8 :
vii) This security shall be a continuing security for repayment of the
Loan together with all interest, additional interest, premia on
prepayment or on redemption and repayment or payment of all other
moneys due to the Lender under the Loan Agreement and these presents
and shall not affect, impair or discharge the liability of the
Borrower by winding up (voluntary or otherwise) or by any merger or
amalgamation, reconstruction or otherwise of the Borrower with any
other company or take over of the management or nationalisation of
the undertaking of the Borrower.
viii) The Borrower hereby declares that the said Goods are and will at all
times be the absolute property of the Borrower at the sole disposal
of the Borrower and subject to the charges created and/or to be
created with the specific permission of the Lender be free from any
charge, trust, pledge, lien, claim or encumbrance and as to future
goods the same shall likewise be unencumbered, absolute and
disposable property of the Borrower with full power of disposition
over the same provided that the Borrower shall be entitled at all
times to sell or dispose of the Bankers' Goods in the ordinary course
of business and also to hypothecate the Bankers' Goods by way of
first charge in favour of its Bankers, such charge(s) in favour of
the Bankers to rank in priority over the charge hereby created.
ix) The Borrower hereby appoints the Lender as its attorney and
authorises the Lender to act for and in the name of the Borrower
to do whatever the Borrower may be required to do under these
presents and generally to use the name of the Borrower in the
exercise of all or any of the powers by these presents conferred
on the Lender and the Borrower shall bear the expenses that may
be incurred in this regard.
x) Nothing herein shall prejudice the rights or remedies of the
Lender in respect of any present or future security, guarantee
obligation or decree for any indebtedness or liability of the
Borrower to the Lender.
... 9
<PAGE> 53
: 9 :
xi) The provisions contained herein shall be read in conjunction with the
provisions of the Loan Agreement as amended from time to time and
to the extent of any inconsistency or repugnancy the latter shall
prevail to all intents and purposes.
IN WITNESS WHEREOF the Borrower has caused its Common Seal to be
affixed hereto on the day, month and year first above written.
The Common Seal of SEEC, INC. has,
pursuant to the Resolution of its Board
of Directors passed in that behalf on
the day of 1994, hereunto been
affixed in the presence of
Ms Keely O'Malley/and Mr John D. Godfrey who have [SEAL]
signed these presents in token thereof
and Mr. Koka Ravindra
authorised person who has countersigned
the same in token thereof.
<PAGE> 54
SCHEDULE
(Short particulars of movable properties)
The whole of the movable properties of the Borrower pertaining to the
Project including its movable plant and machinery, machinery spares, tools and
accessories and other moveables, both present and future, (save and except book
debts) whether installed or not and whether now lying loose or in cases or
which are now lying or stored in or about or shall hereafter from time to time
during the continuance of the security of these presents be brought into or
upon or be stored or be in or about all the Borrower's factories, premises and
godowns situated at Pittsburgh, USA or wherever else the same may be or be held
by any party to the order or disposition of the Borrower or in the course of
transit or on high seas or on order, or delivery, howsoever and wheresoever in
the possession of the Borrower and either by way of substitution or addition.
The terms "moveables" and "immoveables" as used herein do not include source
codes, copyrights and trademarks.
<PAGE> 55
20 Rs.
[Facsimile of Indian Rupee]
The Industrial Credit and Investment
Corporation of India Limited
163 Backbay Reclamation
Bombay 400 - 020 - 25
Dear Sirs,
In consideration of your having agreed to grant to Seec, Inc. the
financial assistance in terms of the Loan Agreement dated day
of , 1994, we the Directors/Promoters of the Company, do hereby, in
pursuance of Article VI (i) of the General Conditions (GC-FC-88) of the said
Loan Agreement, jointly and severally, undertake to you that if there is any
shortfall in the resources of the Company for completing its project and/or
working capital due to any circumstances whatsoever either at the time of
starting of the project or subsequently, we shall make arrangements
satisfactory to you to provide to the Company in these events and when called
upon by you, such additional funds as may be required to complete its project
and for working capital.
... 2
<PAGE> 56
: 2 :
We also hereby jointly and severally undertake to you that such additional
funds as and when provided by us shall be in the form and manner and on such
terms as may be required by you and shall not involve any charge or lien on or
other interest in the assets of the Company. In the event of such funds being
brought in by us by way of unsecured loans/deposits to the Company, we shall not
demand or withdraw such funds or any part thereof nor shall the Company repay
such funds or any part thereof so long as any moneys remain due by the Company
to you under the said Loan Agreement or till the project is duly completed,
whichever is later without your prior written approval.
We agree that if a dispute arises whether the Project is duly completed or
not, your decision shall be final and binding to us.
We note that such unsecured loans/deposits shall carry interest as may be
agreed to by you. We further agree that the Company shall not pay any interest
on such unsecured loans/deposits if, at the time of such payment, there is a
default in the payment of instalments of principal and/or interest due and
owning by the Company to you.
Yours faithfully,
/s/ K. Ravindra
We note the above and agree and confirm that we shall not repay to the
abovementioned the unsecured loans/deposits or any part thereof when received by
us to meet the shortfall in our resources for completing our project and/or for
working capital so long as any moneys remain due by us to you under the said
Loan Agreement or till our Project is duly completed whichever is later without
you prior written approval.
... 3
<PAGE> 57
: 3 :
We shall pay such interest on the said unsecured loans/deposits as may be
agreed to by you. We agree not to pay any interest on the said unsecured
loans/deposits if at the time of such payment there is a default in the payment
of instalments of principal and/or interest due and owing by us to you.
For
Seec, Inc.
Dated this day of 199 .
<PAGE> 58
20 Rs.
[Facsimile of Indian Rupee]
The Industrial Credit and Investment
Corporation of India Limited
163 Backbay Reclamation
Bombay 400 020 - 25
Dear Sirs,
In consideration of your having agreed to grant to Seec, Inc. the
financial assistance in terms of the Loan Agreement dated this day
of 1994, we do hereby, undertake to you that we shall not
transfer, assign, dispose off, pledge, charge or create any lien or in any way
encumber our existing or future shareholdings in the Company in favour of any
person or Company so long as any moneys remain due
.... 2
<PAGE> 59
: 2 :
by the Company to you under the said Loan Agreement or till our project is
dully completed which ever is later without your prior written approval.
Yours faithfully,
/s/ RAJ REDDY /s/ RAVINDRA KOKA
- ------------------------- -----------------------
RAJ REDDY RAVINDRA KOKA
/s/ JOHN D. GODFREY
- ------------------------- ------------------------
ADAM D. YOUNG JOHN D. GODFREY
We note the above and agree and confirm that we shall not recognise or register
any transfer of shares by the abovementioned Directors/Promoters in the
capital of the Company nor shall we note any lien in respect of such shares in
favour of third parties so long as any moneys remain due by the Company to you
under the said Loan Agreement or till the project is duly completed whichever
is later without your prior written approval.
For
Seec, Inc.
Dated this day of 1994.
<PAGE> 60
20 RS.
[Facsimile of Indian Rupee]
The Industrial Credit and Investment
Corporation Of India Limited
163 Bombay Reclamation
Bombay 400 020 - 25
Dear Sirs,
In consideration of your having agreed to grant to Seec, Inc., the
financial assistance in terms of the Loan Agreement dated day
of , 1994, we the Directors / Promoters of the Company, do
hereby, in pursuance of ARTICLE VI (i) of the General Conditions (GC-FC-88) of
the said Loan Agreement, jointly and severally, undertake to you that to the
extent we may make unsecured loans to the company for the project, if we are in
default of any payment due to you under the loan agreement we shall not demand
or withdraw nor shall the Company repay any unsecured loans /deposits or any
part thereof brought in /to be brought in by us for financing the capital cost
and the requirement of working capital for the Company's project as per the
Financing Plan approved by you so long as any moneys remain in default by the
Company to you under the said Loan Agreement.
... 2
<PAGE> 61
: 2 :
We agree that if a dispute arises whether the Project is duly completed or
not, the dispute will be resolved by the process specified in the loan
agreement.
We note that such unsecured loans/deposits shall carry interest at a rate
not to exceed the rate of your loan to the company. We further agree that the
Company shall not pay any interest on such unsecured loans/deposits, if at the
time of such payment, there is a default in the payment of instalments of
principal and /or interest due and owing by the Company to you.
Yours faithfully,
/s/ K. Ravindra
------------------
We note the above and agree and confirm that we shall not repay to the
abovementioned the unsecured loans/deposits or any part thereof when received by
us for financing the capital cost and the requirement of working capital for our
Project as per the Financing Plan approved by you so long as nay moneys due by
us to you under the said Loan Agreement are in default or till our Project is
duly completed, whichever is later, without your prior approval. We shall pay
such interest on the said unsecured loans/deposits at a rate not to exceed the
rate of your loan to the company. We agree not to pay any interest on the said
unsecured loans/deposits if at the time of such payment there is a default in
the payment of instalments of principal and/or interest due and owing by us to
you.
For
Seec, Inc.
Dated this day of 1994.
<PAGE> 62
20 Rs.
[Facsimile of Indian Rupee]
The Industrial Credit and Investment
Corporation of India Limited
163 Backbay Reclamation
Bombay 400 020 - 25
Dear Sirs,
I, Ravi Koka, the President and CEO of Seec, Inc., (hereinafter
referred to as "the Company") refer to the Loan Agreement dated this day
of , 1994, entered into between the Company and yourselves
together with General Conditions (GC-FC-88) attached thereto.
As desired, I hereby agree and undertake that so long as any moneys
remain due and owing by the Company to you:
1. I shall not accept any commission from the Company in any year unless the
instalments of principal sum and interest and other moneys due to you has
been paid or suitable provision for payment thereof has been made to your
satisfaction.
.... 2
<PAGE> 63
: 2 :
2. I shall not accept any compensation from the Company in the event of loss of
my office for any reason whatsoever if there is any default on the part of
the company in payment of any instalment or instalments of principal sum,
interest and other moneys due and owing by the Company to you.
Yours faithfully,
/s/ K. Ravindra
------------------
Dated this day of 1994.
<PAGE> 64
[LETTERHEAD]
July 23, 1996
Mr. U. A. Despande
Industrial Credit Investment Corporation
of India Limited
Regd. Office
163 Backbay Reclamation
Bombay, India 400 020
Dear Mr. Despande:
In confirming our agreement regarding extending the ICICI loan agreement for
one year, I am submitting this amendment for your signature.
o ICICI is agreeable to extend repayment of the loan for an additional one
(1) year. Repayment of principal is to begin on December 15, 1996.
o Interest will continue to acrue on the loan principal at 2.5% above the US
Prime Rate subject to a cap of 9% and a floor of 6% as per section 2.21 of
the loan agreement.
o Interest payments will be made quarterly.
o Royalty revenue will continue to accrue, Payment of Royalties has also been
extended one year. Interest will be charged on Royalties as of February 1,
1996 at a rate of 2.5% above the US Prime rate subject to a cap of 9% and a
floor of 6%. Our records show that current Royalties due total $89,475.74
as of July 1. Accrued interest thru July 31, 1996 is $3,330.51.
Please sign both pages and return to me as soon as possible.
Sincerely,
/s RAVI KOKA
- -------------------------
Ravi Koka
President
Enclosure
Agreed to:
ICICI
/s/ U.A. DESHPANDE Date: 06.08.96
- ------------------------- ------------------
U.A. Deshpande
<PAGE> 65
[LETTERHEAD]
Amortization Schedule
Name of Lender: ICICI
<TABLE>
<CAPTION>
Date Of Amount of Installment Amount outstanding after
Installment Due (USS '000) each installment (USS '000)
- --------------- --------------------- ---------------------------
<S> <C> <C>
December 15, 1996 30 270
March 15, 1997 30 240
June 15, 1997 30 210
September 15, 1997 30 180
December 15, 1997 30 150
March 15, 1998 30 120
June 15, 1998 30 90
September 15, 1998 30 60
December 15, 1998 30 30
March 15, 1999 30 0
</TABLE>
ICICI SEEC, Inc
/s/ U.A. DESHPANDE /s/ RAVINDRA KOKA
- --------------------------- -------------------------
U.A. Deshpande
06.08.96 6/8/96
Date: --------------------- Date: -------------------
<PAGE> 66
[Letterhead]
September 25, 1996
Mr. U. A. Deshpande
Industrial Credit Investment
Corporation of India
Registered Office
163 Backbay Reclamation
Bombay, 400 020
India
Dear Mr. Deshpande:
In connection with the audit of the financial statements of SEEC, Inc.
(the Company) as of March 31, 1996 and 1995 and for the years ended March 31,
1996, 1995 and for the years ended March 31, 1995 and 1994, we are requesting
that the Industrial Credit Investment Corporation of India (ICICI) take certain
actions as indicated with respect to various requirements and covenants
contained in the Company's term loan agreement dated May 3, 1994 and the
Cooperation and Product Financing Agreement dated June 1, 1990 with ICICI. We
understand that oral waivers have been granted previously and are requesting
that these waivers, as identified herein, be confirmed in writing.
TERM LOAN AGREEMENT DATED MAY 3, 1994
1. Payments of interest are to be made quarterly. The Company is in
arrears on interest payments totaling $20,250 at March 31, 1996 and
$27,000 at June 30, 1996. The Company paid $11,000 toward the
outstanding balance on August 1, 1996 and intends to bring the
balance to current status by September 30, 1996.
ICICI ACTION REQUESTED: Please indicate by signing below in the space
provided that ICICI agrees with this payment plan, waives the
Company's non-compliance, and will not declare any event of default
if the balance is paid by September 30, 1996.
2. Installment payments of principal were to commence December 15, 1995.
Payments have been deferred until December 15, 1996 pursuant to your
letter dated July 23, 1996.
ICICI ACTION REQUESTED: Please indicate by signing below in the space
provided ICICI's agreement that this deferral constitutes a waiver of
previous non-payments of principal and as such cures any potential
events of default that may have existed.
<PAGE> 67
Mr. U. A. Deshpande
Industrial Credit Investment
Corporation of India
September 25, 1996
Page 2
3. General Conditions No. GC-FC-88, Section 7.3 General Covenant (A) (ii) -
The referenced section of the General Conditions prohibits the Company
from issuing equity or preference capital or changing its capital
structure. The Company has issued shares of its Common Stock and granted
options to purchase shares of its Common Stock since May 3, 1994, the
date of the Loan Agreement. The Company also intends to offer and sell
shares of its Common Stock in an underwritten public offering and in
connection therewith to issue warrants to purchase shares of its Common
Stock to the representative of the Underwriters. Further, the Company
intends to amend its Articles of Incorporation to increase the
authorized number of shares of Common Stock to 20,000,000 and to
authorise 10,000,000 shares of preferred stock, and it intends to effect
a reverse split of its outstanding Common Stock prior to the
aforementioned public offering.
ICICI ACTION REQUESTED: Please indicate by signing below in the space
provided (i) ICICI's agreement that the provision in Section 7.3 (A)
(ii) of the General Conditions prohibiting the Company from issuing
equity or preference capital or changing its capital structure is
deleted from the General Conditions to the Loan Agreement and is no
longer applicable to the Company; (ii) ICICI's waiver of the application
of this prohibition to any and all issuances of capital by the Company,
including the issuance of Common Stock, options and warrants, from May
3, 1994 and through the date ICICI agrees to the modification hereby
requested; and (iii) ICICI's consent to the Company's planned actions as
described above and agreement that they will not constitute a violation
of, or an event of default under, the Loan Agreement or General
Conditions.
4. General Conditions No. GC-FC-88, section 7.3 General Covenant (B)
(viii) - The Company is required to submit audited annual financial
statements to ICICI each year within six months after year end. The
Company has not submitted annual financial statements but intends to
provide ICICI with its audited March 31, 1996 financial statements on or
before October 15, 1996.
ICICI ACTION REQUESTED: Please indicate by signing below in the space
provided that ICICI waives the Company's non-compliance with this
requirement for all years through March 31, 1996 and that the Company's
plan to submit audited financial statements by October 15, 1996, is
acceptable to ICICI.
<PAGE> 68
Mr. U. A. Deshpande
Industrial Credit Investment
Corporation of India
September 25, 1996
Page 3
5. The loan agreement requires the Company to submit an auditors'
certificate for the utilization of PACT funds. To date, such report
has not been furnished to ICICI.
ICICI ACTION REQUESTED: Please indicate by signing below in the
space provided that ICICI waives the Company's non-compliance with
this requirement for all years through March 31, 1996, and that ICICI
no longer requires the Company to file this report, nor does it
intend to declare an event of default on this requirement.
6. General Conditions No. GC-FC-88, section 7.3 (A) (iii) - The Company
is prohibited from making prepayment of any lean from any other
party. The Company converted all subordinated debt and accrued
interest with related parties, prior to the stated maturity date of
the debt, to shares of its common stock in July 1996.
ICICI Action Requested: Please date and sign below in the space
provided ICICI's consent to such conversion, its agreement that the
prohibition described above is deleted from the General Conditions
and no longer applicable to the Company, and its acknowledgement that
such conversion does not violate or constitute an event of default
under the Loan Agreement or General conditions.
7. General conditions No. GC-FC-88, section 7.3 (A) (V) states the
Company is prohibited from declaring or paying any dividends to
shareholders in excess of 15%, without the prior approval of ICICI.
However, the loan agreement provides that the payment of dividends is
restricted if the loan payments are installments. The loan agreement
further specifies that where language in the General Conditions
differs from the loan agreement, the loan agreement is the
controlling document.
ICICI ACTION REQUESTED: Please indicate by signing below in the
space provided that the language in the loan agreement controls and
the Company is not restricted in the future payment of dividends,
unless the Company is not current with loan payments.
8. General Conditions No. GC-FC-88, section 10.3, Notice to the Lenders
on the Happening of an Event of Default - The Company is required to
notify ICICI in writing specifying the nature of any event of
default.
ICICI ACTION REQUESTED: Please indicate by signing below in the
space provided that this letter satisfies the requirement of section
10.3 in that ICICI has been properly notified by the Company of all
items that may be considered possible events of default.
<PAGE> 69
Mr. U. A. Deshpande
Industrial Credit Investment
Corporation of India
September 25, 1996
Page 4
COOPERATION AND PRODUCT FINANCING AGREEMENT DATED JUNE 1, 1990
9. Royalty payments are to be made to ICICI semiannually on January 15
and July 15 of each year. The Company was in arrears on the royalty
payments and has been granted a deferral until January, 1997.
ICICI ACTION REQUESTED: Please indicate by signing below in the
space provided that ICICI's deferral of payments through January
1997, constitutes a waiver of previous non-payments of royalties and
as such cures any potential event of default that may have existed.
10. annual sales are to be certified by the Company's independent
auditors and semiannual sales are to be certified by a principal
officer of the Company. To date, only one report, for the year ended
March 31, 1995, has been submitted to ICICI.
ICICI ACTION REQUESTED: Please indicate by signing below in the
space provided that ICICI waives the Company's non-compliance with
this requirement for all years through March 31, 1996, and that
ICICI does not intend to declare an event of default on this
requirement. Further, please confirm that by submitting a copy of
the audited financial statements as of and for the year ended March
31, 1996, ICICI will accept such financial statements in
satisfaction of this requirement.
Please respond directly to our auditors, Urish Popeck & Co., Three
Gateway Center, Pittsburgh, PA 15222.
Very truly yours,
/s/ RAVINDRA KOKA
----------------------------------
Ravindra Koka, President
<PAGE> 70
Mr. U. A. Deshpanda
Industrial Credit Investment
Corporation of India
September 25, 1996
Page 5
Dear Urish Popeck & Co.:
ICICI hereby takes the actions, grants and consents and waivers and agrees
to the modifications of the Loan Agreement and General Conditions, as requested
above, except as follows:
NIL
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
/s/ U.A. DESHPANDA
-----------------------------
Authorized Signature
(U.A. Deshpanda)
------------------------------
Date: 07.10.96
<PAGE> 1
Exhibit 10.7
STOCK PURCHASE AGREEMENT
SEEC, INC.
JULY 15, 1996
PENNSYLVANIA RESIDENTS ARE REFERRED TO THE RIGHT OF
WITHDRAWAL DESCRIBED IN SECTION 4(b) HEREOF
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT made as of the 15th day of July, 1996, by
and among SEEC, Inc., a Pennsylvania corporation (the "Company"), Glen
Chatfield (the "Investor") and the noteholders listed on Schedule A hereto
(individually a "Noteholder" and collectively the "Noteholders").
WHEREAS, the authorized capital of the Company consists of 10,000,000
shares of Common Stock (the "Common Stock");
WHEREAS, each Noteholder holds the promissory notes identified on Schedule
A hereto (individually a "Note" and collectively the "Notes"), and each
Noteholder has agreed to convert his or its Note into shares of Common Stock;
WHEREAS, the Investor has agreed to purchase 133,333 shares of Common
Stock; and
WHEREAS, the Company has agreed to effect the conversion of the Notes into
shares of Common Stock and to sell such shares of Common Stock to the Investor,
all upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. ISSUANCE OF COMMON STOCK AND WARRANTS.
(a) SALE OF COMMON STOCK TO INVESTOR. Subject to the terms and
conditions of this Agreement, the Investor agrees to purchase at the Closing
and the Company agrees to sell to the Investor 133,333 shares of Common Stock
at a purchase price of $1.50 per share, for an aggregate purchase price of
$200,000.
(b) CONVERSION OF NOTES. Subject to the terms and conditions of this
Agreement, each Noteholder severally agrees to surrender his or its Notes to
the Company at the Closing, whereupon the principal of and accrued and unpaid
interest on each Note will be automatically converted into shares of Common
Stock at a conversion price of $1.50 per share, with each Note being converted
into the number of whole shares of Common Stock shown on Schedule A. The
Company will not issue fractional shares of Common Stock upon such conversion
but will make the cash payments identified on Schedule A in lieu thereof.
2. CLOSING. The purchase and sale of the Common Stock and the conversion
of the Notes shall take place at the offices of Cohen & Grigsby, P.C., 2900 CNG
Tower, 625 Liberty Avenue, Pittsburgh, Pennsylvania 15222 at
<PAGE> 3
10:00 a.m. as of July 15, 1996 and, in the case of the Investor, a date
mutually agreeable to the Company and the Investor.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR AND NOTEHOLDERS. The
Investor and each Noteholder severally represents and warrants to the Company
that:
(a) ACCREDITED INVESTOR. Each Investor is an "accredited investor" as
defined in Rule 501 promulgated under the Securities Act of 1933 (the "Act").
(b) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with the
Investor and each Noteholder in reliance upon the Investor's and each
Noteholder's representation to the Company, which by the Investor's and such
Noteholder's execution of this Agreement he or it confirms, that the Common
Stock to be received by the Investor or such Noteholder hereunder will be
acquired for investment for the Investor's or such Noteholder's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that the Investor or such Noteholder has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, the Investor or such Noteholder further
represents that the Investor or such Noteholder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participations to such person or to any third person, with respect to any
of the Common Stock to be issued hereunder.
(c) DISCLOSURE OF INFORMATION. The Investor and each Noteholder
acknowledges that he or it has had access to the books and records of the
Company and all other available information, and has had the opportunity to ask
questions of all officers and agents of the Company, pertinent to his or its
investment decision.
(d) RESTRICTED SECURITIES. The Investor and each Noteholder understands
that the shares of Common Stock he or it is acquiring hereunder are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Act, only in
certain limited circumstances. In this connection, the Investor and each
Noteholder represents that he or it is familiar with Rule 144 promulgated by
the Securities and Exchange Commission, as presently in effect, and understands
the resale limitations imposed thereby and by the Act.
(e) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, the Investor and each Noteholder further
agrees not to make any disposition of all or any portion of the Common Stock
unless and until:
-2-
<PAGE> 4
(i) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or
(ii) (x) The Investor or such Noteholder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (y) if reasonably requested by the Company, the Investor or such Noteholder
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of such shares under the Act. It is agreed that the Company will
not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such Registration Statement or opinion of counsel shall be necessary
for a transfer by a holder of Common Stock which is a partnership to a partner
of such partnership or a retired partner of such partnership who retires after
the date hereof, or to the estate of any such partner or retired partner or the
transfer by gift, will or intestate succession of any partner to his spouse or
lineal descendants or ancestors, if the transferee agrees in writing to be
subject to the terms hereof to the same extent as if he were an original
Investor hereunder.
(f) LEGENDS. The Investor and each Noteholder understands and agrees
that the certificates evidencing the Common Stock may bear one or all of the
following legends:
(i) "These securities have not been registered under the Securities
Act of 1933. They may not be sold, offered for sale, pledged or hypothecated in
the absence of a registration statement in effect with respect to the securities
under such Act or an opinion of counsel satisfactory to the Company that such
registration is not required or unless sold pursuant to Rule 144 of such Act."
(ii) Any legend required by the applicable state securities laws.
(g) RESIDENCE. The Investor and each Noteholder is a resident of the
State indicated on Schedule A.
4. PENNSYLVANIA SECURITIES LAW OF 1972.
(a) The Investor and each Noteholder who is a Pennsylvania resident
hereby agrees not to sell the shares of Common Stock purchased pursuant hereto
within 12 months after the date of purchase unless the Company determines
-3-
<PAGE> 5
that such sale is in accordance with Section 203(d) of the Pennsylvania
Securities Law of 1972 and regulations thereunder.
(b) THE INVESTOR AND EACH NOTEHOLDER WHO IS A PENNSYLVANIA RESIDENT IS
HEREBY NOTIFIED THAT HE OR IT HAS THE RIGHT, UNDER SECTION 207(m) OF THE
PENNSYLVANIA SECURITIES LAW OF 1972, TO WITHDRAW HIS OR ITS ACCEPTANCE WITHOUT
INCURRING ANY LIABILITY TO ANY PERSON WITHIN TWO BUSINESS DAYS FROM THE DATE OF
RECEIPT BY THE COMPANY OF HIS OR ITS BINDING WRITTEN CONTRACT OF PURCHASE. UPON
SUCH WITHDRAWAL, THE INVESTOR OR SUCH NOTEHOLDER WILL RECEIVE A FULL REFUND OF
ALL MONEYS PAID BY HIM OR IT. TO ACCOMPLISH THIS WITHDRAWAL, THE INVESTOR OR
SUCH NOTEHOLDER NEED ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY AT ITS
ADDRESS FOR NOTICES INDICATING HIS OR ITS INTENTION TO WITHDRAW. SUCH LETTER OR
TELEGRAM SHOULD BE SENT AND POSTMARKED BEFORE THE END OF SUCH SECOND BUSINESS
DAY. IF THE INVESTOR OR ANY NOTEHOLDER SENDS A LETTER, IT IS PRUDENT TO SEND IT
BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED. IF THE INVESTOR OR ANY NOTEHOLDER
MAKES THE REQUEST ORALLY, HE OR IT SHOULD ASK FOR WRITTEN CONFIRMATION THAT
SUCH REQUEST WAS RECEIVED.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS TO THE INVESTOR AND NOTEHOLDERS
AT CLOSING. The obligations of the Company to the Investor and the Noteholders
under this Agreement are subject to the fulfillment on or before the Closing by
the Investor and each Noteholder of the terms and conditions hereof and of each
of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Investor and each Noteholder contained in Section 3 shall be true on and
as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
(b) SECURITIES QUALIFICATION. Such offer and sale shall be exempt from
qualification or registration under applicable federal and state securities
laws.
(c) QUESTIONNAIRE. Each Investor shall have completed and returned to
the Company the Questionnaire delivered to the Investor herewith.
6. SURVIVAL OF WARRANTIES. The warranties, representations and covenants
of the Investor and the Noteholders contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
-4-
<PAGE> 6
7. SUCCESSORS AND ASSIGNS. Except as specifically provided otherwise
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
8. GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the Commonwealth of Pennsylvania.
9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by the different parties hereto on different counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10. TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
11. NOTICES. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or upon deposit with
the United States Post Office, by registered or certified mail, postage prepaid
and addressed to the party to be notified at the address indicated for such
party on the signature page hereof, or at such other address as such party may
designate by ten (10) days' advance written notice to the other parties.
12. EXPENSES. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
13. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any such term may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the shares of
Common Stock issued hereunder.
14. SEVERABILITY. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
-5-
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SEEC, Inc.
5001 Baum Boulevard
Pittsburgh, PA 15213
Attention: President
By:______________________________
President
---------------------------------
Glen Chatfield
NOTEHOLDERS:
---------------------------------
Ravindra Koka
---------------------------------
Stanley Young
---------------------------------
John D. Godfrey
---------------------------------
Larry Keating
---------------------------------
Rufus Clark
GRA INVESTMENT
By:_________________________________
Title
-6-
<PAGE> 8
---------------------------------
Maxine Goldman
---------------------------------
David Smith
---------------------------------
David L. Phillips
---------------------------------
Charles Hall
---------------------------------
Jan Coopersmith
---------------------------------
Greg Dwyer
---------------------------------
Abe Ostrovsky
PROVIDENCE INVESTMENT
MANAGEMENT GROUP
By:______________________________
Title
THE AMAR FOUNDATION
By:______________________________
Title
-7-
<PAGE> 9
<TABLE>
<CAPTION>
SCHEDULE A
Interest on Number of Full Cash Settlement
Principal Amount Promissory Notes Shares of In Lieu of
Name of of Promissory through Common Stock Fractional
Noteholder Address Note(s) July 15, 1996 upon Conversion Shares
---------- ------- ------- ------------- --------------- ------
<S> <C> <C> <C> <C> <C>
Ravindra Koka Mt. Lebanon, $76,541 $29,207.40 70,499 $0.03
Pennsylvania (7% Demand)
Stanley Young Loeminster, $25,000 --------
Massachusetts (7% Demand) I
+--- $19,318.22 46,212 $0.22
Stanley Young Loeminster, $25,000 I
Massachusetts (7% Demand) --------
Stanley Young Loeminster, $25,000 $6,999.65 21,333 $0.14
Massachusetts (10% Subordinated)
The Amar Foundation Palo Alto, $95,000 $33,878.55 85,919 $0.05
California (7% Demand)
John D. Godfrey Pittsburgh, $50,565 $18,759.07 46,215 $1.25
Pennsylvania (7% Demand)
Larry Keating Danburry, $12,500 $5,333.50 11,889 0
Connecticut (10% Subordinated)
Rufus Clark Winchester, $6,250 $2,666.50 5,944 $0.50
Massachusetts (10% Subordinated)
<PAGE> 10
Interest on Number of Full Cash Settlement
Principal Amount Promissory Notes Shares of In Lieu of
Name of of Promissory through Common Stock Fractional
Noteholder Address Note(s) July 15, 1996 upon Conversion Shares
---------- ------- ------- ------------- --------------- ------
<S> <C> <C> <C> <C> <C>
GRA Investment Woburn, $12,500 $5,333.50 11,889 0
Massachusetts (10% Subordinated)
Maxine Goldman Swampscott, $6,250 $2,659.55 5,939 $1.05
Massachusetts (10% Subordinated)
David Smith Los Angeles, $12,500 -------
California (10% Subordinated) I
+--$7,979.16 17,819 $0.66
David Smith Los Angeles, $6,250 I
California (10% Subordinated) -------
David L. Phillips Danvers, $12,500 $5,288.36 11,858 $1.36
Massachusetts (10% Subordinated)
Charles Hall Sea Cliff, $6,250 $2,643.93 5,929 $0.43
New York (10% Subordinated)
Jan Coopersmith Marblehead, $12,500 $5,288.36 11,858 $1.36
Massachusetts (10% Subordinated)
Greg Dwyer Leominster, $6,250 $2,538.03 5,858 $1.03
Massachusetts (10% Subordinated)
Abe Ostrofsky Coconut Grove, $6,250 $2,569.28 5,879 $0.78
Florida (10% Subordinated)
Providence Investment New York, $100,000 $37,944.30 91,962 $1.29
Management Group New York (10% Subordinated)
TOTAL 457,002
</TABLE>
-2-
<PAGE> 1
Exhibit 10.8
STOCK PURCHASE AGREEMENT
SEEC, INC.
AUGUST 15, 1996
PENNSYLVANIA RESIDENTS ARE REFERRED TO THE RIGHT OF WITHDRAWAL
DESCRIBED IN SECTION 4(b) HEREOF
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT made as of the 15th day of August, 1996,
by and among SEEC, Inc., a Pennsylvania corporation (the "Company"), and the
investors who have executed and delivered this Agreement (individually an
"Investor" and collectively the "Investors").
WHEREAS, the authorized capital of the Company consists of 20,000,000
shares of Common Stock (the "Common Stock"); and
WHEREAS, each Investor has agreed to purchase shares of Common Stock
from the Company; and the Company has agreed to sell such shares of Common
Stock to the Investors, all upon the terms and subject to the conditions
hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, each Investor agrees to purchase and the Company
agrees to sell to each Investor the number of shares of Common Stock identified
on Annex A hereto at a purchase price of $1.64 per share.
2. CLOSING. The purchase and sale of Common Stock to any Investor
shall take place at the offices of Cohen & Grigsby, P.C., 2900 CNG Tower, 625
Liberty Avenue, Pittsburgh, Pennsylvania 15222 at 10:00 a.m. on a date mutually
agreeable to the Company and such Investor. Each Investor acknowledges and
agrees that the Company may issue and sell a minimum of 182,927 shares and a
maximum of 487,805 shares of Common Stock to the Investors under this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
severally represents and warrants to the Company that:
(a) ACCREDITED INVESTOR. Such Investor is an "accredited
investor" as defined in Rule 501 promulgated under the Securities Act of 1933
(the "Act").
(b) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with such Investor in reliance upon such Investor's representation to the
Company, which by such Investor's execution of this Agreement he, she or it
confirms, that the Common Stock to be received by such Investor hereunder will
be acquired for investment for such Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that such Investor has
<PAGE> 3
no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of
the Common Stock to be issued hereunder.
(c) DISCLOSURE OF INFORMATION. Such Investor acknowledges
that he, she or it has had access to the books and records of the Company and
all other available information, and has had the opportunity to ask questions
of all officers and agents of the Company, pertinent to his, her or its
investment decision.
(d) RESTRICTED SECURITIES. Such Investor understands that the
shares of Common Stock he, she or it is acquiring hereunder are characterized
as "restricted securities" under the federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public
offering and that under such laws and applicable regulations such securities
may be resold without registration under the Act only in certain limited
circumstances. In this connection, such Investor represents that he, she or it
is familiar with Rule 144 promulgated by the Securities and Exchange
Commission, as presently in effect, and understands the resale limitations
imposed thereby and by the Act.
(e) FURTHER LIMITATIONS ON DISPOSITION. Without in any
way limiting the representations set forth above, such Investor further agrees
not to make any disposition of all or any portion of the Common Stock unless
and until:
(i) There is then in effect a Registration
Statement under the Act covering such proposed disposition and such disposition
is made in accordance with such Registration Statement; or
(ii) (x) Such Investor shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (y) if reasonably requested by the Company, such Investor shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such shares
under the Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of
paragraphs (i) and (ii) above, no such Registration Statement or opinion of
counsel shall be necessary for a transfer by a holder of Common Stock which is
a partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate
succession of any partner to his spouse or lineal descendants or
-2-
<PAGE> 4
ancestors, if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if he or she were an original Investor hereunder.
(f) LEGENDS. Such Investor understands and agrees that
the certificates evidencing the Common Stock may bear one or all of the
following legends:
(i) "These securities have not been registered
under the Securities Act of 1933. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(ii) Any legend required by the applicable state
securities laws.
(g) RESIDENCE. Such Investor is a resident of the State
indicated on Schedule A.
4. PENNSYLVANIA SECURITIES LAW OF 1972.
(a) Each Investor who is a Pennsylvania resident hereby
agrees not to sell the shares of Common Stock purchased pursuant hereto within
12 months after the date of purchase unless the Company determines that such
sale is in accordance with Section 203(d) of the Pennsylvania Securities Law of
1972 and regulations thereunder.
(b) SUCH INVESTOR WHO IS A PENNSYLVANIA RESIDENT IS HEREBY
NOTIFIED THAT HE, SHE OR IT HAS THE RIGHT, UNDER SECTION 207(m) OF THE
PENNSYLVANIA SECURITIES LAW OF 1972, TO WITHDRAW HIS, HER OR ITS ACCEPTANCE
WITHOUT INCURRING ANY LIABILITY TO ANY PERSON WITHIN TWO BUSINESS DAYS FROM THE
DATE OF RECEIPT BY THE COMPANY OF SUCH INVESTORS BINDING WRITTEN CONTRACT OF
PURCHASE. UPON SUCH WITHDRAWAL, THE INVESTOR WILL RECEIVE A FULL REFUND OF ALL
MONEYS PAID BY HIM, HER OR IT. TO ACCOMPLISH THIS WITHDRAWAL, THE INVESTOR NEED
ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY AT ITS ADDRESS FOR NOTICES
INDICATING SUCH INVESTOR'S INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM
SHOULD BE SENT AND POSTMARKED BEFORE THE END OF SUCH SECOND BUSINESS DAY. IF
THE INVESTOR SENDS A LETTER, IT IS PRUDENT TO SEND IT BY CERTIFIED MAIL, RETURN
RECEIPT REQUESTED. IF THE INVESTOR MAKES THE REQUEST ORALLY, HE OR IT SHOULD
ASK FOR WRITTEN CONFIRMATION THAT SUCH REQUEST WAS RECEIVED.
-3-
<PAGE> 5
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS TO EACH INVESTOR.
The obligations of the Company to any Investor under this Agreement are subject
to the fulfillment on or before the Closing by such Investor of the terms and
conditions hereof and of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of such Investor contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
(b) SECURITIES QUALIFICATION. Such offer and sale shall
be exempt from qualification or registration under applicable federal and state
securities laws.
(c) QUESTIONNAIRE. Such Investor shall have completed
and returned to the Company the Questionnaire delivered to the Investor
herewith.
6. SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Investors contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing.
7. SUCCESSORS AND ASSIGNS. Except as specifically provided otherwise
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
8. GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania.
9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by the different parties hereto on different counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10. TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
11. NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the
-4-
<PAGE> 6
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties.
12. EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
13. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any such term may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the shares of
Common Stock issued hereunder.
14. SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SEEC, Inc.
5001 Baum Boulevard
Pittsburgh, PA 15213
Attention: President
By:______________________________
President
INVESTORS:
---------------------------------
Martin C. Goldman
---------------------------------
David Phillips
---------------------------------
Mark Cohen
-6-
<PAGE> 8
---------------------------------
Dana A. Young
---------------------------------
Deborah Weinstein
---------------------------------
Bob Dunham
---------------------------------
Gerald Appel
---------------------------------
John Rotonde
---------------------------------
Mark Reardon
---------------------------------
Sheldon Frisch
-7-
<PAGE> 9
---------------------------------
Nanda M. Nandkishore
---------------------------------
Radha Ramaswami Basu
---------------------------------
Shyamala Reddy
---------------------------------
Geetha Reddy
-8-
<PAGE> 1
Exhibit 10.9
REGISTRATION RIGHTS AGREEMENT
DATED AS OF AUGUST 15, 1996
AMONG
SEEC, INC.
AND
THE INVESTORS IDENTIFIED HEREIN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Definitions................................................................................... 1
2. Demand Registration........................................................................... 2
3. Piggyback Registration........................................................................ 2
4. Registration on Form S-3...................................................................... 3
5. Obligations of the Company.................................................................... 3
6. Furnish Information........................................................................... 7
7. Suspension of Disposition of Registrable Securities........................................... 7
8. Expenses of Registration...................................................................... 7
9. Underwriting Requirements; Priorities......................................................... 8
10. Termination of the Company's Obligations...................................................... 9
11. Reports Under the 1934 Act.................................................................... 9
12. Lockup Agreement..............................................................................10
13. Certain Limitations in Connection with Future Grants of
Registration Rights.......................................................................11
14. Transfer of Registration Rights...............................................................11
15. Indemnification...............................................................................11
16. Remedies......................................................................................13
17. Amendments and Waivers........................................................................13
18. Notices.......................................................................................13
19. Counterparts..................................................................................14
20. Headings......................................................................................14
21. Governing Law.................................................................................14
22. Severability..................................................................................14
23. Entire Agreement..............................................................................14
24. Parties Benefited.............................................................................14
</TABLE>
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT, entered into as of the 15th day of of August, 1996, by and
among SEEC, INC. a Pennsylvania corporation (the "Company"), and the Investors
identified on the signature pages hereof (individually an "Investor" and
collectively the "Investors").
W I T N E S S E T H:
WHEREAS, each of the Investors has acquired shares of Common Stock of the
Company pursuant to the Stock Purchase Agreement dated as of July 15, 1996
and/or the Stock Purchase Agreement dated as of August 15, 1996 to which the
Company is a party (the "Stock Purchase Agreements"); and
WHEREAS, the Company has agreed to enter into this Agreement for the
purpose of providing the Investors with certain registration rights with
respect to such shares;
NOW, THEREFORE, in consideration of the premises and the mutual terms and
provisions hereof, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following respective meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute enacted hereafter, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time;
(b) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Act;
(c) "Demand Registration" shall mean a registration effected pursuant
to a demand made under Section 2 hereof;
(d) "Holder" shall mean an Investor (if such Investor holds Registrable
Securities) and any other person holding Registrable Securities and any other
person holding Registrable Securities to whom these registration rights have
been transferred pursuant to Section 14 of this Agreement; PROVIDED, HOWEVER,
that any person who acquires any of the Registrable Securities in a
distribution pursuant to a registration statement filed by the Company under
the Act or pursuant to a sale under Rule 144 under the Act shall not be
considered a Holder; and "Holders" shall refer to all such persons
collectively;
<PAGE> 4
(e) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of effectiveness of
such registration statement by the Commission;
(f) "Registrable Securities" shall mean (i) the shares of Common Stock
issued on or prior to the date hereof to the Investors pursuant to either of
the Stock Purchase Agreements and (ii) any Common Stock issued as a dividend or
other distribution with respect to, or in exchange or in replacement of, such
shares of Common Stock; and
(g) "1934 Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
2. DEMAND REGISTRATION. Subject to Sections 9 and 10 below, at any time,
and from time to time, after 180 days following the date on which the Company
shall have first issued and sold any securities under an effective registration
statement (other than on Form S-4 of Form S-8, or any successor forms thereto)
under the Act (hereinafter the "Initial Public Offering Date"), if the Company
shall receive a written request (specifying that it is being made pursuant to
this Section 2) from the Holders of at least a majority of the Registrable
Securities that the Company file a registration statement under the Act
covering the registration for offer and sale of Registrable Securities, then
the Company shall promptly notify in writing all other Holders of such request.
Within 20 calendar days after such notice has been sent by the Company, any
other Holder may give written notice to the Company of his, her or its intent
to include such Holder's Registrable Securities in the registration. As soon as
practicable after the expiration of such 20-day period, the Company shall use
its best efforts to cause all Registrable Securities that Holders have
requested be registered to be registered under the Act.
3. PIGGYBACK REGISTRATION. Subject to Section 9 below, if at any time
after the Initial Public Offering Date the Company proposes to register any of
its securities under the Act, either for its own account or for the account of
others who are not Holders, in connection with the public offering of such
securities solely for cash, on a registration form that would also permit the
registration of Registrable Securities, the Company shall, each such time,
promptly give each Holder written notice of such proposal. Upon the written
request of any Holder given within 20 days after mailing of any such notice by
the Company, the Company shall use its best efforts to cause to be included in
such registration under the Act all the Registrable Securities that each such
Holder has requested be registered.
-2-
<PAGE> 5
4. REGISTRATION ON FORM S-3.
(a) If (i) a Holder or Holders request in writing (specifying that it
is being made pursuant to this Section 4) that the Company file under the Act a
registration statement on Form S-3 (or any successor registration form to Form
S-3 regardless of its designation) for a public offering of Registrable
Securities the reasonably anticipated aggregate price to the public of which
would exceed $1,000,000 and (ii) the Company is a registrant entitled to use
Form S-3 to register such shares, then the Company shall use its best efforts
to cause such shares to be registered on Form S-3 (or any successor
registration form to Form S-3).
(b) The Holder's rights to registration under this Section 4 are in
addition to, and not in lieu of, the registration rights provided under
Sections 2 and 3.
5. OBLIGATIONS OF THE COMPANY. Whenever required under this Agreement to
use its best efforts to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration statement
covering such Registrable Securities and use its best efforts to cause such
registration statement to be declared effective by the Commission as
expeditiously as possible and to keep such registration effective until the
earlier of (i) the date when all Registrable Securities covered by the
registration statement have been sold or (ii) 180 days from the effective date
of the registration statement; provided, that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
will furnish to each Holder of Registrable Securities covered by such
registration statement and the underwriters, if any, copies of all such
documents proposed to be filed (excluding exhibits, unless any such person
shall specifically request exhibits), which documents will be subject to the
review of such Holders and underwriters, and the Company will not file such
registration statement or any amendment thereto or any prospectus or any
supplement thereto (including any documents incorporated by reference therein)
with the Commission if (i) the Holders of a majority of the Registrable
Securities covered by such registration object to such filing or (ii)
information in such registration statement or prospectus concerning a
particular selling Holder has changed and such Holder or the underwriters, if
any, shall reasonably object.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement as may be necessary to
keep such registration statement effective during the period referred to in
Section 5(a) and to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement, and cause
the prospectus to be
-3-
<PAGE> 6
supplemented by any required prospectus supplement, and as so supplemented to
be filed with the Commission pursuant to Rule 424 under the Act.
(c) Furnish to the selling Holders such numbers of copies of such
registration statement, each amendment thereto, the prospectus included in such
registration statement (including each preliminary prospectus), each supplement
thereto and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the Registrable
Securities under such other securities laws of such jurisdictions as shall be
reasonably requested by the selling Holders and do any and all other acts and
things which may be reasonably necessary or advisable to enable such selling
Holders to consummate the disposition of the Registrable Securities owned by
such Holders in such jurisdictions; provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to
transact business or to file a general consent to service of process in any
such states or jurisdictions; and provided further that (anything in this
Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the Registrable Securities shall be
qualified shall require that expenses it incurred in connection with the
qualification of the Registrable Securities in that jurisdiction be borne by
selling shareholders, then such expenses shall be payable by the selling
Holders pro rata, to the extent required by such jurisdiction.
(e) Promptly notify each selling Holder of such Registrable Securities
at any time when a prospectus relating thereto is required to be delivered
under the Act of the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein not
misleading and, at the request of any such Holder, the Company will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading.
(f) Provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement.
(g) Enter into such customary agreements (including underwriting
agreements in customary form for a primary offering) and take all such other
actions as the Holders of a majority of the Registrable Securities being sold
or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities (including, without
limitation, effecting a stock split or a combination of shares).
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<PAGE> 7
(h) Make available for inspection by any selling Holder of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such selling Holder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
officers, directors, employees and independent accountants of the Company to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
(i) Promptly notify the Holders of Registrable Securities and the
underwriters, if any, of the following events and (if requested by any such
person) confirm such notification in writing: (1) the filing of the prospectus
or any prospectus supplement and the registration statement and any amendment
or post-effective amendment thereto and, with respect to the registration
statement or any post-effective amendment thereto, the declaration of the
effectiveness of such documents; (2) any requests by the Commission for
amendments or supplements to the registration statement or the prospectus or
for additional information; (3) the issuance or threat of issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose; and (4) the
receipt by the Company of any notification with respect to the suspension of
the qualification of the Registrable Securities for sale in any jurisdiction or
the initiation or threat of initiation of any proceeding for such purpose.
(j) Make every reasonable effort to prevent the entry of any order
suspending the effectiveness of the registration statement and obtain at the
earliest possible moment the withdrawal of any such order, if entered.
(k) If reasonably requested by any underwriter or a selling Holder of
Registrable Securities in connection with any underwritten offering, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the underwriters and the Holders of a majority of the
Registrable Securities being sold agree should be included therein relating to
the sale of the Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and any other terms of the underwritten (or best efforts underwritten) offering
of the Registrable Securities to be sold in such offering, and make all
required filings of such prospectus supplement or post-effective amendment
promptly after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment.
(l) Prior to the filing of any document which is to be incorporated by
reference into the registration statement or the prospectus (after the initial
filing of the registration statement with the Commission), (i) promptly provide
copies of
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<PAGE> 8
such document to counsel for the selling Holders of the Registrable Securities
and the counsel for the underwriters, if any, (ii) make representatives of the
Company available for discussion of such document and (iii) make such changes
in such document prior to the filing thereof as counsel for such Holders or
underwriters may reasonably request in order to address any concerns raised
with respect to the accuracy or completeness of such document or compliance
with the requirements of the Act or the rules and regulations thereunder.
(m) Cooperate with the selling Holders of Registrable Securities and
the underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends, and enable such Registrable Securities to be in such lots
and registered in such names as the underwriters may request at least two
business days prior to any delivery of Registrable Securities to the
underwriters.
(n) Provide a CUSIP number for all Registrable Securities not later
than the effective date of the registration statement.
(o) Prior to the effectiveness of the registration statement and any
post-effective amendment thereto and at each closing of an underwritten
offering, do the following insofar as the selling Holders or the Registrable
Securities are concerned or affected: (i) make such representations and
warranties to the selling Holders of such Registrable Securities and the
underwriters, if any, with respect to the Registrable Securities and the
registration statement as are customarily made by issuers to underwriters in
primary underwritten offerings; (ii) obtain opinions of counsel to the Company
and updates thereof (which counsel and which opinions shall be reasonably
satisfactory to the underwriters, if any, and to the Holders of a majority of
the Registrable Securities being sold) addressed to each selling Holder and the
underwriters, if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters or their counsel; (iii) obtain "cold
comfort" letters and updates thereof from the Company's independent certified
public accountants addressed to the selling Holders of Registrable Securities
and the underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in cold comfort letters by underwriters
in connection with primary underwritten offerings; and (iv) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold and by the underwriters, if
any, to evidence compliance with clause (i) above and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company.
(p) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make generally available to its security
holders earnings statements satisfying the provisions of section 11(a) of the
Act, no later than 45 days after the end of any 12-month period (or 90 days, if
such period
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<PAGE> 9
is a fiscal year) (i) commencing at the end of any fiscal quarter
in which Registrable Securities are sold to underwriters in a firm or best
efforts underwritten offering, or (ii) if not sold to underwriters in such an
offering, beginning with the first month of the first fiscal quarter of the
Company commencing after the effective date of the registration statement,
which statements shall cover such 12-month periods.
6. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company (a) to take any action pursuant to this Agreement
that the Holders shall furnish to the Company such information regarding them,
the Registrable Securities held by them and the intended method of disposition
of such Registrable Securities as the Company shall reasonably request and as
shall be required in connection with the action to be taken by the Company and
(b) to cause any registration pursuant to this Agreement to have become
effective that the Holders shall have exercised their rights of conversion with
respect to any Registrable Securities proposed to be registered.
7. SUSPENSION OF DISPOSITION OF REGISTRABLE SECURITIES. Each selling
Holder of Registrable Securities agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 5(e) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities until such Holder's
receipt of copies of a supplemented or amended prospectus contemplated by
Section 5(e) hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference
in the prospectus, and, if so directed by the Company, such Holder will deliver
to the Company (at the expense of the Company) all copies, other than permanent
file copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the time periods mentioned in
Section 5(a) hereof shall be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to Section
5(e) hereof to and including the date when each selling Holder of Registrable
Securities shall have received the copies of the supplemented or amended
prospectus contemplated by Section 5(e) hereof or the Advice.
8. EXPENSES OF REGISTRATION. Whether or not any registration statement
prepared and filed pursuant to this Agreement is declared effective by the
Commission, all expenses incurred in connection with a registration pursuant to
the terms hereof (excluding underwriters discounts and commissions), including
without limitation all registration, qualification, application, filing,
listing, transfer agent and registrar fees, printing, messenger, telephone and
delivery fees and expenses, accounting fees and disbursements (including the
expenses of any audit, review and/or "cold comfort" letters), fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel chosen by the
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<PAGE> 10
Holders of a majority of the Registrable Securities being registered shall be
borne by the Company.
9. UNDERWRITING REQUIREMENTS; PRIORITIES.
(a) The Company will have the sole right to select the investment
banker(s) and manager(s) to administer any offering to which Section 2 or
Section 4 is applicable. The Company will not include in any registration under
Section 2 or Section 4 any securities that are not Registrable Securities,
except for securities acquired by any underwriter of an initial public offering
of the Company's Common Stock and securities as to which registration rights
have been granted in compliance with Section 13 hereof, without the written
consent of the Holders of a majority of the Registrable Securities requesting
such registration. If other securities are permitted to be included in a
registration under Section 2 or Section 4 which is an underwritten offering and
the managing underwriters advise the Company that in their opinion the number
of Registrable Securities and other securities requested to be included exceeds
the number of Registrable Securities and other securities which can be sold at
the desired price in such offering, the Company will include in such
registration the number of Registrable Securities and other securities
requested to be included which in the opinion of such underwriters can be sold,
pro rata among the respective holders of such Registrable Securities and other
securities on the basis of the amount of Registrable Securities and such other
securities requested to be registered.
(b) The Company will also have the right to select the investment
banker(s) and manager(s) to administer any offering to which Section 3 is
applicable. If a registration under Section 3 is or includes an underwritten
primary registration on behalf of the Company, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold at the desired price in such offering, the Company will include in such
registration (i) first, the securities the Company proposes to sell, and (ii)
second, the Registrable Securities and other securities requested to be
included in such registration by the Holders of Registrable Securities and the
holders of such other securities requesting such registration in such
quantities as will not, in the opinion of the managing underwriters, jeopardize
the success of the offering, pro rata among the holders thereof on the basis of
the number of shares requested to be registered. If a registration under
Section 3 is an underwritten secondary registration on behalf of holders of
securities of the Company (and does not include a primary offering) and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold at the desired price in such offering, the Company
will include in such registration, the securities requested to be included
therein by the Holders of Registrable Securities and the holders of such other
securities requesting
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<PAGE> 11
such registration pro rata among the holders of such securities on the basis of
the number of shares requested to be included therein.
(c) No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's securities on the
basis provided in any underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements and (ii) properly completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
10. TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have no
further obligations pursuant to Section 2 with respect to any request or
requests made by any Holder after the Company has effected one Demand
Registration pursuant to a demand made by the Holders of Registrable Securities
specified in Section 2(a) in which a registration statement has remained
effective for at least 180 days or has become effective and all Registrable
Securities covered thereby have been sold pursuant thereto. Notwithstanding the
preceding sentence, if in connection with any Demand Registration the Company
shall fail to comply in any material respect with any of the obligations
specified in Sections 5(a) through (d), Sections 5(f) through (h) or Sections
5(j) through (p), or if the Company shall fail to comply in any respect with
any of the obligations specified in Sections 5(e) or (i) hereof, or if a
reduction of the type contemplated by the third sentence of Section 9(a) hereof
occurs, such Demand Registration shall not be counted for the purpose of
determining whether the limits set forth in this Section 10 have been reached.
The Company shall not be obligated under Sections 2, 3 or 4 hereof to
register or include in any registration Registrable Securities that any Holder
has requested to be registered if the Company shall furnish such Holder with a
written opinion of counsel reasonably satisfactory to such Holder that all
Registrable Securities that such Holder holds may be publicly offered, sold and
distributed without registration under the Act pursuant to Rule 144 promulgated
by the Commission under the Act.
11. REPORTS UNDER THE 1934 ACT. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Act and any other rule
or regulation of the Commission that may at any time permit a Holder to sell
securities of the Company to the public without registration, the Company
agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times subsequent to 90 days after
the effective date of the first registration statement covering an underwritten
public offering filed under the Act by the Company;
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<PAGE> 12
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act at any time
after it is subject to such registration requirements; and
(c) furnish to any Holder so long as such Holder owns any of the
Registrable Securities forthwith upon request a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at
any time after 90 days after the effective date of said first registration
statement filed by the Company), and of the Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonable requested by any Holder
in availing any Holder of any rule or regulation of the Commission permitting
the selling of any such securities without registration.
12. LOCKUP AGREEMENT.
(a) The Holders agree, in connection with any registration of the
Company's securities upon the request of the underwriters managing any
underwritten offering of the Company securities, not to sell, make any short
sale of, pledge, grant any option for the purchase of or otherwise dispose of
any Registrable Securities (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, during the seven days prior to and during the 180-day period
beginning on the effective date of such registration (or such shorter period as
the Company or the underwriters may specify).
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable to exercisable for such securities, during the seven days prior to
and during the 180-day period (or such shorter period as the underwriters
managing the offering may specify) beginning on the effective date of any
registration statement related to an underwritten offering pursuant to which
Registrable Securities are to be sold (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form),
unless the underwriters managing the registered public offering otherwise
agree, and (ii) to use its best efforts to cause each holder of at least 5% (on
a fully diluted basis) of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, purchased from the
Company at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any sale or distribution of
any such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
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<PAGE> 13
13. CERTAIN LIMITATIONS IN CONNECTION WITH FUTURE GRANTS OF REGISTRATION
RIGHTS. From and after the date of this Agreement, the Company may enter into
any agreement with any holder or prospective holder of any securities of the
Company providing for the granting to such holder of registration rights
provided that such agreement:
(a) includes the equivalent of Section 12 of this Agreement as a term;
and
(b) includes a provision that, in the case of any registration
involving an underwritten offering, protects the Holders on a pro rata basis if
marketing factors require a limitation on the number of securities to be
included in an underwriting in the manner contemplated by Section 9 of this
Agreement.
14. TRANSFER OF REGISTRATION RIGHTS. Provided that the Company is given
written notice by the Holder at the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being assigned, the registration rights
provided under this Agreement may be transferred in whole or in part at any
time by any Holder.
15. INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under this Agreement:
(a) To the full extent permitted by law, the Company will, and hereby
does indemnify and hold harmless each Holder requesting or joining in a
registration, each director, officer, partner, employee, or agent for such
Holder, any underwriter (as defined in the Act) for such Holder, and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or several,
to which they may become subject under the Act and applicable state securities
laws insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based on any untrue or alleged untrue
statement of any material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein in light of the circumstances under which they were made or
necessary to make the statements therein not misleading or arise out of any
violation by the Company of any rule or regulation promulgated under the Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration; and will reimburse each such
person or entity for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 15(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld) nor shall the Company be liable in any such case for any such loss,
claim,
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<PAGE> 14
damage, liability or action to the extent that it arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus, or amendments or supplements thereto,
in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by or on behalf of any such
Holder, underwriter or controlling person.
(b) To the full extent permitted by law, each Holder requesting or
joining in a registration under this Agreement will indemnify and hold harmless
the Company, each of its directors, each of its officers who have signed the
registration statement, each person, if any, who controls the Company within
the meaning of the Act, and any underwriter for the Company (within the meaning
of the Act), each other selling Holder and each person, if any, who controls
such other selling Holder within the meaning of Section 15 of the Act against
any losses, claims, damages or liabilities, joint or several, to which the
Company or any such director, officer, controlling person or underwriter may
become subject, under the Act and applicable state securities laws, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in such registration statement, preliminary or final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person or underwriter in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 15(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld).
In no event shall the liability of any selling Holder of Registrable
Securities hereunder be greater than the dollar amount of the proceeds received
by such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
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<PAGE> 15
(c) Promptly after receipt by an indemnified party under this Section
15 of notice of the commencement of any action or knowledge of a claim that
would, if asserted, give rise to a claim for indemnity hereunder, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 15, notify the indemnifying party in
writing of the commencement thereof or knowledge thereof and the indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to notify an indemnifying party
promptly of the commencement of any such action or of the knowledge of any such
claim, if prejudicial to his ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
15, but the omission so to notify the indemnifying party will not relieve him
of any liability that he may have to any indemnified party otherwise than under
this Section.
16. REMEDIES. In addition to being entitled to exercise all rights
provided in this Agreement as well as all rights granted by law, including
recovery of damages, each Holder of Registrable Securities will be entitled to
specific performance of its rights under this Agreement. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Agreement and hereby
agrees not to raise the defense in any action for specific performance that a
remedy at law would be adequate.
17. AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of Holders of at
least a majority of the outstanding Registrable Securities.
18. NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery.
(a) if to a Holder of Registrable Securities, at the most current
address given by such Holder to the Company in accordance with the provisions
of this Section 18, which address initially is, for the Investor, the address
set forth in the Purchase Agreement; and
(b) if to the Company, initially at 5001 Baum Boulevard, Pittsburgh,
Pennsylvania 15213, to the attention of its President, and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 18.
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<PAGE> 16
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
20. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
21. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
22. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
23. ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
24. PARTIES BENEFITED. Nothing in this Agreement, express or implied, is
intended to confer upon any third party any rights, remedies, obligations or
liabilities.
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<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
SEEC, INC.
By:___________________________________
Title:________________________________
Printed Name:_________________________
INVESTORS
------------------------------------
Martin C. Goldman
------------------------------------
David L. Phillips
------------------------------------
Mark Cohen
------------------------------------
Dana A. Young
------------------------------------
Deborah Weinstein
------------------------------------
Robert Dunham
------------------------------------
Gerald R. Appel
------------------------------------
John R. Rotonde
------------------------------------
Nanda M. Nandkishore
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------------------------------------
Mark R. Reardon
------------------------------------
Sheldon W. Frisch
------------------------------------
Radha Ramaswami Basu
------------------------------------
Shyamala Reddy
------------------------------------
Geetha Reddy
------------------------------------
Glen Chatfield
------------------------------------
Ravindra Koka
------------------------------------
Stanley Young
------------------------------------
John D. Godfrey
------------------------------------
Larry Keating
------------------------------------
Robert L. Clark
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------------------------------------
Maxine Goldman
------------------------------------
David Smith
------------------------------------
Charles Hall
------------------------------------
Jan Coppersmith
------------------------------------
Greg Dwyer
------------------------------------
Thomas L. Dwyer
------------------------------------
Curt F. Bletzer
------------------------------------
Christopher T. Clark, Jr.
------------------------------------
Abe Ostrovsky
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<PAGE> 20
PROVIDENCE INVESTMENT
MANAGEMENT GROUP
By:__________________________________
Title:_______________________________
AMAR FOUNDATION
By:__________________________________
Title:_______________________________
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<PAGE> 1
Exhibit 10.10
EMPLOYMENT AGREEMENT
MADE this 1st day of October 1996, by and between:
SEEC, INC. a Pennsylvania Corporation, ("SEEC" hereinafter)
AND
RAVINDRA KOKA
an individual, ("EMPLOYEE" hereinafter)
WITNESSETH:
WHEREAS, SEEC is in the business of developing and marketing software;
and
WHEREAS, EMPLOYEE is presently an at will employee of SEEC, and SEEC
wishes to provide increased remuneration and benefits, in return for a
formalized employment agreement which contains, among other things, certain
restrictive covenants; and
WHEREAS, SEEC and EMPLOYEE wish to enter into an employment agreement
on the following terms and conditions;
NOW, THEREFORE, in consideration of the covenants contained herein,
and intending to be legally bound hereby, the parties hereto do covenant and
agree as follows:
ARTICLE I
TERM AND SCOPE OF EMPLOYMENT
SECTION 1. TERM. SEEC will employ EMPLOYEE for a period of two (2)
years from the date of this Agreement unless this Agreement is terminated
before that time, in accordance with the terms of Article VI hereof.
SECTION 2. SCOPE. EMPLOYEE shall hold the position of President and
Chief Executive Officer, and perform such duties and responsibilities as SEEC's
<PAGE> 2
Bylaws and its Board of Directors may from time to time designate in connection
with the said position. SEEC expressly reserves the right, in the exercise of
its sole discretion, to make changes in EMPLOYEE's duties and responsibilities,
so long as such changes are appropriate to EMPLOYEE's position and do not
amount to a demotion. During the term of EMPLOYEE's employment, EMPLOYEE shall
work for SEEC on a full time basis, and shall use his best efforts to further
the best interests and welfare of SEEC. During the term of his employment,
EMPLOYEE agrees that the will refrain from performing, directly or indirectly,
any work or services whatsoever for any third person, without the written
authorization of SEEC.
SECTION 3. EMPLOYEE agrees to abide by such lawful employment policies
and regulations as SEEC may from time to time adopt, and such specific
instructions and directions to EMPLOYEE as SEEC lawfully may give, from time to
time.
ARTICLE II
SALARY, FRINGE BENEFITS AND STOCK OPTIONS
SECTION 1. SALARY AND BONUS. EMPLOYEE shall be paid an annual salary
in the amount of Ninety-Eight Thousand Dollars ($98,000) (the "Base Salary"),
payable in periodic payments in accordance with SEEC's normal payroll practices
currently in effect, or such other payroll practices as SEEC may adopt from
time to time. The Base Salary shall increase to One Hundred Seven Thousand
Eight Hundred Dollars ($107,800) upon the closing of an initial public offering
of SEEC's Common Stock or the closing of any other equity financing the gross
proceeds of which to SEEC equal or exceed $5 million. EMPLOYEE shall also be a
participant in the executive bonus plan that the Compensation Committee of the
Board of Directors shall adopt following the closing of any such initial public
offering or other equity financing.
SECTION 2. FRINGE BENEFITS. EMPLOYEE will be entitled to such health
insurance and other employee benefits as SEEC makes available generally to its
employees in SEEC's discretion.
SECTION 3. REIMBURSEMENTS. SEEC will reimburse EMPLOYEE for all
reasonable travel and other expenses which EMPLOYEE incurs due to activities
required by SEEC.
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<PAGE> 3
ARTICLE III
INVENTIONS, DISCOVERIES, AND IMPROVEMENTS
SECTION 1. All inventions, discoveries, improvements or copyrightable
materials ("Discoveries" ) which EMPLOYEE conceives or makes, solely or in
conjunction with others, during his period of employment with SEEC, in any
field in which, during the term of this Agreement, SEEC is or plans to be
engaged, and in all related fields, are the sole and exclusive property of
SEEC. All such Discoveries made with two (2) years following termination of his
employment shall be deemed to fall within this provision, unless EMPLOYEE bears
the burden of proving, by evidence that is clear and convincing, that they were
conceived and made after the termination of his employment with SEEC.
SECTION 2. EMPLOYEE agrees that he will promptly disclose all
Discoveries to SEEC, and hereby assigns and conveys to SEEC all his right,
title and interest in and to all such Discoveries. EMPLOYEE will assist SEEC,
at its request, in preparing copyright applications, both United States and
foreign, covering all such Discoveries, and will sign and deliver all
documents, and do all things reasonable or necessary to secure and protect
SEEC's ownership interests in all Discoveries. All costs incidental to
EMPLOYEE's performance under this Article, as requested by SEEC, shall be born
by SEEC.
ARTICLE IV
CONFIDENTIALITY OF PROPRIETARY DATA
SECTION 1. For the purposes of this Agreement, all technical,
commercial and business information to which EMPLOYEE obtains access during the
course of his employment, including without limiting the generality of the
foregoing, all memoranda, notes, computer data, computer programs,
spreadsheets, graphs, print-outs, customer lists, customer and trade data,
materials and equipment data, market data, financial data, contracts, orders,
plans, designs, drawings, processes, formulae, codes, apparatus, products,
discoveries, inventions, bug-fixes, improvements, and all other records,
recordings or documents whatsoever, whether belonging to SEEC, or to any third
party, shall be deemed Proprietary Information, regardless of whether or not it
falls within the common-law definition of trade secrets, unless it is lawfully
in the public domain ("Proprietary Information").
SECTION 2. EMPLOYEE agrees to keep confidential all Proprietary
Information to which he has access during the course of his employment.
EMPLOYEE agrees that while such Proprietary Information is in his possession,
he
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<PAGE> 4
shall be deemed to hold the same in trust for SEEC's sole benefit, and shall
not use the same for any purpose, or disclose the same to any person, other
than in the performance of his required employment duties for SEEC, without
SEEC's written consent. Without limiting the generality of the foregoing,
EMPLOYEE acknowledges that in the course of his employment, he may obtain
access to the Proprietary Information of third parties who are doing business
with SEEC. Such information may or may not be marked "Confidential". EMPLOYEE
agrees that he will not use or disclose any third party Proprietary Information
which he obtains during the course of his employment for SEEC for any purpose
other than the performance of his required employment duties for SEEC.
ARTICLE V
NON-COMPETE COVENANT
SECTION 1. EMPLOYEE agrees that for a period of two (2) years after
his employment with SEEC is terminated, he will not, directly or indirectly,
work in the United States, India, Mexico or Canada, for any third party, or for
himself, in marketing and selling software products in direct competition with
the software products marketed or sold by SEEC while EMPLOYEE was employed by
SEEC.
SECTION 2. The non-compete covenant described in Section 1 of this
Article shall not be applicable in any of the following circumstances:
(1) If EMPLOYEE is laid off or terminated by
SEEC under the provisions of Article VI
Section 3 of this Agreement; or
(2) If his employment is terminated without
good cause or otherwise in violation of
this Agreement; or
(3) If EMPLOYEE terminates this Agreement in
accordance with Article VI Section 4
because SEEC is in violation of this
Agreement; or
(4) If any event should occur that gives rise
to the incurrence by SEEC of a severance
obligation to EMPLOYEE under Article VII of
this Agreement.
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<PAGE> 5
ARTICLE VI
TERMINATION
SECTION 1. The initial term of this Agreement shall be for a period of
two (2) years from the date first above written. Thereafter, this Agreement
shall be renewed automatically, from year to year, unless either party gives
written notice to the other of an intent to terminate, not less than thirty
(30) days before the expiration of the then current term of this Agreement. All
provisions of this Agreement shall continue in full force and effect for any
renewed term unless specifically changed by written Agreement of the parties.
In the event certain provisions of this Agreement are changed by written
agreement of the parties from time to time, all other provisions not
specifically changed in writing shall be deemed to continue in full force and
effect.
SECTION 2. SEEC may terminate the employment of EMPLOYEE at any time,
for good cause, without notice. Without limiting the generality of the
foregoing, good cause for termination shall include any conduct of EMPLOYEE
which is in violation of this Agreement, or EMPLOYEE's dishonesty, disloyalty,
willful misconduct, negligence or refusal or unwillingness to perform his
duties hereunder in good faith and to the best of his ability.
SECTION 3. If at any time and from time to time, SEEC, in its sole
discretion, determines that the financial interests of SEEC render it advisable
to lay EMPLOYEE off, or terminate EMPLOYEE's employment, SEEC may lay-off or
terminate EMPLOYEE without being deemed in breach of this Agreement; provided
however, in such event, EMPLOYEE will not be bound by the noncompete covenant
specified in Article V Section 1 of this Agreement.
SECTION 4. EMPLOYEE may terminate this Agreement on thirty (30) days
written notice to SEEC, for any violation of the terms of this Agreement which
SEEC has knowingly failed to cure.
SECTION 5. Except as specified to the contrary in this Agreement, the
following provisions shall survive termination of this Agreement:
(1) Article III relating to Inventions,
Discoveries and Improvements;
(2) Article IV relating to Confidentiality of
Proprietary Data;
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<PAGE> 6
(3) Article V relating to Non-Compete Covenant;
(4) Any obligation of SEEC to pay wages or fringe
benefits not paid as of the date of termination; and
(5) The provisions of Article VII to the extent
necessary to enforce any right arising out of this
Agreement.
ARTICLE VII
SEVERANCE AGREEMENT
SECTION 1. SEVERANCE OBLIGATIONS. If on or after the date of a "Change
in Control" (as defined below), SEEC, for any reason, terminates EMPLOYEE'S
employment or EMPLOYEE resigns "for good reason" (as defined below), then SEEC
shall pay to EMPLOYEE within five days following the date of termination or
date of resignation: (i) EMPLOYEE'S salary and benefits through the termination
date or resignation date, both as in effect on the date prior to the date of
the Change in Control; and (ii) the amount of any bonus payable to EMPLOYEE for
the year in which the Change in Control occurred, pro rated to take into
account the number of days that have elapsed in such year prior to the
termination date or the resignation date. In addition, during the twelve-month
period following the termination or resignation date, SEEC shall continue to
pay to EMPLOYEE his annual salary, as in effect on the day prior to the date of
the Change in Control on the dates when such salary would have been payable,
had EMPLOYEE remained employed by SEEC and shall continue to provide to
EMPLOYEE during such twelve-month period, at no cost to EMPLOYEE, the benefits
EMPLOYEE was receiving on the day prior to the date of the Change in Control or
benefits EMPLOYEE was receiving on the day prior to the date of the Change in
Control or benefits substantially similar thereto.
SECTION 2. DEFINITIONS OF CHANGE OF CONTROL. A "Change in Control" is
deemed to occur upon any of the following events: (i) any individual,
corporation, partnership, association, trust or other entity becomes the
beneficial owner (as defined in Rule 13(d)(3) under the Securities Exchange Act
of 1934), directly or indirectly, of securities of SEEC representing 50% or
more of the combined voting power of SEEC's then outstanding voting securities;
(ii) the individuals who as of the date of this Agreement are members of the
Board of Directors of SEEC (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board of Directors of SEEC (provided,
however, that if the election, or nomination for election by SEEC's
shareholders, of any new director was approved by a vote of a least a majority
of the Incumbent Board, such new director will, be considered as
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<PAGE> 7
a member of the Incumbent Board); (iii) an agreement by SEEC to
consolidate or merge with any other entity pursuant to which SEEC will
not be the continuing or surviving corporation or pursuant to which
shares of the Common Stock of SEEC would be converted into cash,
securities or other property, other than a merger of SEEC in which
holders of the Common Stock of the surviving corporation immediately
after the merger would have the same proportion of ownership of Common
Stock of the surviving corporation immediately after the merger; (iv) an
agreement of SEEC to sell, lease, exchange or otherwise transfer in one
transaction or a series of related transactions substantially all the
assets of SEEC; (v) the adoption of any plan or proposal for a complete
or partial liquidation or dissolution of SEEC; or (vi) an agreement to
sell more than 50% of the outstanding voting securities of SEEC in one
or a series of related transactions other than an initial public
offering of voting securities registered with the Securities and
Exchange Commission.
SECTION 3. DEFINITION OF "GOOD REASON". The term "good reason" means:
(i) a material diminution by SEEC of EMPLOYEE'S title or responsibilities, as
that title and those responsibilities existed on the day prior to the date of a
Change in Control; (ii) a material diminution by SEEC in EMPLOYEE'S salary,
benefits or incentive or other forms of compensation, all as in effect on the
day prior to the date of a Change in Control; or (iii) any reassignment of
EMPLOYEE or relocation of SEEC's principal executive offices outside of the
greater Pittsburgh area.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. NOTICES. Any notices required to be sent under the terms of
this Agreement shall be sent to the parties as follows, or to such new address
as a party may designate in writing. If a party is aware that the following
address is incorrect, the party shall send written notices to both the address
set forth below, and to the last known address of the other party.
TO SEEC AT: TO THE EMPLOYEE AT:
SEEC, Inc. c/o SEEC, Inc.
5001 Baum Blvd. 5001 Baum Blvd.
Pittsburgh, PA 15213 Pittsburgh, PA 15213
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<PAGE> 8
SECTION 2. BINDING ARBITRATION. The parties agree that all claims,
disputes and other matters in question between them, arising out of or related
to this Agreement, and the rights, duties and obligations arising thereunder or
the breach thereof, shall be decided by common-law arbitration in Pittsburgh,
PA, in accordance with the Rules of the American Arbitration Association then
prevailing, unless the parties mutually agree otherwise; provided however, SEEC
shall have the right to obtain preliminary or permanent injunctive relief from
a court of appropriate jurisdiction while the arbitration process is
continuing, and/or after the Board of Arbitrators renders its decision on the
merits; provided further, if either party would be entitled to join a third
party if the proceeding were brought before a court of applicable jurisdiction,
then in the interests of judicial economy, either party may litigate all
disputes against the other party and any third party in one action before a
court of appropriate jurisdiction. The parties agree that with regard to all
claims, disputes and remedies, arising out of this Agreement, the American
Arbitration Association, and the Federal and State Courts in Pittsburgh, PA and
applicable appellate courts, shall have jurisdiction over their persons. This
provision shall not be deemed to confer exclusive subject matter jurisdiction
over such courts. This Agreement shall not be construed as a consent to
arbitrate any dispute with any person who is not party to this Agreement.
SECTION 3. SERVICE OF PROCESS. Service of Process in Arbitration or in
Court may be made by certified mail, return receipt requested, to either party
at the addresses specified in Section 1 above of this Article, which service
shall be complete upon mailing.
SECTION 4. RIGHTS AND REMEDIES. Except as provided in Section 2 above
of this Article, the duties and obligations imposed by this Agreement, and the
rights and remedies available hereunder, shall be in addition to and not in
limitation of, any duties, obligations, rights and remedies otherwise imposed
or available in law or in equity.
SECTION 5. GOVERNING LAW. This Agreement shall be governed by
Pennsylvania law.
SECTION 6. WAIVER. No action or failure to act by either party shall
constitute a waiver of any right or duty accorded to any of them under this
Agreement, nor shall any such action or failure to act constitute an approval
of , or acquiescence in, any breach hereunder, except as may be specifically
agreed in writing.
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SECTION 7. INTEGRATION AND AMENDMENTS. The terms and conditions
contained herein constitute the full understanding of the parties, a complete
allocation of the risks between them, and a complete and exclusive statement of
the terms and conditions of their agreement. No conditions, representations,
understandings, or agreements, not contained herein, and purporting to modify,
waive, vary, explain or supplement the terms or conditions of this contract
shall be binding unless hereafter made in writing and signed by a duly
authorized representative of the party to be bound.
SECTION 8. SUCCESSORS AND ASSIGNS. Any attempted assignment by
EMPLOYEE of the rights and obligations created by this Agreement shall be void.
SEEC may at any time assign its rights, obligations and interests in this
Agreement. Except as provided to the contrary herein, the terms and conditions
of this Agreement shall be binding on the parties, their respective executors,
personal representatives, heirs, successors in interest and assigns.
SECTION 9. GENDER AND NUMBER. All references in this Agreement to the
singular and/or to the masculine gender, shall be deemed to include the plural
and/or feminine gender, where appropriate.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals, as of the date first above written.
ATTEST: SEEC, INC.
______________________________(SEAL) By:_________________________
President or Vice President
Secretary or Treasurer
WITNESS: EMPLOYEE
- ------------------------------ ----------------------------
Ravindra Koka
-9-
<PAGE> 1
Exhibit 10.11
EMPLOYMENT AGREEMENT
MADE this 1st day of October 1996, by and between:
SEEC, INC. a Pennsylvania Corporation, ("SEEC" hereinafter)
AND
JOHN GODFREY
an individual, ("EMPLOYEE" hereinafter)
WITNESSETH:
WHEREAS, SEEC is in the business of developing and marketing software;
and
WHEREAS, EMPLOYEE is presently an at will employee of SEEC, and SEEC
wishes to provide increased remuneration and benefits, in return for a
formalized employment agreement which contains, among other things, certain
restrictive covenants; and
WHEREAS, SEEC and EMPLOYEE wish to enter into an employment agreement
on the following terms and conditions;
NOW, THEREFORE, in consideration of the covenants contained herein,
and intending to be legally bound hereby, the parties hereto do covenant and
agree as follows:
ARTICLE I
TERM AND SCOPE OF EMPLOYMENT
SECTION 1. TERM. SEEC will employ EMPLOYEE for a period of two (2)
years from the date of this Agreement unless this Agreement is terminated
before that time, in accordance with the terms of Article VI hereof.
<PAGE> 2
SECTION 2. SCOPE. EMPLOYEE shall hold the position of Vice President
and perform such duties and responsibilities (and have such titles) as SEEC's
Chief Executive Officer and its Board of Directors may from time to time
designate in connection with the said position. SEEC expressly reserves the
right, in the exercise of its sole discretion, to make changes in EMPLOYEE's
duties and responsibilities, so long as such changes are appropriate to
EMPLOYEE's position and do not amount to a demotion. During the term of
EMPLOYEE's employment, EMPLOYEE shall work for SEEC on a full time basis, and
shall use his best efforts to further the best interests and welfare of SEEC.
During the term of his employment, EMPLOYEE agrees that the will refrain from
performing, directly or indirectly, any work or services whatsoever for any
third person without the written authorization of SEEC.
SECTION 3. EMPLOYEE agrees to abide by such lawful employment policies
and regulations as SEEC may from time to time adopt, and such specific
instructions and directions to EMPLOYEE as SEEC lawfully may give, from time to
time.
ARTICLE II
SALARY, FRINGE BENEFITS AND STOCK OPTIONS
SECTION 1. SALARY AND BONUS. EMPLOYEE shall be paid an annual salary
in the amount of Eighty-Eight Thousand Dollars ($88,000) (the "Base Salary"),
payable in periodic payments in accordance with SEEC's normal payroll practices
currently in effect, or such other payroll practices as SEEC may adopt from
time to time. The Base Salary shall increase to Ninety-Six Thousand Eight
Hundred Dollars ($96,800) upon the closing of an initial public offering of
SEEC's Common Stock or the closing of any other equity financing the gross
proceeds of which to SEEC equal or exceed $5 million. EMPLOYEE shall also be a
participant in the executive bonus plan the Compensation Committee of the Board
of Directors shall adopt following the closing of any such initial public
offering or other equity financing.
SECTION 2. FRINGE BENEFITS. EMPLOYEE will be entitled to such
health insurance and other employee benefits as SEEC makes available generally
to its employees in SEEC's discretion.
SECTION 3. REIMBURSEMENTS. SEEC will reimburse EMPLOYEE for
all reasonable travel and other expenses which EMPLOYEE incurs due to
activities required by SEEC.
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<PAGE> 3
ARTICLE III
INVENTIONS, DISCOVERIES, AND IMPROVEMENTS
SECTION 1. All inventions, discoveries, improvements or copyrightable
materials ("Discoveries" ) which EMPLOYEE conceives or makes, solely or in
conjunction with others, during his period of employment with SEEC, in any
field in which, during the term of this Agreement, SEEC is or plans to be
engaged, and in all related fields, are the sole and exclusive property of
SEEC. All such Discoveries made with two (2) years following termination of his
employment shall be deemed to fall within this provision, unless EMPLOYEE bears
the burden of proving, by evidence that is clear and convincing, that they were
conceived and made after the termination of his employment with SEEC.
SECTION 2. EMPLOYEE agrees that he will promptly disclose all
Discoveries to SEEC, and hereby assigns and conveys to SEEC all his right,
title and interest in and to all such Discoveries. EMPLOYEE will assist SEEC,
at its request, in preparing copyright applications, both United States and
foreign, covering all such Discoveries, and will sign and deliver all
documents, and do all things reasonable or necessary to secure and protect
SEEC's ownership interests in all Discoveries. All costs incidental to
EMPLOYEE's performance under this Article, as requested by SEEC, shall be born
by SEEC.
ARTICLE IV
CONFIDENTIALITY OF PROPRIETARY DATA
SECTION 1. For the purposes of this Agreement, all technical,
commercial and business information to which EMPLOYEE obtains access during the
course of his employment, including without limiting the generality of the
foregoing, all memoranda, notes, computer data, computer programs,
spreadsheets, graphs, print-outs, customer lists, customer and trade data,
materials and equipment data, market data, financial data, contracts, orders,
plans, designs, drawings, processes, formulae, codes, apparatus, products,
discoveries, inventions, bug-fixes, improvements, and all other records,
recordings or documents whatsoever, whether belonging to SEEC, or to any third
party, shall be deemed Proprietary Information, regardless of whether or not it
falls within the common-law definition of trade secrets, unless it is lawfully
in the public domain ("Proprietary Information").
SECTION 2. EMPLOYEE agrees to keep confidential all Proprietary
Information to which he has access during the course of his employment.
EMPLOYEE agrees that while such Proprietary Information is in his possession,
he
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shall be deemed to hold the same in trust for SEEC's sole benefit, and shall
not use the same for any purpose, or disclose the same to any person, other
than in the performance of his required employment duties for SEEC, without
SEEC's written consent. Without limiting the generality of the foregoing,
EMPLOYEE acknowledges that in the course of his employment, he may obtain
access to the Proprietary Information of third parties who are doing business
with SEEC. Such information may or may not be marked "Confidential". EMPLOYEE
agrees that he will not use or disclose any third party Proprietary Information
which he obtains during the course of his employment for SEEC for any purpose
other than the performance of his required employment duties for SEEC.
ARTICLE V
NON-COMPETE COVENANT
SECTION 1. EMPLOYEE agrees that for a period of two (2) years after
his employment with SEEC is terminated, he will not, directly or indirectly,
work in the United States, India, Mexico or Canada, for any third party, or for
himself, in marketing and selling software products in direct competition with
the software products marketed or sold by SEEC while EMPLOYEE was employed by
SEEC.
SECTION 2. The non-compete covenant described in Section 1 of this
Article shall not be applicable in any of the following circumstances:
(1) If EMPLOYEE is laid off or terminated by
SEEC under the provisions of Article VI
Section 3 of this Agreement; or
(2) If his employment is terminated without
good cause or otherwise in violation of
this Agreement; or
(3) If EMPLOYEE terminates this Agreement in
accordance with Article VI Section 4
because SEEC is in violation of this
Agreement; or
(4) If any event should occur that gives rise
to the incurrence by SEEC of a severance
obligation to EMPLOYEE under Article VII of
this Agreement.
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ARTICLE VI
TERMINATION
SECTION 1. The initial term of this Agreement shall be for a period of
two (2) years from the date first above written. Thereafter, this Agreement
shall be renewed automatically, from year to year, unless either party gives
written notice to the other of an intent to terminate, not less than thirty
(30) days before the expiration of the then current term of this Agreement. All
provisions of this Agreement shall continue in full force and effect for any
renewed term unless specifically changed by written Agreement of the parties.
In the event certain provisions of this Agreement are changed by written
agreement of the parties from time to time, all other provisions not
specifically changed in writing shall be deemed to continue in full force and
effect.
SECTION 2. SEEC may terminate the employment of EMPLOYEE at any time,
for good cause, without notice. Without limiting the generality of the
foregoing, good cause for termination shall include any conduct of EMPLOYEE
which is in violation of this Agreement, or EMPLOYEE's dishonesty, disloyalty,
willful misconduct, negligence or refusal or unwillingness to perform his
duties hereunder in good faith and to the best of his ability.
SECTION 3. If at any time and from time to time, SEEC, in its sole
discretion, determines that the financial interests of SEEC render it advisable
to lay EMPLOYEE off, or terminate EMPLOYEE's employment, SEEC may lay-off or
terminate EMPLOYEE without being deemed in breach of this Agreement; provided
however, in such event, EMPLOYEE will not be bound by the non-compete covenant
specified in Article V Section 1 of this Agreement.
SECTION 4. EMPLOYEE may terminate this Agreement on thirty (30) days
written notice to SEEC, for any violation of the terms of this Agreement which
SEEC has knowingly failed to cure.
SECTION 5. Except as specified to the contrary in this Agreement, the
following provisions shall survive termination of this Agreement:
(1) Article III relating to Inventions, Discoveries and
Improvements;
(2) Article IV relating to Confidentiality of Proprietary
Data;
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(3) Article V relating to Non-Compete Covenant;
(4) Any obligation of SEEC to pay wages or fringe
benefits not paid as of the date of termination; and
(5) The provisions of Article VII to the extent
necessary to enforce any right arising out of this
Agreement.
ARTICLE VII
SEVERANCE AGREEMENT
SECTION 1. SEVERANCE OBLIGATIONS. If on or after the date of a "Change
in Control" (as defined below), SEEC, for any reason, terminates EMPLOYEE'S
employment or EMPLOYEE resigns "for good reason" (as defined below), then SEEC
shall pay to EMPLOYEE within five days following the date of termination or
date of resignation: (i) EMPLOYEE'S salary and benefits through the termination
date or resignation date, both as in effect on the date prior to the date of
the Change in Control; and (ii) the amount of any bonus payable to EMPLOYEE for
the year in which the Change in Control occurred, pro rated to take into
account the number of days that have elapsed in such year prior to the
termination date or the resignation date. In addition, during the nine-month
period following the termination or resignation date, SEEC shall continue to
pay to EMPLOYEE his annual salary, as in effect on the day prior to the date of
the Change in Control on the dates when such salary would have been payable,
had EMPLOYEE remained employed by SEEC and shall continue to provide to
EMPLOYEE during such nine-month period, at no cost to EMPLOYEE, the benefits
EMPLOYEE was receiving on the day prior to the date of the Change in Control or
benefits EMPLOYEE was receiving on the day prior to the date of the Change in
Control or benefits substantially similar thereto.
SECTION 2. DEFINITIONS OF CHANGE OF CONTROL. A "Change in Control" is
deemed to occur upon any of the following events: (i) any individual,
corporation, partnership, association, trust or other entity becomes the
beneficial owner (as defined in Rule 13(d)(3) under the Securities Exchange Act
of 1934), directly or indirectly, of securities of SEEC representing 50% or
more of the combined voting power of SEEC's then outstanding voting securities;
(ii) the individuals who as of the date of this Agreement are members of the
Board of Directors of SEEC (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board of Directors of SEEC (provided,
however, that if the election, or nomination for election by SEEC's
shareholders, of any new director was approved by a vote of a least a majority
of the Incumbent Board, such new director will, be considered as
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a member of the Incumbent Board); (iii) an agreement by SEEC to
consolidate or merge with any other entity pursuant to which SEEC will
not be the continuing or surviving corporation or pursuant to which
shares of the Common Stock of SEEC would be converted into cash,
securities or other property, other than a merger of SEEC in which
holders of the Common Stock of the surviving corporation immediately
after the merger would have the same proportion of ownership of Common
Stock of the surviving corporation immediately after the merger; (iv) an
agreement of SEEC to sell, lease, exchange or otherwise transfer in one
transaction or a series of related transactions substantially all the
assets of SEEC; (v) the adoption of any plan or proposal for a complete
or partial liquidation or dissolution of SEEC; or (vi) an agreement to
sell more than 50% of the outstanding voting securities of SEEC in one
or a series of related transactions other than an initial public
offering of voting securities registered with the Securities and
Exchange Commission.
SECTION 3. DEFINITION OF "GOOD REASON". The term "good reason" means:
(i) a material diminution by SEEC of EMPLOYEE'S title or responsibilities, as
that title and those responsibilities existed on the day prior to the date of a
Change in Control; (ii) a material diminution by SEEC in EMPLOYEE'S salary,
benefits or incentive or other forms of compensation, all as in effect on the
day prior to the date of a Change in Control; or (iii) any reassignment of
EMPLOYEE or relocation of SEEC's principal executive offices outside of the
greater Pittsburgh area.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. NOTICES. Any notices required to be sent under the terms of
this Agreement shall be sent to the parties as follows, or to such new address
as a party may designate in writing. If a party is aware that the following
address is incorrect, the party shall send written notices to both the address
set forth below, and to the last known address of the other party.
TO SEEC AT: TO THE EMPLOYEE AT:
SEEC, Inc. c/o SEEC, Inc.
5001 Baum Blvd. 5001 Baum Blvd.
Pittsburgh, PA 15213 Pittsburgh, PA 15213
-7-
<PAGE> 8
SECTION 2. BINDING ARBITRATION. The parties agree that all claims,
disputes and other matters in question between them, arising out of or related
to this Agreement, and the rights, duties and obligations arising thereunder or
the breach thereof, shall be decided by common-law arbitration in Pittsburgh,
PA, in accordance with the Rules of the American Arbitration Association then
prevailing, unless the parties mutually agree otherwise; provided however, SEEC
shall have the right to obtain preliminary or permanent injunctive relief from
a court of appropriate jurisdiction while the arbitration process is
continuing, and/or after the Board of Arbitrators renders its decision on the
merits; provided further, if either party would be entitled to join a third
party if the proceeding were brought before a court of applicable jurisdiction,
then in the interests of judicial economy, either party may litigate all
disputes against the other party and any third party in one action before a
court of appropriate jurisdiction. The parties agree that with regard to all
claims, disputes and remedies, arising out of this Agreement, the American
Arbitration Association, and the Federal and State Courts in Pittsburgh, PA and
applicable appellate courts, shall have jurisdiction over their persons. This
provision shall not be deemed to confer exclusive subject matter jurisdiction
over such courts. This Agreement shall not be construed as a consent to
arbitrate any dispute with any person who is not party to this Agreement.
SECTION 3. SERVICE OF PROCESS. Service of Process in Arbitration or in
Court may be made by certified mail, return receipt requested, to either party
at the addresses specified in Section 1 above of this Article, which service
shall be complete upon mailing.
SECTION 4. RIGHTS AND REMEDIES. Except as provided in Section 2 above
of this Article, the duties and obligations imposed by this Agreement, and the
rights and remedies available hereunder, shall be in addition to and not in
limitation of, any duties, obligations, rights and remedies otherwise imposed
or available in law or in equity.
SECTION 5. GOVERNING LAW. This Agreement shall be governed by
Pennsylvania law.
SECTION 6. WAIVER. No action or failure to act by either party shall
constitute a waiver of any right or duty accorded to any of them under this
Agreement, nor shall any such action or failure to act constitute an approval
of , or acquiescence in, any breach hereunder, except as may be specifically
agreed in writing.
-8-
<PAGE> 9
SECTION 7. INTEGRATION AND AMENDMENTS. The terms and conditions
contained herein constitute the full understanding of the parties, a complete
allocation of the risks between them, and a complete and exclusive statement of
the terms and conditions of their agreement. No conditions, representations,
understandings, or agreements, not contained herein, and purporting to modify,
waive, vary, explain or supplement the terms or conditions of this contract
shall be binding unless hereafter made in writing and signed by a duly
authorized representative of the party to be bound.
SECTION 8. SUCCESSORS AND ASSIGNS. Any attempted assignment by
EMPLOYEE of the rights and obligations created by this Agreement shall be void.
SEEC may at any time assign its rights, obligations and interests in this
Agreement. Except as provided to the contrary herein, the terms and conditions
of this Agreement shall be binding on the parties, their respective executors,
personal representatives, heirs, successors in interest and assigns.
SECTION 9. GENDER AND NUMBER. All references in this Agreement to the
singular and/or to the masculine gender, shall be deemed to include the plural
and/or feminine gender, where appropriate.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals, as of the date first above written.
ATTEST: SEEC, INC.
______________________________(SEAL) By:___________________________
President
Secretary or Treasurer
WITNESS: EMPLOYEE
- ------------------------------ ---------------------------
John Godfrey
-9-
<PAGE> 1
Exhibit 10.12
EMPLOYMENT AGREEMENT
MADE this 1st day of October 1996, by and between:
SEEC, INC. a Pennsylvania Corporation, ("SEEC" hereinafter)
AND
RICHARD GOLDBACH
an individual, ("EMPLOYEE" hereinafter
WITNESSETH:
WHEREAS, SEEC is in the business of developing and marketing software;
and
WHEREAS, SEEC and EMPLOYEE wish to enter into an employment agreement
on the following terms and conditions;
NOW, THEREFORE, in consideration of the covenants contained herein,
and intending to be legally bound hereby, the parties hereto do covenant and
agree as follows:
ARTICLE I
TERM AND SCOPE OF EMPLOYMENT
SECTION 1. TERM. SEEC will employ EMPLOYEE for a period of two (2)
years from the date of this Agreement unless this Agreement is terminated
before that time, in accordance with the terms of Article VI hereof.
SECTION 2. SCOPE. EMPLOYEE shall hold the position of Chief Financial
Officer, and perform such duties and responsibilities as SEEC's Chief Executive
Officer and its Board of Directors may from time to time designate in
connection with the said position. SEEC expressly reserves the right, in the
exercise of its sole discretion, to make changes in EMPLOYEE's duties and
responsibilities, so long as such changes are appropriate to EMPLOYEE's
position and do not amount to a demotion. During the term of EMPLOYEE's
employment, EMPLOYEE shall work
<PAGE> 2
for SEEC on a full time basis, and shall use his best efforts to further
the best interests and welfare of SEEC. During the term of his
employment, EMPLOYEE agrees that the will refrain from performing,
directly or indirectly, any work or services whatsoever, for any third
person or entity, without the written authorization of SEEC.
SECTION 3. EMPLOYEE agrees to abide by such lawful employment policies
and regulations as SEEC may from time to time adopt, and such specific
instructions and directions to EMPLOYEE as SEEC lawfully may give, from time to
time.
ARTICLE II
SALARY, FRINGE BENEFITS AND STOCK OPTIONS
SECTION 1. SALARY. EMPLOYEE shall be paid an annual salary in the
amount of Eighty-Five Thousand Dollars ($85,000) (the "Base Salary"), payable
in periodic payments in accordance with SEEC's normal payroll practices
currently in effect, or such other payroll practices as SEEC may adopt from
time to time. The Base Salary shall increase to Ninety-Three Thousand, Five
Hundred Dollars ($93,500) upon the closing of an initial public offering of
SEEC's Common Stock or the closing of any other equity financing the gross
proceeds of which to SEEC equal or exceed $5 million. EMPLOYEE shall also be a
participant in the executive bonus plan the Compensation Committee of the Board
of Directors shall adopt following the closing of any such public offering or
other equity financing.
SECTION 2. FRINGE BENEFITS. EMPLOYEE will be entitled to such health
insurance and other employee benefits as SEEC makes available generally to its
employees in SEEC's discretion.
SECTION 3. STOCK OPTIONS. Simultaneously with the executed and delivery
hereof, SEEC shall grant to EMPLOYEE stock options to purchase 60,000 shares of
SEEC's Common Stock under SEEC's 1994 Stock Option Plan pursuant to the
Incentive Stock Option Agreement in the form attached hereto as Exhibit A.
SECTION 4. REIMBURSEMENTS. SEEC will reimburse EMPLOYEE for all
reasonable travel and other expenses which EMPLOYEE incurs due to activities
required by SEEC.
-2-
<PAGE> 3
ARTICLE III
INVENTIONS, DISCOVERIES, AND IMPROVEMENTS
SECTION 1. All inventions, discoveries, improvements or copyrightable
materials ("Discoveries" ) which EMPLOYEE conceives or makes, solely or in
conjunction with others, during his period of employment with SEEC, in any
field in which, during the term of this Agreement, SEEC is or plans to be
engaged, and in all related fields, are the sole and exclusive property of
SEEC. All such Discoveries made with two (2) years following termination of his
employment shall be deemed to fall within this provision, unless EMPLOYEE bears
the burden of proving, by evidence that is clear and convincing, that they were
conceived and made after the termination of his employment with SEEC.
SECTION 2. EMPLOYEE agrees that he will promptly disclose all
Discoveries to SEEC, and hereby assigns and conveys to SEEC all his right,
title and interest in and to all such Discoveries. EMPLOYEE will assist SEEC,
at its request, in preparing copyright applications, both United States and
foreign, covering all such Discoveries, and will sign and deliver all
documents, and do all things reasonable or necessary to secure and protect
SEEC's ownership interests in all Discoveries. All costs incidental to
EMPLOYEE's performance under this Article, as requested by SEEC, shall be born
by SEEC.
ARTICLE IV
CONFIDENTIALITY OF PROPRIETARY DATA
SECTION 1. For the purposes of this Agreement, all technical,
commercial and business information to which EMPLOYEE obtains access during the
course of his employment, including without limiting the generality of the
foregoing, all memoranda, notes, computer data, computer programs,
spreadsheets, graphs, print-outs, customer lists, customer and trade data,
materials and equipment data, market data, financial data, contracts, orders,
plans, designs, drawings, processes, formulae, codes, apparatus, products,
discoveries, inventions, bug-fixes, improvements, and all other records,
recordings or document whatsoever, whether belonging to SEEC, or to any third
party, shall be deemed Proprietary Information, regardless of whether or not it
falls within the common-law definition of trade secrets, unless it is lawfully
in the public domain ("Proprietary Information").
SECTION 2. EMPLOYEE agrees to keep confidential all Proprietary
Information to which he has access during the course of his employment.
EMPLOYEE agrees that while such Proprietary Information is in his possession,
he
-3-
<PAGE> 4
shall be deemed to hold the same in trust for SEEC's sole benefit, and shall
not use the same for any purpose, or disclose the same to any person, other
than in the performance of his required employment duties for SEEC, without
SEEC's written consent. Without limiting the generality of the foregoing,
EMPLOYEE acknowledges that in the course of his employment, he may obtain
access to the Proprietary Information of third parties who are doing business
with SEEC. Such information may or may not be marked "Confidential". EMPLOYEE
agrees that he will not use or disclose any third party Proprietary Information
which he obtains during the course of his employment for SEEC for any purpose
other than the performance of his required employment duties for SEEC.
ARTICLE V
TERMINATION
SECTION 1. The initial term of this Agreement shall be for a period of
two (2) years from the date first above written. Thereafter, this Agreement
shall be renewed automatically, from year to year, unless either party gives
written notice to the other of an intent to terminate, not less than thirty
(30) days before the expiration of the then current term of the Agreement. All
provisions of this Agreement shall continue in full force and effect for any
renewed term unless specifically changed by written Agreement of the parties.
In the event certain provisions of this Agreement are changed by written
agreement of the parties from time to time, all other provisions not
specifically changed in writing shall be deemed to continue in full force and
effect.
SECTION 2. SEEC may terminate the employment of EMPLOYEE at any time,
for good cause, without notice. Without limiting the generality of the
foregoing, good cause for termination shall include any conduct of EMPLOYEE
which is in violation of this Agreement, or EMPLOYEE's dishonesty, disloyalty,
willful misconduct, negligence or refusal or unwillingness to perform his
duties hereunder in good faith and to the best of his ability.
SECTION 3. If at any time and from time to time, SEEC, in its sole
discretion, determines that the financial interests of SEEC render it advisable
to lay EMPLOYEE off, or terminate EMPLOYEE's employment, SEEC may lay-off or
terminate EMPLOYEE without being deemed in breach of this Agreement; provided
however, in such event, EMPLOYEE will not be bound by the non-compete covenant
specified in Article V Section 1 of this Agreement.
-4-
<PAGE> 5
SECTION 4. EMPLOYEE may terminate this Agreement on thirty (30) days
written notice to SEEC, for any violation of the terms of this Agreement which
SEEC has knowingly failed to cure.
SECTION 5. Except as specified to the contrary in this Agreement, the
following provisions shall survive termination of this Agreement:
(1) Article III relating to Inventions, Discoveries and
Improvements;
(2) Article IV relating to Confidentiality of
Proprietary Data;
(3) Any obligation of SEEC to pay wages or fringe
benefits not paid as of the date of
termination; and
(4) The provisions of Article VI to the extent necessary
to enforce any right arising out of this Agreement.
ARTICLE VI
SEVERANCE AGREEMENT
SECTION 1. SEVERANCE OBLIGATIONS. If on or after the date of a "Change
in Control" (as defined below), SEEC, for any reason, terminates EMPLOYEE'S
employment or EMPLOYEE resigns "for good reason" (as defined below), then SEEC
shall pay to EMPLOYEE within five days following the date of termination or
date of resignation: (i) EMPLOYEE'S salary and benefits through the termination
date or resignation date, both as in effect on the date prior to the date of
the Change in Control; and (ii) the amount of any bonus payable to EMPLOYEE for
the year in which the Change in Control occurred, pro rated to take into
account the number of days that have elapsed in such year prior to the
termination date or the resignation date. In addition, during the nine-month
period following the termination or resignation date, SEEC shall continue to
pay to EMPLOYEE his annual salary, as in effect on the day prior to the date of
the Change in Control on the dates when such salary would have been payable,
had EMPLOYEE remained employed by SEEC and shall continue to provide to
EMPLOYEE during such nine-month period, at no cost to EMPLOYEE, the benefits
EMPLOYEE was receiving on the day prior to the date of the Change in Control or
benefits EMPLOYEE was receiving on the day prior to the date of the Change in
Control or benefits substantially similar thereto.
-5-
<PAGE> 6
SECTION 2. DEFINITIONS OF CHANGE OF CONTROL. A "Change in Control" is
deemed to occur upon any of the following events: (i) any individual,
corporation, partnership, association, trust or other entity becomes the
beneficial owner (as defined in Rule 13(d)(3) under the Securities Exchange Act
of 1934), directly or indirectly, of securities of SEEC representing 50% or
more of the combined voting power of SEEC's then outstanding voting securities;
(ii) the individuals who as of the date of the Agreements are members of the
Board of Directors of SEEC (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board of Directors of SEEC (provided,
however, that if the election, or nomination for election by SEEC's
shareholders, of any new director was approved by a vote of a least a majority
of the Incumbent Board, such new director will, be considered as a member of
the Incumbent Board); (iii) an agreement by SEEC to consolidate or merge with
any other entity pursuant to which SEEC will not be the continuing or surviving
corporation or pursuant to which shares of the Common Stock of SEEC would be
converted into cash, securities or other property, other than a merger of SEEC
in which holders of the Common Stock of the surviving corporation immediately
after the merger would have the same proportion of ownership of Common Stock of
the surviving corporation immediately after the merger; (iv) an agreement of
SEEC to sell, lease, exchange or otherwise transfer in one transaction or a
series of related transactions substantially all the assets of SEEC; (v) the
adoption of any plan or proposal for a complete or partial liquidation or
dissolution of SEEC; or (vi) an agreement to sell more than 50% of the
outstanding voting securities of SEEC in one or a series of related
transactions other than an initial public offering of voting securities
registered with the Securities and Exchange Commission.
SECTION 3. DEFINITION OF "GOOD REASON". The term "good reason" means:
(i) a material diminution by SEEC of EMPLOYEE'S title or responsibilities, as
that tile and those responsibilities existed on the day prior to the date of a
Change in Control; (ii) a material diminution by SEEC in EMPLOYEE'S salary,
benefits or incentive or other forms of compensation, all as in effect on the
day prior to the date of a Change in Control; or (iii) any reassignment of
EMPLOYEE or relocation of SEEC's principal executive offices outside of the
greater Pittsburgh area.
-6-
<PAGE> 7
ARTICLE VII
MISCELLANEOUS
SECTION 1. NOTICES. Any notices required to be sent under the terms of
this Agreement shall be sent to the parties as follows, or to such new address
as a party may designate in writing. If a party is aware that the following
address is incorrect, the party shall send written notices to both the address
set forth below, and to the last known address of the other party.
TO SEEC AT: TO THE EMPLOYEE AT:
SEEC, Inc. c/o SEEC, Inc.
5001 Baum Blvd. 5001 Baum Blvd.
Pittsburgh, PA 15213 Pittsburgh, PA 15213
SECTION 2. BINDING ARBITRATION. The parties agree that all claims,
disputes and other matters in question between them, arising out of or related
to this Agreement, and the rights, duties and obligations arising thereunder or
the breach thereof, shall be decided by common-law arbitration in Pittsburgh,
PA, in accordance with the Rules of the American Arbitration Association then
prevailing, unless the parties mutually agree otherwise; provided however, SEEC
shall have the right to obtain preliminary or permanent injunctive relief from
a court of appropriate jurisdiction while the arbitration process is
continuing, and/or after the Board of Arbitrators renders its decision on the
merits; provided further, if either party would be entitled to join a third
party if the proceeding were brought before a court of applicable jurisdiction,
then in the interests of judicial economy, either party may litigate all
disputes against the other party and any third party in one action before a
court of appropriate jurisdiction. The parties agree that with regard to all
claims, disputes and remedies, arising out of this Agreement, the American
Arbitration Association, and the Federal and State Courts in Pittsburgh, PA and
applicable appellate courts, shall have jurisdiction over their persons. This
provision shall not be deemed to confer exclusive subject matter jurisdiction
over such courts. This Agreement shall not be construed as a consent to
arbitrate any dispute with any person who is not party to this Agreement.
SECTION 3. Service of Process in Arbitration or in Court, may be made
by certified mail, return receipt requested, to either party at the addresses
specified in Section 1 above of this Article, which service shall be complete
upon mailing.
-7-
<PAGE> 8
SECTION 4. RIGHTS AND REMEDIES. Except as provided in Section 2 above
of this Article, the duties and obligations imposed by this Agreement, and the
rights and remedies available thereunder, shall be in addition to and not in
limitation of, any duties, obligations, rights and remedies otherwise imposed
or available in law or in equity.
SECTION 5. GOVERNING LAW. This Agreement shall be governed by
Pennsylvania law.
SECTION 6. WAIVER. No action or failure to act by either party shall
constitute a waiver of any right or duty accorded to any of them under this
Agreement, nor shall any such action or failure to act constitute an approval
of, or acquiescence in, any breach hereunder, except as may be specifically
agreed in writing.
SECTION 7. INTEGRATION AND AMENDMENTS. The terms and conditions
contained herein constitute the full understanding of the parties, a complete
allocation of the risks between them, and a complete and exclusive statement of
the terms and conditions of their agreement. No conditions, representations,
understandings, or agreements, not contained herein, and purporting to modify,
waive, vary, explain or supplement the terms or conditions of this contract
shall be binding unless hereafter made in writing and signed by a duly
authorized representative of the party to be bound.
SECTION 8. SUCCESSORS AND ASSIGNS. Any attempted assignment by
EMPLOYEE of the rights and obligations created by this Agreement shall be void.
SEEC may at any time assign its rights, obligations and interests in this
Agreement. Except as provided to the contrary herein, the terms and conditions
of this Agreement shall be binding on the parties, their respective executors,
personal representatives, heirs, successors in interest and assigns.
SECTION 9. GENDER AND NUMBER. All references in this Agreement to the
singular and/or to the masculine gender, shall be deemed to include the plural
and/or feminine gender, where appropriate.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals, as of the date first above written.
ATTEST: SEEC, INC.
______________________________(SEAL) By:_____________________________
Secretary or Treasurer President or Vice President
WITNESS: EMPLOYEE
- ------------------------------ --------------------------------
Richard Goldbach
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<PAGE> 1
EXHIBIT 11.1
SEEC, INC.
COMPUTATION OF SHARES USED IN COMPUTING NET INCOME (LOSS)
PER COMMON AND COMMON EQUIVALENT SHARES
YEARS ENDED MARCH 31, 1992, 1993, 1994, 1995 AND 1996,
AND THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31 THREE MONTHS ENDED JUNE 30
-------------------------------------------------------------------------- --------------------------
1992 1993 1994 1995 1996 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Weighted average
number of common
and common
equivalent shares
not subject to the
provisions of SAB
No. 83:
Common shares
issued and
outstanding..... 1,175,300 1,356,116 1,356,116 1,356,568 1,360,712 1,358,376 1,419,283
Common equivalent
shares
consisting of
options and
warrants........ -- -- -- -- -- -- 131,453
Reduction in
common
equivalent
shares through
application of
the treasury
stock method.... -- -- -- -- -- -- (518)
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,175,300 1,356,116 1,356,116 1,356,568 1,360,712 1,358,376 1,550,218
---------- ---------- ---------- ---------- ---------- ---------- ----------
Common and common
equivalent shares
subject to the
provisions of SAB
No. 83:
Issuance of common
stock to:
ERA Software
Systems
Private, Ltd.
an affiliate,
in connection
with the
acquisition of
software
rights........ 150,679 150,679 150,679 150,679 150,679 150,679 150,679
Related party
note holders
in exchange
for principal
and accrued
interest...... 122,606 122,606 122,606 122,606 122,606 122,606 122,606
Officers/shareholders
in exchange
for the
outstanding
balance of
deferred
compensation
and accrued
interest...... 35,173 35,173 35,173 35,173 35,173 35,173 35,173
Related parties
through
private
placements.... 31,685 31,685 31,685 31,685 31,685 31,685 31,685
Unrelated third
parties
through
private
placements.... 109,080 109,080 109,080 109,080 109,080 109,080 109,080
Common stock
equivalents
consisting of
stock options... 37,157 37,157 37,157 37,157 37,157 37,157 37,157
Reduction in
common and
common
equivalent
shares through
application of
the treasury
stock method.... (50,468) (50,468) (50,468) (50,468) (50,468) (50,468) (50,468)
---------- ---------- ---------- ---------- ---------- ---------- ----------
435,912 435,912 435,912 435,912 435,912 435,912 435,912
---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average
number of common
and common
equivalent shares
outstanding....... 1,611,212 1,792,028 1,792,028 1,792,480 1,796,624 1,794,288 1,986,130
========== ========== ========== ========== ========== ========== ==========
Net income (loss)
applicable to
common and common
equivalent
shares............ $ (194,293) $ (416,396) $ (154,809) $ (255,558) $ (153,172) $ (78,988) $ 64,529
========== ========== ========== ========== ========== ========== ==========
Net income (loss)
per common and
common equivalent
share............. $ (.12) $ (.23) $ (.09) $ (.14) $ (.09) $ (.04) $ .03
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
SEEC, Inc.
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated August 30, 1996, except for Notes 15
and 16(d), (e) and (f), and to which the date is October 1, 1996, and the
recapitalization described in Note 1, as to which the date is October , 1996,
relating to the financial statements of SEEC, Inc., which is contained in that
Prospectus, and of our report dated August 30, 1996, relating to the schedule,
which is contained in Part II of the Registration Statement.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
Boston, Massachusetts
October 11, 1996
