U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to________
Commission file number: 1-14076
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-3270045
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
111 North Market Street, San Jose, California 95113
(Address of principal executive offices)
(408) 537-3000
(Issuer's telephone number)
Allegro New Media, Inc.
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [ X ] No
[ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 8,050,424 shares of Common
Stock as of August 8, 1997.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
<PAGE>
PART I. FINANCIAL INFORMATION
Item Page
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996 3
Condensed Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7
<PAGE>
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited) (Note)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . $ 2,822,162 $ 4,833,454
Restricted cash . . . . . . . . . . . . . . . . - 1,650,000
Short-term investments. . . . . . . . . . . . . 1,487,634 6,328,180
Accounts receivable, net. . . . . . . . . . . . 2,667,167 1,991,790
Inventories (Note 3). . . . . . . . . . . . . . 605,783 713,586
Other current assets. . . . . . . . . . . . . . 288,494 235,849
----------- ------------
Total current assets . . . . . . . . . . . 7,871,240 15,752,859
Property and equipment, net. . . . . . . . . . . 619,843 450,867
Acquired software, net . . . . . . . . . . . . . 5,597,917 6,787,614
Goodwill and other assets, net . . . . . . . . . 3,968,454 4,262,033
----------- ------------
$18,057,454 $ 27,253,373
----------- ------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
Accounts payable. . . . . . . . . . . . . . . . $ 2,888,498 $ 3,509,060
Accrued liabilities . . . . . . . . . . . . . . 6,944,528 10,186,059
Notes payable . . . . . . . . . . . . . . . . . 77,274 1,882,548
----------- ------------
Total current liabilities. . . . . . . . . . . . 9,910,300 15,577,667
Stockholders' equity:
Serial Preferred Stock, authorized 1,939,480 shares:
none issued and outstanding:
Class B Voting Preferred Stock, authorized 60,520
shares: issued and outstanding 60,520 shares. . 61 61
Common stock, par value $.001 per share, authorized
30,000,000 shares; issued and outstanding 8,050,424
shares in 1997 and 7,860,243 shares in 1996. . . . 8,050 7,860
Additional paid-in capital . . . . . . . . . . . 42,843,535 41,731,437
Accumulated deficit. . . . . . . . . . . . . . . (34,704,492) (30,063,652)
------------ ------------
Total stockholders' equity. . . . . . . . . . . 8,147,154 11,675,706
------------ ------------
Total liabilities and stockholders' equity. . . $18,057,454 $ 27,253,373
----------- ------------
<FN>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
</FN>
</TABLE>
See notes to condensed financial statements.
<PAGE>
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . $ 4,144,311 $ 421,125 $ 8,094,563 $ 867,049
Cost of goods sold . . . . . . . . 827,603 112,767 1,779,369 342,169
------------ ----------- ----------- -----------
Gross profit . . . . . . . . . . . 3,316,708 308,358 6,315,194 524,879
Selling, general and administrative
expenses 3,565,436 1,127,391 7,728,016 1,629,947
Amortization of acquired software
and goodwill and depreciation. . 822,618 7,180 1,689,537 14,534
Product development. . . . . . . . 890,526 357,288 1,646,738 439,566
Other (income) expense net . . . (18,633) (22,828) (108,257) (52,977)
------------ ----------- ----------- -----------
Net loss . . . . . . . . . . . . . $ (1,943,239) $(1,160,673) $(4,640,840) $(1,506,190)
------------ ----------- ----------- -----------
Net loss per share . . . . . . . . $ (.24) $ (.38) $ (.58) $ (.49)
------------ ----------- ----------- -----------
Weighted average number of common
shares outstanding. . . . . . . . 8,050,424 3,083,760 7,991,909 3,067,215
------------ ----------- ----------- -----------
</TABLE>
See notes to condensed financial statements.
<PAGE>
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1997 1996
Operating activities
<S> <C> <C>
Cash (used in) from operations . . . . . . . . . $ (6,239,217) $(1,533,617)
Investment activities
Purchase of property and equipment . . . . . . . (457,348) (16,862)
Proceeds from sale of short term investments . . 4,840,546 -
Cash used for business acquisition . . . . . . . - (120,650)
------------- ------------
4,383,198 (137,512)
Financing activities
Proceeds from sale of common stock . . . . . . . - 464,907
Repayment of notes . . . . . . . . . . . . . . . (1,805,273) -
------------- ------------
(1,805,273) 464,907
Net (decrease) in cash . . . . . . . . . . . . . (3,661,292) (1,206,222)
Cash at beginning of period. . . . . . . . . . . 6,483,454 2,928,272
------------- ------------
Cash at end of period. . . . . . . . . . . . . . $ 2,822,162 $ 1,722,050
------------- ------------
</TABLE>
See notes to condensed financial statements.
<PAGE>
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation.
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month and six month periods ended
June 30, 1997 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended December 31, 1996.
Certain prior year information has been reclassified to conform to the current
year's presentation.
2. Loss Per Share.
Net loss per share is computed based upon the weighted average number of
shares of common stock outstanding during the periods presented.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to be adopted for the Company's
year ending December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. The impact of Statement No. 128 is not expected to be
material for any previously reported period.
3. Inventories.
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
<S> <C> <C>
Raw materials $ 110,948 $ 31,570
Finished goods 494,835 682,016
--------- ----------
Total $ 605,783 $ 713,586
</TABLE>
4. Stockholders' Equity.
During the first six months of 1997 the Company issued (a) 71,428 shares of
common stock to M.S. Farrell & Co., Inc. ("MSF") and a designee thereof in
connection with the Company's exercise of its right to terminate its exclusive
investment banking and other obligations to MSF and (b) an aggregate of 118,747
of common stock to investment bankers, consultants and other individuals and
upon the exercise of certain outstanding stock options granted under the
Company's 1994 Long-Term Incentive Plan.
5. Business Combinations.
On July 31, 1996, the Company acquired all of the outstanding common stock
of Serif Inc. and all of the outstanding preference and ordinary shares of Serif
(Europe) Limited (collectively "Serif"). The aggregate purchase price was
approximately $4,200,000 and was principally financed through the issuance of
1,000,000 shares of the Company's common stock. The acquisition has been
accounted for as a purchase and the results of operations of Serif are included
in the Company's consolidated financial statements beginning August 1, 1996.
On December 27, 1996, the Company acquired all of the outstanding common
stock of Software Publishing Corporation ("SPC"). The aggregate purchase price,
including all direct costs, was approximately $30,000,000 and was principally
financed through the issuance of 3,376,162 shares of common stock.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Statements contained in this Quarterly Report on Form 10-QSB that are not
based upon historical fact are "forward looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements included
in this Form 10-QSB involve known and unknown risks, uncertainties and other
factors which could cause actual results, performance (financial or operating)
or achievements expressed or implied by such forward looking statements not to
occur or be realized. Such forward looking statements generally are based upon
the best estimates by the Company of future results, performance or achievement,
based upon current conditions and the most recent results of operations. Forward
looking statements may be identified by the use of forward looking terminology
such as "may," "will," "expect," "believe," "estimate," "anticipate,"
"continue," or similar terms, variations of those terms or the negative of those
terms.
The Company has recently acquired three operating companies with the
expectation that such transactions will result in long-term strategic benefits.
The realization of these anticipated benefits will depend in part on whether the
operations of the Company and its recently acquired subsidiaries can be fully
integrated in an efficient and effective manner. This requires, among other
things, integration of the Company's and such subsidiaries' respective product
offerings and coordination of the Company's and such subsidiaries' sales,
marketing, and research and development efforts and distribution channels. While
the Company has substantially implemented its integration plan, there can be no
assurance that the expected long-term strategic benefits of the recent
acquisitions will be realized.
Additional potential risks and uncertainties include, among other things,
such factors as the overall level of business and consumer spending for computer
software, the amount of sales of the Company's products, the competitive
environment within the computer software industry, the level and costs incurred
in connection with the Company's product development efforts and the results of
such efforts, the financial strength of the retail industry, market acceptance
of the Company's products, certain technological considerations, competition,
dependence on key personnel and the other factors and information disclosed and
discussed in this "Item 2. Management's Discussion and Analysis or Plan of
Operation" and in other sections of this Form 10-QSB. Readers of this Form
10-QSB should carefully consider such risks, uncertainties and other
information, disclosures and discussions which contain cautionary statements
identifying important factors that could cause actual results to differ
materially from those provided in the forward looking statements.
General
The Company is an international developer, publisher and supplier of
proprietary computer software applications and companion utilities programs,
primarily targeted towards the visual communications and presentation graphics,
desktop publishing and business productivity segments of the corporate and small
office/home office ("SOHO") markets. The Company's products are designed to
improve the graphical appeal and overall effectiveness of documents produced by
desktop publishing, presentation graphics, web page, e-mail, word processing and
similar applications, as well as to produce documents through the Company's
easy-to-use desktop publishing and presentation graphics applications. The
Company's product lines include several products based upon its patent-pending
Intelligent Formatting technology such as ActiveOffice, ActivePresenter, ASAP
WordPower, ASAP WebShow and ASAP; as well as its traditional products such as
Serif PagePlus, Serif DrawPlus, Harvard Graphics, Harvard ChartXL, Learn to Do
Windows 95 with John C Dvorak, and a line of interactive multimedia products
based on Entrepreneur Magazine publications. In January 1997, the Company
introduced ActiveOffice, which is a companion product to Microsoft Office that
is designed to give users of Microsoft Word, Excel, PowerPoint and Exchange
Mail, a quick and easy way to convert plain text and numbers into visual
graphics within the documents and presentations created by such programs. In
June 1997, the Company introduced ActivePresenter, an Internet and World Wide
Web presentation and publishing program which publishes both its own or
Microsoft PowerPoint presentations for either real time or on demand
presentations on the World Wide Web. The Company intends to release in the
second half of 1997 a new product currently titled ActiveMail, which is expected
to enable e-mail users to produce electronic messages utilizing a rich graphical
presentation rather than ordinary text. The Company also continues to offer word
processing and other business productivity software products, but has
de-emphasized its word processing and other non-visual communications business
<PAGE>
productivity and interactive multimedia products. The Company currently derives
substantially all of its net sales from products sold directly to end-users by
its direct mail and telemarketing centers, and to retailers, distributors and
corporate purchasers by its internal corporate and retail sales force and
independent sales representatives. As the industry evolves mechanisms for
efficiently and securely charging customers directly for software over the
Internet, the Company expects that it may be able to supplement traditional
forms of distribution with distribution of the Company's software directly over
the Internet medium.
North America and international net revenues for the Company's three month
and six month periods ending June 30, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
$ % $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America $1,902,380 46.0 $ 421,125 100.0 $3,774,545 47.0 $867,049 100.0
International 2,241,931 54.0 0 0.0 4,320,018 53.0 0 0.0
---------- ----- --------- ----- ---------- ----- -------- -----
Total net revenues $4,144,311 100.0 $ 421,125 100.0 $8,094,563 100.0 $867,049 100.0
</TABLE>
The Company believes that end users are continuing to migrate from the
Windows 3.1 to the Windows 95 platform and potentially may migrate to Internet
computing. The Company expects increased competition, including price
competition, in the Windows 3.1, Windows 95 and Windows NT markets in the
future. Several of the Company's competitors have introduced suites of products
which include products that directly compete with the Company's products. The
Company believes that these offerings of product suites adversely affect net
revenues and will continue to adversely affect sales of the Company's products
in the future as the individual products within the suites continue to gain
increased levels of inter-operability and functionality. The Company currently
does not offer a suite of general purpose office products; however, the Company
currently offers two suites of products, Serif Publishing Power Suite and
Harvard Presenters Pack, as well as products that complement competitive suite
products. The Company believes that in order to increase its net revenues, it
must continue to develop and introduce new technologies and products internally,
obtain additional technologies and products through strategic alliances and
acquisitions and introduce new marketing strategies. Any inability or delay in
executing these strategies, difficulties encountered in introducing new products
or marketing programs, or failures of the Company's current and future products
to compete successfully with products offered by other vendors, could adversely
affect the Company's net revenues and profitability. The Company's continued
growth is expected to require continued increases in the number of the Company's
employees, expenditures for new product development, the acquisition of product
rights, sales and marketing expenses, and general and administrative expenses.
Results of Operations
Three Month Period Ended June 30, 1997 Compared to the Three Month Period
Ended June 30, 1996
Net Sales. Net sales increased approximately 884% from $421,125 in the
three month period ended June 30, 1996 to $4,144,311 in the three month period
ended June 30, 1997 as a result of the inclusion of sales from Serif and SPC in
the 1997 three month period. There were no Serif or SPC results included in the
1996 period. The Company provided for returns in the three month period ended
June 30, 1997 at approximately 12% of gross sales versus approximately 22% in
the three month period ended June 30, 1996 due to a substantial shift in product
sales from primarily retail sales to more direct channels, which historically
have exhibited fewer returns than the retail sales channels.
Cost of Goods Sold. Cost of goods sold increased approximately 634% from
$112,767 in the three month period ended June 30, 1996 to $827,603 in the three
month period ended June 30, 1997, as a result of higher sales volume. As a
percentage of net sales, cost of goods sold decreased from approximately 27% of
<PAGE>
net sales in the three month period ended June 30, 1996 to approximately 20% of
net sales in the three month period ended June 30, 1997, primarily as a result
of increased sales volumes providing lower per unit production costs. Cost of
goods sold consists primarily of product costs, freight charges, royalties and
inventory allowances for damaged and obsolete products. Product costs consist of
the costs to purchase the underlying materials and print both boxes and manuals,
media costs (CD-ROM's and other media) and assembly.
The Company's gross margins and operating income may be affected in
particular periods by the timing of product introductions, promotional pricing
and rebate offers, as well as by return privileges and marketing promotions in
connection with new product introductions and upgrades. These promotions may
have a negative influence on average selling prices and gross margins. Gross
margins have also been, and may continue to be, adversely affected by
competitive pricing strategies in the industry as a whole, including competitive
upgrade pricing, the OEM business and alternative licensing arrangements.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased by approximately 216% from $1,127,391
in the three month period ended June 30, 1996 to $3,565,436 in the three month
period ended June 30, 1997. Substantially all expenses have increased from the
1996 period due to the inclusion of costs associated with the operations of
Serif and SPC which were acquired subsequent to June 30, 1996. Total selling
expenses (not including salaries) increased approximately 1,418% from $149,973
in the three month period ended June 30, 1996 to $2,276,700 in the three month
period ended June 30, 1997, primarily as a result of an increase in direct mail
advertising associated with the Company's telemarketing operations and the
roll-out costs associated with the release of the Company's ActiveOffice and
ActivePresenter products. SG&A expenses in the three month period ended June 30,
1996 included $637,980 relating to the release of 217,000 shares of common stock
from escrow to two management stockholders. No similar expense was incurred in
the 1997 three month period.
The Company establishes several of its marketing expenditure levels based
on expected net revenues. If orders and shipments do not occur when expected,
expenditure levels could be disproportionately high compared to recognized
revenues for the reported period and the Company's operating results could be
adversely affected. The Company periodically reviews and adjusts its variable
expenditure levels based on actual sales volumes. In the future, the Company's
net revenues and operating results could be adversely affected by these and
other factors, such as delays in new product introductions, the mix of product
sales or distribution channels and customer choices regarding operating systems.
Amortization of Acquired Software and Goodwill and Depreciation. In the
three month period ended June 30, 1997, the Company recorded $784,053 in
amortization of acquired software and goodwill associated with its acquisitions
of Serif and SPC, which was not included in the three month period ended June
30, 1996. Depreciation increased to $38,565 in the three month period ended June
30, 1997 from $7,180 for the three month period ended June 30, 1996 due to the
increased level of fixed assets resulting primarily from the Company's
acquisitions of Serif and SPC.
Product Development. Product development expenses increased approximately
149% from $357,288 in the three month period ended June 30, 1996 to $890,526 in
the three month period ended June 30, 1997 principally as a result of an
increase in product development costs associated with producing new products and
the inclusion of the product development costs associated with the Serif and SPC
subsidiaries which were not included in the 1996 period. As a percentage of net
sales, the Company's product development costs were approximately 21% in the
three month period ended June 30, 1997 versus 85% in the three month period
ended June 30, 1996. The 1996 period included approximately $243,750 for the
acquisition of partially developed software. The Company expects that
development expenses will increase in dollar amount in the future as the Company
expands its development activities, although the Company's long-term goal is to
continue to reduce product development costs as a percentage of sales. All
product development costs have been expensed in the period incurred.
Other Income. Other income decreased from $22,828 in the three month period
ended June 30, 1996 to $18,633 in the three month period ended June 30, 1997
primarily as a result of lower average cash balances during the 1997 period.
<PAGE>
Six Month Period Ended June 30, 1997 Compared to the Six Month Period Ended
June 30, 1996
Net Sales. Net sales increased approximately 834% from $867,049 in the six
month period ended June 30, 1996 to $8,094,563 in the six month period ended
June 30, 1997 as a result of the inclusion of sales from Serif and SPC in the
1997 period. There were no Serif or SPC results included in the 1996 period. The
Company provided in the six month period ended June 30, 1997 for returns at
approximately 15% of gross sales versus approximately 21% in the six month
period ended June 30, 1996, due to a substantial shift in product sales from
primarily retail sales to more direct channels, which historically have
exhibited fewer returns than the retail sales channels.
Cost of Goods Sold. Cost of goods sold increased from $342,169 for the six
month period ended June 30, 1996 to $1,779,369 in the six month period ended
June 30, 1997, or approximately 420%, as a result of increased sales volume. As
a percentage of net sales, cost of goods sold decreased from approximately 39%
in the six month period ended June 30, 1996 to 22% in the six month period ended
June 30, 1997, primarily as a result of higher sales volume providing lower per
unit production costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $6,098,069 or approximately 374% from
$1,629,947 in the six month period ended June 30, 1996 to $7,728,016 in the six
month period ended June 30, 1997. Substantially all expenses have increased from
the 1996 period due to the inclusion of costs associated with the operations of
Serif and SPC which were acquired subsequent to June 30, 1996. General and
administrative expenses increased approximately 879% from $320,442 in the six
month period ended June 30, 1996 to $3,136,230 in the six month period ended
June 30, 1997. Total selling expenses (not including salaries) increased
approximately 1,041% from $316,443 in the six month period ended June 30, 1996
to $3,611,345 in the six month period ended June 30, 1997, primarily as a result
of an increase in direct mail advertising associated with the Company's
telemarketing operations and the roll-out costs associated with the release of
the Company's ActiveOffice and ActivePresenter products. SG&A expenses in the
six month period ended June 30, 1996 included $637,980 relating to the release
of 217,000 shares of common stock from escrow to two management stockholders. No
similar expense was incurred in the 1997 six month period.
Amortization of Acquired Software and Goodwill and Depreciation. In the six
month period ended June 30, 1997, the Company recorded approximately $1,568,106
in amortization of acquired software and goodwill associated with its
acquisitions of Serif and SPC, which were acquired subsequent to June 30, 1996.
Depreciation increased to $121,431 in the six month period ended June 30, 1997
from $14,534 in the six month period ended June 30, 1996 due to the increase in
fixed assets resulting primarily from the Company's acquisition of Serif and
SPC.
Product Development. Product development expenses increased approximately
275% from $439,566 in the six month period ended June 30, 1996 to $1,646,738 in
the six month period ended June 30, 1997 principally as a result of the costs
associated with the development of new Serif and SPC products, which were
acquired subsequent to June 30, 1996. In the 1996 period, the Company expensed
$243,750 relating to the acquisition of partially developed software. As a
percentage of net sales, the Company's product development costs decreased to
approximately 20% in the six month period ended June 30, 1997 versus 51% in the
six month period ended June 30, 1996 due to higher net sales volume which more
than offset the inclusion of expenses relating to Serif and SPC development
projects in the 1997 period. The Company expects that development expenses will
increase in dollar amount in the future as the Company expands its development
activities, although the Company's long-term goal is to continue to reduce
product development costs as a percentage of sales. All development costs have
been expensed in the period incurred.
Other Income. Other income increased approximately 104% from $52,977 in the
six month period ended June 30, 1996 to $108,257 in the six month period ended
June 30, 1997, primarily as a result of higher average cash balances.
Liquidity and Capital Resources
During the six month period ended June 30, 1997, the Company's cash and
cash equivalents and short-term investments decreased by $6,851,838 from
$11,161,634 at December 31, 1996 to $4,309,796 at June 30, 1997, primarily as a
result of using $6,239,217 in operations, $1,805,273 to pay certain debt and
$457,348 to purchase property and equipment, which more than offset cash
generated by investment activities. Although the Company had a working capital
deficit of $2,039,060 at June 30, 1997, the Company believes that its existing
<PAGE>
cash and cash equivalents and cash generated from operations, if any,
should be sufficient to meet its currently anticipated liquidity and capital
expenditure requirements for at least the next twelve months. There can be no
assurance, however, that the Company will be successful in attaining its sales
goals, nor that attaining such goals will have the desired effect on the
Company's cash resources. In the event that the Company does not attain its
revenue and cash collection goals or if the Company's cash resources are
otherwise not sufficient, the Company has developed alternatives which, if
implemented, would be expected to sufficiently reduce expenses to meet currently
anticipated liquidity and capital expenduture requirements for at least the next
twelve months. In addition, the Company may seek additional sources of
financing. The Company has a letter of credit facility of $300,000 relating to
certain lease obligations; however, there can be no assurances that the Company
will be able to obtain additional financing, if at all, or that such financing
will be on terms acceptable to the Company. The Company is pursuing a possible
offering of its equity or debt securities; however, there can be no assurance
that the Company will be successful in completing such an offering.
The Company's operating activities for the first six months of 1997 used
cash of $6,239,217, primarily as a result of reducing accrued liabilities by
$3,241,531, reducing trade accounts payable by $620,562 and increasing accounts
receivable by $675,377. The Company generated cash of $4,383,198 from its
investment activities, resulting primarily from the sale of certain short term
investments, which more than offset the use of $457,348 of cash to purchase
property and equipment. The Company intends to continue to utilize its resources
in 1997 for marketing and advertising, to finance the higher level of inventory
and accounts receivable associated with its anticipated increase in sales, for
capital expenditures, for internal and external software development, as well as
in connection with possible future acquisitions. However, the Company's cash
requirements may change depending upon numerous factors, including, without
limitation, the need to finance the licensing or acquisition of third party
software as well as increased inventory and accounts receivable arising from the
sale and shipment of new products.
In the six month period ended June 30, 1997, approximately 54% of the
Company's total sales were generated outside the U.S. The Company expects this
pattern to continue as it continues to expand its foreign sales operations. The
Company's exposure to foreign currency exchange gains and losses is partially
mitigated as the Company incurs operating expenses in the principal foreign
currency in which it invoices its foreign customers. As of June 30, 1997 the
company had no foreign exchange contracts outstanding. The Company's foreign
exchange gains and losses may be expected to fluctuate from period to period
depending upon the movement in exchange rates.
In June 1994, SPC sold its Superbase product line to Computer Concepts
Corporation ("CCC") (NASDAQ: CCEE) for shares of CCC's restricted common stock.
As of June 30, 1997, SPC owned 736,148 shares of common stock of CCC which it
has or expects to sell during the remainder of 1997, or as soon thereafter as
practicable. CCC has informed SPC that CCC believes that approximately 427,148
of these shares were issued in error by CCC in excess of agreed terms. SPC and
CCC have not as yet resolved this dispute; however, the Company believes that
any such resolution would not have a material adverse effect on its financial
condition. As of August 7, 1997 the closing price of the CCC common stock on The
NASDAQ SmallCap Market was $.50 per share.
Seasonality
The computer software market is characterized by significant seasonal
swings in demand, which typically peak in the fourth quarter of each calendar
year. This seasonal pattern is due primarily to the increased demand for
software during the year-end holiday buying season. In addition, the typical
European summer holiday schedule negatively affects the third quarter of each
calendar year on sales generated for the European markets. The Company expects
its net sales and operating results to continue to reflect this seasonality. The
Company's revenues may also experience substantial variations as a result of a
number of factors, such as consumer and business preferences and introduction of
competing titles by competitors, as well as limited time promotional offers.
There can be no assurance that the Company will achieve consistent growth or
profitability on a quarterly or annual basis.
<PAGE>
Inflation
The Company believes that inflation has generally not had a material impact
on its operations.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is hereby made to the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996, Item 3 thereof (page 14), filed April
15, 1997 (Commission File No.: 1-14076), and to the references therein, for a
discussion of all material pending legal proceedings to which the Company or any
of its subsidiaries are parties.
On July 22, 1997, the Santa Clara Superior Court dismissed three of the
four causes of action alleged by Pyramid Data, Inc. ("Pyramid") in Pyramid's
action against the Company's Software Publishing Corporation ("SPC") subsidiary.
SPC believes that the remaining cause of action is also without merit and
intends to continue to vigorously defend against Pyramid's allegations and to
prosecute its cross complaint for indemnification against Pyramid.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
On June 16, 1997, the Annual Meeting of Stockholders of the Company was
held, at which the following matters were voted upon and adopted by the votes
indicated:
1. Three directors were elected to Class I of the Board of Directors to
serve until the Annual Meeting of Stockholders in 2000, in addition to
the other six directors whose term of office continued after the
Meeting. The names of the newly elected directors and votes cast in
favor of their election and shares withheld are as follows:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
<S> <C> <C>
Barry A. Cinnamon 6,687,719 288,903
Neil R. Austrian, Jr. 6,692,663 283,959
Marc E. Jaffe 6,692,663 283,959
</TABLE>
2. Amendment of the Company's Certificate of Incorporation to change the
Company's name to "Software Publishing Corporation Holdings, Inc." The
votes cast in favor of the proposal, against the proposal, those votes
which abstained and broker non-votes were as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstaining/Withheld Broker Non-Votes
<S> <C> <C> <C> <C>
6,921,747 31,146 23,729 -0-
</TABLE>
3. Amendment of the Company's 1994 Long Term Incentive Plan to increase
the number of shares available for award thereunder from 3,000,000 to
<PAGE>
4,000,000 and to expand the class of eligible participants. The votes
cast in favor of the proposal, against the proposal, those votes which
abstained and broker non-votes were as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstaining/Withheld Broker Non-Votes
<S> <C> <C> <C> <C>
3,261,832 874,793 48,748 2,791,249
</TABLE>
4. Adoption of the Company's 1997 Employee Stock Purchase Plan. The votes
cast in favor of the proposal, against the proposal, those votes which
abstained and broker non-votes were as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstaining/Withheld Broker Non-Votes
<S> <C> <C> <C> <C>
3,775,318 420,120 43,820 2,737,371
</TABLE>
Item 5. Other Information.
Pursuant to a Settlement and General Release Agreement, dated as of July
25, 1997 (the "Fraisl Settlement Agreement"), among Daniel J. Fraisl ("Fraisl"),
the Company and Software Publishing Corporation, a wholly-owned subsidiary of
the Company ("SPC"), Fraisl resigned as an officer and employee of the Company
and SPC and, in connection therewith, received a lump sum payment of $85,000,
payment with respect to accrued vacation time and the Company's agreement to
make all payments in respect of health insurance for Fraisl's benefit for a six
month period. The Company also agreed that all stock options previously granted
to Fraisl would remain exercisable through January 24, 1998, to the extent
exercisable on July 25, 1997. On July 25, 1997, Fraisl held options to purchase
an aggregate 288,220 shares of the common stock, par value $.001 per share (the
"Common Stock"), of the Company, of which 107,220 shares of Common Stock were
then exercisable, all at the exercise price of $4.663 per share. In addition,
pursuant to a Consulting Agreement, dated as of July 25, 1997 (the "Fraisl
Consulting Agreement"), between SPC and Fraisl, SPC retained Fraisl for a two
year period to provide certain consulting services relating to the Company's
Intelligent Formatting technology.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Set forth below are all exhibits to this Quarterly Report on Form 10-QSB.
Exhibit
Number Description
3.1 Composite of Certificate of Incorporation of the Company,
as amended to date.
10.46 Company 1994 Long Term Incentive Plan, as amended.
10.47 Company 1997 Employee Stock Purchase Plan, as amended.
10.48 Settlement and General Release Agreement, dated as of July 25,
1997, among Daniel J. Fraisl, the Company and Software Publishing
Corporation .
10.49 Consulting Agreement, dated as of July 25, 1997, between the
Company and Daniel J. Fraisl.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Company did not file any Current Reports on Form 8-K during the quarter
ended June 30, 1997.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SOFTWARE PUBLISHING CORPORATION
HOLDINGS, INC.
Dated: August 18, 1997 By: /s/ Barry A. Cinnamon
Barry A. Cinnamon
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
Dated: August 18, 1997 By: /s/ Mark E. Leininger
Mark E. Leininger
Chief Operating Officer, Vice
President - Finance, Treasurer,
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
3.1 Composite of Certificate of Incorporation of the Company, as amended
to date.
10.46 Company 1994 Long Term Incentive Plan, as amended.
10.47 Company 1997 Employee Stock Purchase Plan, as amended.
10.48 Settlement and General Release Agreement, dated as of July 25, 1997,
among Daniel J. Fraisl, the
Company and Software Publishing Corporation.
10.49 Consulting Agreement, dated as of July 25, 1997, between the Company
and Daniel J. Fraisl.
27 Financial Data Schedule.
COMPOSITE
CERTIFICATE OF INCORPORATION
of
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
(a Delaware corporation)
* * * * * *
FIRST: The name of the corporation is:
Software Publishing Corporation Holdings, Inc.
SECOND: The location of the registered office of the Corporation in the
State of Delaware is at Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation in the State of Delaware at such address upon whom process against
the Corporation may be served is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is THIRTY-TWO MILLION (32,000,000)
shares. Of these (i) THIRTY MILLION (30,000,000) shares shall be shares of
Common Stock of the par value of $.001 per share; (ii) ONE MILLION NINE HUNDRED
THIRTY-NINE THOUSAND FOUR HUNDRED EIGHTY (1,939,480) shares shall be Serial
Preferred Stock of the par value of $.001 per share; and (iii) SIXTY-THOUSAND
FIVE HUNDRED TWENTY (60,520) shares shall be Class B Voting Preferred Stock,
Series A of the par value of $.001 per share.
(b) The statement of the relative rights, preferences and limitations of
the shares of each class is as follows:
A. Serial Preferred Stock. The Serial Preferred Stock may be issued from
time to time in classes or series and shall have such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be stated and expressed in the resolution or
resolutions of the Board of Directors providing for the issuance of such stock.
<PAGE>
1. Designation. (a) The designation of the series of Serial Preferred Stock
created hereby shall be "Class B Voting Preferred Stock, Series A" (hereinafter
called the "Class B Preferred"), and the number of shares constituting the Class
B Preferred is 60,520.
(b) All shares of Class B Preferred shall be identical with each other in
all respects. All shares of Class B Preferred shall rank, as to the payment of
dividends and of distributions of assets upon any dissolution, liquidation or
winding up of the Corporation, prior to the common stock, par value $.001 per
share, of the Corporation, and any other stock which by its terms ranks junior
to the Class B Preferred and on a parity with any other class or series of stock
of the Corporation ranking on a parity with the Class B Preferred as to
distribution upon dissolution, liquidation or winding up of the Corporation.
(c) Shares of the Class B Preferred that have been redeemed, purchased or
otherwise acquired by the Corporation shall not be reissued as Class B Preferred
and when retired as provided by the General Corporation Law of the State of
Delaware, shall have the status of authorized but unissued shares of Serial
Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors of the
Corporation or a duly authorized committee thereof.
2. Dividends. Each holder of shares of Class B Preferred (each a "Holder")
shall not be entitled to receive any dividends.
3. Liquidation Rights. (a) Upon the dissolution, liquidation or winding up
of the affairs of the Corporation, whether voluntary or involuntary, the Holders
of shares of Class B Preferred then outstanding shall be entitled to receive,
out of the assets of the Corporation available for distribution to stockholders
after satisfying claims of creditors but before distributions of assets shall be
made on the Common Stock or any other class or series of stock ranking junior to
the shares of Class B Preferred upon liquidation, dissolution or winding up of
the Corporation, the amount of $.001 per share plus an amount equal to all
accrued but unpaid dividends on such shares to the date of final distribution.
(b) Neither the sale, lease or exchange (for cash, shares of stock,
securities or other consideration) of all or substantially all the property and
assets of the Corporation, nor the merger or consolidation of the Corporation
into or with any other corporation, or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
paragraph.
(c) After payment to the Holders of the full preferential amount provided
for in this paragraph 3 ($605.20), holders of shares of Class B Preferred in
their capacity as Holders shall have no right or claim to any of the remaining
assets of the Corporation.
(d) If the assets of the Corporation available for distribution to the
Holders upon dissolution, liquidation or winding up of the Corporation, whether
voluntary or involuntary, shall be insufficient to pay in full all amounts to
which the Holders are entitled pursuant to clause (a) of this paragraph 3, and
to which holders of any other class or series of stock of the Corporation
<PAGE>
ranking on a parity with the Class B Preferred as to distribution upon
dissolution, liquidation or winding up of the Corporation (collectively, the
"Parity Stockholders") are entitled pursuant to the Certificate of
Incorporation, as it may be amended from time to time (including any Certificate
of Designations), then such assets shall be distributed among the Holders of the
Class B Preferred and the Parity Stockholders ratably in proportion to the full
amounts otherwise due such Holders and Parity Stockholders.
4. Voting Rights. (a) The Holders of shares of Class B Preferred shall vote
together with the shares of Common Stock of the Corporation. The Holder of each
share of Class B Preferred shall be entitled to ten (10) votes per share of
Class B Preferred.
(b) Voting rights hereunder shall be exercised at each meeting of
stockholders for the election of directors or otherwise or in connection with a
written consent in lieu thereof, as the case may be.
B. Common Stock. Subject to the rights, privileges, preferences and
priorities of any holders of Serial Preferred Stock, the Common Stock shall be
entitled to dividends out of funds legally available therefor, when, as and if
declared and paid to the holders of Common Stock, and upon liquidation,
dissolution or winding up of the Corporation, to share ratably in the assets of
the Corporation available for distribution to the holders of Common Stock.
Except as otherwise provided herein or by law, the holders of the Common Stock
shall have full voting rights and powers, and each share of Common Stock shall
be entitled to one vote. All shares of Common Stock shall be identical with each
other in every respect.
FIFTH: The name and mailing address of the incorporator is as follows:
Neil M. Kaufman
Blau, Kramer, Wactlar
& Lieberman, P.C.
100 Jericho Quadrangle
Suite 225
Jericho, New York 11753
SIXTH: (a) The number of directors of the corporation shall be determined
in the manner prescribed by the by-laws of this corporation.
(b) The Board of Directors shall be divided into three (3) classes as
nearly equal in number as possible, and no class shall include less than one (1)
director. The terms of the office of the directors initially classified shall be
as follows: that of Class I shall expire at the next annual meeting of
shareholders to be held in 1994, Class II at the second annual meeting of
shareholders to be held in 1995 and Class III at the third succeeding annual
<PAGE>
meeting of shareholders to be held in 1996. The foregoing notwithstanding, each
director shall serve until his successor shall have been duly elected and
qualified, unless he shall resign, become disqualified, disabled or shall
otherwise be removed. Whenever a vacancy occurs on the Board of Directors, a
majority of the remaining directors have the power to fill the vacancy by
electing a successor director to fill that portion of the unexpired term
resulting from the vacancy.
(c) At each annual meeting of shareholders after such initial
classification, directors chosen to succeed those whose terms then expire at
such annual meeting shall be elected for a term of office expiring at the third
succeeding annual meeting of shareholders after their election. When the number
of directors is increased by the Board of Directors and any newly created
directorships are filled by the Board of Directors, there shall be no
classification of the additional directors until the next annual meeting of
shareholders. Directors elected, whether by the Board of Directors or by the
shareholders, to fill a vacancy, subject to the foregoing, shall hold office for
a term expiring at the annual meeting at which the term of the Class to which
they shall have been elected expires. Any newly created directorships or any
decrease in directorships shall be so apportioned among the classes as to make
all classes as nearly equal in number as possible.
SEVENTH: Meetings of stockholders may be held within or without the State
of Delaware as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the by-laws of the corporation. Election of directors
need not be by written ballot unless the by-laws of the corporation shall so
provide.
EIGHTH: Subject to the provisions contained in Article TWELFTH hereof, the
corporation reserves the right to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
NINTH: Any action required to be taken or which may be taken at any annual
or special meeting of stockholders of the corporation may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
TENTH: Special meetings of stockholders may be called by the Chairman of
the Board, President or a majority of the Board of Directors or at the written
request of stockholders owning at least sixty-six and two-thirds percent
(66-2/3%) of the entire voting power of the corporation's capital stock.
ELEVENTH: In the event that it is proposed that the corporation enter into
a merger or consolidation with any other corporation and such other corporation
or its affiliates singly or in the aggregate own or control directly or
indirectly fifteen (15%) percent or more of the outstanding voting power of the
<PAGE>
capital stock of this corporation, or that the corporation sell substantially
all of its assets or business to such other corporation, the affirmative vote of
the holders of not less than sixty-six and two-thirds (66-2/3%) percent of the
total voting power of all outstanding shares of capital stock of this
corporation shall be required for the approval of any such proposal; provided,
however, that the foregoing shall not apply to any such merger, consolidation or
sale of assets or business which was approved by resolutions of the Board of
Directors of this corporation prior to the acquisition of the ownership or
control of fifteen (15%) percent of the outstanding shares of this corporation
by such other corporation or its affiliates, nor shall it apply to any such
merger, consolidation or sale of assets or business between this corporation and
another corporation, fifty (50%) percent or more of the total voting power of
which is owned by this corporation. For the purposes hereof, an "affiliate" is
any person (including a corporation, partnership, trust, estate or individual)
who directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified; and
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of management and policies of a person, whether through
the ownership of voting securities, by contract, or otherwise.
TWELFTH: The provisions set forth in Articles SIXTH, NINTH, TENTH AND
ELEVENTH above may not be altered, amended or repealed in any respect unless
such alteration, amendment or repeal is approved by the affirmative vote of the
holders of not less than sixty-six and two-thirds percent (66-2/3%) of the total
voting power of all outstanding shares of capital stock of the corporation.
THIRTEENTH: Each person who at any time is or shall have been a director or
officer of the Corporation and is threatened to be or is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is, or
he or his testator or intestate was, a director, officer, employee or agent of
the Corporation, or served at the request of the Corporation as a director,
officer, employee, trustee or agent of another corporation, partnership, joint,
venture, trust or other enterprise, shall be indemnified against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any such threatened,
pending or completed action, suit or proceeding to the full extent authorized
under Section 145 of the General Corporation Law of the State of Delaware. The
foregoing right of indemnification shall in no way be exclusive of any other
rights of indemnification to which such director, officer, employee or agent may
be entitled under any By-Law, agreement, vote of stockholders or disinterested
directors, or otherwise.
FOURTEENTH: Any and all right, title, interest and claim in or to any
dividends declared by the Corporation, whether in cash, stock, or otherwise,
which are unclaimed by the stockholder entitled thereto for a period of six (6)
years after the close of business on the payment date shall be and be deemed to
be extinguished and abandoned; such unclaimed dividends in the possession of the
Corporation, its transfer agents, or other agents or depositaries, shall at such
time become the absolute property of the Corporation, free and clear of any and
all claims for any person whatsoever.
<PAGE>
FIFTEENTH: Any and all directors of the Corporation shall not be liable to
the Corporation or any stockholder thereof for monetary damages for breach of
fiduciary duty as director except as otherwise required by law. No amendment to
or repeal of this Article FIFTEENTH shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or with
respect to any act or omission of such director occurring prior to such
amendment or repeal.
SIXTEENTH: The Board of Directors of the Corporation shall expressly have
the power and authorization to make, alter and repeal the By-Laws of the
Corporation, subject to the reserved power of the stockholders to make, alter
and repeal any By-Laws adopted by the Board of Directors.
ALLEGRO NEW MEDIA, INC.
1994 Long-Term Incentive Plan
(As amended through June 16, 1997)
1. PURPOSE. The purpose of the 1994 Long-Term Incentive Plan (the "Plan")
is to advance the interests of Allegro New Media, Inc., a Delaware corporation
(the "Company"), and its stockholders by providing incentives to certain key
employees of the Company and its affiliates and to certain other key individuals
who perform services for these entities, including those who contribute
significantly to the strategic and long-term performance objectives and growth
of the Company and its affiliates.
2. ADMINISTRATION.
(a) The Plan shall be determined solely by the Long-Term Incentive Plan
Administrative Committee (the "Committee") of the Board of Directors (the
"Board") of the Company, as such Committee is from time to time constituted, or
any successor committee the Board may designate to administer the Plan; provided
that if at any time Rule 16b-3 or any successor rule ("Rule 16b-3") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), so permits
without adversely affecting the ability of the Plan to comply with the
conditions for exemption from Section 16 of the Exchange Act (or any successor
provision) provided by Rule 16b-3, the Committee may delegate the administration
of the Plan in whole or in part, on such terms and conditions, and to such
person or persons as it may determine in its discretion, as it relates to
persons not subject to Section 16 of the Exchange Act (or any successor
provision). The membership of the Committee or such successor committee shall be
constituted so as to comply at all times with the applicable requirements of
Rule 16b-3. No member of the Committee shall be eligible or have been eligible
within one year prior to his appointment to receive awards under the Plan
("Awards") or to receive awards under any other plan, program or arrangement of
the Company or any of its affiliates if such eligibility would cause such member
to cease to qualify as a "Non-Employee Director" or any successor standard under
Rule 16b-3 as then in effect; provided that if at any time Rule 16b-3 so permits
without adversely affecting the ability of the Plan to comply with the
conditions for exemption from Section 16 of the Exchange Act (or any successor
provision) provided by Rule 16b-3, one or more members of the Committee may
cease to qualify as a "Non-Employee Director" or any successor standard.
(b) The Committee has all the powers vested in it by the terms of the Plan
set forth herein, such powers to include exclusive authority (except as may be
delegated as permitted herein) to select the key employees and other key
individuals to be granted Awards under the Plan, to determine the type, size and
terms of the Award to be made to each individual selected, to modify the terms
of any Award that has been granted, to determine the time when awards will be
granted, to establish performance objectives, to make any adjustments necessary
<PAGE>
or desirable as a result of the granting of Awards to eligible individuals
located outside the United States and to prescribe the form of the instruments
embodying Awards made under the Plan. The Committee is authorized to interpret
the Plan and the Awards granted under the Plan, to establish, amend and rescind
any rules and regulations relating to the Plan, and to make any other
determination, which it deems necessary or desirable for the administration of
the Plan. The Committee (or its delegate as permitted herein) may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any Award in the manner and to the extent the Committee deems necessary or
desirable to carry it into effect. any decision of the Committee (or its
delegate as permitted herein) in the interpretation and administration of the
Plan, as described herein, shall lie within its sole and absolute discretion and
shall be final, conclusive and binding on all parties concerned. The Committee
may act only by a majority of its members in office, except that the members
thereof may authorize any one or more of their members or any officer of the
Company to execute and deliver documents or to take any other ministerial action
on behalf of the Committee with respect to Awards made or to be made to Plan
participants. No member of the Committee and no officer of the Company shall be
liable for anything done or omitted to be done by him, by any other member of
the Committee or by any officer of the Company in connection with the
performance of duties under the Plan, except for his own willful misconduct or
as expressly provided by statute. Determinations to be made by the Committee
under the Plan may be made by its delegates.
3. PARTICIPATION.
(a) Affiliates. If an Affiliate (as hereinafter defined) of the Company
wishes to participate in the Plan and its participation shall have been approved
by the Board upon the recommendation of the Committee, the board of directors or
other governing body of the Affiliate shall adopt a resolution in form and
substance satisfactory to the Committee authorizing participation by the
Affiliate in the Plan with respect to its key employees or other key individuals
performing services for it. As used herein, the term "Affiliate" means any
entity in which the Company has a substantial direct or indirect equity interest
or which has a substantial direct or indirect equity interest in the Company, as
determined by the Committee in its discretion.
An Affiliate participating in the Plan may cease to be a participating
company at any time by action of the Board or by action of the board of
directors or other governing body of such Affiliate, which latter action shall
be effective not earlier than the date of delivery to the Secretary of the
Company of a certified copy of a resolution of the Affiliate's board of
directors or other governing body taking such action. If the participation in
the Plan of an Affiliate shall terminate, such termination shall not relieve it
of any obligations theretofore incurred by it, except as may be approved by the
Committee in its discretion.
(b) Participants. Consistent with the purposes of the Plan, the Committee
shall have exclusive power (except as may be delegated as permitted herein) to
select the key employees and other key individuals performing services for the
Company, including consultants or independent contractors and others who perform
services for the Company and its Affiliates who may participate in the Plan and
<PAGE>
be granted Awards under the Plan. Eligible individuals may be selected
individually or by groups or categories, as determined by the Committee in its
discretion. No director of the Company, unless he is an employee of the Company
or is an officer or director of an Affiliate, shall be eligible to receive an
Award under the Plan, except to the extent that such director provides services
to the Company in addition to those provided in the grantee's capacity as a
director. In no event may a corporation be eligible to receive an Award of
Incentive Stock Options under the Plan.
4. AWARDS UNDER THE PLAN.
(a) Types of Awards. Awards under the Plan may include, but need not be
limited to, one or more of the following types, either alone or in any
combination thereof: (i) "Stock Options," (ii) "Stock Appreciation Rights,"
(iii) "Restricted Stock," (iv) "Performance Grants" and (v) any other type of
Award deemed by the Committee in its discretion to be consistent with the
purposes of the Plan (including but not limited to, Awards of or options or
similar rights granted with respect to unbundled stock units or components
thereof, and Awards to be made to participants who are foreign nationals or are
employed or performing services outside the United States). Stock Options, which
include "Non-Qualified Stock Options" and "Incentive Stock Options" or
combinations thereof, are rights to purchase common shares of the Company and
stock of any other class into which such shares may thereafter be changed (the
"Common Shares"). Non-Qualified Stock Options and Incentive Stock Options are
subject to the terms, conditions and restrictions specified in Paragraph 5.
Stock Appreciation Rights are rights to receive (without payment to the Company)
cash, Common Shares, other Company securities (which may include, but need not
be limited to, unbundled stock units or components thereof, debentures,
preferred stock, warrants, securities convertible into Common Shares or other
property, and other types of securities including, but not limited to, those of
the Company or an Affiliate, or any combination thereof ("Other Company
Securities") or property, or other forms of payment, or any combination thereof,
as determined by the Committee, based on the increase in the value of the number
of Common Shares specified in the Stock Appreciation Right. Stock Appreciation
Rights are subject to the terms, conditions and restrictions specified in
Paragraph 6. Shares of Restricted Stock are Common Shares which are issued
subject to certain restrictions pursuant to Paragraph 7. Performance Grants are
contingent awards subject to the terms, conditions and restrictions described in
Paragraph 8, pursuant to which the participant may become entitled to receive
cash, Common Shares, Other Company Securities or property, or other forms of
payment, or any combination thereof, as determined by the Committee.
(b) Maximum Number of Shares that May Be Issued. There may be issued under
the Plan (as Restricted Stock, in payment of Performance Grants, pursuant to the
exercise of Stock Options or Stock Appreciation Rights, or in payment of or
pursuant to the exercise of such other Awards as the Committee, in its
discretion, may determine) an aggregate of not more than 4,000,000 Common
Shares, subject to adjustment as provided in Paragraph 15. Common Shares issued
pursuant to the Plan may be either authorized but unissued shares, treasury
shares, reacquired shares, or any combination thereof. If any Common Shares
issued as Restricted Stock or otherwise subject to repurchase or forfeiture
rights are reacquired by the Company pursuant to such rights, or if any Award is
<PAGE>
cancelled, terminates or expires unexercised, any Common Shares that would
otherwise have been issuable pursuant thereto will be available for issuance
under new Awards.
(c) Rights with Respect to Common Shares and Other Securities.
(i) Unless otherwise determined by the Committee in its
discretion, a participant to whom an Award of Restricted Stock has
been made (and any person succeeding to such a participant's rights
pursuant to the Plan) shall have, after issuance of a certificate or
copy thereof for the number of Common Shares awarded and prior to the
expiration of the Restricted Period or the earlier repurchase of such
Common Shares as herein provided, ownership of such Common Shares,
including the right to vote the same and to receive dividends or
other distributions made or paid with respect to such Common Shares
(provided that such Common Shares, and any new, additional or
different shares, or Other Company Securities or property, or other
forms of consideration which the participant may be entitled to
receive with respect to such Common Shares as a result of a stock
split, stock dividend or any other change in the corporate or capital
structure of the Company, shall be subject to the restrictions
hereinafter described as determined by the Committee in its
discretion), subject, however, to the options, restrictions and
limitations imposed thereon pursuant to the Plan. Notwithstanding the
foregoing, unless otherwise determined by the Committee in its
discretion, a participant with whom an Award agreement is made to
issue Common Shares in the future shall have no rights as a
shareholder with respect to Common Shares related to such agreement
until issuance of a certificate to him.
(ii) Unless otherwise determined by the Committee in its
discretion, a participant to whom a grant of Stock Options, Stock
Appreciation Rights, Performance Grants or any other Award is made
(and any person succeeding to such a participant's rights pursuant to
the Plan) shall have no rights as a stockholder with respect to any
Common Shares or as a holder with respect to other securities, if
any, issuable pursuant to any such Award until the date of the
issuance of a stock certificate to him for such Common Shares or
other instrument of ownership, if any. Except as provided in
Paragraph 15, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and
whether in cash, securities, other property or other forms of
consideration, or any combination thereof) for which the record date
is prior to the date such stock certificate or other instrument of
ownership, if any, is issued.
5. STOCK OPTIONS. The Committee may grant Stock Options either alone, or in
conjunction with Stock Appreciation Rights, Performance Grants or other Awards,
either at the time of grant or by amendment thereafter, provided that an
Incentive Stock Option may be granted only to an eligible employee of the
Company or its parent or subsidiary corporation. Each Stock Option (referred to
herein as an "Option") granted under the Plan shall be evidenced by an
instrument in such form as the Committee shall prescribe from time to time in
accordance with the Plan and shall comply with the following terms and
conditions, and with such other terms and conditions, including, but not limited
<PAGE>
to, restrictions upon the Option or the Common Shares issuable upon exercise
thereof, as the Committee, in its discretion, shall establish:
(a) The option price may be less than, equal to, or greater than, the fair
market value of the Common Shares subject to such Option at the time the Option
is granted, as determined by the Committee, but in no event will such option
price be less than 85% of the fair market value of the underlying Common Shares
at the time the Option is granted; provided, however, that in the case of an
Incentive Stock Option granted to such an employee, the option price shall not
be less than the fair market value of the Common Shares subject to such Option
at the time the Option is granted, or if granted to such an employee who owns
stock representing more than ten percent of the voting power of all classes of
stock of the Company or of its parent or subsidiary (a "Ten Percent Employee"),
such option price shall be not less than 110% of such fair market value at the
time the Option is granted; provided, further that in no event will such option
price be less than the par value of such Common Shares.
(b) The Committee shall determine the number of Common Shares to be subject
to each option. The number of Common Shares subject to an outstanding Option may
be reduced on a share-for-share or other appropriate basis, as determined by the
Committee, to the extent that Common Shares under such Option are used to
calculate the cash, Common Shares, Other Company Securities or property, or
other forms of payment, or any combination thereof, received pursuant to
exercise of a Stock Appreciation Right attached to such Option, or to the extent
that any other Award granted in conjunction with such Option is paid.
(c) The Option may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or the laws of descent and
distribution, and shall be exercisable during the grantee's lifetime only by
him. Unless the Committee determines otherwise, the Option shall not be
exercisable for at least six months after the date of grant, unless the grantee
ceases employment or performance of services before the expiration of such
six-month period by reason of his disability as defined in Paragraph 12 or his
death.
(d) The Option shall not be exercisable:
(i) in the case of any Incentive Stock Option granted to a Ten
Percent Employee, after the expiration of five years from the date it
is granted, and, in the case of any other Option, after the
expiration of ten years from the date it is granted; provided, that
an Option may be exercised during such period only at such time or
times and in such installments as the Committee may establish;
(ii) unless payment in full is made for the shares being
acquired thereunder at the time of exercise, such payment shall be
made in such form (including, but not limited to, cash, Common
Shares, or the surrender of another outstanding Award under the Plan,
or any combination thereof) as the Committee may determine in its
discretion; and
<PAGE>
(iii) unless the person exercising the Option has been, at all
times during the period beginning with the date of the grant of the
Option and ending on the date of such exercise, employed by or
otherwise performing services for the Company or an Affiliate, or a
corporation, or a parent or subsidiary of a corporation, substituting
or assuming the Option in a transaction to which Section 425(a) of
the Internal Revenue Code of 1986, as amended, or any successor
statutory provisions thereto (the "Code"), is applicable, except
that:
(A) in the case of any Non-Qualified Stock Option, if such
person shall cease to be employed by or otherwise performing
services for the Company or an Affiliate solely by reason of a
period of related Employment as defined in Paragraph 14, he may,
during such period of Related Employment, exercise the
Non-Qualified Stock Option as if he continued such employment or
performance of service; or
(B) if such person shall cease such employment or
performance of services by reason of his disability as defined
in Paragraph 12 or early, normal or deferred retirement under an
approved retirement program of the Company or an Affiliate (or
such other plan or arrangement as may be approved by the
Committee, in its discretion, for this purpose) while holding an
option which has not expired and has not been fully exercised,
such person, at any time within three years (or such other
period determined by the Committee) after the date he ceased
such employment or performance of services (but in no event
after the Option has expired), may exercise the Option with
respect to any shares as to which he could have exercised the
Option on the date he ceased such employment or performance of
services, or with respect to such greater number of shares as
determined by the Committee; or
(C) if such person shall cease such employment or
performance of services for reasons other than Related
Employment, disability, early, normal or deferred retirement or
death (as provided elsewhere) while holding an Option which has
not expired and has not been fully exercised, such person may
exercise the Option at any time during the period, if any, which
the Committee approves (but not beyond the expiration of the
Option) following the date he ceased such employment or
performance of services with respect to any shares as to which
he could have exercised the Option on the date he ceased such
employment or performance of services or, in the Committee's
discretion, any or all shares under the Option whether or not he
could have exercised the Option on the date he ceased such
employment or performance of services; or
(D) if any person to whom an Option has been granted shall
die holding an Option which has not expired and has not been
fully exercised, his executors, administrators, heirs or
distributees, as the case may be, may, at any time within one
year (or such other period determined by the Committee) after
the date of death (but in no event after the Option has
expired), exercise the Option with respect to any shares as to
which the decedent could have exercised the Option at the time
<PAGE>
of his death, or with respect to such greater number of shares
as determined by the Committee.
(e) In the case of an Incentive Stock Option, the amount of aggregate fair
market value of Common Shares (determined at the time of grant of the Option
pursuant to subparagraph 5(a) of the Plan) with respect to which incentive stock
options are exercisable for the first time by an employee during any calendar
year (under all such plans of his employer corporation and its parent and its
parent and subsidiary corporations) shall not exceed $100,000.
(f) It is the intent of the Company that Non-Qualified Stock Options
granted under the Plan not be classified as Incentive Stock Options, that the
Incentive Stock Options granted under the Plan be consistent with and contain or
be deemed to contain all provisions required under Section 422A and other
appropriate provisions of the Code and any implementing regulations (and any
successor provisions thereof), and that any ambiguities in construction shall be
interpreted in order to effectuate such intent. The Agreements providing
Non-Qualified Stock Options shall provide that such Options are not "incentive
stock options" for the purposes of Section 422A of the Code.
6. STOCK APPRECIATION RIGHTS. The Committee may grant Stock Appreciation
Rights either alone, or in conjunction with Stock Options, Performance Grants or
other Awards, either at the time of grant or by amendment thereafter. Each Award
of Stock Appreciation Rights granted under the Plan shall be evidenced by an
instrument in such form as the Committee shall prescribe from time to time in
accordance with the Plan and shall comply with the following terms and
conditions, and with such other terms and conditions, including, but not limited
to, restrictions upon the Award of Stock Appreciation Rights or the Common
Shares issuable upon exercise thereof, as the Committee in its discretion shall
establish:
(a) The Committee shall determine the number of Common Shares to be subject
to each Award of Stock Appreciation Rights. The number of Common Shares subject
to an outstanding Award of Stock Appreciation Rights may be reduced on a
share-for-share or other appropriate basis, as determined by the Committee, to
the extent that Common Shares under such Award of Stock Appreciation Rights are
used to calculate the cash, Common Shares, Other Company Securities or property,
or other forms of payment, or any combination thereof, received pursuant to
exercise of an Option attached to such Award of Stock Appreciation Rights, or to
the extent that any other Award granted in conjunction with such Award of Stock
Appreciation Rights is paid.
(b) The Award of Stock Appreciation Rights may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by will or
the laws of the descent and distribution, and shall be exercisable during the
grantee's lifetime only by him. Unless the Committee determines otherwise, the
Award of Stock Appreciation Rights shall not be exercisable for at least six
months after the date of grant, unless the grantee ceases employment or
performance of services before the expiration of such six-month period by reason
of his disability as defined in Paragraph 12 or his death.
<PAGE>
(c) The Award of Stock Appreciation Rights shall not be exercisable:
(i) in the case of any Award of Stock Appreciation Rights that
are attached to an Incentive Stock Option granted to a Ten Percent
Employee, after the expiration of five years from the date it is
granted, and, in the case of any other award of Stock Appreciation
Rights, after the expiration of ten years from the date it is
granted. Any Award of Stock Appreciation Rights may be exercised
during such period only at such time or times and in such
installments as the Committee may establish;
(ii) unless the Option or other Award to which the Award of
Stock Appreciation Rights is attached is at the time exercisable; and
(iii) unless the person exercising the Award of Stock
Appreciation Rights has been, at all times during the period
beginning with the date of the grant thereof and ending on the date
of such exercise, employed by or otherwise performing services for
the Company or an Affiliate, except that
(A) in the case of any Award of Stock Appreciation Rights
(other than those attached to an Incentive Stock Option), if
such person shall cease to be employed by or otherwise
performing services for the Company or an Affiliate solely by
reason of a period of Related Employment as defined in Paragraph
14, he may, during such period of Related Employment, exercise
the Award of Stock Appreciation Rights as if he continued such
employment or performance of services; or
(B) if such person shall cease such employment or
performance of services by reason of his disability as defined
in Paragraph 12 or early, normal or deferred retirement under an
approved retirement program of the Company or an Affiliate (or
such other plan or arrangement as may be approved by the
Committee, in its discretion, for this purpose) while holding an
Award of Stock Appreciation Rights which has not expired and has
not been fully exercised, such person may, at any time within
three years (or such other period determined by the Committee)
after the date he ceased such employment or performance of
services (but in no event after the Award of Stock Appreciation
Rights has expired), exercise the Award of Stock Appreciation
Rights with respect to any shares as to which he could have
exercised the Award of Stock Appreciation Rights on the date he
ceased such employment or performance of services, or with
respect to such greater number of shares as determined by the
Committee; or
(C) if such person shall cease such employment or
performance of services for reasons other than Related
Employment, disability, early, normal or deferred retirement or
death (as provided elsewhere) while holding an Award of Stock
Appreciation Rights which has not expired and has not been fully
<PAGE>
exercised, such person may exercise the Award of Stock
Appreciation Rights at any time during the period, if any, which
the Committee approves (but in no event after the Award of Stock
Appreciation Rights expires) following the date he ceased such
employment or performance of services with respect to any shares
as to which he could have exercised the Award of Stock
Appreciation Rights on the date he ceased such employment or
performance of services or as otherwise permitted in the
Committee's discretion; or
(D) if any person to whom an Award of Stock Appreciation
Rights has been granted shall die holding an Award of Stock
Appreciation Rights which has not expired and has not been fully
exercised, his executors, administrators, heirs or distributees,
as the case may be, may, at any time within one year (or such
other period determined by the Committee) after the date of
death (but in no event after the Award of Stock Appreciation
Rights has expired), exercise the Award of Stock Appreciation
Rights with respect to any shares as to which the decedent could
have exercised the Award of Stock Appreciation Rights at the
time of his death, or with respect to such greater number of
shares as determined by the Committee.
(d) An Award of Stock Appreciation Rights shall entitle the holder (or any
person entitled to act under the provisions of subparagraph 6(c)(iii)(D) hereof)
to exercise such Award or to surrender unexercised the option (or other Award)
to which the Stock Appreciation Rights is attached (or any portion of such
Option or other Award) to the Company and to receive from the Company in
exchange therefor, without payment to the Company, that number of Common Shares
having an aggregate value equal to the excess of the fair market value of one
share, at the time of such exercise, over the exercise price (or Option Price,
as the case may be) per share, times the number of shares subject to the Award
or the Option (or other Award), or portion thereof, which is so exercised or
surrendered, as the case may be. The Committee shall be entitled in its
discretion to elect to settle the obligation arising out of the exercise of a
Stock Appreciation Right by the payment of cash or Other Company Securities or
property, or other forms of payment, or any combination thereof, as determined
by the Committee, equal to the aggregate value of the Common Shares it would
otherwise be obligated to deliver. Any such election by the Committee shall be
made as soon as practicable after the receipt by the Committee of written notice
of the exercise of the Stock Appreciation Right. The value of a Common Share,
Other Company Securities or property, or other forms of payment determined by
the Committee for this purpose shall be the fair market value thereof on the
last business day next preceding the date of the election to exercise the Stock
Appreciation Right, unless the Committee, in its discretion, determines
otherwise.
(e) A Stock Appreciation Right may provide that it shall be deemed to have
been exercised at the close of business on the business day preceding the
expiration date of the Stock Appreciation Right or of the related Option (or
other Award), or such other date as specified by the Committee, if at such time
such Stock Appreciation Right has a positive value. Such deemed exercise shall
be settled or paid in the same manner as a regular exercise thereof as provided
in subparagraph 6(d) hereof.
<PAGE>
(f) No fractional shares may be delivered under this Paragraph 6, but in
lieu thereof a cash or other adjustment shall be made as determined by the
Committee in its discretion.
7. RESTRICTED STOCK. Each Award of Restricted Stock under the Plan shall be
evidenced by an instrument in such form as the Committee shall prescribe from
time to time in accordance with the Plan and shall comply with the following
terms and conditions, and with such other terms and conditions as the Committee,
in its discretion, shall establish:
(a) The Committee shall determine the number of Common Shares to be issued
to a participant pursuant to the Award, and the extent, if any, to which they
shall be issued in exchange for cash, other consideration, or both.
(b) Common Shares issued to a participant in accordance with the Award may
not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed
of, except by will or the laws of descent and distribution, or as otherwise
determined by the Committee, for such period as the Committee shall determine,
from the date on which the Award is granted (the "Restricted Period"). The
Company will have the option, at the Committee's discretion, to repurchase the
shares subject to the Award at such price as the Committee shall have fixed or
to provide for forfeiture to the Company of the shares subject to the Award,
which option or forfeiture may be exercisable (i) if the participant's
continuous employment or performance of services for the Company and its
Affiliates shall terminate for any reason, except solely by reason of a period
of Related Employment as defined in Paragraph 14, or except as otherwise
provided in subparagraph 7(c), prior to the expiration of the Restricted Period,
(ii) if, on or prior to the expiration of the Restricted Period or the earlier
lapse of such forfeiture option, the participant has not paid to the Company an
amount equal to any federal, state, local or foreign income or other taxes which
the Company determines is required to be withheld in respect of such shares, or
(iii) under such other circumstances as determined by the Committee in its
discretion. Such repurchase option or forfeiture shall be exercisable on such
terms, in such manner and during such period as shall be determined by the
Committee when the Award is made or as amended thereafter, except as otherwise
determined in the Committee's discretion. Each certificate for Common Shares
issued pursuant to a Restricted Stock Award shall bear an appropriate legend
referring to the foregoing repurchase option or forfeiture and other
restrictions and to the fact that the shares are partly paid, shall be deposited
by the award holder with the Company, together with a stock power endorsed in
blank, or shall be evidenced in such other manner permitted by applicable law as
determined by the Committee in its discretion. Any attempt to dispose of any
such Common Shares in contravention of the foregoing repurchase and forfeiture
options and other restrictions shall be null and void and without effect. If
Common Shares issued pursuant to a Restricted Stock Award shall be repurchased
or forfeited pursuant to the repurchase option described above, the participant,
or in the event of his death, his personal representative, shall forthwith
deliver to the Secretary of the Company the certificates for the Common Shares
awarded to the participant, accompanied by such instrument of transfer, if any,
as may reasonably be required by the Secretary of the Company.
<PAGE>
(c) If a participant who has been in continuous employment or performance
of services for the Company or an Affiliate since the date on which a Restricted
Stock Award was granted to him shall, while in such employment or performance of
services, die, or terminate such employment or performance of services by reason
of disability as defined in Paragraph 12 or by reason of early normal or
deferred retirement under an approved retirement program of the Company or an
Affiliate (or such other plan or arrangement as may be approved by the Committee
in its discretion, for this purpose) and any of such events shall occur after
the date on which the Award was granted to him and prior to the end of the
Restricted Period of such Award, the Committee may determine to cancel the
repurchase option or forfeiture (and any and all other restrictions) on any or
all of the Common Shares subject to such Award; and the repurchase option or
forfeiture shall become exercisable at such time as to the remaining shares, if
any.
8. PERFORMANCE GRANTS. The Award of a Performance Grant ("Performance
Grant") to a participant will entitle him to receive a specified amount
determined by the Committee (the "Actual Value"), if the terms and conditions
specified herein and in the Award are satisfied. Each Award of a Performance
Grant shall be subject to the following terms and conditions, and to such other
terms and conditions, including but not limited to, restrictions upon any cash,
Common Shares, Other Company Securities or property, or other forms of payment,
or any combination thereof, issued in respect of the Performance Grant, as the
Committee, in its discretion, shall establish, and shall be embodied in an
instrument in such form and substance as is determined by the Committee.
(a) The Committee shall determine the value or range of values of a
Performance Grant to be awarded to each participant selected for an award and
whether or not such a Performance Grant is granted in conjunction with an Award
of Options, Stock Appreciation Rights, Restricted Stock or other Award, or any
combination thereof, under the Plan (which may include, but need not be limited
to, deferred Awards) concurrently or subsequently granted to the participant
(the "Associated Award"). As determined by the Committee, the maximum value of
each Performance Grant (the "Maximum Value") shall be: (i) an amount fixed by
the Committee at the time the award is made or amended thereafter, (ii) an
amount which varies from time to time based in whole or in part on the then
current value of a Common Share, Other Company Securities or property, or other
securities or property, or any combination thereof, or (iii) an amount that is
determinable from criteria specified by the Committee. Performance Grants may be
issued in different classes or series having different names, terms and
conditions. In the case of a Performance Grant awarded in conjunction with an
Associated Award, the Performance Grant may be reduced on an appropriate basis
to the extent that the Associated Award has been exercised, paid to or otherwise
received by the participant, as determined by the Committee.
(b) The award period ("Award Period") in respect of any Performance Grant
shall be a period determined by the Committee. At the time each Award is made,
the Committee shall establish performance objectives to be attained within the
Award Period as the means of determining the Actual Value of such a Performance
Grant. The performance objectives shall be based on such measure or measures of
<PAGE>
performance, which may include, but need not be limited to, the performance of
the participant, the Company, one or more of its subsidiaries or one or more of
their divisions or units, or any combination of the foregoing, as the Committee
shall determine, and may be applied on an absolute basis or be relative to
industry or other indices, or any combination thereof. The Actual Value of a
Performance Grant shall be equal to its Maximum Value only if the performance
objectives are attained in full, but the Committee shall specify the manner in
which the Actual Value of Performance Grants shall be determined if the
performance objectives are met in part. Such performance measures, the Actual
Value or the Maximum Value, or any combination thereof, may be adjusted in any
manner by the Committee in its discretion at any time and from time to time
during or as soon as practicable after the Award Period, if it determines that
such performance measures, the Actual Value or the Maximum Value, or any
combination thereof, are not appropriate under the circumstances.
(c) The rights of a participant in Performance Grants awarded to him shall
be provisional and may be cancelled or paid in whole or in part, all as
determined by the Committee, if the participant's continuous employment or
performance of services for the Company and its Affiliates shall terminate for
any reason prior to the end of the Award Period, except solely by reason of a
period of Related Employment as defined in Paragraph 14.
(d) The Committee shall determine whether the conditions of subparagraph
8(b) or 8(c) hereof have been met and, if so, shall ascertain the Actual Value
of the Performance Grants. If the Performance Grants have no Actual Value, the
Award and such Performance Grants shall be deemed to have been cancelled and the
Associated Award, if any, may be cancelled or permitted to continue in effect in
accordance with its terms. If the Performance Grants have any Actual Value and:
(i) were not awarded in conjunction with an Associated Award,
the Committee shall cause an amount equal to the actual Value of the
Performance Grants earned by the participant to be paid to him or his
beneficiary as provided below; or
(ii) were awarded in conjunction with an Associated Award, the
Committee shall determine, in accordance with criteria specified by
the Committee (A) to cancel the Performance Grants, in which event no
amount in respect thereof shall be paid to the participant or his
beneficiary, and the Associated Award may be permitted to continue in
effect in accordance with its terms, (B) to pay the Actual Value of
the Performance Grants to the participant or his beneficiary as
provided below, in which event the Associated Award may be cancelled
or (C) to pay to the participant or his beneficiary as provided
below, the Actual Value of only a portion of the Performance Grants,
in which a complimentary portion of the Associated Award may be
permitted to continue in effect in accordance with its terms or be
cancelled, as determined by the Committee.
Such determination by the Committee shall be made as promptly as
practicable following the end of the Award Period or upon the earlier
termination of employment or performance of services, or at such other time or
<PAGE>
times as the Committee shall determine, and shall be made pursuant to criteria
specified by the Committee.
Payment of any amount in respect of the Performance Grants which the
Committee determines to pay as provided above shall be made by the Company as
promptly as practicable after the end of the Award Period or at such other time
or times as the Committee shall determine, and may be made in cash, Common
Shares, Other Company Securities or property, or other forms of payment, or any
combination thereof or in such other manner, as determined by the Committee in
its discretion. Notwithstanding anything in this Paragraph 8 to the contrary,
the Committee may, in its discretion, determine and pay out the Actual Value of
the Performance Grants at any time during the Award Period.
9. DEFERRAL OF COMPENSATION. The Committee shall determine whether or not
an Award shall be made in conjunction with deferral of the participant's salary,
bonus or other compensation, or any combination thereof, and whether or not such
deferred amounts may be
(i) forfeited to the Company or to other participants, or any
combination thereof, under certain circumstances (which may include,
but need not be limited to, certain types of termination of
employment or performance of services for the Company and its
Affiliates),
(ii) subject to increase or decrease in value based upon the
attainment of or failure to attain, respectively, certain performance
measures and/or
(iii) credited with income equivalents (which may include, but need
not be limited to, interest, dividends or other rates of return)
until the date or dates of payment of the Award, if any.
10. DEFERRED PAYMENT OF AWARDS. The Committee may specify that the payment
of all or any portion of cash, Common Shares, Other Company Securities or
property, or any other form of payment, or any combination thereof, under an
Award shall be deferred until a later date. Deferrals shall be for such periods
or until the occurrence of such events, and upon such terms, as the Committee
shall determine in its discretion. Deferred payments of Awards may be made by
undertaking to make payment in the future based upon the performance of certain
investment equivalents (which may include, but need not be limited to,
government securities, Common Shares, other securities, property or
consideration, or any combination thereof), together with such additional
amounts of income equivalents (which may be compounded and may include, but need
not be limited to, interest, dividends or other rates of return, or any
combination thereof) as may accrue thereon until the date or dates of payment,
such investment equivalents and such additional amounts of income equivalents to
be determined by the Committee in its discretion.
<PAGE>
11. AMENDMENT OR SUBSTITUTION OF AWARDS UNDER THE PLAN. The terms of any
outstanding Award under the Plan may be amended from time to time by the
Committee in its discretion in any manner that it deems appropriate (including,
but not limited to, acceleration of the date of exercise of any Award and/or
payments thereunder, or reduction of the Option Price of an Option or exercise
price of an Award of Stock Appreciation Rights); provided, that no such
amendment shall adversely affect in a material manner any right of a participant
under the Award without his written consent, unless the Committee determines in
its discretion that there have occurred or are about to occur significant
changes in the participant's position, duties or responsibilities, or
significant changes in economic, legislative, regulatory, tax, accounting or
cost/benefit conditions which are determined by the Committee in its discretion
to have or to be expected to have a substantial effect on the performance of the
Company, or any subsidiary, affiliate, division or department thereof, on the
Plan or an any Award under the Plan. The Committee may, in its discretion,
permit holders of Awards to surrender outstanding Awards as a condition
precedent to the grant of new Awards under the Plan.
12. DISABILITY. For the purposes of this Plan, a participant shall be
deemed to have terminated his employment or performance of services for the
Company and its Affiliates by reason of disability if the Committee shall
determine that the physical or mental condition of the participant by reason of
which such employment or performance of services terminated was such at that
time as would entitle him to payment of monthly disability benefits under any
disability plan of the Company or an Affiliate in which he is a participant. If
the participant is not eligible for benefits under any disability plan of the
Company or an Affiliate, he shall be deemed to have terminated such employment
or performance of services by reason of disability if the Committee shall
determine that he is permanently and totally disabled within the meaning of
Section 22(e)(3) of the Code.
13. TERMINATION OF A PARTICIPANT. For all purposes under the Plan, the
Committee shall determine whether a participant has terminated employment by or
the performance of services for the Company or an Affiliate, provided that
transfers between the Company and an Affiliate or between Affiliates, and
approved leaves of absence shall not be deemed such a termination.
14. RELATED EMPLOYMENT. For the purposes of this Plan, Related Employment
shall mean the employment or performance of services by an individual for an
employer that is neither the Company nor an Affiliate, provided that (i) such
employment or performance of services is undertaken by the individual at the
request of the Company or an Affiliate, (ii) immediately prior to undertaking
such employment or performance of services, the individual was employed by or
performing services for the Company or an Affiliate or was engaged in Related
Employment as herein defined, and (iii) such employment or performance of
services is in the best interests of the Company and is recognized by the
Committee, in its discretion, as Related Employment for purposes of this
Paragraph 14. The death or disability of an individual during a period of
<PAGE>
Related Employment as herein defined shall be treated, for purposes of this
Plan, as if the death or onset of disability had occurred while the individual
was employed by or performing services for the Company or an Affiliate.
15. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding Common Shares of the Company by reason of any stock split, stock
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, share offering, reorganization, combination or
exchange of shares, a sale by the Company of all or part of its assets, any
distribution to stockholders other than a normal cash dividend, or other
extraordinary or unusual event, if the Committee shall determine, in its
discretion, that such change equitably requires an adjustment in the terms of
any Award or the number of Common Shares available for Awards, such adjustment
may be made by the Committee and shall be final, conclusive and binding for all
purposes of the Plan.
16. DESIGNATION OF BENEFICIARY BY PARTICIPANT. A participant may name a
beneficiary to receive any payment to which he may be entitled in respect of any
Award under the Plan in the event of his death, on a written form to be provided
by and filed with the Committee, and in a manner determined by the Committee in
its discretion. The Committee reserves the right to review and approve
beneficiary designations. A participant may change his beneficiary from time to
time in the same manner, unless such participant has made an irrevocable
designation. Any designation of beneficiary under the Plan (to the extent it is
valid and enforceable under applicable law) shall be controlling over any other
disposition, testamentary or otherwise, as determined by the Committee in its
discretion. If no designated beneficiary survives the participant and is living
on the date on which any amount becomes payable to such participant's
beneficiary, such payment will be made to the legal representatives of the
participant's estate, and the term "beneficiary" as used in the Plan shall be
deemed to include such person or persons. If there is any question as to the
legal right of any beneficiary to receive a distribution under the Plan, the
Committee in its discretion may determine that the amount in question be paid to
the legal representatives of the estate of the participant, in which event the
Company, the Board and the Committee and the members thereof will have no
further liability to anyone with respect to such amount.
17. CHANGE IN CONTROL.
(a) Upon any Change in Control:
(i) each Stock Option and Stock Appreciation Right that is
outstanding on the date of such Change in Control shall be
exercisable in full immediately;
(ii) all restrictions with respect to Restricted Stock shall
lapse immediately, and the Company's right to repurchase or forfeit
any Restricted Stock outstanding on the date of such Change in
<PAGE>
Control shall thereupon terminate and the certificates representing
such Restricted Stock and the related stock powers shall be promptly
delivered to the participants entitled thereto; and
(iii) All Award Periods for the purposes of determining the
amounts of Awards of Performance Grants shall end as of the end of
the calendar quarter immediately preceding the date of such Change in
Control, and the amount of the Award payable shall be the portion of
the maximum possible Award allocable to the portion of the Award
Period that had elapsed and the results achieved during such portion
of the Award Period.
(b) For this purpose, a Change in Control shall be deemed to occur when and
only when any of the following events first occurs:
(i) any person who is not currently such becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then outstanding voting securities; or
(ii) three or more directors, whose election or nomination for
election is not approved by a majority of the Incumbent Board (as
hereinafter defined), are elected within any single 24-month period
to serve on the Board of Directors; or
(iii) members of the Incumbent Board cease to constitute a
majority of the Board of Directors without the approval of the
remaining members of the Incumbent Board; or
(iv) any merger (other than a merger where the Company is the
survivor and there is no accompanying Change in Control under
subparagraphs (i), (ii) or (iii) of this paragraph (b)),
consolidation, liquidation or dissolution of the Company, or the sale
of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur pursuant to subparagraph (i) of this paragraph (b) solely because 25% or
more of the combined voting power of the Company's outstanding securities is
acquired by one or more employee benefit plans maintained by the Company or by
any other employer, the majority interest in which is held, directly or
indirectly, by the Company. For purposes of this Section 17, the terms "person"
and "beneficial owner" shall have the meaning set forth in Sections 3(a) and
13(d) of the Exchange Act, and in the regulations promulgated thereunder, as in
effect on December 15, 1993; and the term "Incumbent Board" shall mean (A) the
members of the Board of Directors of the Company on December 31, 1993, to the
extent that they continue to serve as members of the Board of Directors, and (B)
any individual who becomes a member of the Board of Directors after December 31,
1993, if his election or nomination for election as a director was approved by a
vote of at least three-quarters of the then Incumbent Board.
<PAGE>
18. MISCELLANEOUS PROVISIONS.
(a) No employee or other person shall have any claim or right to be granted
an Award under the Plan. Determinations made by the Committee under the Plan
need not be uniform and may be made selectively among eligible individuals under
the Plan, whether or not such eligible individuals are similarly situated.
Neither the Plan nor any action taken hereunder shall be construed as giving any
employee or other person any right to continue to be employed by or perform
services for the Company or any Affiliate, and the right to terminate the
employment of or performance of services by any participant at any time and for
any reason is specifically reserved.
(b) No participant or other person shall have any right with respect to the
Plan, the Common Shares reserved for issuance under the Plan or in any Award,
contingent or otherwise, until written evidence of the Award shall have been
delivered to the recipient and all the terms, conditions and provisions of the
Plan and the Award applicable to such recipient (and each person claiming under
or through him) have been met.
(c) Except as may be approved by the Committee where such approval shall
not adversely affect compliance of the Plan with Rule 16b-3 under the Exchange
Act, a participant's rights and interest under the Plan may not be assigned or
transferred, hypothecated or encumbered in whole or in part either directly or
by operation of law or otherwise (except in the event of a participant's death)
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner; provided, however, that
any Option or similar right (including, but not limited to, a Stock Appreciation
Right) offered pursuant to the Plan shall not be transferable other than by will
or the laws of descent and distribution and shall be exercisable during the
participant's lifetime only by him.
(d) No Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment shall be issued hereunder with
respect to any Award unless counsel for the Company shall be satisfied that such
issuance will be in compliance with applicable federal, state, local and foreign
legal, securities exchange and other applicable requirements.
(e) It is the intent of the Company that the Plan comply in all respects
with Rule 16b-3 under the Exchange Act, that any ambiguities or inconsistencies
in construction of the Plan be interpreted to give effect to such intention and
that if any provision of the Plan is found not to be in compliance with Rule
16b-3, such provision shall be deemed null and void to the extent required to
permit the Plan to comply with Rule 16b-3.
(f) The Company and its Affiliates shall have the right to deduct from any
payment made under the Plan, any federal, state, local or foreign income or
other taxes required by law to be withheld with respect to such payment. It
shall be a condition to the obligation of the Company to issue Common Shares,
Other Company Securities or property, other securities or property, or other
forms of payment, or any combination thereof, upon exercise, settlement or
payment of any Award under the Plan, that the participant (or any beneficiary or
person entitled to act) pay to the Company, upon its demand, such amount as may
<PAGE>
be requested by the Company for the purpose of satisfying any liability to
withhold federal, state, local or foreign income or other taxes. If the amount
requested is not paid, the Company may refuse to issue Common Shares, Other
Company Securities or property, other securities or property, or other forms of
payment, or any combination thereof. Notwithstanding anything in the Plan to the
contrary, the Committee may, in its discretion, permit an eligible participant
(or any beneficiary or person entitled to act) to elect to pay a portion or all
of the amount requested by the Company for such taxes with respect to such
Award, at such time and in such manner as the Committee shall deem to be
appropriate including, but not limited to, by authorizing the Company to
withhold, or agreeing to surrender to the Company on or about the date such tax
liability is determinable, Common Shares, Other Company Securities or property,
other securities or property, or other forms of payment, or any combination
thereof, owned by such person or a portion of such forms of payment that would
otherwise be distributed, or have been distributed, as the case may be, pursuant
to such Award to such person, having a fair market value equal to the amount of
such taxes.
(g) The expenses of the Plan shall be borne by the Company. However, if an
Award is made to an individual employed by or performing services for an
Affiliate:
(i) if such Award results in payment of cash to the participant,
such Affiliate shall pay to the Company an amount equal to such cash
payment unless the Committee shall otherwise determine in its
discretion;
(ii) if the Award results in the issuance by the Company to the
participant of Common Shares, Other Company Securities or property,
other securities or property, or other forms of payment, or any
combination thereof, such Affiliate shall, unless the Committee shall
otherwise determine in its discretion, pay to the Company an amount
equal to the fair market value thereof, as determined by the
Committee, on the date such Common Shares, other Company Securities
or property, other securities or property, or other forms of payment,
or any combination thereof, are issued (or in the case of the
issuance of Restricted Stock or of Common Shares, Other Company
Securities or property, or other securities or property, or other
forms of payment subject to transfer and forfeiture conditions, equal
to the fair market value thereof on the date on which they are no
longer subject to applicable restrictions), minus the amount, if any,
received by the Company in respect of the purchase of such Common
Shares, Other Company Securities or property, other securities or
property or other forms of payment, or any combination thereof, all
as the Committee shall determine in its discretion; and
(iii) the foregoing obligations of any such Affiliate entity
shall survive and remain in effect and binding on such entity even if
its status as an Affiliate of the Company should subsequently cease,
except as otherwise agreed by the Company and the entity.
(h) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Award under the Plan, and rights to the
<PAGE>
payment of Awards shall be no greater than the rights of the Company's general
creditors.
(i) By accepting any Award or other benefit under the Plan, each
participant and each person claiming under or through him shall be conclusively
deemed to have indicated his acceptance and ratification of, and consent to, any
action taken by the Company, the Board or the Committee or its delegates.
(j) Fair market value in relation to Common Shares, Other Company
Securities or property, other securities or property or other forms of payment
of Awards under the Plan or any combination thereof, as of any specific time
shall mean such value as determined by the Committee in accordance with
applicable law.
(k) The masculine pronoun includes the feminine and the singular includes
the plural wherever appropriate.
(l) The appropriate officers of the Company shall cause to be filed any
reports, returns or other information regarding Awards hereunder or any Common
Shares issued pursuant hereto as may be required by Section 13 or 15(d) of the
Exchange Act (or any successor provision) or any other applicable statute, rule
or regulation.
(m) The validity, construction, interpretation, administration and effect
of the Plan, and of its rules and regulations, and rights relating to the Plan
and to Awards granted under the Plan, shall be governed by the substantive laws,
but not the choice of law rules, of the State of Delaware.
19. PLAN AMENDMENT OR SUSPENSION. The Plan may be amended or suspended in
whole or in part at any time and from time to time by the Board, but no
amendment shall be effective unless and until the same is approved by
stockholders of the Company where the failure to obtain such approval would
adversely affect the compliance of the Plan with Rule 16b-3 under the Exchange
Act and with other applicable law. No amendment of the Plan shall adversely
affect in a material manner any right of any participant with respect to any
Award theretofore granted without such participant's written consent, except as
permitted under Paragraph 11.
20. PLAN TERMINATION. This Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) upon the adoption of a resolution of the Board terminating the Plan; or
(b) ten years from the date the Plan is initially approved and adopted by
the stockholders of the Company in accordance with Paragraph 21 hereof;
provided, however, that the Board may, prior to the expiration of such ten-year
period, extend the term of the Plan for an additional period of up to five years
<PAGE>
for the grant of Awards other than Incentive Stock Options. No termination of
the Plan shall materially alter or impair any of the rights or obligations of
any person, without his consent, under any Award theretofore granted under the
Plan except that subsequent to termination of the Plan, the Committee may make
amendments permitted under Paragraph 11.
21. SHAREHOLDER ADOPTION. The Plan shall be submitted to the stockholders
of the Company for their approval and adoption at a meeting to be held on or
before December 31, 1993, or at any adjournment thereof. The Plan shall not be
effective and no Award shall be made hereunder unless and until the Plan has
been so approved and adopted. The stockholders shall be deemed to have approved
and adopted the Plan only if it is approved and adopted at a meeting of the
stockholders duly held by vote taken in the manner required by the laws of the
State of Delaware and the applicable Federal securities laws.
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
The following constitutes the provisions of the 1997 Employee Stock
Purchase Plan of Software Publishing Corporation Holdings, Inc.:
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Code. The provisions of the Plan shall, accordingly, be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock, $.001 par value, of the
Company.
(d) "Company" shall mean Software Publishing Corporation Holdings, Inc., a
Delaware corporation.
(e) "Compensation" shall mean all regular straight time gross earnings,
exclusive of payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions or other compensation.
(f) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of sick leave, military
leave or any other leave of absence approved by the Board, provided that such
leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
(g) "Designated Subsidiary" shall mean each Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
<PAGE>
(h) "Employee" shall mean any person, including an officer, who is
customarily employed for at least twenty hours per week and more than five
months in a calendar year by the Company or one of its Designated Subsidiaries.
(i) "Enrollment Date" shall mean the first Trading Day of each Offering
Period of the Plan.
(j) "Exercise Date" shall mean the last Trading Day of each Offering Period
of the Plan.
(k) "Offering Period" shall mean a period of approximately six months,
commencing on the first Trading Day on or after January 1 of each calendar year
and terminating on the last Trading Day on or before the following June 30, or
commencing on the first Trading Day on or after July 1 of each calendar year and
terminating on the last Trading Day on or before the following December 31,
during which an option granted pursuant to the Plan may be exercised.
(1) "Participant" shall mean, for any given Offering Period," an eligible
Employee who has complied with paragraph 5(a) hereof and is participating in the
Plan.
(m) "Plan" shall mean this Employee Stock Purchase Plan.
(n) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
(o) "Trading Day" shall mean a day on which national stock exchanges and/or
the NASDAQ Stock Market are open for trading.
3. Eligibility.
(a) Any Employee as defined in paragraph 2 who shall be employed by the
Company on any given Enrollment Date shall be eligible to participate in the
Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) if, immediately after the grant,
such Employee (or any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own stock and/or hold
outstanding options to purchase stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
Subsidiary of the Company, or (ii) which permits the Employee rights to purchase
stock under all employee stock purchase plans of the Company and its
Subsidiaries to accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
<PAGE>
4. Offering Periods. The Plan shall be implemented by consecutive Offering
Periods with a new Offering Period commencing on the first Trading Day on or
after January 1 and July 1 of each calendar year, or on such other date as the
Board of Directors shall determine, and continuing thereafter until terminated
in accordance with paragraph 19 hereof. The Board of Directors of the Company
shall have the power to change the duration of Offering Periods with respect to
future offerings without stockholder approval if such change is announced at
least fifteen days prior to the scheduled beginning of the first Offering Period
to be affected.
5. Participation.
(a) An eligible Employee may become a Participant in the Plan by completing
a subscription agreement authorizing payroll deductions on the form provided by
the Company and filing it with the Company's payroll office prior to the
applicable Enrollment Date, unless a later time for filing the subscription
agreement is set by the Board for all eligible Employees with respect to a given
Offering Period.
(b) Payroll deductions for a Participant shall commence on the first
payroll date following the Enrollment Date and shall end on the last payroll
date in the Offering Period to which such authorization is applicable, unless
sooner terminated by the Participant as provided in paragraph 10 hereof.
6. Payroll Deductions.
(a) At the time a Participant in the Plan files the Participant's
subscription agreement, the Participant shall elect to have payroll deductions
made on each payday during the Offering Period in an amount not exceeding 10%,
but not less than $5.00, of the Compensation which the Participant receives on
each payday during the Offering Period, and the aggregate of such payroll
deductions during the Offering Period shall not exceed 10% of the Participant's
aggregate Compensation during said Offering Period.
(b) All payroll deductions made by a Participant shall be credited to the
Participant's account under the Plan. A Participant may not make any additional
payments into such account.
(c) A Participant may discontinue participation in the Plan as provided in
paragraph 10 hereof, or may lower or increase (but not above 10% or less than
$5.00) the rate of the Participant's payroll deductions during the Offering
Period by completing or filing with the Company a new authorization for payroll
deductions; provided, however, that a Participant may not change the rate of the
Participant's payroll deductions more than once during an Offering Period. The
<PAGE>
change in rate shall be effective at the beginning of the subsequent pay period
following the Company's receipt of the new authorization or as soon as possible.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and paragraph 3(b) herein, a Participant's payroll
deductions may be decreased to zero at such time during any Offering Period
which is scheduled to end during the current calendar year (the "Current
Offering Period") in which the aggregate of all payroll deductions which were
previously used to purchase stock under the Plan in a prior Offering Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Offering Period equal $25,000. Payroll deductions
shall recommence at the rate provided in such Participant's subscription
agreement at the beginning of the first Offering Period which is scheduled to
end in the following calendar year, unless terminated by the Participant as
provided in paragraph 10 hereof.
(e) At the time a Participant's option is exercised, in whole or in part,
or at the time some or all of the Common Stock issued under the Plan is disposed
of, such Participant must make adequate provision for the Company's federal,
state or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but will not be obligated to, withhold from the Participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option.
(a) On the Enrollment Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase on
the Exercise Date of such Offering Period (at the per share option price) up to
a number of shares of Common Stock determined by dividing such Employee's
payroll deductions accumulated during the Offering Period (not to exceed an
amount equal to 10% of his actual Compensation during such Offering Period) by
the lower of (i) 85% of the fair market value of a share of Common Stock on the
Enrollment Date, or (ii) 85% of the fair market value of a share of Common Stock
on the Exercise Date, subject to the limitations set forth in paragraphs 3(b)
and 12 hereof, and subject to the further limitation that the number of shares
of Common Stock subject to any option granted to an Employee shall not exceed
300% of the number of shares of Common Stock determined by dividing an amount
equal to 10% of the Employee's semi-annual Compensation as of the first day of
the Exercise Period by 85% of the fair market value of a share of Common Stock
on the Enrollment Date. Fair market value of a share of Common Stock shall be
determined as provided in paragraph 7(b) herein.
(b) The option price per share of the shares offered in a given Offering
Period shall be the lower of: (i) 85% of the fair market value of a share of
Common Stock on the Enrollment Date or (ii) 85% of the fair market value of a
share of Common Stock on the Exercise Date. The fair market value of the Common
<PAGE>
Stock on a given date shall be determined by the Board in its discretion;
provided, however, that where there is a public market for the Common Stock, the
fair market value per share shall be the closing price of the Common Stock as
reported by the stock exchange on which shares of Common Stock are listed or the
closing bid price of the Common Stock as reported by the NASDAQ Stock Market, if
listed thereon.
8. Exercise of Option. A Participant's option for the purchase of shares
will be exercised automatically on the Exercise Date of an Offering Period, and
the maximum number of full shares subject to option will be purchased for him at
the applicable option price with the accumulated payroll deductions in his
account, unless prior to such Exercise Date the Participant has withdrawn from
the Offering Period. The shares purchased upon exercise of an option hereunder
shall be deemed to be transferred to the Participant on the Exercise Date.
During a Participant's lifetime, such Participant's option to purchase shares
hereunder is exercisable only by the Participant. No fractional shares shall be
purchased and any cash remaining in a Participant's account after an Exercise
Date shall be returned to the Participant or retained in the Participant's
account for the subsequent Offering Period, as the Board shall determine,
subject to earlier withdrawal by the Participant as provided in paragraph 10
hereof.
9. Delivery. As promptly as practicable after each Exercise Date, the
Company shall arrange the delivery to each Participant, as appropriate, of a
certificate representing the shares of Common Stock purchased upon exercise of
such Participant's option.
10. Withdrawal: Termination of Employment.
(a) The Participant may withdraw all but not less than all of the payroll
deductions credited to such Participant's account under the Plan at any time
prior to the Exercise Date of an Offering Period by giving written notice to the
Company. All of the Participant's payroll deductions credited to such
Participant's account with respect to such Offering Period will be paid to the
Participant promptly after receipt of such Participant's notice of withdrawal
and such Participant's option for the Offering Period will be automatically
terminated, and no further payroll deductions for the purchase of shares will be
made during the Offering Period. If a Participant withdraws from an Offering
Period, payroll deductions will not resume at the beginning of the succeeding
Offering Period unless a new subscription agreement for such Participant is
delivered to the Company for such succeeding Offering Period.
(b) Upon termination of the Participant's Continuous Status as an Employee
prior to the Exercise Date of an Offering Period for any reason, including
retirement or death, the payroll deductions credited to such Participant's
account will be returned to the Participant or, in the case of death, to the
person or persons entitled thereto under paragraph 14 hereof, and such
Participant's option will be automatically terminated.
<PAGE>
(c) In the event an Employee fails to maintain Continuous Status as an
Employee during an Offering Period in which the Employee is a Participant, the
Employee will be deemed to have elected to withdraw from the Plan and the
payroll deductions credited to the Employee's account will be returned to the
Employee and the Employee's option terminated. Notwithstanding the foregoing,
(i) if an Employee shall take an unpaid leave of absence approved by the Board
in accordance with paragraph 2(f) hereof of more than 30 days during an Offering
Period in which the Employee is a Participant, he will be deemed to have
withdrawn from the Offering Period on the 31st day of such leave, and (ii) if an
Employee shall take a paid leave of absence approved by the Board in accordance
with paragraph 2(f) hereof of more than 90 days during an Offering Period in
which the Employee is a Participant, the Employee will be deemed to have
withdrawn from the Offering Period on the earlier of (aa) the 91st day if the
Employee is paid for the entire 90 day leave, or (bb) the last day upon which
the Employee is paid provided the Employee is paid for at least 30 days. On the
date upon which the Employee shall be deemed to have withdrawn from the Offering
Period, the payroll deductions credited to the Employee's account will be
returned to the Employee.
(d) A Participant's withdrawal from an Offering Period will not have any
effect upon the Employee's eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods.
11. Interest. No interest shall accrue on the payroll deductions of a
Participant in the Plan.
12. Stock.
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan shall be 1,000,000 shares, subject to
adjustment upon changes in capitalization of the Company as provided in
paragraph 18 hereof. If on a given Exercise Date the total number of shares
which would otherwise be subject to options granted pursuant to Section 7(a)
hereof on the Enrollment Date of an Offering Period exceeds the number of shares
then available under the Plan (after deduction of all shares for which options
have been exercised or are then outstanding), the Company shall make a pro rata
allocation of the shares remaining available for option grant in as uniform a
manner as shall be practicable and as it shall determine to be equitable. In
such event, the Company shall give written notice of such reduction of the
number of shares subject to the option to each Employee affected thereby and
shall similarly reduce the rate of payroll deductions, if necessary.
(b) The Participant will have no interest or voting right in shares covered
by the Participant's option until such option has been exercised.
<PAGE>
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant, in the name of the Participant and
the Participant's spouse, or in the name of a broker designated by the
Participant.
13. Administration.
(a) The Plan shall be administered by the Board of the Company or a
committee of members of the Board appointed by the Board. The administration,
interpretation or application of the Plan by the Board or its committee shall be
final, conclusive and binding upon all Participants. Members of the Board who
are eligible Employees are permitted to participate in the Plan, provided that:
(i) Members of the Board who are eligible to participate in
the Plan may not vote on any matter affecting the administration of
the Plan or the grant of any option pursuant to the Plan.
(ii) If a Committee is established to administer the Plan,
no member of the Board who is eligible to participate in the Plan may
be a member of the Committee.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of paragraph
13(a) hereof, in the event that Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or any successor provision ("Rule 16b-3")
provides specific requirements for the administrators of plans of this type, the
Plan shall be only administered by such a body and in such a manner as shall
comply with the applicable requirements of Rule 16b-3. Unless permitted by Rule
16b-3, no discretion concerning decisions regarding the Plan shall be afforded
to any committee or person that is not a "Non-Employee Director" as that term is
used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the Participant's account under the
Plan in the event of such Participant's death subsequent to an Exercise Date on
which an option is exercised but prior to delivery to such Participant of such
shares and cash. In addition, a Participant may file a written designation of a
beneficiary who is to receive any cash from the Participant's account under the
Plan in the event of such Participant's death prior to the Exercise Date of an
Offering Period.
(b) A designation of beneficiary may be changed by the Participant at any
time by written notice. In the event of the death of a Participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such Participant's death, the Company shall deliver such shares and/or
cash to the executor or administrator of the estate of the Participant, or if no
such executor or administrator has been appointed (to the knowledge of the
<PAGE>
Company), the Company, in its discretion, may deliver such shares and/or cash to
the spouse or to any one or more dependents or relatives of the Participant, or
if no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a Participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in paragraph 14 hereof) by the Participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with paragraph 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each Participant in
the Plan. Statements of account will be given to participating Employees
semi-annually promptly following each Exercise Date, which statements will set
forth the amounts of payroll deductions, the per share purchase price, the
number of shares purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
<PAGE>
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation in which the Company
shall not be the surviving corporation, each option under the Plan shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the "New Exercise Date"). An option shall be deemed
to be assumed if, following the sale of assets or merger, the option confers the
right to purchase, for each share of stock subject to the option immediately
prior to the sale of assets or merger, the consideration (whether stock, cash or
other securities or property) received in the sale of assets or merger by
holders of Common Stock for each share of Common Stock held on the effective
date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent, the Board of Directors may,
with the consent of the successor corporation and the Participant, provide for
the consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in fair market value to
the per share consideration received by holders of Common Stock in the sale of
assets or merger. If the Board shortens the Offering Period then in progress in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify each Participant in writing, at least 30 days prior to
the New Exercise Date, that the Exercise Date for such Participant's option has
been changed to the New Exercise Date and that the Participant's option will be
exercised automatically on the New Exercise Date, unless prior to such date the
Participant has withdrawn from the Offering Period as provided in paragraph 10
hereof.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of outstanding Common Stock, and in
the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination. The Board of Directors of the Company may at
any time terminate or amend the Plan. Except as provided in paragraph 18 hereof,
no such termination can affect options previously granted, nor may an amendment
make any change in any option theretofore granted which adversely affects the
rights of any Participant, nor may an amendment be made without prior approval
of the stockholders of the Company (obtained in the manner described in
paragraph 21) if such amendment would:
(a) Increase the number of shares that may be issued under the Plan;
<PAGE>
(b) Permit payroll deductions at a rate in excess of 10% of the
Participant's Compensation;
(c) Change the designation of the employees (or class of employees)
eligible for participation in the Plan; or
(d) Constitute an amendment for which stockholder approval is required in
order to comply with Rule 16b-3 or under Section 423 of the Code (or any
successor rule or provision or any other applicable law or regulation).
20. Notices. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be made in writing and deemed
to have been duly given three business days following forwarding via certified
mail, return receipt requested, postage prepaid, addressed to the Company's
Secretary (or such other designee of the Company), at the Company's principal
place of business. All notices or other communications by the Company to a
Participant under and in connection with the Plan shall be in writing and deemed
to have been duly given three business days following forwarding via regular
mail, postage prepaid, addressed to the Participant at the Participant's address
as listed on the records of the Company.
21. Stockholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company in accordance with applicable state law within
twelve months before or after the date the Plan is adopted by the Board.
(b) If and in the event that the Company has registered any class of equity
securities pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), any required approval of the stockholders of the
Company obtained after such registration shall be solicited substantially in
accordance with Section 14(a) of the Exchange Act and the rules and regulations
promulgated thereunder.
(c) If any required approval of the Plan itself or of any amendment thereto
by the stockholders of the Company is solicited at any time otherwise than in
the manner described in paragraph 21(b) hereof, then the Company shall, at or
prior to the first annual meeting of stockholders held subsequent to the later
of (i) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (ii) the granting of an option hereunder
to an officer or director after such registration, furnish in writing to the
stockholders substantially the same information which would be required (if
proxies to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished.
<PAGE>
22. Conditions Upon Issuance of Shares. Shares of Common Stock shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares of Common Stock are being purchased only for investment
and without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any
applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders of
the Company as described in paragraph 21 hereof. It shall continue in effect for
a term of twenty years unless sooner terminated under paragraph 19 hereof.
24. Additional Restrictions of Rule 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
SETTLEMENT AND GENERAL RELEASE AGREEMENT
THIS SETTLEMENT AND GENERAL RELEASE AGREEMENT (the "Agreement") is made and
entered into as of the 25th day of July, 1997 by and between Daniel J. Fraisl
("Fraisl" or the "Employee"), Software Publishing Corporation Holdings, Inc.
(formerly known as Allegro New Media, Inc.), a Delaware corporation ("SPCH"),
and Software Publishing Corporation, a Delaware corporation ("SPC")
(collectively, the "Parties"). The Parties acknowledge that the terms and
conditions of this Agreement have been voluntarily agreed to and that such terms
are final and binding.
WHEREAS, Fraisl has been employed by SPCH and SPC as Vice President -
Research and Development; and
WHEREAS, SPCH and SPC accept Fraisl's resignation as an employee and
officer; and
WHEREAS, the Parties now desire to settle fully and finally all claims
Fraisl may have against SPCH or SPC and that SPCH or SPC may have against Fraisl
and others released herein, including, but not limited to, any matters arising
out of Fraisl's employment with SPCH and SPC and his separation therefrom;
NOW, THEREFORE, in consideration of the premises and mutual promises herein
contained, it is agreed as follows:
1. Non-Admission of Liability or Wrongdoing.
This Agreement shall not be construed in any way as an admission by the
Parties that any of them have acted wrongfully with respect to each other or any
other person or that any one of them has any rights whatsoever against the
others.
2. Resignation.
Fraisl hereby resigns as an officer and employee of SPCH and SPC. Fraisl
agrees to return to SPCH or SPC all assets, equipment or other items which are
owned by SPCH or SPC not later than six (6) months after the date of this
Agreement.
3. Consideration to Fraisl.
(a) On the eighth day after the execution and delivery of this Agreement:
(i) SPCH shall pay to Fraisl an amount equal to EIGHTY-FIVE THOUSAND
DOLLARS $85,000;
<PAGE>
(ii) SPCH shall pay to Fraisl an amount equal to $6,977.61 in respect of
accrued vacation; and
(iii) SPCH shall continue to make all payments in respect of health
insurance for Fraisl's benefit for a period of 6 months after the date of
this Agreement.
(b) Subject to the terms of the Stock Option Plans pursuant to which such
stock options were granted, all incentive stock options granted to Fraisl by
SPCH or SPC shall be exercisable for a period of three (3) months from and after
the date hereof to the extent otherwise exercisable, and thereafter shall
terminate. Subject to the terms of the Stock Option Plans pursuant to which such
stock options were granted and applicable law, SPCH, SPC and Fraisl shall treat
all incentive stock options granted to Fraisl by SPCH or SPC as non-qualified
options, and any such non-qualified options shall be exerciseable for the period
set forth in clause (c) below.
(c) Subject to the terms of the Stock Option Plans pursuant to which such
stock options were granted, all non-qualified stock options granted to Fraisl by
SPCH or SPC shall be exercisable for a period of six (6) months from and after
the date hereof to the extent otherwise exercisable, and thereafter shall
terminate.
4. Complete Release.
(a) As a material inducement to SPCH and SPC to enter into this Agreement,
Fraisl hereby waives, releases and discharges SPCH and SPC, their respective
officers, directors, stockholders, employees, agents, attorneys, subsidiaries,
servants, successors, insurers, affiliates and their successors and assigns,
from any and all manner of action, claims, liens, demands, liabilities, causes
of action, charges, complaints, suits (judicial, administrative, or otherwise),
damages, debts, demands, obligations of any other nature, past or present, known
or unknown, whether in law or in equity, whether founded upon contract
(expressed or implied), tort (including, but not limited to, defamation),
statute or regulation (State, Federal or local), common law and/or any other
theory or basis, from the beginning of the world to the date hereof, including,
but not limited to, any claim that Fraisl has asserted, now asserts or could
have asserted. This includes, but is not limited to, claims arising under
Federal, State or local laws prohibiting employment or other discrimination or
claims growing out of any legal restrictions on the Company's rights to
terminate its employees, including without limitation any claim arising under
Title VII of the United States Code. It is expressly understood by Fraisl that
among the various rights and claims being waived by him in this release are
those arising under the Age Discrimination in Employment Act of 1967 (29 U.S.C.
621, et seq.) and any and all rights Fraisl may have pursuant to the Employment
Agreement dated April 7, 1995 between Fraisl and SPCH, as amended, and pursuant
to the Management Continuity Agreement dated January 8, 1996 between Fraisl and
SPC, as amended. Notwithstanding anything else contained in this agreement, this
agreement is not intended to release any rights Fraisl has with respect to his
participation in company sponsored stock option plans, the SPC sponsored 401K or
any rights Fraisl has to seek and obtain indemnification and/or defense in the
event that any claim is asserted against Fraisl by a third party. Fraisl
represents and warrants that he is not aware of any pending or threatened claims
by a third party which might give rise to such a claim for indemnification of
defense.
<PAGE>
(b) As a material inducement to Fraisl to enter into this Agreement, each
of SPCH and SPC hereby irrevocably and unconditionally waive, release and
discharge Fraisl, his agents and attorneys, successors and assigns from any and
all manner of action, claims, liens, demands, liabilities, causes of action,
charges, complaints, suits (judicial, administrative or otherwise), damages,
debts, demands, obligations of any other nature, past or present, presently
known to SPCH or SPC, whether in law or in equity, whether founded upon contract
(expressed or implied, tort (including, but not limited to, defamation), statute
or regulation (State, Federal or local), common law and/or any other theory or
basis, from the beginning of the world to the date hereof arising out of his
employment and resignation therefrom or the termination thereof, including, but
not limited to, any claim that SPCH or SPC has asserted, now asserts or could
have asserted, so long as such action, claims, liens, demands, liabilities,
causes of action, charges, complaints, suits (judicial, administrative or
otherwise), damages, debts, demands or obligations of any other nature do not
arise out of or relate to any willful misconduct, negligence or fraud committed
by Fraisl, any violation by Fraisl of Section 16 of the Securities Exchange Act
of 1934, as amended or the agreements of Fraisl contained herein or in the
Consulting Agreement of even date herewith between Fraisl and SPC (the
"Consulting Agreement").
(c) It is understood and agreed by the Parties that the facts and
respective assumptions of law in contemplation of which this Agreement is made
may hereafter prove to be other than or different from those facts and
assumptions now known, made or believed by them to be true. The Parties
expressly accept and assume the risk of the facts and assumptions to be so
different, and agree that all terms of this agreement shall be in all respects
effective and not subject to termination or reclusion by any such difference in
facts or assumptions of law.
5. Acknowledgments.
Fraisl acknowledges that:
(a) He has had a full twenty-one (21) days within which to consider this
Agreement before executing it;
(b) He has carefully read and fully understands all of the provisions of
this Agreement;
(c) He is, through this Agreement, releasing SPCH, SPC and their affiliates
from any and all claims he may have against any of them;
(d) He knowingly and voluntarily agrees to all of the terms set forth in
this Agreement;
(e) He knowingly and voluntarily intends to be legally bound by the same;
(f) He was advised and hereby is advised in writing to consider the terms
of this Agreement and consult with an attorney of his choice prior to executing
this Agreement;
<PAGE>
(g) He has a full seven (7) days following the execution of this Agreement
to revoke this Agreement and has been and hereby is advised in writing that this
Agreement shall not become effective or enforceable until the revocation period
has expired;
(h) He understands that rights or claims under the Age Discrimination in
Employment Act of 1967 (29 U.S.C. 621 et seq.) that may arise after the date of
this Agreement is executed are not waived.
6. Non-Disclosure.
Fraisl shall not disclose or deliver to any other party certain trade
secrets or confidential or proprietary information gained through employment
with SPCH or SPC. This includes, but is not limited to, proprietary
technologies, software programs and tools, financial information, business
plans, systems files, algorithms, file structures, customer lists, supplier
lists, internal program structures, options, documentation and data developed by
SPCH or SPC or any subsidiary or division thereof. Fraisl agrees that any breach
of this Section 6 will cause SPCH and SPC substantial and irreparable damages
that would not be quantifiable and therefore, in the event of any such breach,
in addition to other remedies that may be available, SPCH and SPC shall have the
right to seek specific performance and other injunctive and equitable relief.
7. Non-Disparagement.
The Parties mutually agree not to publish, communicate or disseminate any
negative information as regards each other, or to make public any information
regarding this Agreement to the media, suppliers, vendors and other industry
participants, or in any way to any other person, except that they may disclose
its contents to their respective financial advisors, accountants and attorneys
and as required by law.
8. No Representations.
The Parties represent that in signing this Agreement, they do not rely on
nor have they relied on any representation or statement not specifically set
forth in this Agreement by any of the releasees or by any of the releasees'
agents, representatives or attorneys with regard to the subject matter, basis or
effect of this Agreement or otherwise.
9. Successors.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective administrators, representatives, executors,
successors and assigns.
10. Governing Law.
This agreement is made and entered into in this State of California, and
shall in all respects be interpreted, enforced and governed under the laws of
the State of California.
<PAGE>
11. Arbitration.
(a) Any dispute arising between the Parties, including but not limited to
those pertaining to the formation, validity, interpretation, effect or alleged
breach of this Agreement ("Arbitrable Dispute") will be submitted to arbitration
in San Jose, California, before an experienced employment arbitrator and
selected in accordance with the rules of the American Arbitration Association
labor tribunal. Each party shall pay the fees of their respective attorneys, the
expenses of their witnesses and any other expenses connected with presenting
their claim. Other costs of the arbitration, including the fees of the
arbitrator, cost of any record or transcript of the arbitration, administrative
fees, and other fees and costs shall be borne equally by the Parties.
(b) Should any party to this Agreement hereafter institute any legal action
or administrative proceedings against another party with respect to any claim
waived by this Agreement or pursue any other Arbitrable Dispute by any method
other than said arbitration, the responding party shall be entitled to recover
from the initiating party all damages, costs, expenses and attorneys' fees
incurred as a result of such action.
12. Proper Construction.
(a) The language of all parts of this Agreement shall in all cases be
construed as a whole according to its fair meaning, and not strictly for or
against any of the parties;
(b) As used in this Agreement, the term "or" shall be deemed to include the
term "and/or" and the singular or plural number shall be deemed to include the
other whenever the context so indicates or requires;
(c) The paragraph headings used in this Agreement are intended solely for
convenience of reference and shall not in any manner amplify, limit, modify or
otherwise be used in the interpretation of any of the provisions hereof.
13. Severability.
Should any of the provisions of this Agreement be declared or be determined
to be illegal or invalid, the validity of the remaining parts, terms or
provisions shall not be affected thereby and said illegal or invalid part, term
or provision shall be deemed not to be a part of this Agreement.
14. Entire Agreement.
This Agreement sets forth the entire agreement between the Parties, and
fully supersedes any and all prior agreements or understandings between the
Parties pertaining to the subject matter hereof. All other contracts, agreements
or understandings between the Parties, other than the Consulting Agreement, are
null and void.
<PAGE>
15. Counterparts.
This Agreement may be executed in counterparts. Each counterpart shall be
deemed an original, and when taken together with the other signed counterpart,
shall constitute one fully executed Agreement.
PLEASE READ CAREFULLY. THIS SETTLEMENT AND GENERAL RELEASE AGREEMENT
INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
Dated: San Jose, California Dated: San Jose, California
July 25, 1997 July 25, 1997
SOFTWARE PUBLISHING CORPORATION
HOLDINGS, INC.
By: /s/ Barry A. Cinnamon /s/Daniel J. Fraisl
Name: Barry A. Cinnamon Daniel J. Fraisl
Title: President
SOFTWARE PUBLISHING CORPORATION
By: /s/ Barry A. Cinnamon
Name: Barry A. Cinnamon
Title: President
CONSULTING AGREEMENT
AGREEMENT, dated July 25, 1997, by and between SOFTWARE PUBLISHING
CORPORATION, a Delaware corporation (the "Company") and Daniel J. Fraisl, an
individual residing at 13500 Sarah View Drive, Saratoga, California 95070 (the
"Consultant").
W I T N E S S E T H:
WHEREAS, from March 1995 through the date hereof, the Consultant has served
as an officer of the Company; and
WHEREAS, the Company desires to retain the Consultant because of his
extensive knowledge, experience and abilities with respect to the business being
conducted by the Company, and the Company considers that the advice of the
Consultant may be important to the continued success of the Company, and the
Consultant is willing to accept a retainer with the Company as a consultant and
to provide to the Company his services, upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, the Company and the Consultant hereby agree as
follows:
Section 1. Consulting Period.
(a) The Company hereby engages the Consultant to furnish the advisory and
consulting services specified herein, and the Consultant hereby accepts such
engagement and agrees to provide such services, on the terms and conditions
herein set forth, for a two (2) year period commencing on the date hereof (the
"Closing Date") and ending on the second anniversary of the date hereof (the
"Consulting Period"). During the Consulting Period, Consultant agrees to devote
all his efforts to the affairs of the Company at all times when he is located at
the Company's offices or conducting business on the Company's behalf.
(b) The Consulting Period may be terminated by the Company:
(i) Upon the date of death of the Consultant;
(ii) 60 days following written notice by the Company to the Consultant
of the Company's termination of the Consulting Period.
(c) In the event the Company terminates the services of the Consultant
pursuant to Section 1(b) hereof, the Company shall pay to the Consultant an
amount equal to $80,000 if no amount is paid pursuant to Section 3(a)(i) hereof.
If a payment is made pursuant to Section 3(a)(i) hereof, no further compensation
will be payable hereunder.
<PAGE>
Section 2. Consulting Services.
(a) During the Consulting Period, the Consultant shall furnish the Company
with advisory and consulting services to be determined by the Company relating
to the establishment of strategic development and licensing relationships
("Relationships") between the Company and other computer software companies,
primarily with regard to the Company's Intelligent Formatting technology. For
the purpose of this Agreement, the term "Company" shall include also Software
Publishing Corporation Holdings, Inc., a Delaware corporation ("SPCH") and any
corporation which is a subsidiary or affiliate thereof, and any corporation
which is a successor in interest to the Company or SPCH, whether by reason of
merger, consolidation, and/or purchase or acquisition of substantially all of
the Company's or SPCH's assets or otherwise.
(b) During the Consulting Period, the Consultant shall be available to
furnish advisory and consulting services hereunder at the request of the
Company. During the Consulting Period, the Consultant shall provide to the
Company regular reports regarding the status, progress and proposed terms of any
Relationship, at intervals determined by the Company.
Section 3. Compensation and Expenses.
(a) As compensation for the Consultant's services set forth in Section 2
above, the Company shall pay to the Consultant (i) $40,000, payable upon the
establishment of the first Relationship which yields actual revenues received by
the Company in excess of $40,000 as a direct result of the Consultant's
involvement; (ii) $40,000, payable upon the establishment of the second
Relationship which yields actual revenues received by the Company in excess of
$40,000 as a direct result of the Consultant's involvement; and (iii) for each
subsequent Relationship which directly results from Consultant involvement, an
amount equal to the following percentage of the total revenues actually received
by the Company plus the mutually agreed upon value of the marketing benefit
received by the Company pursuant to the Relationship developed hereto, payable
upon closing:
Amount of Revenue Generated Percentage
$0 - $100,000 25%
$100,000 - $500,000 20%
$500,000 - $1,000,000 15%
over $1,000,000 10%
(b ) The Company will reimburse the Consultant for all reasonable, actual
out-of-pocket expenses incurred by the Consultant in the performance of duties
hereunder at the request of the Company, to the extent such expenses have been
approved in advance by the Company, either upon presentation of properly
itemized charges, receipts and similar documentation or otherwise in accordance
with policies or practices established from time to time by the Company.
<PAGE>
Section 4. Independent Contractor
The Consultant shall be an independent contractor and shall not be
considered an employee of the Company for any purpose whatsoever, including, but
not limited to, medical, health or accident insurance or plans, retirement or
pension plans or benefits; incentive, bonus or similar plans; sick, disability
or vacation pay or allowances; withholding, social security or other employer
contributions; and the use of credit cards. The Company will not be responsible
for any income tax withholding with respect to any remuneration paid or payable
to Consultant hereunder.
Section 5. Non-Competition, Confidentiality, Non-Interference and
Proprietary Information.
(a) Non-Competition. During the term of this Agreement (the "Restricted
Period"), the Consultant shall not, without the written consent of the Company,
directly or indirectly,
(i) become associated with, render services to, invest in, represent,
advise or otherwise participate in as an officer, employee, director,
stockholder, partner, promoter, agent of, consultant for or otherwise, any
business which is conducted in any of the jurisdictions in which the Company's
business is conducted and which is competitive with the business conducted by
the Company relating to the Company's Intelligent Formatting or similar
technology which the Company is engaged or plans to be engaged at the time
Consultant's retention by the Company ceased; provided, however, that nothing
contained herein will prevent Consultant from owning less than five percent (5%)
of any class of equity or debt securities listed on a national securities
exchange or traded in any established over-the-counter securities market, so
long as such involvement with the issuer of any such securities is solely that
of a passive investor;
(ii) for the Consultant's own account or for the account of any other
person or entity interfere with the Company's relationship with any of its
suppliers, customers, licensors, licensees, developers, representatives or
agents; or
(iii) solicit, entice or induce on behalf of the Consultant or any other
person or entity, the services, retention or employment of any person who has
been an employee, sales representative, consultant to or agent of the Company
within six months of the date of such individual's departure from the Company.
(b) Confidentiality. In the course of the Consultant's retention by the
Company, the Consultant will have access to and possession of valuable and
important confidential or proprietary data or information of the Company and its
operations. The Consultant will not during the Consultant's retention by the
Company or at any time thereafter divulge or communicate to any person nor shall
the Consultant direct any Company employee, representative or agent to divulge
or communicate to any person (other than to a person bound by confidentiality
obligations similar to those contained herein and other than as necessary in
performing the Consultant's duties hereunder) or use to the detriment of the
Company or for the benefit of any other person, any of such confidential or
proprietary data or information or make or remove any copies thereof, whether or
not marked or otherwise identified as "confidential" or "secret." The Consultant
shall take all reasonable precautions in handling the confidential or
<PAGE>
proprietary data or information within the Company to a strict need-to-know
basis and shall comply with any and all security systems and measures adopted
from time to time by the Company to protect the confidentiality of the
confidential or proprietary data or information.
(c) Confidential or Proprietary Data or Information. The term "confidential
or proprietary data or information" as used in this Agreement shall mean
information not generally available to the public, including, without
limitation, all database information, personnel information, financial
information, customer lists, supplier lists, trade secrets, forms, information
regarding operations, systems, trade programs, services, know how, computer and
any other processed or collated data, computer programs, software applications,
technology, pricing, marketing and advertising data.
(d) Proprietary Information and Disclosure. The Consultant agrees that the
Consultant will at all times promptly disclose to the Company in such form and
manner as the Company may reasonably require, any inventions, improvements or
procedural or methodological innovations, inventions, programs, methods, forms,
systems, services, designs, marketing ideas, products or processes (whether or
not capable of being trademarked, copyrighted or patented) conceived or
developed or created by the Consultant during or in connection with the
Consultant's retention hereunder and which relate to the business conducted by
the Company relating to the Company's Intelligent Formatting or similar
technology which the Company is engaged or plans to be engaged ("Intellectual
Property"). The Consultant agrees that all such Intellectual Property shall be
the sole property of the Company, and hereby assigns, conveys and transfers to
the Company all of the Consultant's right, title and interest therein to the
Company. The Consultant further agrees that the Consultant will execute such
instruments and perform such acts as may reasonably be requested by the Company
to transfer to and perfect in the Company all legally protectable rights in such
Intellectual Property.
(f) Return of Property. All written materials, records and documents made
by the Consultant or coming into the Consultant's possession during the
Consultant's retention by the Company concerning any software, technology,
products, processes or equipment manufactured, used, developed, investigated,
purchased, sold or considered by the Company or otherwise concerning the
business or affairs of the Company shall be the sole property of the Company,
and upon termination of the Consultant's retention by the Company, or upon
request of the Company during the Consultant's retention by the Company, the
Consultant shall promptly deliver the same to the Company. In addition, upon
termination of the Consultant's retention by the Company, the Consultant will
deliver to the Company all other Company property in the Consultant's possession
or under the Consultant's control, including, but not limited to, tangible
property, financial statements, marketing and sales data, customer and supplier
lists, database information and other documents, and any Company credit cards.
(g) Survival. The provisions of this Section 5 shall survive the
termination of your retention hereunder.
Section 6. Equitable Relief.
With respect to the covenants contained in Section 5 of this Agreement, the
Consultant agrees that any remedy at law for any breach or threatened or
attempted breach of such covenants may be inadequate and that the Company shall
<PAGE>
be entitled to specific performance or any other mode of injunctive and/or other
equitable relief to enforce its rights hereunder or any other relief a court
might award without the necessity of showing any actual damage or irreparable
harm or the posting of any bond or furnishing of other security.
Section 7. Assignment.
This Consulting Agreement shall not be assigned by either party hereto
except that the Company may assign its rights hereunder to any parent,
subsidiary or affiliate or to any successor in interest of the Company whether
by merger, consolidation, purchase or acquisition of substantially all of the
Company's assets or otherwise.
Section 8. Notices.
All notices, requests, demands and other communications hereunder must be
in writing and shall be deemed to have been duly given if mailed, by prepaid,
first-class, registered or certified mail, return receipt requested, delivered
by a nationally recognized overnight courier service or sent by facsimile
transmission electronically confirmed during normal business hours, and
addressed as follows:
(a) If to the Company, to: Software Publishing Corporation Holdings,
Inc.
111 North Market Street
San Jose, California 95113
Attention: President
Fax No: (408) 537-3508
with copy to: Moritt, Hock & Hamroff, LLP
400 Garden City Plaza
Garden City, New York 11530
Attention: Neil M. Kaufman
Fax No.: (516) 873-2010
(b) If to the Consultant, to:Daniel J. Fraisl
13500 Sarah View Drive
Saratoga, California 95070
Fax No.:
with a copy to: Thomas N. Makris, Esq.
Rosenblum Parish & Isaacs
555 Montgomery Street
San Francisco, California 94111
Fax No.: (415) 397-5383
Section 9. Miscellaneous.
This Agreement represents the entire understanding of the parties hereto
relating to the retention of the Consultant as a consultant to the Company, and
the terms and provisions of this Agreement may not be modified or amended,
except in writing. Any failure or delay on the part of either party in
exercising any power or right hereunder shall not operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude any
other or further exercise thereof or the exercise of any other right or power
hereunder. The headings in this Agreement are for convenience of reference only
and shall not be considered as part of this Agreement nor limit or otherwise
affect the meaning thereof. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of California, without
regard to its conflicts of laws or rules.
IN WITNESS WHEREOF, the parties hereto have duly executed this Consulting
Agreement on the day and year first above written.
SOFTWARE PUBLISHING CORPORATION
By: /s/ Barry A. Cinnamon
Barry A. Cinnamon
President
/s/ Daniel J. Fraisl
Daniel J. Fraisl
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-30-1997
<CASH> 2,822,162
<SECURITIES> 1,487,634
<RECEIVABLES> 6,335,786
<ALLOWANCES> 3,668,619
<INVENTORY> 605,783
<CURRENT-ASSETS> 7,871,240
<PP&E> 619,843
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,057,454
<CURRENT-LIABILITIES> 9,910,300
<BONDS> 0
0
61
<COMMON> 8,050
<OTHER-SE> 8,139,043
<TOTAL-LIABILITY-AND-EQUITY> 18,057,454
<SALES> 8,094,563
<TOTAL-REVENUES> 8,094,563
<CGS> 1,779,369
<TOTAL-COSTS> 1,779,369
<OTHER-EXPENSES> 3,336,275
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (108,257)
<INCOME-PRETAX> (4,640,840)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,640,840)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,640,840)
<EPS-PRIMARY> (.58)
<EPS-DILUTED> (.58)
</TABLE>
