THIS DOCUMENT IS A COPY OF THE FORM 10-KSB FILED ON APRIL 16, 1998 PURSUANT TO
A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _________ to
__________
Commission file number: 1-14076
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
(Name of small business issuer in its charter)
Delaware 22-3270045
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3A Oak Road, Fairfield, New Jersey 07004
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (973) 808-1992
Securities registered under Section 12(b) of the Exchange Act:
Common Stock, par value $.001
Securities registered under Section 12(g) of the Exchange Act:
None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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 No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's net revenues for its most recent fiscal year. $17,156,865.
The aggregate market value of the voting stock held by non-affiliates of
the registrant was $5,398,650, at April 13, 1998, based on the last bid price of
the Common Stock on such date of $.69, as reported by the Nasdaq Stock Market.
As of April 13, 1998, there were a total of 9,042,958 shares of the Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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PART I
Introductory Comment - Forward Looking Statements.
Statements contained in this Annual Report on Form 10-KSB 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-KSB 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 Software Publishing Corporation Holdings, Inc. (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.
As discussed in "Item 1. Description of Business," the Company acquired
three operating software companies in 1996 and conducted a major restructuring
of its management and operations in late 1997 and early 1998 with the
expectation that such transactions and restructuring will result in long-term
strategic benefits. The realization of these anticipated benefits will depend in
part on whether the cost savings intended to be realized from the restructuring
can be achieved. While the Company has substantially implemented its integration
and restructuring plans, there can be no assurance that the expected long-term
strategic benefits of the acquisitions and restructuring 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 market acceptance and amount of sales of the Company's products,
the extent that the Company's direct mail programs achieve satisfactory response
rates, the efficiency of the Company's telemarketing operations, the competitive
environment within the computer software and direct mail industries, the
Company's ability to raise additional capital, the ability of the Company to
continue to implement its reorganization plan efficiently and achieve the
anticipated results therefrom, the cost-effectiveness of the Company's product
development activities, the extent to which the Company is successful in
developing, acquiring or licensing successful products, and other factors and
information disclosed and discussed in "Item 1. Description of Business," "Item
6. Management's Discussion and Analysis or Plan of Operation" and in other
sections of this Form 10-KSB. Readers of this Form 10-KSB 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.
Item 1. Description of Business.
General
The Company is an international developer, publisher and supplier of
proprietary computer software applications primarily targeted towards the visual
communications market segment through desktop publishing, presentation graphics
and business productivity software for the corporate and small office/home
office ("SOHO") markets. The Company's products produce documents through its
easy-to-use desktop publishing, drawing and presentation graphics applications,
and also improve the graphical appeal and overall effectiveness of documents
produced by either the Company's or third parties' desktop publishing,
presentation graphics, web page, e-mail, word processing and other similar
applications. The Company currently offers seventeen products, primarily Serif
PagePlus and Harvard Graphics , that operate on the Windows 95, Windows NT ,
Windows 3.1 and DOS operating systems for IBM personal computers and
compatibles. The Company has established a multi-channel distribution system
utilizing direct mail, telemarketing, retail, corporate and OEM sales channels
and also disseminates its software programs over the Internet.
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The Company was incorporated in Delaware on December 23, 1993, and
succeeded to the business of its predecessor New Jersey corporation, which was
formed on July 20, 1992. In July 1996, the Company acquired Serif Inc. and Serif
(Europe) Limited (collectively, "Serif"), which expanded its product line to
include the Serif PagePlus and DrawPlus desktop publishing titles. In December
1996, the Company acquired all of the outstanding capital stock of Software
Publishing Corporation ("SPC") pursuant to a merger (the "Merger") of a
wholly-owned subsidiary of the Company with and into SPC, which resulted in the
further expansion of the Company's product line to include SPC's presentation
graphics and other visual communications and business productivity software
products. The Company continues to operate the Serif companies and SPC as
wholly-owned subsidiaries. Since January 1998, the operations of SPC were
significantly reduced or eliminated. The Company's business strategy currently
includes the leveraging of the Serif and Harvard brand names and their user base
for Serif and SPC products in marketing the Company's present product lines,
products currently under development and additional products which may be
developed, licensed or acquired in the future. Unless the context otherwise
requires, all references herein to the Company include Software Publishing
Corporation Holdings, Inc. and its subsidiaries, including SPC and Serif, on a
consolidated basis.
The Company's principal executive offices are located at 3A Oak Road,
Fairfield, New Jersey 07004; telephone (973) 808-1992. The Company maintains
websites at www.spco.com, www.serif.com and www.harvardgraphics.com.
Business Strategy
The Company's strategic objective is to become a leading supplier of
easy-to-use software applications that improve the graphical appeal and overall
effectiveness of documents produced by desktop publishing, drawing and
presentation graphics applications, as well as to maximize the profitability and
productivity of the Company's direct mail and telemarketing operations in the
United States and Europe.
The Company believes that many current graphical presentation software
applications and first-generation Internet publishing tools were designed for
computer specialists, corporate MIS departments, computer consultants and other
technically knowledgeable users. The Company believes that there is a market
opportunity for software that makes it easy for the average computer user to
create high-quality, graphically rich documents, presentations, e-mail and web
pages.
With respect to sales and marketing, the Company intends to leverage its
multi-million user, multi-national installed base of Serif PagePlus and Harvard
Graphics through its multi-national direct mail and telemarketing operations, as
well as the corporate and retail sales channels. The Company believes that the
Internet may provide additional opportunities for further sales and marketing
success, and has established an on-line store at its website from which its
products may be purchased.
The Company's primary product families are the Serif line of desktop
publishing and drawing products, consisting primarily of Serif PagePlus,
SerifDraw Plus and Serif Publishing Power Suite, and the Harvard line of
graphical information presentation products, consisting primarily of Harvard
Graphics and Harvard ChartXL. The Company believes that Serif PagePlus is the
most popular desktop presentation software application in use in the United
Kingdom. The Company also markets the Active line of companion utility products
(currently consisting of ActiveOffice , Active Presenter , ActiveMail and Serif
MailPlus ), and the ASAP line of presentation graphics products. In 1996, the
Company introduced new products, including ASAP WordPower , ASAP WebShow , ASAP
WebShow Presentation Kit, Serif PagePlus 4, Serif DrawPlus 3, and a suite of
presentation products called the Harvard Graphics Presenter's Pack consisting of
Harvard Graphics, Harvard ChartXL , Harvard Spotlight , and Flamingo Plus
(distributed under license from a third party), and also created two Internet
plug-ins, ASAP WebShow for Netscape Navigator and an ActiveX version of ASAP
WebShow for Microsoft Internet Explorer 3.0. 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. In June 1997, the Company introduced ActivePresenter, which is
designed to enable users to quickly and easily prepare and publish to the world
wide web real-time or self-running presentations. In September 1997, the Company
introduced Serif Page Plus 5, an upgrade of its popular Serif PagePlus product.
In November 1997, the Company introduced ActiveMail and Serif MailPlus, which
enable e-mail users to produce electronic messages utilizing a rich graphical
presentation rather than ordinary text.
<PAGE>
Products
The Company's primary product lines include desktop publishing,
presentation graphics and business productivity applications. Certain of the
Company's product lines are available in languages other than English, including
those product lines with significant foreign revenues. Both the Serif and
Harvard lines of products continue to derive substantial revenues from foreign
sales. See "Item 6. Management's Discussion and Analysis or Plan of Operations."
The Company's primary products, listed by product genre, are:
Desktop Publishing
Serif PagePlus 5 Professional Edition for Windows 95 is the
Company's premium desktop publishing application designed to permit
the average computer user to produce professional-quality
advertisements, flyers, reports, banners, brochures, newsletters,
greeting cards and other written documents.
Serif PagePlus Home/Office for Windows 95 is designed for
more price-sensitive SOHO and home computer desktop publishing users
who do not need all the content and advanced features included in
PagePlus 5.
Serif PagePlus 4 is designed to permit the average computer
user to produce professional-quality advertisements, flyers, reports,
banners, brochures, newsletters, greeting cards and other written
documents.
Serif DrawPlus 3 Home/Office Edition for Windows 95, is
designed for both the average and advanced computer user, with a range
of drawing and design tools that they can use to create logos,
posters, cartoons, certificates, report covers and greeting cards.
Serif Publishing Power Suite is a combination of products
consisting of Serif PagePlus 3, TypePlus, TablePlus, DrawPlus 3,
PhotoPlus, Arena 3D Design ED (licensed from a third party) and
PhotoMorph 2.0 (licensed from a third party), along with 7,000 clipart
images, 500 photos and 400 fonts.
Serif PagePlus Home/Office Designer Pack provides over 100
design wizards, 100 additional fonts, 50 photos and over 5,000 clipart
images.
Serif ClipArt Pack contains 75,000 clipart images licensed
from a third party.
Presentation Graphics
Harvard Graphics 4.0 for Windows 95 is a Windows
presentation graphics package offering a range of capabilities
enabling users to create and deliver more effective presentations.
Harvard Graphics 3.0 for Windows is a Windows 3.1
presentation graphics package offering the Advisor System and an
interactive design checker.
Harvard ChartXL 2.0 for Windows 95 is a charting application
program that provides users of spreadsheet software and other major
Windows-based applications a tool for analyzing, viewing and
presenting their data more effectively with more than 300 unique two-
and three-dimensional business, statistical, and technical chart
types, coupled with spreadsheet capabilities and "what if" analytical
tools.
<PAGE>
Harvard Spotlight 2.0 for Windows 95 helps assist users to
control the flow and delivery of their electronic presentations.
ActiveMail and Serif MailPlus, which were released in
November 1997, enable users to send graphical e-mail messages in
addition to or instead of plain text.
ActivePresenter, which was released in June 1997, is
designed to enable users to quickly and easily prepare and publish to
the world wide web real-time presentations, which can be moderated or
self-running, thereby enabling users to coordinate presentations to
any participants with access to the Internet or from any location.
Active Office, which was released in January 1997, is
designed as a companion to Microsoft Office that gives users of Word,
Excel, PowerPoint and Exchange Mail a quick and easy way to turn plain
text and numbers into high-impact visual elements which are embedded
in their text, thereby increasing the communication effectiveness of
their documents.
ASAP WordPower, v.1.95 is a presentation graphics
application that helps inexperienced users create a presentation
within a few minutes. ASAP WordPower allows the Windows 95 user to
convert text created in ASAP WordPower or MS Word into a professional,
well-designed presentation.
ASAP WebShow is a viewer for presentations that are created
with the Company's ASAP WordPower presentation software and posted to
the World Wide Web. The combination of ASAP WebShow and ASAP WordPower
provides a set of tools to enhance communications over the Internet.
Together, these two products offer users a solution for creating and
viewing presentations on the World Wide Web. An ASAP WebShow user can
view a presentation in interactive or auto-run mode, download the
materials for later viewing, or print hard copies for local use.
Business Productivity Applications
Word Processing and Other Products. The Company's word
processing and other business productivity products are older, legacy
products for mature market segments. These products include
Professional Write, Professional Write PLUS, OfficeWriter and
Professional File. The Company has de-emphasized this category.
Other Products. The Company markets an interactive
multimedia tutorial under the Company's Learn to Do brand, titled
Learn to Do Windows 95 with John C. Dvorak. The Company has
de-emphasized this product.
Intellectual Property and Other Proprietary Rights
The Company believes that its success depends significantly upon its
proprietary technology. The Company currently relies on a combination of
copyright and trademark laws, trade secrets, confidentiality procedures and
contractual provisions and other written materials under trade secret, patent
and copyright laws to protect its proprietary technology; however, these
generally afford only limited protection. The Company has registered and applied
for registration for certain service marks and trademarks, and intends to
continue to evaluate the registration of additional service marks and trademarks
as appropriate. Additionally, the Company generally copyrights its software and
related user documentation, but the copyright laws afford only limited practical
protection against duplication of the media embodying the programs and the
related user manuals. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or services or to obtain and use information that the Company regards
as proprietary. In addition, the laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the United States.
Monitoring and identifying unauthorized use of such broadly disseminated
products as personal computer software is difficult. The Company expects
software piracy to be a continuing problem for the software industry. The
Company relies upon software engineering and marketing skills to protect its
market position, in addition to the copyright and trademark or trade secret
<PAGE>
protection discussed above. Because the software development industry is
characterized by rapid technological change, the Company believes that factors
such as the technological and creative skills of its personnel, new product
developments, frequent product enhancements, brand name recognition and reliable
product maintenance are as important to establishing and maintaining a
technology leadership position as the various legal protections of its
technology.
The Company currently has patent applications pending related to the
technology contained in its Harvard Spotlight product. There can be no assurance
that any new patent applications will be submitted, that any pending
applications will be approved, that if issued, any such patent will not be
challenged, or that if challenged, any such patent will not be invalidated, any
of which may have a material adverse effect on the Company. The Company's patent
application relating to its Intelligent Formatting technology has been denied by
the U.S. Patent Office. There can be no assurance that any issued patent will
provide the Company with any competitive advantages. The Company believes that
it retains ownership rights to all software, both developed and commercially
distributed by the Company, except for those components of the software that the
Company licenses from third parties. Software offered by the Company is licensed
and generally provided in object code pursuant to shrink-wrap or on-screen
license agreements or executed license agreements which contain restrictions on
disclosure and transferability. In addition, the Company has from time to time
licensed to third parties the right to use, modify, reproduce, sublicense,
distribute and market certain of the Company's software products or portions of
its software products. Such licensed software is provided in object code and, in
certain limited circumstances, source code, pursuant to agreements which contain
restrictions on disclosure and transferability.
Certain technology used in the Company's products is licensed on a
perpetual, fully paid, non-royalty-bearing basis from third parties. If any
event occurred that rendered technology licensed from a third party and
incorporated in the Company's products unavailable to the Company, or if the
technology is not appropriately supported and enhanced by the licensor, the
Company could be forced to expend financial and development resources to replace
that technology. Such expenditures could materially adversely affect the
Company's business, financial condition and results of operations.
The Company is not aware that any of its products materially infringes the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim such infringement by the Company or its licensors
with respect to current or future products. The Company expects that software
product developers will increasingly be subject to such claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or might require the Company to enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company.
Litigation may be necessary to protect the Company's proprietary
technology. Any such litigation may be time-consuming and costly. There can be
no assurance that the Company's means of protecting its proprietary rights will
be adequate or that the Company's competitors will not independently develop
similar technology or duplicate the Company's products or services or design
around patents or other intellectual property rights of the Company. There has
been a substantial amount of litigation in the software industry regarding
intellectual property rights and there can be no assurance that the patents or
other intellectual property rights of others will not have a material adverse
effect on the Company's ability to do business.
Competitors and potential competitors of the Company may resort to
litigation as a means of competition. Such litigation may be costly and expose
the Company to new claims that it may not have anticipated. Although patent and
intellectual property disputes in the software area have often been settled
through licensing, cross-licensing or similar arrangements, costs associated
with such arrangements may be substantial if they may be obtained at all. Any
litigation involving the Company, whether as plaintiff or defendant, regardless
of the outcome, including any litigation relating to claims which have been or
may in the future be asserted against the Company, may result in substantial
costs and expenses to the Company and significant diversion of effort by the
Company's technical and management personnel. In addition, there can be no
assurance that litigation, either instituted by or against the Company, will not
be necessary to resolve issues that may arise from time to time in the future
with other competitors. Any such litigation could have a material adverse effect
upon the Company's business, operating results and financial condition. In the
event of an adverse result in any such litigation, the Company could be required
to expend significant resources to develop non-infringing technology, obtain
<PAGE>
licenses to the technology which is the subject of the litigation on terms not
advantageous to the Company, pay damages, and/or cease the use of any infringing
technology. There can be no assurance that the Company would be successful in
such development, that any such licenses would be available and/or that the
Company would have available funds sufficient to satisfy any cash awards.
Product Development
The personal computer software industry is characterized by rapid
technological change, which requires a continuing high level of expenditures for
the enhancement of existing products as well as development, licensing or
acquisition of new software products. The Company's current product development
activities include enhancing and updating its present software packages and
designing certain new products. The Company intends to expand and update its
Serif software code to meet the demands of the current market.
The Company's Serif technology provides advanced desktop publishing and
drawing capabilities while also providing a code base to continue to expand the
products as user requirements evolve. In 1997, the Company introduced one new
product based on its updated Serif technology. The Company has focused research
and development resources to expand its Serif and Harvard Graphics technology,
as well as to integrate the Intelligent Formatting technology into its Serif
products.
The Company intends to acquire additional technology through a combination
of internal development, licensing, purchasing and strategic alliances. There
can be no assurance that the Company's product development efforts or product
introductions will result in commercially successful products. The Company's
revenues are based on a combination of products developed internally, acquired
products and licensed products. The Company intends to continue a flexible
approach to the development, acquisition and release of new products and
technologies, recognizing that the rapid changes in the software industry
require ever shorter development cycles and ever higher levels of product
quality and functionality. The Company plans to continue to develop and acquire
software technology and products, and to acquire licensing or distribution
rights to third-party products, to enhance and expand its product offerings.
In June 1996, SPC entered into a non-exclusive licensing and joint
development agreement with Oracle Corporation ("Oracle") to embed Intelligent
Formatting technology into the Oracle InterOffice Product Line. Under the
agreement, the Company's Intelligent Formatting engine is being ported to Java
for use in the Oracle InterOffice product line. Intelligent Formatting
technology is intended to enhance the Oracle InterOffice product offerings in
the area of visual communications. The collaborative services offered by Oracle
InterOffice -- messaging, directory services, calendar/scheduling, document
management and workflow -- are designed to enable users to productively share,
exchange and manage information within their group, across the enterprise and
beyond. Intelligent Formatting technology is expected to complement these
services by adding rich visual content to the range of the Oracle InterOffice
applications. Under the terms of this agreement, Oracle has paid to the Company
a development fee and a one-time license fee in installments. The Company
believes that the development fee and license fee have not resulted in a
material financial benefit to the Company. In addition, in June 1996, Oracle
Corporation purchased a worldwide end-user site license for the Company's ASAP
WordPower visual communications software. Under the terms of the agreement, the
Company granted Oracle and its subsidiaries a license for the desktop, network
and mobile use of ASAP WordPower.
The Company spent approximately $3,227,215 in 1997 and approximately
$1,077,615 in 1996 for product development and enhancement activities. These
expenditures represented approximately 18.8% and 22.9% of total net revenues for
such years, respectively.
Production
After approval by quality assurance personnel and management, the Company's
product development staff produces the master diskettes, CD-ROMs and user
manuals for its proprietary software as part of its product development
activities. Third party contractors generally print and assemble CD-ROM discs,
diskettes, manuals, catalog inserts and boxes in which the Company's products
are shipped. The Company has multiple sources for major components of its
products, does not rely on any one principal supplier and has not experienced
any material delays in production or assembly. To date, the Company has not
<PAGE>
experienced any material difficulties or delays in production of its software
products and related documentation.
Sales and Marketing
The Company's products are sold primarily through direct mail,
telemarketing, retail, corporate, and original equipment manufacturer ("OEM")
channels. The Company has also positioned itself to take advantage of the
Internet as an additional sales medium. Direct mail sales, which accounted for
approximately 72.4% and 75.5% of the Company's revenues in 1997 and 1996,
respectively, are generated by inbound and outbound telemarketing operations in
the U.S. and U.K. Corporate sales are comprised of both individual product sales
as well as volume sales. Most sales to the retail channel are made on a two-step
basis with the initial sales being made to distributors and then to retail
chains. The Company also distributes its products through OEMs on a bundled or
value-added basis. In addition, the popularity of the Internet and the World
Wide Web has made it feasible for the Company to sell its products over the
Internet. In this connection, the Company has established an on-line software
store from which the Company's products may be purchased. As the Internet
continues to evolve mechanisms for efficiently and securely charging customers
directly for software, the Company expects that it may continue to supplement
traditional forms of software distribution with distribution of its software
directly over the Internet medium.
The Company utilizes its telemarketing operations in conjunction with its
direct mail operations to maximize direct sales to existing and new end user
customers. These mailings and direct response advertisements originate from the
Company's offices in the United States and England and are handled by the
Company's inbound and outbound telemarketers in Nashua, New Hampshire and
Nottingham, England. These mailings and advertisements are varied and tested to
attempt to maximize response rates and profitability. The Company maintains a
list of its registered user customers and sends periodic mailings to sell
upgrade versions and new products.
The Company assists distributors and resellers in selling, promoting and
merchandising its products. Large corporate and government sales are fulfilled
principally through resellers and distributors while all other sales are
fulfilled directly. The Company also offers site licenses and volume purchase
discounts to its corporate customers. The OEM sales effort is responsible for
sales to hardware and software original equipment manufacturers, which include
the Company's products in bundles with their equipment.
The Company's advertising programs for its product lines are designed to
increase corporate and product brand awareness, as well as to sell directly to
customers. The Company's advertising targets new customers, its installed
customer base and, with competitive upgrade promotions, its competitors'
customers. The Company advertises primarily through promotions to support
distributors' and resellers' sales efforts, including distributor/reseller
advertising programs, rebates, training and price promotions, and engages in
joint promotional activities with personal computer, peripheral and other
manufacturers, direct mailings and participation at trade shows. The Company
also promotes its products through in-house training and direct mail as well as
offering volume purchase discounts and site licenses.
The Company's products continue to derive substantial revenues from foreign
sales. The Company translates certain of its products, including packaging,
documentation, software, and promotional materials, for international markets.
These translations are generally done by contractors hired by the Company, or by
the Company's local sales and marketing agents. Advertising and promotional
programs are customized for local markets where necessary. International sales
include localized versions of selected products, as well as the English language
versions of the Company's products throughout the United Kingdom, Europe, Latin
America, South America and the Asia/Pacific region. Localized versions include
German, French, Spanish, Italian, Portuguese and Dutch. Approximately 49% of the
worldwide sales in 1997 of the Company and its subsidiaries were made outside of
the U.S., and, for 1996, on a combined pro forma basis, foreign sales accounted
for approximately 44% of the Company's total net sales. The Company expects to
continue to sell internationally and invoice in foreign currencies. Accordingly,
the Company is subject to risks associated with exchange rate fluctuations.
The Company has a general return policy for its North American resellers
and distributors whereby they may return any products previously purchased from
the Company, provided that the aggregate purchase price for such returned
products does not exceed 10% of the reseller's or distributor's net purchases
<PAGE>
for the prior quarter. In addition to this return allowance, North American
distributors and resellers may generally exchange any discontinued products
within ninety days of notification of discontinuation for products of equal or
greater value. For international distributors and resellers, the general return
policy is the same as for North American resellers and distributors, except that
returns with respect to sales in a quarter must be completed within the first
month of the subsequent quarter. For international distributors and resellers,
the policy for the exchange of obsolete products generally allows returns within
thirty days after the announcement of a product's obsolescence, provided that
the product was shipped within thirty days prior to the announcement. However,
to maintain good customer relations, the Company may accept returns in excess of
those allowed under its general policy.
The Company typically ships products within several days after receipt of
orders, which is customary in the personal computer applications software
business. Accordingly, the Company does not believe that its order backlog is a
meaningful indicator of future business.
Customer Support
The Company provides free technical support directly in the United States
and the United Kingdom and through third-party contractors in Europe and other
international locations for a period of thirty days from either the first call
to its technical support centers from the customer or from receipt of the
customer's product registration card. The Company expenses the cost of this
support as incurred. After this initial period, technical support is available
for purchase under a variety of value-added support programs. However, to
maintain good customer relations, the Company may provide free technical support
in excess of the initial period.
Competition
The market for visual communications and business productivity software is
highly competitive and subject to rapid technological change. Many of the
Company's current and potential competitors possess significantly greater
financial, technical and marketing resources, greater name recognition and a
larger installed customer base than the Company. In addition, any of these
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, as well as to devote greater resources to
the development, promotion and sale of their products than the Company.
Furthermore, because there are relatively low barriers to entry in the software
industry, the Company expects additional competition from other established and
emerging companies, which may choose to enter the market by developing products
that compete with those offered by the Company or by acquiring companies,
businesses, products or product lines that compete with the Company. It is also
possible that the competitors may enter into alliances and rapidly acquire
significant market share. The Company also believes that competition will
increase as a result of software industry consolidation. There can be no
assurance that the Company's current or potential competitors will not develop
or acquire products comparable or superior to those developed by the Company,
combine or merge to form significant competitors, or adapt more quickly than the
Company to new technologies, evolving industry trends and changing customer
requirements. Increased competition could result in price reductions, reduced
margins or loss of market share, any of which could materially and adversely
affect the Company's business, operating results and financial condition. There
can be no assurance that the Company will be able to compete successfully
against current and future competitors or that competitive pressures faced by
the Company will not have a material adverse effect on its business, operating
results and financial condition. If the Company is unable to compete
successfully against current and future competitors, the Company's business,
operating results and financial condition would be materially and adversely
affected.
Some of the competitors of the Company sell "bundles" or "suites" of
products which include products that directly compete with the Company's
products and which are bundled with other office software programs by the same
or multiple competitors. These suite products are sold at an all-inclusive
price. Additionally, application software is increasingly provided as part of
the operating system, or bundled and pre-loaded into new computers. The price
for a stand-alone or pre-loaded bundle or suite of software is typically
significantly less than separately purchased applications, and many end users
are likely to prefer the bundle or suite over a more expensive combination of
other individually purchased applications, even if the latter applications offer
superior performance or features. These factors have resulted in and are
expected to continue to cause significant downward pressures on average selling
<PAGE>
prices for the Company's products. There is no assurance that the Company will
be able to adopt strategies to compete successfully in this environment.
Based on product lines and price points, the Company regards Microsoft,
Symantec Corporation, Corel Corporation, Lotus Development Corporation, Adobe
Systems, Broderbund Software, The Learning Company, Micrografix, Fractile,
Visio, Meditools, Deltapoint, Macromedia, International Microcomputer Software,
Inc. and Design Intelligence as close competitors. The dominant position of
Microsoft in the personal computer operating system and application program
market place provides it with a range of competitive advantages, including the
ability to determine the direction of future operating systems and to leverage
its strength existing in one or more product areas to achieve a dominant
position in new markets. This position may enable Microsoft to increase its
market position even with respect to products having superior performance, price
and ease-of-use features. Microsoft's ability to offer corporate and SOHO
productivity software, to bundle software, to provide incentives to customers to
purchase certain products in order to obtain favorable sales terms or necessary
compatibility or information with respect to other products, and to pre-load
such bundled software on new computers, may significantly inhibit the Company's
ability to maintain or expand its business. In addition, as Microsoft or other
companies create new operating systems and applications, there can be no
assurance that the Company will be able to ensure that its products will be
compatible therewith. The introduction of upgrades to operating systems or the
introduction of new operating systems and standardized software by Microsoft and
others, over which the Company has no control, may adversely affect the
Company's ability to upgrade its own products, and may cause reduction in sales
of the Company's products.
The Company believes that the principal competitive factors in the
corporate and SOHO software market include pricing (which includes individual
product pricing, standard and competitive upgrade pricing, licensing and volume
discounting), product functionality, ease-of-use, bundling in suites of related
products, distribution through existing and new channels and brand name
recognition. The Company's ability to compete will be contingent on its
continued enhancement of its existing products, its ability to correctly
identify and enter new markets, effectively market and sell its current
products, develop, acquire or license new products and broaden its distribution
channels. The Company believes that competition will continue to intensify in
the future and that new product introductions, further price reductions,
strategic alliances and other actions by competitors could materially and
adversely affect the Company's competitive position.
Operations
The Company coordinates its accounting, product development, sales,
marketing, purchasing and scheduling primarily at its offices in Fairfield, New
Jersey and its telemarketing, sales and fulfillment operations at Nashua, New
Hampshire, Nottingham, England and Munich, Germany. The Company's inventory
control, order processing, warehousing and shipping activities related to such
operations are located primarily at its offices in Nashua and Nottingham. The
Company's computer systems handle order entry, order processing, picking,
billing, accounts receivable, accounts payable, general ledger, inventory
control, catalog management and analysis, and mailing list management.
Governmental Regulation
The Company believes that it does not need any government approval for
production and sale of its products. In addition, the Company knows of no
governmental regulations, either federal, state or local which materially affect
its operations or products. Furthermore, the Company knows of no environmental
laws, either federal, state or local, which would affect the Company or its
products. Consequently, the Company has not incurred any costs nor has it
experienced any effects from compliance with any governmental regulations or
environmental laws.
Employees
As of December 31, 1997, the Company had approximately 144 full-time
employees, of whom 21 were in product development, 87 were in marketing, sales
and customer support, eleven were in production and 25 were in general and
administrative functions. Of the total, 78 employees were located in North
America and 66 internationally. In addition, the Company utilized approximately
four independent contractors in connection with its product development,
<PAGE>
administration and marketing activities. The Company has never experienced a
work stoppage and believes that it has satisfactory relations with its employees
and contractors. In January 1998, the Company terminated the employment of
twelve employees, of which five were administrative, three were in marketing,
three in product development and one in production. Also, three contractors'
engagements were terminated.
Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish twenty-first century dates
from twentieth century dates. As a result, in less than two years, computer
systems and software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. The Company believes that its products and
internal systems are Year 2000 compliant. In addition, the Company believes that
the purchasing patterns of customers and potential customers may be affected by
Year 2000 issues as companies expend significant resources to correct or patch
their current software systems for Year 2000 compliance. These expenditures may
result in reduced funds available to purchase software products such as those
offered by the Company, which could result in a material adverse effect on the
Company's business, operating results and financial condition.
Item 2. Description of Properties.
The Company's principal executive offices are located at 3A Oak Road,
Fairfield, New Jersey, 07004. The Company's North American executive,
administrative, sales, marketing and support staff are primarily located at this
facility. The lease for this facility terminates in September 1999 and provides
for average annual rental costs of approximately $80,400, for approximately
13,400 square feet of space. Approximately 10,000 square feet of this facility
have been subleased for the duration of the lease, providing a net annual rental
cost of approximately $19,200. In addition, Serif Inc. leases approximately
18,000 square feet of office and warehouse space in Nashua, New Hampshire
pursuant to a lease ending in March 2002. This facility serves as the Company's
primary North American telemarketing, customer support, product development
warehouse and fulfillment center. Rental costs for the Nashua facility average
approximately $90,000 per year for the remaining term. Serif (Europe) Limited
leases approximately 25,000 square feet of office and warehouse space in
Nottingham, England for a five year period which commenced in May 1997. This
facility serves as the Company's United Kingdom telemarketing center and
European warehouse and fulfillment center. The rental cost for the Nottingham
facility is expected to average approximately $168,000 per year for the lease
term. The Company also leases 1,200 square feet of office space in Munich,
Germany pursuant to a lease which expires in November 1999 with a rental cost of
approximately $26,000 per year for the lease term. The facility serves as the
Company's European sales office. The Company believes that its existing space
provides it with adequate space for the foreseeable future. The Company does not
own nor does it contemplate owning any real property in the foreseeable future.
Item 3. Legal Proceedings.
On January 30, 1998, an action was commenced against the Company, Mark E.
Leininger and Barry A. Cinnamon in the United States District Court, Southern
District of New York, under the caption Howard Milstein and Ronald Altman v.
Software Publishing Corporation Holdings, Inc., Mark E. Leininger and Barry A.
Cinnamon. Mr. Leininger currently is President, Chief Operating Officer and a
director of the Company and Mr. Cinnamon formerly was Chairman of the Board,
President and Chief Executive Officer of the Company. In the action, plaintiffs
allege that, in October 1997, they purchased an aggregate 889,000 shares of
Common Stock for $919,495 based upon certain statements made to one of the
plaintiffs. Plaintiffs further allege that such statements were intentional
misrepresentations of material fact that were designed to deceive plaintiffs as
to the Company's true financial state and to induce the plaintiffs to invest in
the Company. Plaintiffs seek recision of their investment and a return of their
purchase price and certain other relief. The Company believes that these claims
are without merit and intends to vigorously defend itself in this action. The
Company has filed an answer in this action denying the plaintiffs' allegations
and asserting affirmative defenses, including that the plaintiffs' subscription
agreements bar plaintiffs' claims, and asserting counterclaims that, among other
<PAGE>
things, plaintiffs breached certain of the representations contained in their
subscription agreements, that plaintiff Altman breached his fiduciary duties to
the Company, and that plaintiffs' violated Section 13(d) of the Exchange Act by
filing a materially false and misleading Schedule 13D with respect to the Common
Stock.
On February 13, 1998, a summons and complaint was filed in the Superior
Court of New Jersey, Essex County under the caption Barry Cinnamon and Lori
Kramer Cinnamon, suing derivatively on behalf of Software Publishing Corporation
Holdings, Inc. and its shareholders, and Barry Cinnamon and Lori Kramer
Cinnamon, individually, v. Software Publishing Corporation Holdings, Inc., Neil
M. Kaufman, Mark Leininger and John Does 1-10. Mr. Leininger is President, Chief
Operating Officer and a director of the Company; Mr. Kaufman is a director of
the Company, the principal of Kaufman & Associates, LLC, counsel to the Company,
and was Secretary of the Company from December 1996 to December 1997; Mr.
Cinnamon was Chairman of the Board, President and Chief Executive Officer of the
Company until December 19, 1997; and Ms. Kramer Cinnamon was an officer and
director of the Company until December 19, 1997. To date, the summons and
complaint has been served on the Company and has not been served on either of
the named individual defendants or any of the other defendants. In this action,
plaintiffs seek (i) the recision of the Settlement and General Release
Agreement, dated as of December 19, 1998 (the "Cinnamon Settlement Agreement"),
between the Company and each plaintiff and the License Agreement, dated as of
December 19, 1998 (the "Cinnamon License Agreement," and, together with the
Cinnamon Settlement Agreement, the "Cinnamon Agreements"), between the Company
and Mr. Cinnamon, (ii) payment of the full amount of compensation due under
their former respective employment agreements with the Company, (iii) that Mr.
Kaufman be enjoined from continuing to act as a director and officer of, and
counsel to, the Company, (iv) that the Company be required to provide an
"'opinion letter' as required by the Securities Exchange Act of 1934, as
amended, to permit the sale of shares of stock held by the Cinnamons without
restriction," (v) that the Company be required to immediately register the stock
held by plaintiffs and (vi) compensatory and punitive damages, attorney's fees,
and other relief. Plaintiffs seek such relief based upon their allegations that
the defendants improperly caused the resignation of plaintiffs from their
positions as officers and directors of the Company, that Mr. Kaufman improperly
influenced the decision of the Board of Directors to adopt the Company's
December 1997 restructuring plan (thereby rejecting Mr. Cinnamon's plans for the
Company), and that the Cinnamon Agreements were entered into by each plaintiff
under duress and the coercion of defendants (despite plaintiffs having been
represented by counsel in connection with these matters). The Company believes
that the plaintiff's allegations are without merit, and intends to vigorously
defend itself in this action. The ultimate outcome of this action is unknown at
the present time.
In January 1998, SPC and Pyramid Data, Inc. ("Pyramid") settled the
remaining cause of action in the action brought by Pyramid in May 1994 against
SPC in the Santa Clara Superior Court. The settlement agreement resulted in a
payment by the Company to Pyramid of $9,500 and the dismissal of the action. The
Company has made an application to the court to determine that this settlement
also acts as a bar to the claims of indemnification and contribution under the
cross-complaints among SPC, Custom Paper Products ("CPP") and certain officers
and directors of CPP. No assurance can be given that the Company's application
to the court will be granted. However, the Company does not believe that an
adverse decision against the Company on these claims of indemnification and
contribution would have a material affect on the Company's business, operating
results or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
(a) Market Information
The Company's Common Stock was traded on the Nasdaq SmallCap Market under
the symbol "ANMI" from December 6, 1995 through December 27, 1996, under the
symbol "SPCOD" from December 28, 1996 through January 27, 1997, and has been
traded under the symbol "SPCO" since January 28, 1997. The Common Stock was also
traded on the Boston Stock Exchange under the symbol "APO" from December 6, 1995
through January 20, 1997 and has been traded under the symbol "SPO" since
January 20, 1997. The following table sets forth the range of high and low
closing prices for the Company's Common Stock for the periods indicated as
derived from reports furnished by Nasdaq. The information reflects inter-dealer
prices, without retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
High Bid Low Bid
Fiscal 1996
<S> <C> <C>
First Quarter . . . . . . . . . . . . . $ 6-3/4 $ 3-1/2
Second Quarter. . . . . . . . . . . . . 6-5/8 2-5/8
Third Quarter . . . . . . . . . . . . . 9-3/8 4
Fourth Quarter. . . . . . . . . . . . . 7-13/16 3-1/2
Fiscal 1997
First Quarter . . . . . . . . . . . . . $ 4-3/4 $ 2-15/16
Second Quarter. . . . . . . . . . . . . 3-3/16 1-7/8
Third Quarter . . . . . . . . . . . . . 2-3/8 1
Fourth Quarter. . . . . . . . . . . . . 2-5/16 23/32
</TABLE>
As of April 13, 1998, the closing price for the Common Stock as reported on
Nasdaq was $11/16. At April 13, 1998, there were 657 stockholders of record of
the Company. The Company estimates, based upon surveys conducted by its transfer
agent in connection with the Company's 1998 Annual Meeting of Stockholders, that
there are approximately 10,000 beneficial stockholders.
The Company has never paid cash dividends on its capital stock and does not
anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain any future earnings for reinvestment in its
business. Any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon the Company's
financial condition, results of operations, capital requirements and other
relevant factors.
The Company has been advised by Nasdaq that the Company may not be in
compliance with certain of Nasdaq's continued listing maintenance requirements:
(a) NASD Marketplace Rule 4310(c)(4), which requires that the Common Stock
maintain a $1.00 per share minimum bid price, and (b) NASD Marketplace Rule
4310(c)(2), which requires that the Company either maintain net tangible assets
of at least $2,000,000, maintain a market capitalization of at least $35,000,000
or have reported net income in two of the last three fiscal years of at least
$500,000. The Company believes it is in compliance with Rule 4310(c)(2) based
upon its audited financial statements for the year ended December 31, 1997,
which shows that the Company had net tangible assets of approximately $2,874,847
(for NASDAQ purposes) at December 31, 1997, and has provided Nasdaq with a copy
of such audited financial statements and other information which the Company
believes should overcome the determination of Nasdaq's staff that the Common
Stock be delisted from Nasdaq, which determination has been stayed pending a
hearing. However, in order to comply with Rule 4310(c)(4), the Common Stock must
have a bid price of at least $1.00 per share for at least ten consecutive
trading days. The Company intends to seek stockholder approval of a reverse
stock split (the "Reverse Stock Split"), which the Company believes will result
in the Common Stock having a bid price of at least $1.00 per share, at the 1998
Annual Meeting of Stockholders of the Company scheduled for May 26, 1998.
However, no assurance can be given that the Reverse Stock Split will result in
the Common Stock having
<PAGE>
a bid price of at least $1.00 per share for at least ten consecutive trading
days, that, in the future, the bid price for the Common Stock will not fall
below $1.00 per share causing a new violation of Rule 4310(c)(4), that the
Company will maintain net tangible assets of at least $2,000,000 or that the
Company will maintain compliance with all other NASD Marketplace Rules with
respect to Nasdaq continued listing maintenance requirements.
(b) Recent Sales of Unregistered Securities
The information set forth below is a list of all sales by the Company of
the Company's equity securities occurring during 1997.
On October 23, 1997, the Company consummated the sale of an aggregate
961,000 shares of Common Stock to five accredited investors for aggregate gross
proceeds of $1,021,543 and estimated net proceeds of $960,466 in private
transactions exempt from registration under Section 4(2) of the Securities Act
and Rule 506 of Regulation D promulgated thereunder. In connection with such
sale, the Company paid $51,077 and issued a five year option to purchase 96,100
shares of Common Stock, at an exercise price of $1.2756 per share, to a
financial consultant. See "Item 3. Legal Proceedings."
Item 6. Management's Discussion and Analysis or Plan of Operation.
The following discussion should be read in conjunction with the historical
financial statements, including the notes thereto, of the Company included
elsewhere herein.
General
The Company is an international developer, publisher and supplier of
proprietary computer software applications primarily, targeted towards the
visual communications market segment through desktop publishing, presentation
graphics and business productivity software for the corporate and small
office/home office ("SOHO") markets. The Company's products produce documents
through its easy-to-use desktop publishing, drawing and presentation graphics
applications, and also improve the graphical appeal and overall effectiveness of
documents produced by either the Company's or third parties' desktop publishing,
presentation graphics, web page, e-mail, word processing and other similar
applications. The Company currently offers seventeen products, primarily Serif
PagePlus and Harvard Graphics , that operate on the Windows 95, Windows NT
Windows 3.1 and DOS operating systems for IBM personal computers and
compatibles. The Company has established a multi-channel distribution system
utilizing direct mail, telemarketing, retail, corporate and OEM sales channels
and also disseminates its software programs over the Internet. 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.
In July 1996, the Company acquired Serif Inc. and Serif (Europe) Limited in
the Serif Acquisition, which significantly expanded the Company's product line
to include desktop publishing titles Serif PagePlus and Serif DrawPlus, among
others. In December 1996, the Company acquired all of the outstanding capital
stock of SPC upon consummation of the Merger, as a result of which the Company's
product line expanded further to include SPC's presentation graphics and other
visual communications and business productivity software products. The Company
continues to operate the Serif companies and SPC as wholly-owned subsidiaries.
Since January 1998, the operations of SPC were significantly reduced or
eliminated.
In 1997, the Company incurred approximately $376,000 of certain
non-recurring expenses or charges, relating primarily to the restructuring of
its California operations including n expense related to a settlement agreement
with its former President approved in December 1997. In 1996, the Company
incurred approximately $23,199,533 of certain non-recurring expenses or charges,
relating primarily to the acquisition of Serif and SPC. The 1996 expenses or
charges included $2,773,180 relating to the release from escrow of 531,000
shares of Common Stock to two former management stockholders, $1,026,000
relating to the issuance of certain warrants to MS Farrell, $1,104,353 in
charges relating to the restructuring of the Company's operations subsequent to
the acquisitions of Serif and SPC, an aggregate of $17,514,000 of in-process
research and
<PAGE>
development costs associated with the acquisitions of Serif and SPC and
approximately $782,000 associated with settlement of outstanding claims and
employee severance not related to the Company's 1996 restructuring. These
expenses and charges accounted for approximately 85.8% of the Company's net loss
for 1996.
North America and international net revenues for the Company's fiscal years
ended December 31, 1997, 1996 and 1995 and the percentage change of such net
revenues compared to the prior fiscal year, were as follows:
<TABLE>
<CAPTION>
Percentage Percentage
1997 Change 1996 Change 1995
<S> <C> <C> <C> <C> <C>
North America...... $ 8,770,684 296.0% $ 2,214,587 57.0% $ 1,410,962
International..... 8,386,181 237.3% 2,486,368 --
___________ ______ ___________ ___________
Total net revenues $17,156,865 265.0% $ 4,700,955 233.2% $ 1,410,962
</TABLE>
The Company believes that end users are continuing to migrate from the
Windows 3.1 to the Windows 95 and Windows NT platforms and potentially may
migrate to Internet computing. The Company expects increased competition,
including price competition, in the Windows 95, Windows NT and Windows 3.1
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. These suites of products may be bundled with other office
software programs by the same or other competitors, or are distributed at no
charge or are included as part of the operating system. The Company believes
these offerings of product suites have adversely affected 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
one suite of products, Serif Publishing Power Suite, as well as products that
complement competitive suite products. The Company believes that in order to
increase its net revenues, it must continue to expand its direct marketing and
telemarketing operations, introduce new marketing strategies and continue to
introduce new technologies and products through strategic alliances,
acquisitions, licensing or distribution arrangements or internal development.
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
competitors, could adversely affect the Company's net revenues and
profitability.
Results of Operations
1997 Compared to 1996
Net Sales. Net sales increased by $12,455,910 or approximately 265% to
$17,156,865 in 1997 from $4,700,955 in 1996 as a result of inclusion of the
sales from the Company's Serif and SPC subsidiaries for the entire 1997 period,
as compared to the inclusion of the Serif subsidiaries for five months in 1996.
As a result of a transition to selling products primarily through direct
channels instead of at retail, the Company provided in 1997 for returns at
approximately 5% of gross sales versus approximately 28% in 1996.
Cost of Goods Sold. In 1997, cost of goods sold increased by $2,338,061, or
approximately 129% from $1,817,688 in 1996 to $4,155,749 in 1996, primarily as a
result of inclusion of costs of goods sold by the Company's Serif and SPC
subsidiaries for the entire 1997 period, as compared to the inclusion of the
Serif subsidiaries for five months in 1996. Cost of goods sold decreased as a
percentage of net sales from approximately 38.7% in 1996 to approximately 24.2%
in 1997, as a result of the effect of increased sales volumes providing lower
per unit production costs and an effort to reduce product costs during 1997.
The Company's gross margins and operating income may be affected in
particular periods by the timing of product introductions and 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
<PAGE>
affected by competitive pricing strategies in the industry as a whole, including
competitive upgrade pricing, the OEM business and alternative licensing
arrangements.
Costs of goods sold consists primarily of product costs, freight charges,
royalties and an inventory allowance 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-ROMs and other media) and assembly.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased by $11,817,720 or approximately
157.6% from $7,496,665 in 1996 to $19,314,385 in 1997. SG&A expenses for 1997
include $8,432,837 of marketing and administrative expenses relating to the
operations of the Company's Serif and SPC subsidiaries, compared to $2,209,973
of marketing and administrative expenses for the Serif subsidiaries in 1996;
$5,820,341 of salary and wage expense compared to $1,746,568 in 1996; and
$5,862,855 of general and administrative expense in 1997 compared to $4,608,305
in similar expenses in 1996.
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.
Costs Associated with Release of Escrow Shares. 1996 expenses include
non-cash charges to compensation of $2,773,180 relating to the release from
escrow of 531,000 shares of Common Stock in April and September 1996 to the
Company's former President and another former management stockholder. See
"Escrow Shares." There were no similar expenses in 1997.
Product Development. Product development expenses increased $2,149,600 or
199.4% from $1,077,615 in 1996 to $3,227,215 in 1997. The Company's long-term
goal is to continue to reduce product development costs as a percentage of net
sales. The Company's product development costs were 18.8% of net sales in 1997
as compared to 22.9% in 1996. All internally generated development costs have
been expensed in the period incurred. The Company intends to continue to acquire
externally developed technology, explore strategic alliances and other methods
of acquiring or licensing technology, and invest in internal development
projects. Because of the inherent uncertainties associated with software
development projects, there can be no assurance that the Company's research and
development efforts will result in successful product introductions or increased
revenues or profitability.
Restructuring Expenses. In 1997, the Company expensed $375,902 in charges
related to the restructuring of its operations. The expenses associated with
this restructuring program, which was substantially completed by February 1998,
included employee severance arrangements, the settlement and general release
agreement with the Company's former President and Chief Executive Officer, and
costs relating to the elimination of lease facilities in California. See "Item
3. Legal Proceedings." In 1996 the Company incurred restructuring costs of
$1,104,353 which consisted of severance payments, expenses relating to the
elimination of duplicative facilities and other restructuring related costs.
In-Process Research and Development. In 1996, based on an allocation of the
Serif purchase price, the Company expensed $3,514,000 of in-process research and
development costs associated with its acquisition of the Serif companies, and
based on an allocation of the SPC purchase price, the Company expensed
$14,000,000 of in-process research and development costs associated with its
acquisition of SPC. There were no such charges in 1997.
Other Income. In 1997, the Company received interest income of $195,655 as
compared to $121,380 in 1996, primarily as a result of higher cash balances.
<PAGE>
Liquidity and Capital Resources
During 1997, the Company's cash, cash equivalents and short-term
investments decreased by $8,404,481 to $2,760,353, primarily as a result of the
Company's loss from operations during the year ended December 31, 1997. In light
of the stabilization of the Company's cash flow resulting primarily from its
1997 restructuring, the Company believes that its existing 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 several 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. The
Company received approximately $960,466 of net proceeds from the sales, on
October 23, 1997, of an aggregate 961,000 shares of Common Stock in private
transactions to five accredited investors. The Company has a letter of credit
facility of $300,000 relating to certain lease obligations and a debt facility
of approximately $200,000, of which $58,000 was outstanding as of December 31,
1997, from its primary bank in the United Kingdom; 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 1997 used cash of $2,776,974,
primarily related to costs associated with its operations. The Company intends
to continue to utilize its working capital in 1998 for software development,
marketing and advertising, to finance the higher level of inventory necessary to
support the anticipated continued increase in sales and for capital
expenditures, including the purchase of computer equipment and software.
However, the Company's working capital 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
arising from the sale and shipment of new products.
In 1997, approximately 48.9% of the Company's total sales were generated
outside the U.S. The Company expects this practice to continue. The Company's
exposure for foreign currency exchange gains and losses is partially mitigated,
as the Company incurs operating expenses in most of the currencies in which it
invoices customers. As of December 31, 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 on the movement in
exchange rates.
In June 1994, SPC sold its Superbase product line to Computer Concepts
Corporation ("CCC") (Nasdaq National Market: CCEE) for shares of CCC's
restricted common stock. As of December 31, 1997, SPC owned the equivalent of
43,400 shares of common stock of CCC, which were sold in 1998. As of April 14,
1998 the closing price of the CCC common stock on The Nasdaq National Market was
$3.91.
Escrow Shares
From December 1993 through May 1995, Barry A. Cinnamon and Richard Bergman,
the Company's former Vice President of Product Development, placed an aggregate
of 542,500 shares of Common Stock in escrow pending the Company's attainment of
certain minimum net revenue or Common Stock price per share thresholds. Five
hundred and thirty-one thousand (531,000) of these shares were released from
escrow (500,000 shares to Barry A. Cinnamon and 31,000 to Richard Bergman) by
the Board, although these thresholds were not reached. In connection therewith,
the Company recognized compensation expense of approximately $2,773,180 in 1996.
Net Operating Loss Carryforwards
The Company estimates its consolidated tax net operating loss carryforwards
to be approximately $84 million at December 31, 1997. Under Section 382 of the
Code, certain changes in the ownership or the business of a corporation that has
net operating loss carryforwards result in the inability to use or the
imposition of significant restrictions on the use of such net operating loss
carryforwards to offset future income and tax liability of such corporation.
After giving effect to the Merger, an "ownership change" was deemed to have
occurred under Section 382 of the Code and the regulations thereunder with
respect to both the Company and SPC, and, as a result thereof, the use by the
<PAGE>
Company of these net operating loss carryforwards will be limited.
Utilization of the net operating loss carryforwards of SPC may be further
limited by reason of the consolidated return separate return limitation year
rules, and the SPC net operating loss carryforwards are also subject to the
additional limitation that such losses can only be utilized to offset the
separate company taxable income of SPC. The Company estimates that the maximum
utilization of such net operating loss carry forwards to be approximately
$1,200,000 per year through 2012. There can be no assurance that the Company
will be able to utilize all or any of its net operating loss carryforwards. The
Company has fully reserved the tax benefit of its net operating loss
carryforward and other deferred tax assets because of uncertainty of
realization. In addition, the foreign losses incurred by SPC may decrease or
otherwise restrict the ability of the Company to claim U.S. tax credits for
foreign income taxes. The Company has applied for a closing agreement with the
Internal Revenue Service pursuant to which the Company will become jointly and
severally liable for SPC's tax obligations upon occurrence of a "triggering
event" requiring recapture of dual consolidated losses previously utilized by
SPC. Such closing agreement will avoid SPC being required to recognize a tax of
approximately $8 million on approximately $24.5 million of SPC's previous dual
consolidated losses upon the Merger. While the Company believes that it will
obtain this agreement, failure to do so could result in the recognition of this
tax liability. Any future acquiror of the Company may also be required to agree
to a similar closing agreement, to the extent it is able to do so. Non-U.S.
persons generally would be ineligible to do so. This could have a material
adverse effect on the future ability of the Company to sell SPC to such an
ineligible person.
Seasonality
The computer software market is characterized by significant seasonal
swings in demand, which typically peak in the fourth quarter of each calendar
year. The seasonal pattern is due primarily to the increased demand for software
during the year-end holiday buying season and reduced retail and corporate
demand for business software during the European summer vacation period. 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 pricing offers. There can be no assurance that the Company will
achieve consistent growth or profitability on a quarterly or annual basis.
Inflation
The Company believes that inflation has generally not had a material impact
on its operations.
Item 7. Financial Statements.
Set forth below is a list of the financial statements of the Company
included in this Annual Report on Form 10- KSB.
Item Page*
Independent Auditors' Reports...............................................F-2
Balance Sheet as of December 31, 1997.......................................F-5
Statements of Operations for the years ended December 31, 1997 and 1996.....F-6
Statements of Stockholders' Equity for the years ended December 31, 1997
and 1996...............................................................F-7
Statements of Cash Flows for the years ended December 31, 1997 and 1996.....F-8
Notes to Financial Statements...............................................F-9
- ----------
* Page F-1 follows page 39 to this Annual Report on Form 10-KSB.
<PAGE>
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.
On February 11, 1998, the Board of Directors (the "Board") of the Company,
acting upon the recommendation of the Audit Committee of the Board, determined
to replace Ernst & Young LLP ("Ernst & Young") as the independent auditors of
the Company's financial statements and appointed Richard A. Eisner & Company,
LLP ("Eisner") as the Company's new independent auditors engaged as the
principal accountant to audit the Company's financial statements, commencing
with the Company's fiscal year ended December 31, 1997. The reports of Ernst &
Young for either of the past two years did not contain an adverse opinion or a
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles. There were no disagreements with Ernst &
Young requiring disclosure pursuant to Item 304(a)(1)(iv) of Regulation S-K, nor
were there any reportable events requiring disclosure pursuant to Item
304(a)(1)(v) of Regulation S-K. In addition, during the Company's two most
recent fiscal years and through the date hereof, neither the Company nor anyone
acting on the Company's behalf consulted with Eisner on matters which would
require disclosure pursuant to Item 304(a)(2) of Regulation S-K. The Company
requested Ernst & Young to furnish it a letter addressed to the Commission
stating whether it agrees with the above statements and Ernst & Young has done
so.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange
Act.
Officers and Directors
The current executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Director
Name Age Positions and Offices with the Company Since
<S> <C> <C>
Mark E. Leininger 47 President, Chief Operating Officer and Director 1996
Kevin D. Sullivan 47 Chief Financial Officer and Treasurer N/A
Marc E. Jaffe, Esq. 46 Chairman of the Board of Directors and Secretary 1995
Robert Gordon 57 Vice President - Marketing and Sales N/A
Norman W. Alexander 68 Director 1996
Neil R. Austrian, Jr. 33 Director 1996
Neil M. Kaufman, Esq. 37 Director 1996
Martin F. Schacker 40 Director 1997
</TABLE>
Set forth below is a brief description of the background of the officers
and directors of the Company based on information provided by them to the
Company.
Mark E. Leininger was Chief Financial Officer of the Company from July 1995
through December 1997, and has been the Chief Operating Officer and a director
of the Company since September 1996 and President of the Company since January
1998. From February 1994 through April 1995, Mr. Leininger was the President of
Phoenix Leasing Corporation, a passenger and cargo air carrier and aircraft
leasing company, which filed for bankruptcy protection in 1996. From February
1986 through February 1994, Mr. Leininger held various positions, including
Chief Financial Officer and Chief Operating Officer, with Mid Pacific Air
Corporation, a transportation and service company whose stock was traded on
NASDAQ. Mr. Leininger received an MBA from National University, San Diego,
California in 1979 and a BA from Miami University, Oxford, Ohio in 1972.
Kevin D. Sullivan has served as the Company's Chief Financial Officer, Vice
President - Finance and Treasurer of the Company since December 1997. From
November 1995 to December 1997, Mr. Sullivan was Chief Financial Officer of
Prizm Environmental and Occupational Health, Inc., a multi-clinic health care
company. From December 1993 to September 1994, he was Chief Financial Officer of
Scientific Packaging Corp., a manufacturer of packaging for household laundry
products. Mr. Sullivan served as Controller (from 1987 to 1988), Treasurer (from
1989 to 1990) and Manager of Bankruptcy Claims Resolutions (from 1990 to 1993)
of Prime Hospitality Corp., a New York Stock Exchange company, when it was known
as Prime Motor Inns, Inc. Mr. Sullivan received a BS degree from Pennsylvania
State University in 1976.
Marc E. Jaffe, Esq., has been a director of the Company since May 1995. In
January 1998, Mr. Jaffe was elected Chairman of the Board of Directors of the
Company, in which capacity he does not serve as the Company's chief executive
officer. From 1992 until the present time, Mr. Jaffe has been President of
Electronic Licensing Organization, Inc., which has acted as the Company's agent
in the acquisition of certain electronic publishing rights. From 1988 to 1991,
Mr. Jaffe was Executive Vice President of database management for Franklin
Electronic Publishers, a New York Stock Exchange company engaged in the business
of publishing electronic books on hand held media. From 1985 through 1987, Mr.
Jaffe was President of the software and video division of Simon & Schuster, a
publishing company. Mr. Jaffe received a JD degree from Columbia University
School of Law in 1976 and a BA from Columbia College in 1973.
<PAGE>
Robert Gordon has served as the Company's Vice President - Marketing and
Sales or Vice President Marketing since June 1996. From January 1995 to June
1996, Mr. Gordon was Chairman of the Board of a family-owned chain of four
health and fitness clubs. From 1984 through December 1994, he was President of
Leber Katz Partners Direct Marketing, a New York City-based advertising agency.
From 1980 to 1984, Mr. Gordon was President of RCA Record and Tape Club.
Norman W. Alexander has been a director of the Company since October 1996.
Mr. Alexander is a retired former director of Imperial Foods Ltd., a food
products company, and formerly was the chairman of several subsidiaries thereof.
Neil R. Austrian, Jr., has been a director of the Company since April 1996.
Since March 1998, Mr. Austrian has been a partner with the Rust Group, a private
venture capital and investment marketing services partnership. From July 1997 to
February 1998, Mr. Austrian was the Chief Financial Officer of Tescorp., Inc., a
cable television company, and was Vice President of Operations of Tescorp., Inc.
from October 1994 through February 1998. Prior to joining Tescorp., Inc., Mr.
Austrian was an associate at Rust Capital, Ltd., a venture capital firm, from
1988 to October 1994. Mr. Austrian holds a BA Degree from Swarthmore College.
Neil M. Kaufman, Esq., has been a director of the Company since December
1996 and served as the Company's Secretary from December 1996 to December 1997.
Mr. Kaufman is currently the principal of Kaufman & Associates, LLC, counsel to
the Company. From January 1997 to December 1997, Mr. Kaufman was a partner in
Moritt, Hock & Hamroff, LLP ("Moritt Hock"). For four years prior thereto, he
was a member of Blau, Kramer, Wactlar & Lieberman, P.C. ("Blau Kramer"). Prior
to his affiliation with Blau Kramer, Mr. Kaufman was associated with Lord Day &
Lord, Barrett Smith ("Lord Day"). Moritt Hock, Blau Kramer and Lord Day served
as counsel to the Company during the periods in which Mr. Kaufman was affiliated
or associated with such firms. Mr. Kaufman received a JD degree from New York
University School of Law in 1984 and a BA degree from SUNY Binghamton in 1981.
Martin F. Schacker has been a director of the Company since December 1997.
Mr. Schacker also served as a director of the Company from August 1994 to
December 1995. From 1991 until the current time, Mr. Schacker has been Chairman
of M.S. Farrell & Co., Inc., a Wall Street investment banking and brokerage firm
which serves as the Company's investment banker and acted as the representative
of the underwriters of the Company's initial public offering. From 1987 through
1991, Mr. Schacker served as Senior Vice President of investments and corporate
finance of D.H. Blair & Company, Inc., an investment banking and brokerage firm.
Prior to that, Mr. Schacker served as Senior Vice President of Shearson Lehman
Brothers, a Wall Street investment banking and brokerage firm. Mr. Schacker
received a BA in Business from Hofstra University in 1982. Mr. Schacker is a
director of Innapharma, Inc., a Suffern, New York-based biotechnology and
contract research company.
The Company's Board of Directors is classified into three classes. The
directors in each class serve for three-year terms. Neil R. Austrian, Jr. and
Marc E. Jaffe are members of Class I which serves until the Company's 2000
Annual Meeting of Stockholders. Norman W. Alexander and Neil M. Kaufman are
members of Class II which serves until the Company's 1998 Annual Meeting of
Stockholders. Mark E. Leininger and Martin F. Schacker are members of Class III
which serves until the Company's 1999 Annual Meeting of Stockholders. Directors
receive no cash compensation for their services to the Company as directors, but
are reimbursed for expenses actually incurred in connection with attending
meetings of the Board of Directors. Members of the Board of Directors who are
not employees of the Company, of which there currently are four, are eligible to
participate in the Company's Outside Director and Advisor Stock Option Plan.
During 1997, the Board of Directors met eleven times and acted by unanimous
written consent on two occasions. All current directors of the Company attended
not less than 75% of such meetings of the Board and committees thereof on which
they serve.
The Audit Committee, which currently consists of Norman W. Alexander, Neil
R. Austrian, Jr. and Marc E. Jaffe, met once during 1997. The Audit Committee
recommends engagement of the Company's independent certified public accountants,
and is primarily responsible for reviewing and approving the scope of the audit
and other services performed by the Company's independent certified public
accountants and for reviewing and evaluating the Company's accounting principles
and practices, systems of internal controls, quality of financial reporting and
accounting and financial staff, as well as any reports or recommendations issued
by the independent accountants.
<PAGE>
The Compensation Committee, which currently consists of Norman W. Alexander
and Neil R. Austrian, Jr., held meetings or acted by unanimous written consent
thirty times during 1997. The Compensation Committee generally reviews and
approves of the Company's executive compensation and currently administers all
of the Company Stock Plans.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5, and amendments thereto,
furnished to the Company, together with written representations received by the
Company from applicable parties that no Form 5 was required to be filed by such
parties, all parties subject to the reporting requirements of Section 16(a) of
the Exchange Act filed all such required reports, except that Daniel J. Fraisl
failed to timely file two Statements of Changes in Beneficial Ownership of
Securities on Form 4 or an Annual Statement of Beneficial Ownership of
Securities on Form 5 relating to five grants of stock options by the Company;
Lori Kramer Cinnamon failed to timely file a Form 4 relating to two grants of
stock options by the Company and two stock purchase transactions by Barry A.
Cinnamon, the husband of Ms. Kramer Cinnamon; Joseph V. Szczepaniak failed to
timely file two Forms 4 or a Form 5 relating to three grants of stock options by
the Company; George Lauro (who resigned as a director on December 20, 1996)
failed to timely file a Form 4 or Form 5 relating to one grant of stock options
by the Company; Marc E. Jaffe failed to timely file two Forms 4 or a Form 5
relating to two grants of stock options by the Company; and each of Norman
Alexander and Neil R. Austrian, Jr. failed to timely file a Form 4 or Form 5
relating to a grant of stock options by the Company. Additionally, pursuant to
the Company's stock option repricing program (the "Repricing Program"), pursuant
to which certain option holders are permitted to exchange their stock options
for 25% fewer options with otherwise identical terms, except that the exercise
price thereof is reduced to $1.25 per share, each of Messrs. Alexander,
Austrian, Cinnamon, Jaffe and Kaufman, Ms. Kramer Cinnamon, Mark E. Leininger
and Eng Chye Low (since resigned as a director) failed to timely file a Form 4
or Form 5 relating to the deemed cancellations and grants of repriced stock
options. See "Item 10. Executive Compensation - Repricing of Options."
Item 10. Executive Compensation.
The following table sets forth, for the three years ended December 31,
1997, the cash and other compensation paid to all individuals serving as the
Company's Chief Executive Officer (or acting in a similar capacity) during 1997
and the two other individuals serving as executive officers of the Company on
December 31, 1997 whose total salary and bonus, for services rendered to the
Company during 1997, was $100,000 or more (each, a "Named Executive Officer").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Securities All
Other Annual Underlying Other
Name and Principal Position Year Salary Bonus Compensation(1) Option Compensation
<S> <C> <C> <C> <C> <C>
Barry A. Cinnamon 1997 $145,481 $111,617 -- 305,000(3) --
Chairman of Board 1996 95,000 39,892 -- 60,500 --
Chief Executive Officer 1995 46,822 26,922 -- -0- --
and President(2)
Mark E. Leininger, 1997 $145,000 $ 39,737 -- 300,000(5) --
President, Chief Operating 1996 81,000 35,000 -- 225,000 --
Officer, Chief Financial 1995 29,442 -- -- 20,000 --
Officer, Treasurer and Vice
President - Finance(4)
Robert Gordon(6) 1997 $ 75,100 $ 28,521 -- 147,291(7) --
Vice President - Marketing 1996 26,809 35,085 -- 75,810 --
and Sales 1995 -- -- -- -- --
<FN>
- ----------
(1) The value of all perquisites provided did not exceed the lesser of
$50,000 or 10% of the officer's salary and bonus.
(2) Mr. Cinnamon resigned as an officer, director and employee of the Company
on December 19, 1997. See "Item 3. Legal Proceedings."
(3) Includes options to purchase 5,000 shares of Common Stock granted to Lori
Kramer Cinnamon, Mr. Cinnamon's wife.
(4) Mr. Leininger was appointed President of the Company on January 28, 1998.
Upon the appointment of Kevin D. Sullivan as Chief Financial Officer,
Treasurer and Vice President - Finance on December 19, 1997, Mr. Leininger
no longer served in such positions.
(5) Does not include options to purchase 545,000 shares of Common Stock
repriced and reduced to options to purchase 408,750 shares of Common Stock
under the Repricing Program. See "Repricing of Options" below and "Item
12. Certain Relationships and Related Transactions."
(6) Mr. Gordon was hired by the Company on August 2, 1996. Mr. Gordon receives
a quarterly bonus based on 2% of the net contribution of the direct mail
sales of the Company. One-third of this bonus is paid to Mr. Gordon in
cash and the remainder is paid in options to purchase Common Stock at an
exercise price equal to the closing price of the Common Stock on the last
day of the quarter in which earned.
(7) Does not include options to purchase 214,873 shares of Common Stock
repriced and reduced to options to purchase 161,154 shares of Common Stock
under the Repricing Program. See "Repricing of Options" below and
"Item 12. Certain Relationships and Related Transactions."
</FN>
</TABLE>
Stock Option Grants in 1997
The following table sets forth (a) the number of shares underlying options
granted to each Named Executive Officer during 1997, (b) the percentage the
grant represents of the total number of options granted to all Company employees
during the 1997, (c) the per share exercise price of each option, (d) the
expiration date of each option.
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Percentage of Total
Underlying Options Options Granted to Exercise Expiration
Name Granted During 1997 Employees in 1997 Price Date
<S> <C> <C> <C> <C>
Barry A. Cinnamon....... 300,000 6.7% $3.43 2/4/07
Barry A. Cinnamon....... 4,000 (1) * 3.875 1/14/07
Barry A. Cinnamon....... 1,000 (1) * 3.43 2/4/07
Robert Gordon........... 1,735 * 3.875 12/31/06
Robert Gordon........... 1,000 * 3.43 2/4/07
Robert Gordon........... 1,328 * 2.9375 3/31/07
Robert Gordon........... 135,000 3.0 2.25 5/13/07
Robert Gordon........... 5,512 .1 2.0625 6/29/07
Robert Gordon........... 2,716 * 1.1875 10/8/07
Robert Gordon........... 56,250 (2) 1.3 1.25 7/31/06
Robert Gordon........... 607 (2) * 1.25 10/14/06
Robert Gordon........... 1,301 (2) * 1.25 12/31/06
Robert Gordon........... 750 (2) * 1.25 2/4/07
Robert Gordon........... 996 (2) * 1.25 3/31/07
Robert Gordon........... 101,250 (2) 2.3 1.25 5/13/07
Mark E. Leininger....... 300,000 6.7 3.43 2/4/07
Mark E. Leininger....... 15,000 (2) .3 1.25 7/20/05
Mark E. Leininger....... 7,500 (2) .2 1.25 2/19/06
Mark E. Leininger....... 52,500 (2) .2 1.25 4/24/06
Mark E. Leininger....... 108,750 (2) 2.4 1.25 9/28/06
Mark E. Leininger....... 225,000 (2) 5.0 1.25 2/4/07
<FN>
- ----------
* Less than .1%.
(1) Represents options granted to Lori Kramer Cinnamon, the wife of Mr.
Cinnamon.
(2) Represents repriced options.
</FN>
</TABLE>
Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/
SAR Values
Set forth in the table below is information, with respect to each of the
Named Executive Officers, as to the (a) number of shares acquired during 1997
upon each exercise of options granted to such individuals, (b) the aggregate
value realized upon each such exercise (i.e., the difference between the market
value of the shares at exercise and their exercise price), (iii) the total
number of unexercised options held on December 31, 1997, separately identified
between those exercisable and those not exercisable, and (iv) the aggregate
value of in-the-money, unexercised options held on December 31, 1997, separately
identified between those exercisable and those not exercisable.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised Options In-the-Money Options at
at December 31, 1997 December 31, 1997
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C> <C>
Barry A. Cinnamon(1).. -0- -0- 40,080 102,998 -0- -0-
Mark E. Leininger(2).. -0- -0- 147,916 260,834 -0- -0-
Robert Gordon(2)...... -0- -0- -0- 169,382 -0- -0-
<FN>
- ---------
(1) Includes options to purchase 19,914 (exercisable) and 7,831
(unexercisable) shares of Common Stock granted to Lori Kramer Cinnamon, the
wife of Mr. Cinnamon.
(2) Gives effect to Repricing Program. See "Repricing of Options" below.
</FN>
</TABLE>
<PAGE>
Employment Agreements
The Company entered into employment agreements with each of Barry A.
Cinnamon and Lori Kramer Cinnamon, both of which were terminated in connection
with their resignations as directors, officers and employees of the Company. See
"Item 12. Certain Relationships and Related Transactions."
The employment agreement with Barry A. Cinnamon provided for him to serve
as the President and Chief Executive Officer of the Company for a term expiring
in December 1999, with an annual base salary of $150,000, bonuses of 5% of the
Company's consolidated net income before taxes and extraordinary items, .15% of
the Company's consolidated net sales and .75% of the Company's consolidated
gross profits. In October 1996, the Board of Directors determined to pay to Mr.
Cinnamon a bonus of $25,000 following the first profitable fiscal quarter of the
Company after the Merger.
The employment agreement with Lori Kramer Cinnamon provided for her to
serve as a Vice President of Marketing of the Company for a term expiring in
December 1999, with an annual base salary of not more than $40,000, a bonus of
1% of the Company's net income before taxes and extraordinary items and .75% of
the Company's gross profit. Under the terms of Ms. Cinnamon's agreement, the
Board of Directors may increase Ms. Cinnamon's base salary by not more than 15%
per year.
The Company also has entered into an agreement with Mark E. Leininger (the
"Leininger Agreement"), which contains restrictions on the employee engaging in
competition with the Company for the term thereof and for up to one year
thereafter and provisions protecting the Company's proprietary rights and
information. The Leininger Agreement provides for the payment of three times the
average annual cash compensation paid by the Company to Mr. Leininger over the
previous five years, less $1.00, and the accelerated vesting of all outstanding
stock options granted to Mr. Leininger, upon the termination of his employment
within six months after a change in control or within six months prior thereto
if such termination was without cause. In October 1996, the Board of Directors
determined to pay to Mr. Leininger a bonus of $25,000 following the first
profitable fiscal quarter of the Company after the Merger.
Company Stock Plans
1994 Long Term Incentive Plan
The Company has adopted the Company's 1994 Long Term Incentive Plan (the
"1994 Incentive Plan") in order to motivate qualified employees of the Company,
to assist the Company in attracting employees and to align the interests of such
persons with those of the Company's stockholders. The 1994 Incentive Plan
provides for the grant of "incentive stock options" within the meaning of the
Section 422 of the Internal Revenue Code of 1986, as amended, "non-qualified
stock options," stock appreciation rights, restricted stock, performance grants
and other types of awards to officers, key employees, consultants and
independent contractors of the Company and its affiliates.
The 1994 Incentive Plan, which is administered by the Compensation
Committee of the Board of Directors (currently comprised of Norman W. Alexander
and Neil R. Austrian, Jr.), currently authorizes the issuance of a maximum of
4,000,000 shares of Common Stock, which may be either newly issued shares,
treasury shares, re-acquired shares, shares purchased in the open market or any
combination thereof. Incentive stock options generally may be granted at an
exercise price of not less than the fair market value of shares of Common Stock
on the date of grant, and non-qualified stock options may be granted at an
exercise price of not less than 85% of such fair market value. If any award
under the 1994 Incentive Plan terminates, expires unexercised, or is canceled,
the shares of Common Stock that would otherwise have been issuable pursuant
thereto will be available for issuance pursuant to the grant of new awards. The
Company has issued an aggregate 5,000 shares of Common Stock upon exercise of
options granted under the 1994 Incentive Plan and options to purchase an
aggregate 3,247,439 shares of Common Stock are outstanding under the 1994
Incentive Plan and options to purchase 752,561 shares remain available for grant
under the 1994 Incentive Plan as of March 31, 1998.
<PAGE>
Outside Director and Advisor Stock Option Plan
The Company adopted the Outside Director and Advisor Stock Option Plan (the
"Director and Advisor Plan") for the purpose of attracting and retaining
well-qualified persons for service as directors of and advisors to the Company
and to provide such persons with the opportunity to increase their personal
interest in the Company's continued success and further align their interests
with the interests of the stockholders of the Company through the grant of
options to purchase shares of Common Stock. All directors of the Company who are
not employees of the Company (each, a "Non-Employee Director"), of which there
are presently five, are eligible to participate in the Director and Advisor
Plan. Currently, up to 500,000 shares of Common Stock may be issued under the
Director and Advisor Plan.
Under the Director and Advisor Plan, each Non-Employee Director of the
Company and each member of the Advisory Committee of the Company (each, an
"Outside Director or Advisor"), upon first becoming an Outside Director or
Advisor, receives options to purchase 25,000 shares of Common Stock at a price
equal to the fair market value of the Common Stock on the date of grant and
thereafter receives options to purchase 10,000 shares of Common Stock at a price
equal to the per share fair market value of the Common Stock on August 1st of
each subsequent year. In March 1997, the Advisory Committee was eliminated.
Options awarded to each Outside Director or Advisor become exercisable over a
period of two years, and are subject to forfeiture under certain conditions. The
Company has issued an aggregate 19,666 shares of Common Stock upon exercise of
options granted under the Director and Advisor Plan, options to purchase an
aggregate 355,334 shares of Common Stock are outstanding under the Director and
Advisor Plan and options to purchase 125,000 shares remain available for grant
under the Director and Advisor Plan as of March 31, 1998.
SPC 1989 Stock Plan
In connection with the Merger, pursuant to the Assumption, the Company
assumed all of SPC's obligations under SPC's 1989 Stock Plan (the "SPC 1989
Plan"). The SPC 1989 Plan remains effective and the Company may, until the SPC
1989 Plan terminates in accordance with its terms, at its discretion, grant
additional options under the SPC 1989 Plan.
The SPC 1989 Plan provides for the grant of incentive stock options,
non-qualified stock options, stock appreciation rights, stock purchase rights,
incentive stock rights, performance grants and other types of awards to
officers, key employees, consultants and independent contractors of SPC and the
Company. The SPC 1989 Plan, which is administered by the Compensation Committee
of the Board of Directors, currently authorizes the issuance of a maximum of
268,050 shares of Common Stock, which may be either newly issued shares,
treasury shares, re-acquired shares, shares purchased in the open market or any
combination thereof. Incentive stock options generally may be granted at an
exercise price of not less than the fair market value of shares of Common Stock
on the date of grant; non-qualified stock options may be granted at an exercise
price of not less than 50% of such fair market value; incentive stock rights
permit the rightsholder to receive cash or shares of Common Stock based upon the
Company or the rightsholder obtaining results specified at the time of the
granting of such rights; stock appreciation rights (which may be granted in
connection with an option grant or as a separate grant) entitles the grantee to
receive a cash payment based upon the yield of the Common Stock between grant
and exercise; stock purchase rights entitle the rightsholder to purchase shares
of Common Stock at a price of not less than 50% of the fair market price of such
shares with the Company retaining a diminishing right to repurchase such shares
over a specified period should the rightsholder's relationship with the Company
terminate; and long term performance awards allow the Company to customize
incentive award programs to permit the awarding of cash or Common Stock upon the
Company or grantee researching specified levels of performance. If any award
under the SPC 1989 Plan terminates, expires unexercised, or is canceled, the
shares of Common Stock that would otherwise have been issuable pursuant thereto
will be available for issuance pursuant to the grant of new awards. The
equivalent of 13,849 shares of Common Stock have been issued upon exercise of
options granted under the SPC 1989 Plan, the Company has options to purchase an
aggregate 32,916 shares of Common Stock outstanding under the SPC 1989 Plan and
options to purchase 221,285 shares remain available for grant under the SPC 1989
Plan as of March 31, 1998. The SPC 1989 Plan will terminate in October 1999.
<PAGE>
SPC 1991 Stock Option Plan
In connection with the Merger, pursuant to the Assumption, the Company
assumed all of SPC's obligations under SPC's 1991 Stock Option Plan (the "SPC
1991 Plan"). The SPC 1991 Plan remains effective and the Company may, until the
SPC 1991 Plan terminates in accordance with its terms, at its discretion, grant
additional options under the SPC 1991 Plan.
The SPC 1991 Plan provides for the grant of incentive stock options,
non-qualified stock options and stock purchase rights to officers, key
employees, consultants and independent contractors of SPC and the Company. The
SPC 1991 Plan, which is administered by the Compensation Committee of the Board
of Directors, currently authorizes the issuance of a maximum of 428,880 shares
of Common Stock, which may be either newly issued shares, treasury shares,
re-acquired shares, shares purchased in the open market or any combination
thereof. Incentive stock options generally may be granted at an exercise price
of not less than the fair market value of shares of Common Stock on the date of
grant; non-qualified stock options may be granted at an exercise price of not
less than 85% of such fair market value; and stock purchase rights entitle the
rightsholder to purchase shares of Common Stock at a price of not less than 85%
of the fair market price of such shares with the Company retaining a diminishing
right to repurchase such shares over a specified period should the
rightsholder's relationship with the Company terminate. If any award under the
SPC 1991 Plan terminates, expires unexercised, or is canceled, the shares of
Common Stock that would otherwise have been issuable pursuant thereto will be
available for issuance pursuant to the grant of new awards. The equivalent of
1,065 shares of Common Stock have been issued upon exercise of options granted
under the SPC 1991 Plan, the Company has options to purchase an aggregate 49,244
shares of Common Stock outstanding under the SPC 1989 Plan and options to
purchase 378,571 shares remain available for grant under the SPC 1991 Plan as of
March 31, 1998. The SPC 1991 Plan will terminate in October 2001.
Repricing of Options
On August 29, 1997, the Board of Directors approved the Repricing Program
pursuant to which the Company has offered to all then-current officers,
directors and employees of the Company the opportunity to reduce the exercise
price of their respective options granted under the Company Stock Plans to $1.25
per share of Common Stock (the fair market value of the Common Stock as of the
close of business on such date); provided, that, as a condition to such
repricing, the optionee is required to surrender for cancellation 25% of the
options so repriced, which would in all cases be the latest options to become
exercisable under each repriced option. Except for such cancellation provision,
each repriced option would be identical to the optionee's prior option, except
that, during the six-month period commencing from the date of the acceptance of
the repricing offer, the options would not be exercisable. The creation of the
Repricing Program was approved primarily because of the importance to the
Company of having equity incentives in the hands of key officers, directors and
employees. The Board believed that stock options which are "out of the money"
provide less compensatory incentive to an officer, director and employee who may
be considering alternative opportunities. The six month period during which the
repriced options may not be exercised was viewed as a means of retaining the
services of valued employees for a longer period of time. The Committee decided
to include directors and officers in the Repricing Program because of the
importance of their leadership, administrative and technical skills to the
success of the Company's business. See "Item 12. Certain Relationships and
Related Transactions."
Indemnification
Section 145 of the Delaware General Corporation Law provides that
indemnification of directors, officers, employees and other agents of a
corporation, and persons who serve at its request as directors, officers,
employees or other agents of another organization, may be provided by such
corporation.
The Company's Certificate of Incorporation includes provisions eliminating
the personal liability of its directors for monetary damages resulting from
breaches of their fiduciary duty except, pursuant to the limitations of the
Delaware General Corporation Law, (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or any
amendatory or successor provisions thereto, or (iv) with respect to any
transaction from which the director derived an improper personal benefit. The
<PAGE>
Company's By-laws provide indemnification to directors, officers, employees
and agents, including against claims brought under state or Federal securities
laws, to the full extent allowable under Delaware law. The Company also has
entered into indemnification agreements with its directors and executive
officers providing, among other things, that the Company will provide defense
costs against any such claim, subject to reimbursement in certain events. The
Company also maintains a directors and officers liability insurance policy in a
coverage amount of $3,000,000, subject to a $200,000 deductible.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the beneficial ownership of shares of voting
stock of the Company, as of March 31, 1998, of (i) each person known by the
Company to beneficially own 5% or more of the shares of outstanding Common Stock
based on filings with the SEC and certain other information, (ii) each of the
Company's executive officers and directors, and (iii) all of the Company's
executive officers and directors as a group. Except as otherwise indicated, all
shares are beneficially owned, and investment and voting power is held by, the
persons named as owners.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Common Stock Percentage Ownership
Beneficial Owner (1) Beneficial Owned (2) of Common Stock (3)
<S> <C> <C> <C>
Mark E. Leininger........ 1,182,817 (4) 12.8
Barry A. Cinnamon (5).... 1,036,817 (6) 11.2
Lori Kramer Cinnamon (5). 1,036,817 (7) 11.2
Howard Milstein.......... 889,000 (8) 9.8
Gwyn Jones............... 469,804 (9) 5.2
M.S. Farrell & Co., Inc.. 343,305 (10) 3.7
Martin F. Schacker....... 343,305 (11) 3.7
Norman W. Alexander...... 121,245 (12) 1.3
Marc E. Jaffe............ 85,414 (13) 1.0
Neil R. Austrian, Jr..... 63,582 (14) *
Neil M. Kaufman.......... 58,665 (15) *
Robert Gordon............ 31,073 (16) *
Kevin D. Sullivan........ 12,500 (17) *
All officers and directors
<FN>
as a group (10 persons). 1,898,601 (18) 19.5
- ----------
* Less than 1.0%.
(1) Unless otherwise indicated, the address for each beneficial owner
listed in the table is Software Publishing Corporation Holdings, Inc., 3A
Oak Road, Fairfield, New Jersey 07004.
(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities which may be acquired by such person within
60 days from the date on which beneficial ownership is to be deter-
mined upon the exercise of options, warrants or convertible securities.
(3) Each beneficial owner's percentage ownership is determined by assuming
that stock options and warrants that are held by such person (but not those
held by any other person) and which are exercisable within such 60 day
period, have been exercised.
(4) Represents (a) options to purchase 171,249 shares of Common Stock granted
to Mr. Leininger under the Company Stock Plans which are exercisable within
the next 60 days, (b) the 111,248 shares of Common Stock held by the Serif
(Europe) Limited Share Ownership Trust (the "Serif Trust"), of which Mr.
Leininger acts as trustee and as to which Mr. Leininger disclaims
beneficial ownership and (c) the 900,320 presently outstanding shares of
Common Stock beneficially owned by Barry A. Cinnamon and Lori Kramer
Cinnamon which Mr Leininger, as President of the Company, has the proxy to
vote pursuant to the terms of the Cinnamon Settlement Agreement. Does not
include options to purchase 237,501 shares of Common Stock granted to Mr.
Leininger under the Company Stock Plans which are not exercisable within
the next 60 days.
<PAGE>
(5) The address for Mr. Cinnamon and Ms. Kramer Cinnamon is 18480 Hillview
Drive, Los Gatos, California 95030.
(6) Includes (a) an aggregate 52,778 shares of Common Stock held by Mr.
Cinnamon as custodian for his minor children under the New Jersey Uniform
Gift to Minors Act, (b) options to purchase 115,333 shares of Common Stock
granted to Mr. Cinnamon under the Company Stock Plans which are exercisable
within the next 60 days and (c) options to purchase 21,164 shares of Common
Stock granted to Lori Kramer Cinnamon, Mr. Cinnamon's wife, under the
Company Stock Plans which are exercisable within the next 60 days. Does
not include (a) 990,558 shares of Common Stock issued in connection with
the Company's acquisition of the Serif subsidiaries and remaining
subject to a Stockholders Agreement, dated as of July 31, 1996 (the
"Stockholders Agreement"), to which Mr. Cinnamon is a party and pursuant
to which the holders of such 990,558 shares (including the Serif Trust,
Gwyn Jones and Norman Alexander) have agreed to vote their respective
shares of Common Stock for the director-nominees of the Company's Board
of Directors and Mr. Cinnamon has agreed to vote all of the securities of
the Company owned by him for Mr. Jones or Mr. Jones' nominee
(Norman Alexander) as a director of the Company, in each case until July
31, 1998 and (b) options to purchase 6,581 shares of Common Stock granted
to Ms. Kramer Cinnamon under the Company Stock Plans which are not
exercisable within the next 60 days. Pursuant to the Cinnamon Settlement
Agreement, Mr. Cinnamon and Ms. Kramer Cinnamon have granted the President
of the Company (presently, Mark E. Leininger) an irrevocable proxy to vote
all of the shares of Common Stock owned beneficially or of record by
either of them, in any capacity, in such manner as may be determined
by the President of the Company in his sole discretion.
(7) Represents (a) 847,542 shares of Common Stock owned of record by Barry
A. Cinnamon, Ms. Kramer Cinnamon's husband, (b) an aggregate of 52,778
shares of Common Stock held by Mr. Cinnamon as custodian for their minor
children under the New Jersey Uniform Gift to Minors Act, (c) options to
purchase 21,164 shares of Common Stock granted to Ms. Kramer Cinnamon under
the Company Stock Plans which are exercisable within the next 60 days and
(d) options to purchase 115,333 shares of Common Stock granted to Mr.
Cinnamon under the Company Stock Plans which are exercisable within the
next 60 days. Does not include (a) options to purchase 6,581 shares of
Common Stock granted to Ms. Kramer Cinnamon under the Company Stock Plans
which are not exercisable within the next 60 days and (b) the 990,558
shares remaining subject to the Stockholders Agreement to which Mr.
Cinnamon is a party.
(8) Represents 865,000 shares of Common Stock registered in the name of Howard
Milstein ("H. Milstein") and 24,000 shares registered in the name of
Ronald L. Altman ("Altman"). Does not include an option (the "Altman
Option") to purchase 96,100 shares of Common Stock (the "Altman Option
Shares") granted to Altman which is not exercisable within the next
60 days. According to a Schedule 13D filed by H. Milstein, Altma, Michael
Jesselson ("Jesselson") and Edward Milstein ("E. Milstein" and,
collectively with H. Milstein, Altman, and Jesselson, the "Milstein
Group"), the individuals comprising the Milstein Group have entered into
an agreement, dated as of October 23, 1997 (the "Milstein Group
Agreement"), which provides that (a) H. Milstein and E. Milstein each have
a 25% beneficial interest in the aggregate 889,000 shares of Common Stock
(the "Milstein Group Shares") registered in the names of H. Milstein and
Altman, and Jesselson has a 50% beneficial interest in the Milstein Group
Shares, (b) Altman has a 15% interest in the net profits or losses to the
others collectively resulting from the sale of the Milstein Group Shares
and (c) H. Milstein has the sole voting power and dispositive power with
regard to all of the Milstein Group Shares. The Milstein Group
Agreement also appears to provide that (a) in the event of the sale of the
Altman Option, Altman shall receive 50% of the net proceeds thereof (taking
into account any sales, commissions or related fees) and the balance of the
net proceeds shall be divided among H. Milstein, E. Milstein and Jesselson
in the proportion of 25%, 25% and 50%, respectively, (b) if the Altman
Option is exercised and the Altman Option Shares are subsequently sold,
Altman shall receive 50% of the net proceeds thereof (after taking into
account the payment of the exercise price and any costs of disposing of the
Altman Option Shares) and the balance of such net proceeds shall be divided
among H. Milstein, E. Milstein and Jesselson in the proportion of 25%, 25%
and 50%, respectively, and (c) H. Milstein has the sole power to dispose,
transfer and vote the Altman Option Shares and to exercise, dispose or
transfer the Altman Option. The address for Howard Milstein is c/o Douglas
Elliman, 575 Madison Avenue, New York, New York 10022. See "Legal
Proceedings."
(9) Does not include any of the shares of Common Stock or other securities of
the Company owned by any other party to the Stockholders Agreement.
The address for Mr. Jones is Barley Green Farm, Laxfield Road, Stradbrooke
Eye, Suffolk, England IP21 5JT.
<PAGE>
(10) Includes (a) warrants owned of record by M.S. Farrell Holdings, Inc. ("MSF
Holdings"), the corporate parent of MS Farrell, to purchase 113,500 shares
of Common Stock which are exercisable within the next 60 days, (b) 62,428
shares of Common Stock owned of record by MSF Holdings, (c) the
Underwriters' Purchase Options ("UPOs") owned of record by MS Farrell to
purchase 70,244 shares of Common Stock which are exercisable within the
next 60 days, (d) warrants owned of record by Martin F. Schacker, the
Chairman of the Board of Directors of MS Farrell and controlling person of
both MS Farrell and MSF Holdings (see note (11) below), to purchase 48,500
shares of Common Stock and (e) options to purchase 33,333 shares of Common
Stock granted to Mr. Schacker under the Company Stock Plans which are
exercisable within the next sixty days. Does not include (a) options to
purchase 66,667 shares of Common Stock granted to Mr. Schacker under the
Company Stock Plans which are not exercisable within the next 60 days or
(b) shares of Common Stock, UPOs and warrants to purchase an additional
195,561 shares of Common Stock originally granted to MS Farrell which
currently are owned by stockholders, directors, managing directors and
executive officers of MS Farrell and MSF Holdings and others. The address
for MS Farrell is 67 Wall Street, New York, New York 10005.
(11) Represents (a) warrants owned by Mr. Schacker to purchase 48,500 shares of
Common Stock which are exercisable within the next 60 days, (b) 77,728
shares of Common Stock owned by MS Farrell and MSF Holdings, each of
which Mr. Schacker is Chairman of the Board and the controlling person,
(c) options to purchase 33,333 shares of Common Stock granted to Mr.
Schacker under the Company Stock Plans which are exercisable within the
next sixty days, (d) warrants exercisable within the next 60 days to
purchase 113,500 shares of Common Stock owned of record by MSF Holdings
and (e) UPOs owned by MS Farrell to purchase 70,244 shares of Common Stock.
Does not include (a) options to purchase 66,667 shares of Common Stock
granted to Mr. Schacker under the Company Stock Plans which are not
exercisable within the next 60 days or (b) shares of Common Stock, UPOs
and warrants to purchase an additional 195,561 shares of Common Stock
originally granted to MS Farrell which currently are owned by stockholders,
directors, managing directors and executive officers of MS Farrell and MSF
Holdings and others. The address for Mr. Schacker is MS Farrell, 67 Wall
Street, New York, New York 10005.
(12) Includes options to purchase 53,332 shares of Common Stock granted to Mr.
Alexander under the Company Stock Plans which are exercisable within
the next 60 days. Does not include (a) options to purchase 72,918 shares
of Common Stock granted to Mr. Alexander under the Company Stock Plans
which are not exercisable within the next 60 days or (b) any of the shares
of Common Stock or other securities of the Company owned by any other
party to Stockholders Agreement. The address for Mr. Alexander is Burnside,
Church Walk, Marholm, Peterborough, PE 67H2 England.
(13) Represents options to purchase 85,414 shares of Common Stock granted
to Mr. Jaffe under the Company Stock Plans which are exercisable within the
next 60 days. Does not include options to purchase 117,086 shares of Common
Stock granted to Mr. Jaffe under the Company Stock Plans which are not
exercisable within the next 60 days. The address for Mr. Jaffe is Electric
Licensing Organization, 386 Park Avenue South, Suite 1900, New York, New
York 10016.
(14) Represents (a) 750 shares of Common Stock held in an Individual Retirement
Account ("IRA") for the benefit of Mr. Austrian, (b) 750 shares of Common
Stock held in an IRA for the benefit of Mr. Austrian's spouse and
(c) options to purchase 62,082 shares of Common Stock granted to Mr.
Austrian under the Company Stock Option Plans which are exercisable within
the next 60 days. Does not include options to purchase 71,668 shares of
Common Stock granted to Mr. Austrian under the Company Stock Option
Plans which are not exercisable within the next 60 days. The address for
Mr. Austrian is c/o Rust Group, 327 Congress Avenue, Suite 200, Austin,
Texas 78701.
(15) Includes options to purchase 36,665 shares of Common Stock granted to Mr.
Kaufman under the Company Stock Plans which are exercisable within the
next 60 days. Does not include options to purchase 8,335 shares of Common
Stock granted to Mr. Kaufman under the Company Stock Plans which are not
exercisable within the next 60 days. The address for Mr. Kaufman is Kaufman
& Associates, LLC, 50 Charles Lindbergh Boulevard, Suite 206, Mitchel
Field, New York 11553.
(16) Includes options to purchase 26,073 shares of Common Stock granted to Mr.
Gordon under the Company Stock Option Plans which are exercisable within
the next 60 days. Does not include options to purchase 143,309 shares of
Common Stock granted to Mr. Gordon nder the Company Stock Option Plans
which are not exercisable within the next 60 days.
(17) Represents options to purchase 12,500 shares of Common Stock granted to Mr.
Sullivan under the Company Stock Option Plans which are exercisable within
the next 60 days. Does not include options to purchase 37,500 shares of
<PAGE>
Common Stock granted to Mr. Sullivan under the Company Stock Option Plans
which are not exercisable within the next 60 days.
(18) Includes (a) an aggregate 712,892 shares of Common Stock issuable upon
exercise of the options and warrants discussed in notes (4) and (10)
through (17) above which are exercisable within the next 60 days, (b) the
111,248 shares of Common Stock registered in the name of the Serif Trust
and (c) the 900,320 shares of Common Stock beneficially owned by Mr.
Cinnamon and Ms. Kramer Cinnamon which are subject to the proxy granted to
Mr. Leininger, as President of the Company, pursuant to the terms of the
Cinnamon Settlement Agreement.
</FN>
</TABLE>
Item 12. Certain Relationships and Related Transactions.
Martin F. Schacker, a director of the Company, is Chairman of the Board of
Directors of MS Farrell and MSF Holdings, the parent holding company of MS
Farrell. MS Farrell acted as placement agent on behalf of the Company in selling
an aggregate of 1,115,250 shares of Class A Convertible Preferred Stock of the
Company in June 1994 and an additional 75,000 shares of Class A Convertible
Preferred Stock in November 1994 for aggregate gross proceeds of $1,190,250. In
consideration for its services in connection therewith, MS Farrell received a
10% commission and a 3% non-accountable expense allowance on the gross proceeds
of such offering, a warrant which became exercisable for an aggregate of 302,354
shares of Common Stock which MS Farrell has exercised in full for nominal
consideration, and certain other consideration. As a result of such warrant
exercise, MS Farrell became a holder of more than 5% of the outstanding Common
Stock.
In May 1995, MS Farrell loaned $100,000 to the Company (the "MS Farrell
Loan"). The MS Farrell Loan was evidenced by a promissory note in the principal
amount of $100,000, bearing interest at a rate equal to fourteen percent (14%)
per annum, maturing on the earlier of (i) December 25, 1995 or (ii) the
consummation of a subsequent offering of securities other than similar notes.
The MS Farrell Loan was secured by the Company's accounts receivable. In June
through August 1995, MS Farrell acted as placement agent with respect to an
aggregate $459,000 principal amount of additional 14% Promissory Notes issued by
the Company to other persons. MS Farrell did not receive any compensation in
connection with the sale of these additional 14% Promissory Notes. MS Farrell
also acted as placement agent on behalf of the Company in selling an aggregate
of $1,250,000 principal amount of promissory notes and 243,902 shares of Common
Stock in August 1995. In connection with its services therewith, MS Farrell
received a 10% commission and a 3% non-accountable expense allowance on the
gross proceeds of such offering. The MS Farrell Loan was repaid from the
Company's proceeds of such offering.
MS Farrell acted as representative of the underwriters of the Company's
initial public offering (the "IPO"), which was consummated on December 12, 1995,
pursuant to which the Company sold an aggregate 1,142,400 shares of Common Stock
for gross proceeds of $5,854,800. As compensation for its underwriting services
in connection with the IPO, MS Farrell received a 10% underwriting discount and
a 3% non-accountable expense allowance of the gross proceeds from the IPO and
Underwriters' Purchase Options to purchase 103,300 shares of Common Stock at
$6.15 per share for a four year period terminating on December 5, 2000.
Pursuant to an engagement agreement, dated December 23, 1993, between the
Company and MS Farrell, the Company agreed (a) to use MS Farrell as its
exclusive investment banker for a five-year period, (b) to pay monthly
consulting fees to MS Farrell of $2,500 until December 1998, in connection with
which the Company paid MS Farrell $138,128 through August 20, 1996, and (c) to
pay to MS Farrell a fee of 2% of the greater of the maximum commitment under, or
the maximum amount actually borrowed by the Company pursuant to, a conventional
line of credit extended to the Company by a bank or other short-term lender
introduced to the Company by MS Farrell. The Company had the right to terminate
the above-described obligations under this engagement agreement upon the payment
of $250,000 in cash. In August 1996, in exchange for the right to pay such
termination fee in shares of Common Stock, the suspension of payment of
obligations under this engagement agreement and certain other consideration, the
Company granted to MS Farrell and a designee thereof warrants (the "MSF
Warrants")to purchase 500,000 shares of Common Stock exercisable at $6.875 per
share for a six-year period and extended the expiration date of the
Underwriters' Purchase Options to August 22, 2002. In March 1997, the Company
exercised its right to terminate the Company's investment banking obligations to
<PAGE>
MS Farrell and, in connection therewith, issued an aggregate of 71,428 shares of
Common Stock to MSF Holdings, the parent holding company of MS Farrell, and to
one other designee thereof.
In June 1996, the Company loaned $200,000 to a corporation (the "Debtor")
of which MS Farrell is an affiliate and of which Martin F. Schacker, a director
of the Company and Chairman of the Board of MS Farrell, is a director and
stockholder and Neil M. Kaufman, a director of the Company, is a stockholder.
This loan was represented by a promissory note (the "Debtor Note") bearing
interest at 14% per annum which was secured by the assets of Debtor. In
connection with this loan, the Company also received a warrant (the "Innapharma
Warrant") to purchase 100,000 shares of the common stock of Innapharma, Inc., a
pharmaceutical company ("Innapharma"), of which MS Farrell may also be
considered an affiliate and of which Mr. Schacker is a director, at an exercise
price of $5.50 per share. In March 1997, in consideration for a warrant (the
"Debtor Warrant") to purchase 100,000 shares of the common stock of the Debtor
at an exercise price of $1.00 per share, exercisable for a six year period, the
Company agreed to extend the maturity of the Debtor Note and the Company further
agreed to exchange the Debtor Note for a similar note (the "Innapharma Note")
bearing interest at 12% per annum issued by Innapharma maturing on the earlier
of November 27, 1997 or the consummation of an offering of equity securities of
Innapharma. In July, 1997, the Innapharma Note was repaid in full (including all
accrued interest thereon) and contemporaneously therewith, the Company assigned
the Innapharma Warrant to MS Farrell in exchange for a reduction in the number
of shares of Common Stock that may be purchased under the MS Farrell Warrants by
100,000 to 400,000 shares.
Pursuant to a Financial Advisory Agreement, dated as of November 20, 1997
(the "1997 Farrell Agreement"), between the Company and MS Farrell, the Company
retained MS Farrell to perform specified financial advisory services for the
Company on a non-exclusive basis. In consideration for entering into the 1997
Farrell Agreement, the number of shares of Common Stock that may be purchased
upon exercise of the MS Farrell Warrants was reduced by 60,000 to 340,000
shares, the number of shares of Common Stock that may be purchased upon exercise
of the Underwriters' Purchase Options was reduced by 15,495 to 87,805 shares,
the exercise price of both the MS Farrell Warrants and Underwriters' Purchase
Options was reduced to $2.00 per share and MS Farrell waived all anti-dilutive
rights under the Underwriters' Purchase Options and MS Farrell Warrants in
connection with the Company's October 1997 sale of 962,000 shares of Common
Stock in a private placement transaction. Under the 1997 Farrell Agreement, the
Company is obligated to pay MS Farrell between 2% and 7% of the aggregate
consideration paid in any merger, consolidation, recapitalization, business
combination or other stock or asset transaction in which MS Farrell participates
as an identifying or introducing agent or in connection with which the Company
seeks the advice of MS Farrell. Pursuant to an Amendment to the Financial
Advisory Agreement, dated January 10, 1998 (the "1998 Farrell Agreement"),
between the Company and MS Farrell, MS Farrell agreed to perform additional
financial advisory services for the Company. In consideration for entering into
the 1998 Farrell Agreement, the per share exercise price of the MS Farrell
Warrants and Underwriters' Purchase Options was reduced to the lesser of: $1.27
or 120% of the sale price of any shares of Common Stock sold by the Company to a
source introduced by MS Farrell within the twelve-month period terminating on
January 27, 1999; provided, however, that the per share exercise price may not
be less than $1.06; and the expiration date of the MS Farrell Warrants and
Underwriters' Purchase Options was extended to August 20, 2002.
Prior to the Company's IPO, Barry A. Cinnamon, formerly the President,
Chief Executive Officer and Chairman of the Board of the Company and currently a
principal stockholder of the Company, and Richard Bergman, the Company's former
Vice President of Product Development, placed into escrow an aggregate of
542,500 shares of Common Stock (the "Escrow Shares"), 500,000 of which shares
were placed in escrow by Mr. Cinnamon and 42,500 of which shares were placed in
escrow by Mr. Bergman. In April 1996, upon the execution and delivery by the
Company of a letter of intent to acquire all of the issued and outstanding
capital stock of Serif Inc. and Serif (Europe) Limited, 217,000 shares of Common
Stock then held in escrow were released from escrow and delivered to the
above-named stockholders, 200,000 of which shares were delivered to Mr. Cinnamon
and 17,000 of which shares were delivered to Mr. Bergman (the "April 1996 Escrow
Release"). In September 1996, 314,000 of the remaining shares of the Company
Common Stock then held in escrow were released from escrow and delivered to Mr.
Cinnamon (300,000 shares) and Mr. Bergman (14,000 shares) (the "September 1996
Escrow Release"; and together with the April 1996 Escrow Release, the "Escrow
Releases"). Presently, no shares remain in escrow and all of the arrangements
relating to the Escrow Shares have been terminated. The Company incurred a
compensation expense of approximately $2,773,180 in connection with the Escrow
Releases in 1996. See "Item 6. Management's Discussion and Analysis or Plan of
Operation."
<PAGE>
In April 1996, Barry A. Cinnamon sold 44,000 shares of Common Stock to MS
Farrell for a price equal to $2.00 per share, and, in August 1996, Mr. Cinnamon
sold 42,946 shares of Common Stock to MS Farrell for a price equal to $6.00 per
share.
Pursuant to the Cinnamon Agreements, Barry A. Cinnamon and Lori Kramer
Cinnamon resigned as officers, directors and employees of the Company and the
Company granted Mr. Cinnamon a license to certain aspects of the Company's
Intelligent Formatting technology in connection with an Internet database
reporting software product which had been under preliminary development by the
Company. Mr. Cinnamon and Ms. Kramer Cinnamon are husband and wife. Under the
terms of the Cinnamon Settlement Agreement, (a) the Company paid Mr. Cinnamon
$56,000, and agreed to (i) reimburse Mr. Cinnamon for his verified reasonable
expenses incurred in the normal course of the fulfillment of his duties as an
officer and director of the Company, (ii) pay Mr. Cinnamon $10,000 per month for
a twenty month period, (iii) continue to make all payments with respect to
health insurance for the Cinnamons' benefit comparable to the coverage available
to the Company's executive officers through the earlier of December 31, 1999 or
such time as Mr. Cinnamon is employed or retained on a substantially full-time
basis, (iv) reimburse Mr. Cinnamon for his reasonable moving expenses, up to a
maximum of $15,000, and (v) register for resale by Mr. Cinnamon 865,000 shares
of Common Stock in the Company's proposed Registration Statement on Form S-3,
and (b) (i) Mr. Cinnamon surrendered for cancellation all 60,520 shares of Class
B Voting Preferred Stock, Series A, of the Company, (ii) the Cinnamons
irrevocably appointed the President of the Company as proxy to vote all shares
of Common Stock owned beneficially or of record by either of them, in any
capacity, in such manner as may be determined by the President of the Company in
his sole discretion, and (iii) the Cinnamons agreed to limit the sale of their
shares of Common Stock to a specified schedule under certain circumstances. In
addition, the Company and Mr. Cinnamon and Ms. Kramer Cinnamon exchanged
releases, the release by Mr. Cinnamon and Ms. Kramer Cinnamon extending to the
Company's subsidiaries, officers, directors, stockholders, attorneys and others.
See "Item 3. Legal Proceedings."
In July 1996, the Company acquired all of the issued and outstanding shares
of capital stock of Serif Inc. and Serif (Europe) Limited. Pursuant to the terms
of the agreements for such acquisitions (the "Serif Acquisition Agreements"),
the Company issued to Norman Alexander an aggregate 67,913 shares of Common
Stock and agreed to nominate Gwyn Jones or his designee to the Board of
Directors of the Company. Mr. Jones, who became a holder of more than 5% of the
outstanding Common Stock as a result of the consummation of the Serif
Acquisition Agreements, designated Mr. Alexander as his nominee and Mr.
Alexander was elected as a director of the Company in October 1996. In addition,
Barry A. Cinnamon, Norman Alexander and the other former stockholders of the
Serif companies entered into the Stockholders Agreement pursuant to which each
party agreed, for a term of two years, to vote their respective shares of Common
Stock in favor of the election as directors of the nominees for directors
designated by the Company's Board of Directors and in favor of the election as a
director of Mr. Jones or Mr. Jones' designee. Pursuant to the terms of the Serif
Acquisition Agreements, the Company entered into a three-year employment
agreement with Gwyn Jones, the founder and largest stockholder of Serif, and the
Company elected Gwyn Jones as a director in Class II. In October 1996, Mr. Jones
resigned as an officer, director and employee of the Company and Serif pursuant
to agreements under which Mr. Jones received or is to receive the base salary
payable under his employment agreement and certain other consideration,
including the elimination of the prohibition on Mr. Jones selling the 469,804
shares of Common Stock which Mr. Jones received pursuant to the Serif
Acquisition Agreements and the substitution, in lieu thereof, of a restriction
allowing him to sell no more than thirty percent (30%) of the average daily
trading volume of Common Stock in any week and certain other restrictions.
Digital Paper, Inc. ("Digital Paper"), and its stockholders, one of whom is
Daniel Fraisl, formerly Vice President - Research and Development of the
Company, entered into an amendment to the Stock Purchase Agreement by which SPC
acquired Digital Paper, which amendment became effective upon consummation of
the Merger. The amendment provided that a remaining payment of $1,650,000 and
two incentive payments with an aggregate total of $325,000 upon the attainment
of certain product sales and development criteria, which is required by the
terms of the Stock Purchase Agreement to be made by SPC to Digital Paper's
stockholders in cash or in shares of SPC common stock, be paid in cash or in
shares of Common Stock, at the option of each such stockholder. None of the
criteria were met in 1996, but were achieved in 1997. Pursuant to a Settlement
and General Release Agreement, dated as of July 25, 1997 (the "Fraisl Settlement
Agreement"), among Mr. Fraisl, the Company and SPC, Mr. 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
<PAGE>
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. None of
these options were exercised. 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.
During 1995, SPC entered into three-year, non-interest-bearing loan
agreements with Irfan Salim, the then President and Chief Executive Officer of
SPC, in the amount of $300,000, and with Robert T. Iguchi, the then Vice
President of North American Sales and Service of SPC, in the amount of $117,000.
Both of these obligations were secured by the right to a second deed of trust on
their respective homes. During the fourth fiscal quarter of 1996, Mr. Iguchi
repaid to the Company the outstanding balance of his loan, in the amount of
$117,000. During the SPC 1996 Fiscal Year, SPC forgave $125,000 of Mr. Salim's
loan, which was treated as compensation to him. The $175,000 balance of Mr.
Salim's loan was due on February 17, 1997. Pursuant to an agreement with Mr.
Salim, the Company received $125,000 in full payment of the Company's loan to
Mr. Salim.
During 1996, the Company incurred approximately $350,000 in legal fees to
Blau Kramer, then its counsel. During 1997, the Company incurred approximately
$480,000 in legal fees to Moritt Hock, then its counsel. Neil M. Kaufman, a
director of the Company, was a member of Blau Kramer during 1996 and a partner
in Moritt Hock during 1997. Mr. Kaufman currently is the principal of Kaufman &
Associates, LLC, counsel to the Company. During 1997, the Company incurred
approximately $55,000 in legal fees to the predecessor of Kaufman & Associates,
LLC. In 1996 and 1997, Blau Kramer and Moritt Hock acted as counsel to MS
Farrell in connection with four private placement transactions, two of such
transactions involving Innapharma, and also acted as counsel to the Debtor.
Martin F. Schacker, a director of the Company, is Chairman of the Board of MS
Farrell and a director of Innapharma; and MS Farrell may also be considered an
affiliate of Innapharma.
Pursuant to a Settlement and General Release Agreement, dated as of
September 26, 1997 (the "Szczepaniak Settlement Agreement"), among Joseph V.
Szczepaniak ("Szczepaniak"), the Company and SPC, Szczepaniak resigned as an
officer and employee of the Company and SPC and, in connection therewith,
received, among other things, a lump sum payment of $50,000, payment with
respect to accrued vacation time and the Company's agreement to make all
payments in respect of health insurance for Szczepaniak's benefit for a three
month period. The Company also agreed that all stock options previously granted
to Szczepaniak would remain exercisable through March 26, 1998, to the extent
exercisable on September 26, 1997.
Pursuant to a Settlement and General Release Agreement, dated as of January
30, 1997 (the "Frazer Settlement Agreement"), among Miriam K. Frazer ("Frazer"),
the Company and SPC, Frazer resigned as an officer and employee of the Company
and SPC and, in connection therewith, received, among other things, payments
aggregating $165,000 and an additional payment with respect to accrued vacation
time. The Company also agreed that all stock options previously granted to
Frazer would remain exercisable through July 30, 1997, to the extent exercisable
on January 30, 1997.
On January 28, 1998, the Compensation Committee of the Board of Directors
of the Company determined to compensate Marc E. Jaffe for his services as
Chairman of the Board of Directors of the Company at the rate of $5,000 per
month, payable $2,500 in the month of service and $2,500 twelve months after
such initial payment. During 1996, the Company paid $2,000 to Electronic
Licensing Organization, Inc. ("ELO") in respect of electronic content licensing
services. There were no payments made to ELO by the Company in 1997.
With respect to compensation paid to Barry A. Cinnamon and Mark E.
Leininger in their capacities as employees of the Company, see "Item 10.
Executive Compensation."
In connection with the Repricing Program, options held by directors and
executive officers granted under the Company Stock Plans were repriced as
follows:
<PAGE>
<TABLE>
<CAPTION>
Prior Option Repriced Option (1)
Shares Per Share Shares
Optionee Underlying Option Exercise Price Underlying Option Expiration Date
<S> <C> <C> <C> <C>
Norman W. Alexander..... 25,000 $ 5.03 18,750 12/19/06
Norman W. Alexander..... 10,000 2.0125 7,500 7/31/07
Neil R. Austrian, Jr.... 25,000 2.75 18,750 4/25/06
Neil R. Austrian, Jr.... 10,000 5.875 7,500 7/31/06
Neil R. Austrian, Jr.... 10,000 2.0125 7,500 7/31/07
Robert Gordon........... 75,000 5.875 56,250 7/31/06
Robert Gordon........... 810 6.25 607 10/14/06
Robert Gordon........... 1,735 3.875 1,301 12/31/06
Robert Gordon........... 1,000 3.43 750 2/4/07
Robert Gordon........... 1,328 2.9375 996 3/31/07
Robert Gordon........... 135,000 2.25 101,250 5/13/07
Marc E. Jaffe........... 5,000 2.50 3,750 10/31/04
Marc E. Jaffe........... 25,000 2.75 18,750 8/2/05
Marc E. Jaffe........... 10,000 5.875 7,500 7/31/06
Marc E. Jaffe........... 10,000 2.0125 7,500 7/31/07
Neil M. Kaufman......... 25,000 3.75 18,750 4/24/06
Neil M. Kaufman......... 25,000 5.03 18,750 12/19/06
Neil M. Kaufman......... 10,000 2.0125 7,500 7/31/07
Mark E. Leininger....... 20,000 3.75 15,000 7/20/05
Mark E. Leininger....... 10,000 4.25 7,500 2/19/06
Mark E. Leininger....... 70,000 2.75 52,500 4/25/06
Mark E. Leininger....... 145,000 7.56 108,750 9/28/06
Mark E. Leininger....... 300,000 3.43 225,000 2/4/07
<FN>
- ---------
(1) The exercise price of all options were repriced to $1.25 per share.
(2) Under the terms of the Cinnamon Settlement Agreement all of the options
granted to Mr. Cinnamon and Ms. Kramer Cinnamon will expire on December 19,
1998.
</FN>
</TABLE>
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Set forth below are all exhibits to this Annual Report on Form 10-KSB:
3.1 Composite of Certificate of Incorporation of the Company, as amended
to date. (Incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076),
for the quarter ended June 30, 1997, filed with the Commission on
August 19, 1997.)
3.2 Certificate of Designations of the Junior Participating Preferred
Stock, Series A, filed with the Delaware Secretary of State on March
31, 1998.
3.3 By-laws of the Company, as amended.
4.1 Specimen Common Stock Certificate.
10.1 Company 1994 Long Term Incentive Plan, as amended to date.
(Incorporated by reference to Exhibit 10.46 to the Company's Quarterly
Report on Form 10-QSB (Commission File Number: 1-14076), for the
quarter ended June 30, 1997, filed with the Commission on August 19,
1997.)
10.2 Company Outside Director and Advisor Stock Option Plan, as amended to
date. (Incorporated by reference to Exhibit 10.47 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076),
for the quarter ended June 30, 1997, filed with the Commission on
August 19, 1997.)
10.3 SPC 1987 Stock Option Plan. (Incorporated by reference to Exhibit 4.1
to the Company's Registration Statement on Form S-8 (Registration
Number: 333-19509), filed with the Commission on January 10, 1997.)
<PAGE>
10.4 SPC 1989 Stock Plan. (Incorporated by reference to Exhibit 4.2 to
the Company's Registration Statement on Form S-8 (Registration Number:
333-19509), filed with the Commission on January 10, 1997.)
10.5 SPC 1991 Stock Option Plan. (Incorporated by reference to Exhibit
4.3 to the Company's Registration Statement on Form S-8 (Registration
Number: 333-19509), filed with the Commission on January 10, 1997.)
10.6 Employment Agreement dated as of December 27, 1993, as amended through
Amendment No. 6, between the Company and Barry A. Cinnamon.
(Incorporated by reference to Exhibit 10.3 to the Company's Amendment
No. 1 to Registration Statement on Form SB-2 (Registration Number:
33-97184), filed with the Commission on November 6, 1995,
Exhibit 10.30 to the Company's Quarterly Report on Form 10-QSB
(Commission File Number: 1-14076), for the quarter ended March 31,
1996, filed with the Commission on May 14, 1996, and Exhibit 10.35
to the Company's Quarterly Report on Form 10-QSB (Commission File
Number: 1-14076), for the quarter ended September 30, 1996, filed
with the Commission on November 5, 1996.)
10.7 Amendment No. 7 to Employment Agreement between the Company and Barry
A. Cinnamon. (Incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.8 Employment Agreement dated as of December 27, 1993, as amended through
Amendment No. 3, between the Company and Lori Kramer Cinnamon.
(Incorporated by reference to Exhibit 10.4 to the Company's Amendment
No. 1 to Registration Statement on Form SB-2 (Registration Number:
33-97184), filed with the Commission on November 6, 1995.)
10.9 Settlement and General Release Agreement, dated as of September 26,
1997, among Joseph Szczepaniak, the Company and Software Publishing
Corporation. (Incorporated by reference to Exhibit 10.52 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended September 30, 1997, filed with the
Commission on November 14, 1997.)
10.10 Settlement and General Release Agreement, dated s of July 25, 1997,
among Daniel J. Fraisl, the Company and Software Publishing
Corporation. (Incorporated by reference to Exhibit 10.48 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended June 30, 1997, filed with the
Commission on August 19, 1997.)
10.11 Agreement dated October 25, 1996 between the Company and Mark E.
Leininger. (Incorporated by reference to Exhibit 10.36 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended September 30, 1996, filed with the
Commission on November 5, 1996.)
10.12 Agreement and Plan of Reorganization dated as of October 1, 1996
among the Company, SPC and SPC Acquisition Corporation.
(Incorporated by reference to Exhibit 2 to the Company's Registration
Statement on Form S-4 (Registration Number: 333-16449), filed with
the Commission on November 21, 1996.)
10.13 Form of Bridge Unit Subscription Agreement. (Incorporated by
reference to Exhibit 10.7 to the Company's Registration Statement
on Form SB-2 (Registration Number: 33-97184), filed with the
Commission on September 21, 1995.)
10.14 Stock Option Agreement dated as of August 2, 1994 between the Company
and Berlitz Publishing Company, Inc. (Incorporated by reference to
Exhibit 10.10 to the Company's Registration Statement on Form SB-2
(Registration Number: 33-97184), filed with the Commission on
September 21, 1995.)
10.15 Settlement and General Release Agreement dated as of January 30, 1997
between the Company and Miriam K. Frazer. (Incorporated by reference
to Exhibit 10.15 to the Company's Annual Report on Form 10-KSB
(Commission File Number: 1-14076), for the year ended December 31,
1996, filed with the Commission on April 15, 1997.)
10.16 Agreement, dated June 14, 1994, as amended, between the Company, M.S.
Farrell & Co., Inc. and the holders of shares of Class A Convertible
Preferred Stock. (Incorporated by reference to Exhibit 10.20 to the
Company's Registration Statement on Form SB-2 (Registration
Number: 33-97184), filed with the Commission on September 21, 1995.)
10.17 Form of Indemnification Agreement between the Registrant and its
executive officers and directors. (Incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement on Form SB-2
(Registration Number: 33-97184), filed with the Commission on
September 21, 1995.)
10.18 Form of Underwriters' Purchase Option (Specimen).
10.19 Form of Lock-Up Agreement dated as of July 31, 1996 relating to
limitations on stock sales between the Company and each of the former
stockholders of Serif Inc. (Incorporated by reference to Exhibit
10.21 to the Company's Annual Report on Form 10-KSB (Commission
File Number: 1-14076), for the year ended December 31, 1996, filed
with the Commission on April 15, 1997.)
<PAGE>
10.20 Form of Lock-Up Agreement dated as of July 31, 1996 relating to
limitations on stock sales between the Company and each of the former
stockholders of Serif (Europe) Limited. (Incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-KSB
(Commission File Number: 1-14076), for the year ended December 31,
1996, filed with the Commission on April 15, 1997.)
10.21 Agreement and Plan of Reorganization dated as of July 31, 1996
among the Company, Serif Inc., Gwyn Jones and all other stockholders
of Serif Inc. (Incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K (Date of Report: July 31, 1996)
(Commission File Number: 1-14076), filed with the Commission on August
13, 1996.)
10.22 Agreement and Plan of Reorganization dated as of July 31, 1996 among
the Company, Serif (Europe) Limited, Gwyn Jones and all other
stockholders of Serif (Europe) Limited. (Incorporated by reference to
Exhibit 4.4 to the Company's Current Report on Form 8-K (Date of
Report: July 31, 1996) (Commission File Number: 1-14076), filed with
the Commission on August 13, 1996.)
10.23 Registration Rights Agreement dated July 31, 1996 between the
Company and the former stockholders of Serif Inc. and Serif (Europe)
Limited. (Incorporated by reference to Exhibit 10.31 to the Company's
Current Report on Form 8-K (Date of Report: July 31, 1996) (Commission
File Number: 1-14076), filed with the Commission on August 13, 1996.)
10.24 Escrow Agreement dated July 31, 1996, among the Company, Serif Inc.,
the former stockholders of Serif Inc., Gwyn Jones and Blau, Kramer,
Wactlar & Lieberman, P.C. (Incorporated by reference to Exhibit 2
to the Schedule 13D Statement of Barry A. Cinnamon, with respect
to the Common Stock of the Company, filed with the Commission on
October 31, 1996.)
10.25 Localization and Distribution Agreement for Harvard Graphics Windows
Products dated February 16, 1995 between Choten, Inc. and SPC.
(Incorporated by reference to Exhibit 10.21 to Software Publishing
Corporation's Annual Report on Form 10-K (Commission File Number:
0-14025), for the fiscal year ended September 30, 1995, filed with the
Commission on December 29, 1995.)
10.26 Escrow Agreement dated July 31, 1996, among the Company, Serif
(Europe) Limited, the former Stockholders of Serif (Europe) Limited,
Gwyn Jones and Blau, Kramer, Wactlar & Lieberman, P.C. (Incorporated
by reference to Exhibit 10.28 to the Company's Annual Report
on Form 10-KSB (Commission File Number: 1-14076), for the year ended
December 31, 1996, filed with the Commission on April 15, 1997.)
10.27 Lease Agreement dated September 7, 1995 between Community Towers LLC
and the Company, for facilities located at 111 North Market Street,
San Jose, California. (Incorporated by reference to Exhibit 10.22 to
Software Publishing Corporation's Annual Report on Form 10-K
(Commission File Number: 0-14025), for the fiscal year ended September
30, 1995, filed with the Commission on December 29, 1995.)
10.28 Stockholders' Agreement dated as of July 31, 1996 among Barry A.
Cinnamon, Gwyn Jones and the former stockholders of Serif Inc. and
Serif (Europe) Limited. (Incorporated by reference to Exhibit 1 to
the Schedule 13D Statement of Barry A. Cinnamon, with respect to the
Common Stock of the Company, filed with the Commission on October 31,
1996.)
10.29 Letter Agreement dated October 24, 1996 between the Company and Gwyn
Jones. (Incorporated by reference to Exhibit 10.31 to the Company's
Annual Report on Form 10-KSB (Commission File Number: 1-14076), for
the year ended December 31, 1996, filed with the Commission on April
15, 1997.)
10.30 Compromise Agreement executed October 24, 1996 between the Company
and Gwyn Jones. (Incorporated by reference to Exhibit 10.32 to the
Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.31 Settlement and General Release Agreement dated as of July 23, 1996
among the Company, Richard Bergman and Barry Cinnamon.
(Incorporated by reference to Exhibit 10.32 to the Company's Current
Report on Form 8-K (Date of Report: July 31, 1996) (Commission File
Number: 1-14076), filed with the Commission on August 13, 1996.)
10.32 Escrow Agreement dated as of December 27, 1993, as amended through
September 5, 1996, among the Company, Barry A. Cinnamon, Richard
Bergman and Blau, Kramer, Wactlar & Lieberman, P.C. (Incorporated
by reference to Exhibit 10.25 to the Company's Amendment No. 1 to
Registration Statement on Form SB-2 (Registration Number: 33-97184),
filed with the Commission on November 6, 1995, Exhibit 10.32 to
the Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended March 31, 1996, filed with the
Commission on May 14, 1996, and Exhibit 10.34 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076),
for the quarter ended September 30, 1996, filed with the Commission
on November 5, 1996.)
<PAGE>
10.33 Escrow Agreement dated as of May 25, 1995, as amended through
September 5, 1996, among the Company, Barry A. Cinnamon, Richard
Bergman and Blau, Kramer, Wactlar & Lieberman, P.C. (Incorporated by
reference to Exhibit 10.26 to the Company's Amendment No. 1 to
Registration Statement on Form SB-2 (Registration Number: 33-97184),
filed with the Commission on November 6, 1995, and Exhibit 10.34 to
the Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended September 30, 1996, filed with the
Commission on November 5, 1996.)
10.34 Stock Purchase Agreement dated March 31, 1995 among SPC, Digital
Paper, Inc., Daniel J. Fraisl, Carl Meyer and Anthony N. Hoeber.
(Incorporated by reference to Exhibit 10.4 to Software Publishing
Corporation's Quarterly Report on Form 10-Q (Commission File Number:
0-14025), for the quarter ended March 31, 1995, filed with the
Commission on May 15, 1995.)
10.35 Amendment to Stock Purchase Agreement dated as of April 2, 1996
among SPC, Digital Paper, Inc. Daniel J. Fraisl, Carl Meyer and
Anthony N. Hoeber. (Incorporated by reference to Exhibit 10.39 to the
Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.36 Amendment No. 2 to Stock Purchase Agreement dated October 1, 1996
among SPC, Digital Paper, Inc., Daniel J. Fraisl, Carl Meyer and
Anthony N. Hoeber. (Incorporated by reference to Exhibit 10.40 to
the Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.37 Asset Purchase Agreement dated as of May 1, 1996 between the Company
and BizEd, Inc. (Incorporated by reference to Exhibit 10.41 to the
Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.38 Consulting Agreement dated as of May 1, 1996 between the Company and
Clifford J. Schorer, Jr. (Incorporated by reference to Exhibit 10.42
to the Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.39 Form of MS Farrell Warrant Certificate issued to MS Farrell & Co.,
Inc. and certain other persons.
10.40 Letter Agreement dated March 27, 1997 between the Company and M.S.
Farrell & Co., Inc. (Incorporated by reference to Exhibit 10.45
to the Company's Annual Report on Form 10-KSB (Commission File
Number: 1-14076), for the year ended December 31, 1996, filed with
the Commission on April 15, 1997.)
10.41 Consulting Agreement, dated as of July 25, 1997, between the Company
and Daniel J. Fraisl. (Incorporated by reference to Exhibit 10.49
to the Company's Quarterly Report on Form 10-QSB (Commission File
Number: 1-14076), for the quarter ended June 30, 1997, filed with
the Commission on August 19, 1997.)
10.42 Form of Subscription Agreements, each dated October 23, 1997, between
the Company and each of Ronald L. Altman (with respect to 24,000
shares of Common Stock), Gerold M. Fleischner (with respect to
24,000 shares of Common Stock), Howard Milstein (with respect to
865,000 shares of Common Stock), Patriot Group, LP (with respect to
24,000 shares of Common Stock) and Stephen P. Rosenblatt (with respect
to 24,000 shares of Common Stock). (Incorporated by reference to
Exhibit 10.50 to the Company's Quarterly Report on Form 10-QSB
(Commission File Number: 1-14076), for the quarter ended September
30, 1997, filed with the Commission on November 14, 1997.)
10.43 Registration Rights Agreement, dated October 23, 1997, among the
Company, Ronald L. Altman, Gerold M. Fleischner, Howard Milstein,
Patriot Group, LP and Stephen P. Rosenblatt. (Incorporated by
reference to Exhibit 10.51 to the Company's Quarterly Report on Form
10-QSB (Commission File Number: 1-14076), for the quarter ended
September 30, 1997, filed with the Commission on November 14,
1997.)
10.44 Option, dated October 23, 1997, issued to Ronald L. Altman.
Incorporated by reference to Exhibit 10.53 to the Company's Quarterly
Report on Form 10-QSB (Commission File Number: 1-14076), for the
quarter ended September 30, 1997, filed with the Commission on
November 14, 1997.)
10.45 Settlement and Release Agreement, dated December 19, 1997, among
the Registrant, Barry A. Cinnamon and Lori Kramer Cinnamon.
(Incorporated by reference to Exhibit 10.54 to the Company's
Current Report on Form 8-K (Date of Report: December 19, 1997)
(Commission File Number: 1-14076), filed with the Commission on
December 30, 1997.)
10.46 License Agreement, dated December 19, 1997, between Software
Publishing Corporation and Barry A. Cinnamon. (Incorporated by
reference to Exhibit 10.55 to the Company's Current Report on Form
8-K (Date of Report: December 19, 1997) (Commission File Number:
1-14076), filed with the Commission on December 30, 1997.)
<PAGE>
10.47 Financial Advisory Agreement, dated as of November 20, 1997,
between the Registrant and M.S. Farrell & Co., Inc.
10.48 Amendment to the Financial Advisory Agreement, dated as of
January 28, 1998, between the Registrant and M.S. Farrell & Co., Inc.
10.49 Amendment No. 1 to Escrow Agreement, dated as of April 1, 1997,
among the Company, Serif Inc., Norman W. Alexander, Moritt, Hock &
Hamroff, LLP and Blau, Kramer, Wactlar & Lieberman, P.C.
10.50 Amendment No. 1 to Escrow Agreement, dated as of April 1, 1997, among
the Company, Serif (Europe) Limited, Norman W. Alexander, Moritt, Hock
& Hamroff, LLP and Blau, Kramer, Wactlar & Lieberman, P.C.
10.51 Rights Agreement, dated as of March 31, 1998, between the Company and
American Stock Transfer & Trust Company.
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Richard A. Eisner & Company, LLP. 23.3 Consent of Ernest &
Young U.K.
24 Powers of Attorney (set forth on the signature page of this Annual
Report on Form 10-KSB).
27 Financial Data Schedule.
(b) Reports on Form 8-K.
On December 30, 1997, the Company filed a Current Report on Form 8-K (Date
of Report: December 19, 1997) with the Commission reporting, as an Item 5
disclosure, the restructuring of the Company's operations and management. No
financial statements were required to be or were filed with this Form 8-K. This
Form 8-K was amended by Amendment No. 1 on Form 8-K/A, filed with the Commission
on January 9, 1998.
On February 13, 1998 the Company filed a Current Report on Form 8-K (Date
of Report: February 11, 1998) with the Commission reporting, as an Item 4
disclosure, the change in the Company's auditors. This Form 8-K was amended by
Amendment No.1 on Form 8-K/A filed with the Commission on February 17, 1998.
<PAGE>
Index to Financial Statements
Independent Auditors' Reports..............................................F-2
Balance Sheet at December 31, 1997 ........................................F-5
Statements of Operations for the years ended December 31,
1997 and 1996............................................................F-6
Statements of Stockholders' Equity for the years ended
December 31, 1997 and 1996...............................................F-7
Statements of Cash Flows for the years ended December
31, 1997 and 1996........................................................F-8
Notes to Financial Statements..............................................F-9
F-1
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Software Publishing Corporation Holdings, Inc.
Fairfield, New Jersey
We have audited the consolidated balance sheet of Software Publishing
Corporation Holdings, Inc. and subsidiaries (formerly Allegro New Media, Inc.
and subsidiaries) as of December 31, 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. We did not audit the financial statements of
Serif (Europe) Limited, a wholly owned subsidiary, which statements reflected
total assets of $2,594,742 at December 31, 1997 and total revenues of $7,266,486
for the year then ended. Those financial statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Serif (Europe) Limited is based solely on
the report of the other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors,
the financial statements enumerated above present fairly, in all material
respects, the consolidated financial position of Software Publishing Corporation
Holdings, Inc. and subsidiaries as of December 31, 1997, and the consolidated
results of their operations and their consolidated cash flows for the year then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a working capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
As described in Note 9, the Company has applied to enter into a closing
agreement with the Internal Revenue Service with respect to dual consolidated
losses previously utilized by a wholly owned subsidiary of the Company, Software
Publishing Corporation ("SPC"). Such closing agreement, if not consummated, will
require the Company to recognize a tax of approximately $8 million on
approximately $24.5 million of SPC's previous dual consolidated losses.
/s/ Richard A. Eisner & Company, LLP
New York, New York
April 15, 1998
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Serif (Europe) Limited
We have audited the accompanying balance sheet of Serif (Europe) Limited as of
December 31, 1997, and the related statements of operations, cash flows and
shareholders' equity for the year then ended. The financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Serif (Europe) Limited at
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with United States generally accepted accounting
principles.
/s/ Ernst & Young
Ernst & Young
Chartered Accountants
April 9, 1998
Nottingham, England
F-3
<PAGE>
Board of Directors
Software Publishing Corporation Holdings, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit) and cash flows of Software Publishing Corporation
Holdings, Inc. and subsidiaries (formerly, Allegro New Media, Inc.) for the year
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations, changes in
stockholders' equity and cash flows of Software Publishing Corporation Holdings,
Inc. and subsidiaries (formerly, Allegro New Media, Inc.) for the year ended
December 31, 1996 in conformity with generally accepted accounting principles.
/s/Ernst & Young
Hackensack, New Jersey
April 14, 1997
F-4
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
<TABLE>
<CAPTION>
Current assets:
<S> <C>
Cash and cash equivalents. . . . . . . . . . . . . . . $ 2,586,753
Marketable securities. . . . . . . . . . . . . . . . . 173,600
Accounts receivable, less allowances of $623,000 1,324,102
Inventories. . . . . . . . . . . . . . . . . . . . . . 567,336
Prepaid expenses and other current assets. . . . 329,591
___________
Total current assets . . . . . . . . . . . . 4,981,382
Property and equipment, net. . . . . . . . . . . . . . . . 568,888
Acquired software, net of accumulated amortization of $2,460,250 4,446,750
Goodwill, net of accumulated amortization of $106,173. . . 268,559
Restricted cash. . . . . . . . . . . . . . . . . . . . . . 300,000
Other assets . . . . . . . . . . . . . . . . . . . . . . . 63,923
___________
Total assets . . . . . . . . . . . . . . . . $10,629,502
___________
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S> <C>
Accounts payable . . . . . . . . . . . . . . . . . . . $ 3,015,198
Accrued liabilities. . . . . . . . . . . . . . . . . . 4,112,267
Current portion of long-term debt. . . . . . . . . . . 173,866
___________
Total current liabilities. . . . . . . . . 7,301,331
Long-term debt, less current maturities. . . . . . . . . 184,765
___________
Total liabilities. . . . . . . . . . . . . 7,486,096
___________
Commitments and contingencies. . . .. . . . . . . . . . . --
Stockholders' equity: . . . . . . . . . . . . . . . . . . --
Serial Preferred Stock, authorized 1,939,480 shares,
none issued and outstanding. . . . . . . . . . . . . --
Class B Voting Preferred Stock, Series A, 60,520
shares authorized, none issued and outstanding. . . . --
Common stock, par value $.001 per share, authorized
30,000,000 shares; issued and outstanding 9,011,418
shares. . . . . . . . . . . . . . . . . . . . . . . . 9,011
Additional paid-in capital. . . . . . . . . . . . . . . 42,965,813
Accumulated deficit . . . . . . . . . . . . . . . . . . (39,831,418)
___________
Total stockholders' equity. . . . . . . . . 3,143,406
___________
Total liabilities and stockholders' equity. $ 10,629,502
<FN>
See report of independent auditors and accompanying notes.
</FN>
</TABLE>
F-5
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
<S> <C> <C>
Net sales................................ $ 17,156,865 $ 4,700,955
Cost of goods sold....................... 4,155,749 1,817,688
____________ ___________
Gross profit................ 13,001,116 2,883,267
Selling, general and administrative expenses (19,314,385) (7,496,665)
Costs associated with release of escrow shares -- (2,773,180)
Product development..................... (3,227,215) (1,077,615)
In-process research and development acquired -- (17,514,000)
Restructuring expenses................. (375,902) (1,104,353)
Other income, net...................... 195,655 121,380
____________ ___________
Loss before income taxes.. $ (9,720,731) $(26,961,166)
Income taxes........................... (47,035) (78,201)
____________ ___________
Net loss................. $ (9,767,766) $(27,039,367)
____________ ___________
Loss per common share:
Net loss per common share -
basic and diluted.................. $ (1.19) $ (7.48)
Weighted average number of common shares
outstanding - basic and diluted.... 8,203,065 3,614,479
<FN>
See report of independent auditors and accompanying notes.
</FN>
</TABLE>
F-6
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class B Additional Total
Voting Preferred Common Stock Paid-In Accumulated Stockholders'
Stock Series A $.001 Par Value Capital Deficit Equity
----------------- --------------- ---------- ----------- ------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995............. 60,520 $ 61 3,335,077 $ 3,335 $ 6,158,753 $ (3,024,285) $ 3,137,864
Issuance of common stock from exercise
of options........................... 19,666 20 73,728 73,748
Issuance of common stock upon exercise of
over-allotment option................ 109,400 109 464,777 464,886
Issuance of common stock purchase warrants 767,297 767,297
Issuance of common stock and options in
connection with business combinations 4,376,162 4,376 31,352,643 31,357,019
Issuance of common stock and common stock to
be issued for services and compensation 19,938 20 141,059 141,079
Costs associated with the release of
escrow shares........................ 2,773,180 2,773,180
Net loss................................. (27,039,367) (27,039,367)
_______ ______ _________ _______ ___________ _____________ _____________
Balance at December 31, 1996............. 60,520 $ 61 7,860,243 $ 7,860 $41,731,437 $(30,063,652) $ 11,675,706
Issuance of common stock in payment of
liabilities for services in connection
with business combinations........... 111,272 111 (111)
Issuance of common stock in payment of
liability for services............... 2,475 3 14,997 15,000
Issuance of common stock in connection with
cancellation of agreement for services 71,428 71 249,929 250,000
Issuance of common stock from exercise
of options........................... 5,000 5 9,995 10,000
Sale of common stock..................... 961,000 961 959,505 960,466
Retirement of Class B Voting Preferred
Stock, Series A...................... (60,520) $ (61) 61 --
Net loss................................. (9,767,766) (9,767,766)
_______ ______ _________ _______ ___________ _____________ _____________
Balance at December 31, 1997............. 0 $ 0 9,011,418 $ 9,011 $42,965,813 $(39,831,418) $ 3,143,406
<FN>
See report of independent auditors and accompanying notes.
</FN>
</TABLE>
F-7
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
<S> <C> <C>
Operating activities:
Net loss.................................... $ (9,767,766) $(27,039,367)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization............. 6,358,731 293,781
Costs associated with the release of
escrow stock........................... -- 2,773,180
Costs associated with issuance of common
stock and common stock purchase warrants -- 908,376
In-process research and development acquired -- 17,514,000
Provisions for accounts receivable........ 171,000 501,000
Sale of marketable securities............. 6,154,580
Changes in operating assets and liabilities:
Accounts receivable..................... 496,688 209,231
Inventories............................. 146,251 14,850
Prepaid expenses and other current assets (93,742) (37,417)
Other assets............................ 59,938 171,613
Accounts payable........................ (493,863) 22,782
Accrued liabilities..................... (5,808,791) 4,454,367
_____________ _____________
Net cash used in operating activities... (2,776,974) (213,604)
_____________ _____________
Investing activities:
Purchase of property and equipment.......... (266,275) (116,896)
Restricted cash draw downs.................. 1,350,000
Cash and cash equivalents acquired in
business combination, net of cash paid.... -- 1,963,342
_____________ _____________
Net cash provided by investing
activities.................... 1,083,725 1,846,446
_____________ _____________
Financing activities:
Proceeds from issuance of notes payable..... 124,873
Proceeds from sale of common stock.......... 970,466 538,634
Payment of long-term debt................... (1,523,918)
Costs incurred to register common stock..... -- (391,167)
_____________ _____________
Net cash (used in) provided
by financing activities....... (553,452) 272,340
_____________ _____________
(Decrease) increase in cash and cash equivalents (2,246,701) 1,905,182
Cash and cash equivalents at beginning of year 4,833,454 2,928,272
_____________ _____________
Cash and cash equivalents at end of year.... $ 2,586,753 $ 4,833,454
Supplemental disclosure of noncash financing and investing activities:
Activities in connection with business combinations:
Short-term investments acquired........... -- $ 6,328,180
Common stock and stock options issued, net -- 31,357,019
Notes payable assumed..................... -- 1,757,675
Restricted cash........................... -- 1,650,000
Common stock issued in payment of
liabilities for services................ $ 265,000
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest paid............................. $ 60,328
Income taxes.............................. 1,974
<FN>
See report of independent auditors and accompanying notes.
</FN>
</TABLE>
F-8
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1. Summary of Significant Accounting Policies
Nature of Business
Software Publishing Corporation Holdings, Inc. (formerly known as Allegro
New Media, Inc.) ("SPCH") and subsidiaries (collectively, the "Company"), is an
international developer and supplier of desktop publishing, presentation
graphics and business productivity computer software products to corporate
customers, consumers, retail and wholesale customers and original equipment
manufacturers primarily in the United States and Europe.
Liquidity and Basis of Presentation
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations and has a working capital deficiency of $2,319,949 as of
December 31, 1997. If the Company does not attain its revenue and cash
collection goals or if the Company's cash resources are not sufficient, it may
be necessary to obtain additional financing to fund the Company's operations.
The Company is considering an equity offering; however, there can be no
assurance that the Company will be successful in such an offering or in
obtaining other sources of financing. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Principles of Consolidation
The consolidated financial statements include the accounts of SPCH and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The translation of foreign currencies into
United States dollars for subsidiaries where the local currency is the
functional currency is performed for balance sheet accounts using the exchange
rate in effect at year end and for revenue and expense accounts using an average
rate for the period. For foreign operations which are considered an extension of
United States operations, the United States dollar is used as the functional
currency. Gains and losses resulting from remeasurement and foreign currency
transactions are included in the results of operations.
Business Combinations
The Company has accounted for all business combinations under the purchase
method of accounting. Under this method the purchase price is allocated to the
assets and liabilities of the acquired enterprise as of the acquisition date
based on their estimated respective fair values and are subject to revision for
a period not to exceed one year from the date of acquisition. The results of
operations of the acquired enterprise are included in the Company's consolidated
financial statements for the period subsequent to the acquisition. Stockholders'
equity as of December 31, 1996 includes amounts for shares required to be issued
in connection with one of these transactions.
Concentration of Credit Risk
The Company performs periodic credit evaluations of its customers but
generally does not require collateral from its customers.
Revenue Recognition
Revenue is generally recognized upon shipment of products to customers and
is recorded net of allowances for anticipated returns for potential excess
quantities in the distribution channel. Certain customers have been provided
F-9
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
goods on a consignment basis. Revenues on these transactions are recognized upon
the sale of products to the ultimate customer. Revenue for "locked versions" of
software are recognized when customers purchase an unlocking code.
Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity of
three months or less when purchased.
Inventories
Inventories, which are principally finished goods, are stated at the lower
of cost (first-in, first-out) or market.
Royalty Advances
Non-refundable royalty payments in connection with licensing contracts for
the Company's products are generally amortized based on product sales.
Management evaluates the future realization of royalty advances periodically and
charges to cost of goods sold any amounts they believe will not be recovered
through future sales.
Product Development Costs and Acquired Software
Costs incurred in the development of new software products and enhancements
to existing software products are expensed as incurred until technological
feasibility has been established. To date, the Company's product development has
been completed concurrent with the establishment of technological feasibility
and, accordingly, no costs have been capitalized.
Acquired software consists of the value of product development acquired as
a result of business combinations and is being amortized over a three year
period.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided on a
straight-line basis based upon the estimated useful lives of the related assets,
generally 3 to 7 years. Leasehold improvements are amortized on a straight-line
basis over the shorter of the life of the improvement or the remainder of the
lease term.
Goodwill
Goodwill represents costs in excess of net assets of businesses acquired in
purchase transactions. Goodwill is being amortized on a straight-line basis over
5 years. Goodwill associated with the Software Publishing Corporation
acquisition (Note 2) was reduced during to reflect the settlement and adjustment
of acquisition and pre-acquisition liabilities and accruals.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. These estimates principally include provisions for sales
returns and allowances, purchase price allocations, and contingent assets and
liabilities. Actual results could differ from these estimates.
F-10
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
Income Taxes
The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The resulting asset at December 31, 1997
was fully reserved since management believes it is more likely than not that the
realization of such benefit will not be realized.
Loss Per Share
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128") in the year ended December 31, 1997 and
has retroactively applied the affects thereof to the year ended December 31,
1996. SFAS No. 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes anti-dilutive effects of
options, warrants and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share.
Basic loss per share is computed based upon the weighted average number of
common shares outstanding during each year. Stock options did not have an effect
on the computation of diluted earnings per share in 1997 and 1996 since they
were anti-dilutive.
Marketable Securities
The Company accounts for investments in marketable securities pursuant to
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS No. 115"). SFAS No. 115
requires, among other things, the classification of investments in one of three
categories based upon the Company's intent: trading, available-for-sale and
held-to-maturity, with trading and available-for sale securities carried at
market value and held to maturity carried at amortized cost. The Company
accounts for marketable securities as trading securities and gains and losses
are included in the statement of operations.
Fair Value of Financial Investments
The fair value of the Company's financial instruments, including cash and
cash equivalents, marketable securities, accounts receivable, accounts payable,
accrued liabilities and long-term debt approximate their carrying values because
of short-term maturities or because their interest rates approximate current
market rates.
Recently Issued Accounting Announcements
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and displaying comprehensive income and its
components in financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. The Company is in
the process of determining its preferred format. The adoption of SFAS No. 130
will have no impact on the Company's consolidated results of operations,
financial position or cash flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131
establishes standards for the way that public business enterprises report
F-11
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to stockholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. Financial statement disclosures for prior
periods are required to be restated. The Company is in the process of evaluating
the disclosure requirements. The adoption of SFAS No. 131 will have no impact on
the Company's consolidated results of operations, financial position or cash
flows.
Advertising and Promotion Costs
Advertising and promotion costs include the costs of advertising,
catalogues, direct mail and postage and are expensed as incurred. These costs
amounted to approximately $6,978,000 and $1,818,000 in 1997 and 1996,
respectively.
2. Business Combinations
On July 31, 1996, the Company acquired all of the outstanding common stock
of Serif Inc. and all of the outstanding preference shares and ordinary shares
of Serif (Europe) Limited (collectively, "Serif"). Serif is engaged in the
development and marketing of personal computer software products in the United
States and Europe, principally the United Kingdom. The aggregate purchase price,
including all direct costs, was approximately $4,200,000 and was principally
financed through the issuance of 1,000,000 shares of the Company's common stock.
As a result of the preliminary purchase price allocation, a charge to earnings
of approximately $3,514,000 was recorded on the date of acquisition representing
the cost assigned to in-process research and development. The cost of the
acquisition exceeded the fair value of Serif's net assets by approximately
$400,000, which was recorded as goodwill.
On December 27, 1996, the Company acquired all of the outstanding common
stock of Software Publishing Corporation ("SPC"). SPC is engaged in the
development and marketing of personal computer software products, principally in
the United States. 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 the Company's common stock. As a result of the preliminary
purchase price allocation, a charge to earnings of approximately $14,000,000 was
recorded on the date of acquisition representing the cost assigned to in-process
research and development. The cost of the acquisition exceeded the fair value of
SPC's net assets by approximately $3,795,000, which was recorded as goodwill as
of the acquisition date and was subsequently eliminated in 1997 as a result of
settlement and adjustment of pre-acquisition liabilities and accruals.
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions had occurred on January 1, 1996 and does
not purport to be indicative of what would have occurred had the acquisitions
occurred on the date indicated or of the results which may occur in the future.
Year Ended December 31, 1996
----------------------------
Net sales......................... $21,781,955
Net loss.......................... $22,259,598
Net loss per share................ $2.94
F-12
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
3. Marketable Securities
<TABLE>
<CAPTION>
Marketable securities at fair market value consist of the following at
December 31, 1997:
<S> <C>
Common stock of Computer Concepts Corporation......... $ 173,600
___________
4. Property and Equipment
Property and equipment consists of the following as of December 31, 1997:
Office furniture and equipment........................ $ 961,784
Leasehold improvements................................ 101,000
___________
1,062,784
Less accumulated depreciation......................... (493,896)
___________
Total................................................. $ 568,888
___________
</TABLE>
5. Long-term Debt
<TABLE>
<CAPTION>
Long-term debt consists of the following at December 31, 1997:
<S> <C>
Note payable - vendor payable in monthly varying installments
commencing March 1998 through May 1999 and bearing
interest at 7% per annum............................ $ 145,000
Notes payable - landlord payable in monthly installments
of $1,402 through March 2002 and bearing interest at
10% per annum....................................... 58,068
Bank loans payable in monthly installments of $4,100 through
July 2000 and bearing interest at 9.5% per annum.... 58,435
Capital lease obligation payable in quarterly installments
of $6,300 through June 2002 and bearing interest
at 10.25% per annum................................. 97,128
___________
$ 358,631
Less current maturities............................... (173,866)
___________
$ 184,765
___________
</TABLE>
Maturities of long-term debt as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
<S> <C>
1998 . . . . . $ 173,866
1999 . . . . . 84,701
2000 . . . . . 39,492
2001 . . . . . 38,759
2002 . . . . . 21,813
_________
Total. . . . . $ 358,631
_________
</TABLE>
F-13
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
6. Accrued Liabilities
Accrued liabilities at December 31, 1997 consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Accrued legal costs. . . . . . . . $ 412,739
Accrued restructuring costs. . . . 375,902
Income taxes payable . . . . . . . 924,835
Other accruals . . . . . . . . . . 2,398,791
___________
$ 4,112,267
___________
</TABLE>
7. Stockholders' Equity
During 1993, certain of the then existing employee/stockholders of the
Company agreed to place an aggregate of 1,000,000 newly issued shares of the
Company's common stock into escrow. In 1994, 677,500 of these shares were
canceled with the approval of such stockholders. Under the terms of the escrow
agreement, the remaining shares were to be released to the stockholders based
upon the Company achieving certain financial results, as defined. On May 25,
1995, certain stockholder employees surrendered to the Company a total of
280,000 shares of the Company's common stock and agreed to place an additional
220,000 shares under the terms of an additional escrow agreement. These shares
were to be released to the stockholders upon the Company attaining certain
financial results, as defined. During 1996, the Company's Board of Directors
released a total of 531,000 shares held under the escrow agreements. This
release resulted in the recognition of compensation expense totaling $2,773,180
based on the fair value of the shares on the date of release. The remaining
11,500 shares were canceled by the Company.
In December 1995, the Company completed an initial public offering of
1,033,000 shares of its common stock and received net proceeds of $4,156,411.
Upon the completion of this offering the Company repaid all of the 10% notes
payable then outstanding and issued 243,902 shares of its common stock to the
holders thereof. The Company incurred an extraordinary loss of $990,928 relating
to deemed interest and deferred financing costs associated with the repayment of
the 10% notes payable. In January 1996, the Company issued 109,400 shares of
common stock in connection with the exercise of the over-allotment option by the
underwriter of the Company's initial public offering and received net proceeds
of $464,886 in connection therewith.
In connection with a license agreement, in 1994 the licensor was granted an
option to purchase up to 100,000 shares of the Company's common stock at a price
per share equal to the initial public offering price (less underwriting
discounts). This agreement expires on July 31, 1998.
On July 31, 1996, the Company acquired all of the outstanding common stock
and preferred shares of Serif. The aggregate purchase price was approximately
$4,200,000 and was principally financed through the issuance of 1,000,000 shares
of Common Stock.
On December 27, 1996, the Company acquired all of the outstanding common
stock of SPC. The aggregate purchase price was approximately $30,000,000 and was
principally financed through the issuance of 3,376,162 shares of Common Stock.
In February 1997, the Company issued an aggregate 111,272 shares of common
stock in payment for services associated with the acquisition of SPC to three
financial advisors which was accrued for and reflected in additional paid-in
F-14
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
capital in 1996. Also, in February 1997, the Company issued 2,475 shares of its
common stock for payment of $15,000 in consulting fees which was accrued as a
liability in 1996.
In 1996, the Company granted warrants, exercisable at $6.875 per share
until August 22, 2002, to purchase 500,000 shares of the Company's common stock
and agreed to issue 71,428 shares of its common stock to the underwriter of its
initial public offering, and a designee thereof, to modify and terminate,
respectively, certain contractual rights of such underwriter. The related costs
amounted to $1,026,000 in 1996 and are included in selling, general and
administrative expenses in 1996. The 71,428 shares of common stock were issued
in 1997 in satisfaction of the related liability of $250,000 recorded in 1996.
In March 1997, the Company received proceeds of $10,000 for the issuance of
5,000 shares of Common Stock for the exercise of certain stock options.
In October 1997, the Company consummated the sale of an aggregate 961,000
shares of Common Stock to five investors for net proceeds of $960,466 in private
transactions. In connection with such sale, the Company issued a five year
option to purchase 96,100 shares of common stock, at an exercise price of
$1.2756 per share, to a financial advisor.
Preferred Stock
There are 1,939,480 authorized shares of Serial Preferred Stock, par value
$.001 per share. Any shares of Serial Preferred Stock that have been redeemed
are deemed retired and extinguished and may be reissued. The Board of Directors
establishes and designates the series and fixes the number of shares and the
relative rights, preferences and limitations of the respective series of the
Serial Preferred Stock. No shares were issued or outstanding at December 31,
1997.
The Class B Voting Preferred Stock, Series A ("Class B Voting Preferred")
has maximum liquidation rights of $.001 per share, but is not permitted to
receive dividends. The issued shares of the Class B Voting Preferred have been
retired and canceled.
In March 1998, the Company authorized 100,000 shares of Junior
Participating Preferred Stock, Series A, par value $.001 per share. The Junior
Preferred Stock has preferential voting, dividend and liquidation rights over
the Common Stock.
On March 31, 1998, the Company declared a dividend distribution, payable
April 30, 1998, of one Preferred Share Purchase Right ("Right") on each share of
Common Stock. Each Right, when exercisable, entitles the registered holder
thereof to purchase from the Company one one-thousandth of a share of Junior
Preferred Stock at a price of $1.00 per one one-thousandth of a share (subject
to adjustment). The one one-thousandth of a share is intended to be the
functional equivalent of one share of the Common Stock.
The Rights will not be exercisable or transferable apart from the Common
Stock until an Acquiring Person, as defined in the Rights Agreement, dated as of
March 31, 1998, between the Company and American Stock Transfer & Trust Company,
without the prior consent of the Company's Board of Directors, acquires 20% or
more of the voting power of the Common Stock or announces a tender offer that
would result in 20% ownership. The Company is entitled to redeem the Rights, at
$.001 per Right, any time before a 20% position has been acquired or in
connection with certain transactions thereafter announced. Under certain
circumstances, including the acquisition of 20% of the Common Stock, each Right
not owned by a potential Acquiring Person will entitle its holder to purchase,
at the Right's then-current exercise price, shares of Junior Preferred Stock
having a market value of twice the Right's exercise price.
F-15
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
Holders of a Right will be entitled to buy stock of an Acquiring Person at
a similar discount if, after the acquisition of 20% or more of the Company's
voting power, the Company is involved in a merger or other business combination
transaction with another person in which its common shares are changed or
converted, or the Company sells 50% or more of its assets or earning power to
another person. The Rights expire on April 20, 2008.
8. Restructuring Expenses
In connection with the closure of its California offices initiated in
December 1997 and completed in February 1998, the Company initiated a
restructuring program, the expenses and charges relating to which consist of
employee severance arrangements ($84,292), a settlement agreement with its
former President and Chief Executive Officer ($256,000), the elimination of
lease facilities in California and other related costs ($35,610).
9. Income Taxes
At December 31, 1997 the Company has available net operating loss
carryforwards of approximately $84,000,000 that expire in years 2002 through
2012, and general business credit carryovers of approximately $1,500,000, which
expire in years 2005 and 2006. These carryforwards are subject to the
limitations as described below.
The significant components of the Company's deferred tax assets and
liabilities, as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Current:
<S> <C>
Reserve for accounts receivable, inventory and other.. $ 832,000
Valuation allowance for current deferred tax assets... (832,000)
____________
Net current deferred tax assets. -0-
____________
Non-current:
Depreciation.......................................... 1,721,000
General business credit carryforwards................. 1,527,000
Net operating loss carryforwards 33,696,000
____________
Total non-current deferred tax assets............... 36,944,000
____________
Valuation allowance for non-current deferred tax
assets.............................................. (34,528,000)
____________
Net non-current deferred tax assets................. -0-
____________
$ -0-
____________
</TABLE>
The increase in the valuation allowance during the year ended December 31,
1997 in the amount of $980,000 was due principally to the net operating loss
incurred.
F-16
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
The Company's loss before taxes is comprised of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
United States....................... $(9,871,203) $(27,154,223)
Foreign............................. 150,472 193,057
____________ _____________
$(9,720,731) $(26,961,166)
</TABLE>
The provision for income taxes of $47,035 for 1997 and $78,201 in 1996
consists principally of foreign taxes which are currently payable.
The reconciliation of income tax computed at the United States federal
statutory tax rates to the recorded income tax expense is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Tax (benefit) at United States federal
statutory rates.................. $(3,305,000) $ (9,167,000)
Permanent differences.............. 1,322,000
Write-off of in-process research
and development costs............ 5,955,000
Costs associated with release of
escrow shares.................... 942,900
Change in valuation allowance from
operations....................... 1,900,000 2,262,600
Foreign and state income taxes..... 47,205 78,201
Other.............................. 83,000 6,500
____________ _____________
$ 47,205 $ 78,201
____________ _____________
</TABLE>
The Tax Reform Act of 1986 enacted a complex set of rules limiting the
potential utilization of net operating loss and tax credit carryforwards in
periods following a corporate "ownership change". In general, for federal income
tax purposes, an ownership change is deemed to occur if the percentage of stock
of a loss corporation owned (actually, constructively and, in some cases,
deemed) by one or more "5% shareholders" has increased by more than 50
percentage points over the lowest percentage ownership of such stock owned
during a three-year testing period. With regard to the purchase of SPC, such a
change in ownership occurred. As a result of the change, the Company's ability
to utilize its net operating loss carryforwards and general business credits
will be limited to approximately $1.2 million of taxable income per year as of
December 31, 1997 and losses subsequent to 1996 can be fully utilized until it
is used or expired. The SPC portion of the net operating loss carryforwards
totaling approximately $69 million are also subject to the additional limitation
that such losses can only be utilized to offset the separate company taxable
income of SPC.
In connection with the purchase of SPC, the Company applied for a closing
agreement with the Internal Revenue Service pursuant to which the Company will
become jointly and severally liable for SPC's tax obligations upon occurrence of
a "triggering event" requiring recapture of dual consolidated losses previously
utilized by SPC. Such closing agreement will avoid the Company being required to
recognize a tax of approximately $8 million on approximately $24.5 million of
SPC's previous dual consolidated losses at the acquisition date.
F-17
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
While the Company believes it will obtain this agreement, failure to do so
could result in the recognition of this tax liability.
10. Stock Option Plans
The Company has five stock options plans: the Allegro New Media, Inc. 1994
Long-Term Incentive Plan (the "1994 Incentive Plan"), the Outside Directors and
Advisors Stock Option Plan (the "Company Directors Plan"), the Software
Publishing Corporation 1987 Stock Option Plan, the Software Publishing
Corporation 1989 Stock Option Plan and the Software Publishing Corporation 1991
Stock Option Plan (collectively, the "SPC Stock Option Plans"). All plans are
administered by the Board of Directors or a committee thereof.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation." ("SFAS No. 123")
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
Elements of the Company's various stock option plans include the following:
The 1994 Incentive Plan - In December 1993, the Company's Board of
Directors and stockholders adopted the 1994 Incentive Plan. Under the terms of
the 1994 Incentive Plan, the Company's Board of Directors or a committee thereof
may grant options, stock appreciation rights, restricted stock performance
grants of the Company's common stock, cash or other assets to employees,
consultants and others who perform services for the Company at such prices as
may be determined by the Board of Directors (which price may be no less than 85%
of the fair market value of the common stock on the date of grant in the case of
nonqualified stock options). In June 1997, the Company's stockholders approved
the increase of the maximum number of shares under the 1994 Incentive Plan from
3,000,000 to 4,000,000. The options currently outstanding vest over a period of
up to five years and expire after 10 years.
The Company's Directors Plan - In August 1995, the Company's Board of
Directors and stockholders approved the Company's Directors Plan. Under the
terms of this plan, each new non-employee director and member of the Advisory
Committee receives options to purchase 25,000 shares exercisable at fair market
value on the date of grant upon becoming such a director or member. In addition,
on each August 1 thereafter each such person will receive options to purchase
10,000 shares of the Company's common stock at an exercise price equal to the
fair market value at the respective dates of grant. The Advisory Committee of
the Company was dissolved in 1997. The maximum number of shares of common stock
subject to this plan is 500,000. The options vest over a period of two years and
expire after 10 years.
The SPC Plans - Options under the SPC Stock Option plans may be granted for
periods of up to ten years, for the 1987 and 1989 plans, at prices no less than
50% of fair value and for the 1991 plan, an exercise price no lower than 85% of
fair value, in each case for non qualified options, and at not less than fair
market value for incentive stock options. To date all options have been issued
at fair value. Options become exercisable at such times and under such
conditions as determined by the Board of Directors. As a result of the
acquisition of SPC by the Company all options outstanding under the SPC Plans
were converted (based on the exchange ratio used to complete the acquisition) to
options to acquire the Company's common stock.
F-18
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
In addition to the Plan's described above, the Company's Board of Directors
from time-to-time has granted outside consultants and vendors non-plan options.
Specific terms of each such grant are at the sole discretion of the Board of
Directors and are generally at prices not less than the fair market value at the
date of grant.
Option activities under the plans and for the non-plan options are detailed
in the following table:
<TABLE>
<CAPTION>
Weighted
Average
1994 Company's Exercise
Incentive Directors SPC Non- Price Per
Plan Plan Plans Plan Share
Outstanding at
<S> <C> <C> <C> <C> <C>
January 1, 1996..... 354,737 175,000 100,000 $ 3.13
Granted........... 1,119,310 215,000 50,000 4.43
Assumed........... -- 651,360 5.01
Exercised......... -- (19,666) 3.75
Forfeited......... (12,500) 3.75
___________ _______ ________ _______ ______
Outstanding at
January 1, 1997..... 1,461,547 370,334 651,360 150,000 3.99
Granted........... 3,512,467 50,000 55,000 2.06
Exercised......... (5,000) 2.00
Forfeited......... (1,249,000) (25,000) (488,989) 3.43
Repriced - granted 736,725 120,000 4,871 1.25
Repriced - forfeited (982,300) (160,000) (6,494) 2.96
___________ _______ ________ _______ ______
Outstanding at
December 31, 1997... 3,474,689 355,334 215,748 150,000 $ 2.29
___________ _______ ________ _______ ______
Exercisable at
December 31, 1997... 308,434 277,740 142,832 150,000 $ 3.84
___________ _______ ________ _______ ______
Exercisable at
December 31, 1996... 98,128 160,325 109,627 150,000 $ 4.76
___________ _______ ________ _______ ______
</TABLE>
As of December 31, 1997, 5,208,196 shares of common stock are reserved for
issuance under the plans described above.
In August 1997, the Board of Directors approved a repricing program
pursuant to which the Company offered to the Company's then current officers,
employees and directors holding options granted under the Company's various
stock option plans an opportunity to reprice the exercise price of their
respective options granted under the Company's stock option plans to $1.25 per
share of common stock which was the fair value as of the repricing program,
provided that the option holder surrender 25% of their options.
The weighted average fair value of options granted was $1.57 and $3.36 for
1997 and 1996, respectively.
F-19
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
At December 31, 1997, for each of the following classes of options as
determined by range of exercise price, the following information regarding
weighted-average exercise prices and weighted average remaining contractual
lives of each class is as follows:
<TABLE>
<CAPTION>
Weighted
Weighted Average
Weighted Average Exercise
Average Remaining Number of Price of
Number Exercise Contract Life Options Options
of Price of of Outstanding Currently Currently
Option Class Options Options Options Exercisable Exercisable
<S> <C> <C> <C> <C> <C>
Prices ranging from:
$0.81 - $1.99... 2,389,488 $ 1.19 9.48 259,503 $ 1.18
$2.00 - $3.99... 1,358,406 2.87 8.47 259,129 2.87
$4.00 - $5.99... 387,877 5.07 4.25 310,374 4.96
$6.00 - $7.99... 60,000 6.92 4.62 50,000 6.75
</TABLE>
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had been
accounting for its employee stock options under the fair value method of that
statement. The fair value of these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following assumptions for
1997 and 1996, respectively: weighted-average risk-free interest rates of 6.25%
for 1997 and 6.5% for 1996; no dividends; volatility factors of the expected
market price of the Company's common stock of 1.2046 for 1997 and .7601 for 1996
and a weighted-average expected life of the options of 5.13 years for 1997 and
7.5 years for 1996.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options granted in 1997 and 1996 is amortized to expense over the options'
vesting period. The Company's pro forma information follows:
<TABLE>
1997 1996
<S> <C> <C>
Pro forma net loss........................ $(11,204,354) $(27,626,144)
Pro forma net loss per share-basic and
diluted............................... $ (1.37) $ (7.64)
</TABLE>
The pro forma disclosures presented above for 1997 and 1996, respectively,
reflect compensation expense only for options granted in 1997 and 1996. These
amounts may not necessarily be indicative of the pro forma effect of SFAS No.
123 for future periods in which options may be granted.
F-20
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
11. Commitments and Contingencies
Leases
The Company leases certain office space under non-cancelable operating
leases. In addition to the fixed rentals, certain of the leases require the
Company to pay certain additional amounts based on certain costs related to the
property. Certain of the leases have renewal options for periods of up to 2
years. Rental expense was approximately $540,000 and $108,000 in 1997 and 1996,
respectively.
Future minimum lease payments under non-cancelable operating leases with
terms of one year or more are as follows:
<TABLE>
<S> <C>
1998 . . . . . $ 255,000
1999 . . . . . 255,000
2000 . . . . . 248,000
2001 . . . . . 254,000
2002 . . . . . 72,000
__________
Total. . . . . $ 1,084,000
__________
</TABLE>
Pending Litigation
On January 30, 1998, an action was commenced against the Company, Mark E.
Leininger and Barry A. Cinnamon in the United States District Court, Southern
District of New York. Mr. Leininger currently is President, Chief Operating
Officer and a director of the Company and Mr. Cinnamon formerly was Chairman of
the Board, President and Chief Executive Officer of the Company. In the action,
plaintiffs allege that, in October 1997, they purchased an aggregate 889,000
shares of the Company's common stock for gross proceeds of $919,495 based upon
certain statements made to one of the plaintiffs. Plaintiffs further allege that
such statements were intentional misrepresentations of material fact that were
designed to deceive plaintiffs as to the Company's true financial state and to
induce the plaintiffs to invest in the Company. Plaintiffs seek recision of
their investment and a return of their purchase price and certain other relief.
The Company believes that these claims are without merit and intends to
vigorously defend itself in this action. The Company has filed an answer in this
action denying the plaintiffs' allegations and asserting affirmative defenses,
including that the plaintiffs' subscription agreements bar plaintiffs' claims,
and asserting counterclaims that, among other things, plaintiffs breached
certain of the representations contained in their subscription agreements, that
plaintiff Altman breached his fiduciary duties to the Company and that
plaintiffs' violated Section 13(d) of the Exchange Act by filing a materially
false and misleading Schedule 13D with respect to the Common Stock.
On February 13, 1998, a summons and complaint was filed in the Superior
Court of New Jersey, Essex County under the caption Barry Cinnamon and Lori
Kramer Cinnamon, suing derivatively on behalf of Software Publishing Corporation
Holdings, Inc. and its shareholders, and Barry Cinnamon and Lori Kramer
Cinnamon, individually, v. Software Publishing Corporation Holdings, Inc., Neil
M. Kaufman, Mark Leininger and John Does 1-10. Mr. Leininger is President, Chief
Operating Officer and a director of the Company; Mr. Kaufman is a director of
the Company, the principal of Kaufman & Associates, LLC, counsel to the Company,
and was Secretary of the Company from December 1996 to December 1997; Mr.
Cinnamon was Chairman of the Board, President and Chief Executive Officer of the
Company until December 19, 1997; and Ms Kramer Cinnamon was an officer and
director of the Company until December 19, 1997. To date, the summons and
complaint has been served on the Company, and has not been served on either of
the named individual defendants or any of the other defendants. In this action,
plaintiffs seek (i) the recision of the Settlement and General Release
Agreement, dated as of December 19, 1998 (the "Cinnamon Settlement Agreement"),
F-21
<PAGE>
Software Publishing Corporation Holdings, Inc. and Subsidiaries
(Formerly Allegro New Media, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
between the Company and each plaintiff and the License Agreement, dated as of
December 19, 1998 (the "Cinnamon License Agreement," and, together with the
Cinnamon Settlement Agreement, the "Cinnamon Agreements"), between the Company
and Mr. Cinnamon, (ii) payment of the full amount of compensation due under
their former respective employment agreements with the Company, (iii) that Mr.
Kaufman be enjoined from continuing to act as a director and officer of, and
counsel to, the Company, (iv) that the Company be required to provide an
"'opinion letter' as required by the Securities Exchange Act of 1934, as
amended, to permit the sale of shares of stock held by the Cinnamons without
restriction," (v) that the Company be required to immediately register the stock
held by plaintiffs and (vi) compensatory and punitive damages, attorney's fees,
and other relief. Plaintiffs seek such relief based upon their allegations that
the defendants improperly caused the resignation of plaintiffs from their
positions as officers and directors of the Company, that Mr. Kaufman improperly
influenced the decision of the Board of Directors to adopt the Company's
December 1997 restructuring plan (thereby rejecting Mr. Cinnamon's plans for the
Company), and that the Cinnamon Agreements were entered into by each plaintiff
under duress and the coercion of defendants (despite plaintiffs having been
represented by counsel in connection with these matters). The Company believes
that the plaintiff's allegations are without merit, and intends to vigorously
defend itself in this action.
The Company has other litigation matters in progress in the ordinary course
of business. In the opinion of management, all of such other pending litigation
of the Company will be resolved without a material adverse effect of the
Company's financial position, results of operations or cash flows.
12. Foreign Operations
The Company conducts its business within the computer software industry
segment.
Foreign operations as of December 31, 1997 and for the year then ended are
as follows:
<TABLE>
<CAPTION>
United
States Europe Eliminations Consolidated
<S> <C> <C> <C> <C>
Net sales.................... $ 8,770,684 $8,386,181 $17,156,865
(Loss) income before income
taxes...................... $(10,445,713) $ 724,982 $(9,720,731)
Identifiable assets as of
December 31, 1997.......... $ 7,554,216 $3,489,164 $(413,878) $10,629,502
============ ========== ========== ===========
</TABLE>
13. Related Party Transaction
The Company incurred legal expenses of approximately $600,000 in 1997 and
$350,000 in 1996 to a law firm in which a director of the Company was a member,
of which approximately $176,000 is included in accounts payable at December 31,
1997.
F-22
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SOFTWARE PUBLISHING CORPORATION
HOLDINGS, INC.
Date: April 15, 1998 By: /s/ Mark E. Leininger
Mark E. Leininger
President and Chief Operating Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Annual Report on Form 10-KSB has been signed on April 15, 1998 by
the following persons in the capacities indicated. Each person whose signature
appears below constitutes and appoints Mark E. Leininger and Kevin D. Sullivan,
or either of them, with full power of substitution, his/her true and lawful
attorneys-in-fact and agents to do any and all acts and things in his/her name
and on his/her behalf in his/her capacities indicated below which they or either
of them may deem necessary or advisable to enable Software Publishing
Corporation Holdings, Inc. to comply with the Securities Exchange Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Annual Report on Form 10-KSB,
including specifically, but not limited to, power and authority to sign for
him/her in his/her name in the capacities stated below, any and all amendments
thereto, granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in such connection, as fully to all intents and purposes as
he/her might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
/s/ Mark E. Leininger Chief Operating Officer and Director
Mark E. Leininger (Principal Executive Officer)
/s/ Kevin D. Sullivan Chief Financial Officer, Vice President -
Kevin D. Sullivan Finance, Treasurer
/s/ Marc E. Jaffe Chairman of the Board of Directors
Marc E. Jaffe
/s/ Neil M. Kaufman Director
Neil M. Kaufman
/s/ Norman W. Alexander Director
Norman W. Alexander
<PAGE>
/s/ Neil R. Austrian, Jr. Director
Neil R. Austrian, Jr.
/s/ Martin F. Schacker Director
Martin F. Schacker
<PAGE>
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
ANNUAL REPORT ON FORM 10-K
Fiscal Year Ended December 31, 1997
EXHIBIT INDEX
Set forth below are all exhibits to this Annual Report on Form 10-KSB:
3.1 Composite of Certificate of Incorporation of the Company, as amended
to date. (Incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076),
for the quarter ended June 30, 1997, filed with the Commission on
August 19, 1997.)
3.2 Certificate of Designations of the Junior Participating Preferred
Stock, Series A, filed with the Delaware Secretary of State on March
31, 1998.
3.3 By-laws of the Company, as amended.
4.1 Specimen Common Stock Certificate.
10.1 Company 1994 Long Term Incentive Plan, as amended to date.
(Incorporated by reference to Exhibit 10.46 to the Company's Quarterly
Report on Form 10-QSB (Commission File Number: 1-14076), for the
quarter ended June 30, 1997, filed with the Commission on August 19,
1997.)
10.2 Company Outside Director and Advisor Stock Option Plan, as amended to
date. (Incorporated by reference to Exhibit 10.47 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076),
for the quarter ended June 30, 1997, filed with the Commission on
August 19, 1997.)
10.3 SPC 1987 Stock Option Plan. (Incorporated by reference to Exhibit 4.1
to the Company's Registration Statement on Form S-8 (Registration
Number: 333-19509), filed with the Commission on January 10, 1997.)
10.4 SPC 1989 Stock Plan. (Incorporated by reference to Exhibit 4.2 to
the Company's Registration Statement on Form S-8 (Registration Number:
333-19509), filed with the Commission on January 10, 1997.)
10.5 SPC 1991 Stock Option Plan. (Incorporated by reference to Exhibit
4.3 to the Company's Registration Statement on Form S-8 (Registration
Number: 333-19509), filed with the Commission on January 10, 1997.)
10.6 Employment Agreement dated as of December 27, 1993, as amended through
Amendment No. 6, between the Company and Barry A. Cinnamon.
(Incorporated by reference to Exhibit 10.3 to the Company's Amendment
No. 1 to Registration Statement on Form SB-2 (Registration Number:
33-97184), filed with the Commission on November 6, 1995,
Exhibit 10.30 to the Company's Quarterly Report on Form 10-QSB
(Commission File Number: 1-14076), for the quarter ended March 31,
1996, filed with the Commission on May 14, 1996, and Exhibit 10.35
to the Company's Quarterly Report on Form 10-QSB (Commission File
Number: 1-14076), for the quarter ended September 30, 1996, filed
with the Commission on November 5, 1996.)
10.7 Amendment No. 7 to Employment Agreement between the Company and Barry
A. Cinnamon. (Incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.8 Employment Agreement dated as of December 27, 1993, as amended through
Amendment No. 3, between the Company and Lori Kramer Cinnamon.
(Incorporated by reference to Exhibit 10.4 to the Company's Amendment
No. 1 to Registration Statement on Form SB-2 (Registration Number:
33-97184), filed with the Commission on November 6, 1995.)
10.9 Settlement and General Release Agreement, dated as of September 26,
1997, among Joseph Szczepaniak, the Company and Software Publishing
Corporation. (Incorporated by reference to Exhibit 10.52 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended September 30, 1997, filed with the
Commission on November 14, 1997.)
10.10 Settlement and General Release Agreement, dated s of July 25, 1997,
among Daniel J. Fraisl, the Company and Software Publishing
Corporation. (Incorporated by reference to Exhibit 10.48 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended June 30, 1997, filed with the
Commission on August 19, 1997.)
10.11 Agreement dated October 25, 1996 between the Company and Mark E.
Leininger. (Incorporated by reference to Exhibit 10.36 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended September 30, 1996, filed with the
Commission on November 5, 1996.)
<PAGE>
10.12 Agreement and Plan of Reorganization dated as of October 1, 1996
among the Company, SPC and SPC Acquisition Corporation.
(Incorporated by reference to Exhibit 2 to the Company's Registration
Statement on Form S-4 (Registration Number: 333-16449), filed with
the Commission on November 21, 1996.)
10.13 Form of Bridge Unit Subscription Agreement. (Incorporated by
reference to Exhibit 10.7 to the Company's Registration Statement
on Form SB-2 (Registration Number: 33-97184), filed with the
Commission on September 21, 1995.)
10.14 Stock Option Agreement dated as of August 2, 1994 between the Company
and Berlitz Publishing Company, Inc. (Incorporated by reference to
Exhibit 10.10 to the Company's Registration Statement on Form SB-2
(Registration Number: 33-97184), filed with the Commission on
September 21, 1995.)
10.15 Settlement and General Release Agreement dated as of January 30, 1997
between the Company and Miriam K. Frazer. (Incorporated by reference
to Exhibit 10.15 to the Company's Annual Report on Form 10-KSB
(Commission File Number: 1-14076), for the year ended December 31,
1996, filed with the Commission on April 15, 1997.)
10.16 Agreement, dated June 14, 1994, as amended, between the Company, M.S.
Farrell & Co., Inc. and the holders of shares of Class A Convertible
Preferred Stock. (Incorporated by reference to Exhibit 10.20 to the
Company's Registration Statement on Form SB-2 (Registration
Number: 33-97184), filed with the Commission on September 21, 1995.)
10.17 Form of Indemnification Agreement between the Registrant and its
executive officers and directors. (Incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement on Form SB-2
(Registration Number: 33-97184), filed with the Commission on
September 21, 1995.)
10.18 Form of Underwriters' Purchase Option (Specimen).
10.19 Form of Lock-Up Agreement dated as of July 31, 1996 relating to
limitations on stock sales between the Company and each of the former
stockholders of Serif Inc. (Incorporated by reference to Exhibit
10.21 to the Company's Annual Report on Form 10-KSB (Commission
File Number: 1-14076), for the year ended December 31, 1996, filed
with the Commission on April 15, 1997.)
10.20 Form of Lock-Up Agreement dated as of July 31, 1996 relating to
limitations on stock sales between the Company and each of the former
stockholders of Serif (Europe) Limited. (Incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-KSB
(Commission File Number: 1-14076), for the year ended December 31,
1996, filed with the Commission on April 15, 1997.)
10.21 Agreement and Plan of Reorganization dated as of July 31, 1996
among the Company, Serif Inc., Gwyn Jones and all other stockholders
of Serif Inc. (Incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K (Date of Report: July 31, 1996)
(Commission File Number: 1-14076), filed with the Commission on August
13, 1996.)
10.22 Agreement and Plan of Reorganization dated as of July 31, 1996 among
the Company, Serif (Europe) Limited, Gwyn Jones and all other
stockholders of Serif (Europe) Limited. (Incorporated by reference to
Exhibit 4.4 to the Company's Current Report on Form 8-K (Date of
Report: July 31, 1996) (Commission File Number: 1-14076), filed with
the Commission on August 13, 1996.)
10.23 Registration Rights Agreement dated July 31, 1996 between the
Company and the former stockholders of Serif Inc. and Serif (Europe)
Limited. (Incorporated by reference to Exhibit 10.31 to the Company's
Current Report on Form 8-K (Date of Report: July 31, 1996) (Commission
File Number: 1-14076), filed with the Commission on August 13, 1996.)
10.24 Escrow Agreement dated July 31, 1996, among the Company, Serif Inc.,
the former stockholders of Serif Inc., Gwyn Jones and Blau, Kramer,
Wactlar & Lieberman, P.C. (Incorporated by reference to Exhibit 2
to the Schedule 13D Statement of Barry A. Cinnamon, with respect
to the Common Stock of the Company, filed with the Commission on
October 31, 1996.)
10.25 Localization and Distribution Agreement for Harvard Graphics Windows
Products dated February 16, 1995 between Choten, Inc. and SPC.
(Incorporated by reference to Exhibit 10.21 to Software Publishing
Corporation's Annual Report on Form 10-K (Commission File Number:
0-14025), for the fiscal year ended September 30, 1995, filed with the
Commission on December 29, 1995.)
10.26 Escrow Agreement dated July 31, 1996, among the Company, Serif
(Europe) Limited, the former Stockholders of Serif (Europe) Limited,
Gwyn Jones and Blau, Kramer, Wactlar & Lieberman, P.C. (Incorporated
by reference to Exhibit 10.28 to the Company's Annual Report
on Form 10-KSB (Commission File Number: 1-14076), for the year ended
December 31, 1996, filed with the Commission on April 15, 1997.)
<PAGE>
10.27 Lease Agreement dated September 7, 1995 between Community Towers LLC
and the Company, for facilities located at 111 North Market Street,
San Jose, California. (Incorporated by reference to Exhibit 10.22 to
Software Publishing Corporation's Annual Report on Form 10-K
(Commission File Number: 0-14025), for the fiscal year ended September
30, 1995, filed with the Commission on December 29, 1995.)
10.28 Stockholders' Agreement dated as of July 31, 1996 among Barry A.
Cinnamon, Gwyn Jones and the former stockholders of Serif Inc. and
Serif (Europe) Limited. (Incorporated by reference to Exhibit 1 to
the Schedule 13D Statement of Barry A. Cinnamon, with respect to the
Common Stock of the Company, filed with the Commission on October 31,
1996.)
10.29 Letter Agreement dated October 24, 1996 between the Company and Gwyn
Jones. (Incorporated by reference to Exhibit 10.31 to the Company's
Annual Report on Form 10-KSB (Commission File Number: 1-14076), for
the year ended December 31, 1996, filed with the Commission on April
15, 1997.)
10.30 Compromise Agreement executed October 24, 1996 between the Company
and Gwyn Jones. (Incorporated by reference to Exhibit 10.32 to the
Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.31 Settlement and General Release Agreement dated as of July 23, 1996
among the Company, Richard Bergman and Barry Cinnamon.
(Incorporated by reference to Exhibit 10.32 to the Company's Current
Report on Form 8-K (Date of Report: July 31, 1996) (Commission File
Number: 1-14076), filed with the Commission on August 13, 1996.)
10.32 Escrow Agreement dated as of December 27, 1993, as amended through
September 5, 1996, among the Company, Barry A. Cinnamon, Richard
Bergman and Blau, Kramer, Wactlar & Lieberman, P.C. (Incorporated
by reference to Exhibit 10.25 to the Company's Amendment No. 1 to
Registration Statement on Form SB-2 (Registration Number: 33-97184),
filed with the Commission on November 6, 1995, Exhibit 10.32 to
the Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended March 31, 1996, filed with the
Commission on May 14, 1996, and Exhibit 10.34 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076),
for the quarter ended September 30, 1996, filed with the Commission
on November 5, 1996.)
10.33 Escrow Agreement dated as of May 25, 1995, as amended through
September 5, 1996, among the Company, Barry A. Cinnamon, Richard
Bergman and Blau, Kramer, Wactlar & Lieberman, P.C. (Incorporated by
reference to Exhibit 10.26 to the Company's Amendment No. 1 to
Registration Statement on Form SB-2 (Registration Number: 33-97184),
filed with the Commission on November 6, 1995, and Exhibit 10.34 to
the Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended September 30, 1996, filed with the
Commission on November 5, 1996.)
10.34 Stock Purchase Agreement dated March 31, 1995 among SPC, Digital
Paper, Inc., Daniel J. Fraisl, Carl Meyer and Anthony N. Hoeber.
(Incorporated by reference to Exhibit 10.4 to Software Publishing
Corporation's Quarterly Report on Form 10-Q (Commission File Number:
0-14025), for the quarter ended March 31, 1995, filed with the
Commission on May 15, 1995.)
10.35 Amendment to Stock Purchase Agreement dated as of April 2, 1996
among SPC, Digital Paper, Inc. Daniel J. Fraisl, Carl Meyer and
Anthony N. Hoeber. (Incorporated by reference to Exhibit 10.39 to the
Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.36 Amendment No. 2 to Stock Purchase Agreement dated October 1, 1996
among SPC, Digital Paper, Inc., Daniel J. Fraisl, Carl Meyer and
Anthony N. Hoeber. (Incorporated by reference to Exhibit 10.40 to
the Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.37 Asset Purchase Agreement dated as of May 1, 1996 between the Company
and BizEd, Inc. (Incorporated by reference to Exhibit 10.41 to the
Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.38 Consulting Agreement dated as of May 1, 1996 between the Company and
Clifford J. Schorer, Jr. (Incorporated by reference to Exhibit 10.42
to the Company's Annual Report on Form 10-KSB (Commission File Number:
1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.39 Form of MS Farrell Warrant Certificate issued to MS Farrell & Co.,
Inc. and certain other persons.
10.40 Letter Agreement dated March 27, 1997 between the Company and M.S.
Farrell & Co., Inc. (Incorporated by reference to Exhibit 10.45
to the Company's Annual Report on Form 10-KSB (Commission File
Number: 1-14076), for the year ended December 31, 1996, filed with
the Commission on April 15, 1997.)
<PAGE>
10.41 Consulting Agreement, dated as of July 25, 1997, between the Company
and Daniel J. Fraisl. (Incorporated by reference to Exhibit 10.49
to the Company's Quarterly Report on Form 10-QSB (Commission File
Number: 1-14076), for the quarter ended June 30, 1997, filed with
the Commission on August 19, 1997.)
10.42 Form of Subscription Agreements, each dated October 23, 1997, between
the Company and each of Ronald L. Altman (with respect to 24,000
shares of Common Stock), Gerold M. Fleischner (with respect to
24,000 shares of Common Stock), Howard Milstein (with respect to
865,000 shares of Common Stock), Patriot Group, LP (with respect to
24,000 shares of Common Stock) and Stephen P. Rosenblatt (with respect
to 24,000 shares of Common Stock). (Incorporated by reference to
Exhibit 10.50 to the Company's Quarterly Report on Form 10-QSB
(Commission File Number: 1-14076), for the quarter ended September
30, 1997, filed with the Commission on November 14, 1997.)
10.43 Registration Rights Agreement, dated October 23, 1997, among the
Company, Ronald L. Altman, Gerold M. Fleischner, Howard Milstein,
Patriot Group, LP and Stephen P. Rosenblatt. (Incorporated by
reference to Exhibit 10.51 to the Company's Quarterly Report on Form
10-QSB (Commission File Number: 1-14076), for the quarter ended
September 30, 1997, filed with the Commission on November 14,
1997.)
10.44 Option, dated October 23, 1997, issued to Ronald L. Altman.
Incorporated by reference to Exhibit 10.53 to the Company's Quarterly
Report on Form 10-QSB (Commission File Number: 1-14076), for the
quarter ended September 30, 1997, filed with the Commission on
November 14, 1997.)
10.45 Settlement and Release Agreement, dated December 19, 1997, among
the Registrant, Barry A. Cinnamon and Lori Kramer Cinnamon.
(Incorporated by reference to Exhibit 10.54 to the Company's
Current Report on Form 8-K (Date of Report: December 19, 1997)
(Commission File Number: 1-14076), filed with the Commission on
December 30, 1997.)
10.46 License Agreement, dated December 19, 1997, between Software
Publishing Corporation and Barry A. Cinnamon. (Incorporated by
reference to Exhibit 10.55 to the Company's Current Report on Form
8-K (Date of Report: December 19, 1997) (Commission File Number:
1-14076), filed with the Commission on December 30, 1997.)
10.47 Financial Advisory Agreement, dated as of November 20, 1997,
between the Registrant and M.S. Farrell & Co., Inc.
10.48 Amendment to the Financial Advisory Agreement, dated as of
January 28, 1998, between the Registrant and M.S. Farrell & Co., Inc.
10.49 Amendment No. 1 to Escrow Agreement, dated as of April 1, 1997,
among the Company, Serif Inc., Norman W. Alexander, Moritt, Hock &
Hamroff, LLP and Blau, Kramer, Wactlar & Lieberman, P.C.
10.50 Amendment No. 1 to Escrow Agreement, dated as of April 1, 1997, among
the Company, Serif (Europe) Limited, Norman W. Alexander, Moritt, Hock
& Hamroff, LLP and Blau, Kramer, Wactlar & Lieberman, P.C.
10.51 Rights Agreement, dated as of March 31, 1998, between the Company and
American Stock Transfer & Trust Company.
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Richard A. Eisner & Company, LLP. 23.3 Consent of Ernest &
Young U.K.
24 Powers of Attorney (set forth on the signature page of this Annual
Report on Form 10-KSB).
27 Financial Data Schedule.
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
CERTIFICATE OF DESIGNATIONS
of the
JUNIOR PARTICIPATING PREFERRED STOCK, SERIES A
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), hereby
certifies that the following resolution was duly adopted by the Board of
Directors of the Corporation at a duly convened meeting thereof held on March
31, 1998, at which meeting a quorum of the directors was present and acting
throughout:
RESOLVED, that, pursuant to Article Fourth of the
Certificate of Incorporation, as amended, which creates and authorizes
1,939,480 shares of Preferred Stock of the par value of $.001 per share
(hereinafter called the "Serial Preferred Stock"), of which no shares are
currently issued and outstanding so that all 1,939,480 shares of Serial
Preferred Stock have the status of authorized but unissued shares and are
available for issuance, the Board of Directors of the Corporation hereby
establishes a series of Serial Preferred Stock to consist of 100,000
shares, and hereby fixes the powers, designation, preferences and relative,
participating, optional and other rights of such series of Serial Preferred
Stock, and the qualifications, limitations and restrictions thereof, in
addition to those set forth in said Article Fourth, as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Junior Participating Preferred Stock, Series A" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 100,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Company convertible
into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common Stock, par value $.001
per share (the "Common Stock"), of the Company, and of any other junior stock,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on the first day of January, April, July and October in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of (i) $10 or (ii)
subject to the provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Company shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
<PAGE>
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then, in each such case, the amount to which holders of shares of Series
A Preferred Stock were entitled immediately prior to such event under clause
(ii) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(b) The Company shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (a) of this Section immediately after
the Company declares a dividend or distribution on the Common Stock (other than
a dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $10 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or, unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events, such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 50 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series F Preferred Stock
shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Company. In
the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then, in each
such case, the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Serial Preferred Stock or any similar stock,
or by law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Company having general
voting rights shall vote together as one class on all matters submitted to a
vote of shareholders of the Company.
(c) Except as set forth herein, or as otherwise provided by law, holders of
Series A Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate action.
<PAGE>
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock; provided that
the Company may at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any stock of the Company
ranking junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(b) The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company unless
the Company could, under paragraph (a) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall, upon their cancellation, become authorized but unissued shares of Serial
Preferred Stock and may be reissued as part of a new series of Serial Preferred
Stock subject to the conditions and restrictions on issuance set forth herein,
in the Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Serial Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Company, no distribution shall be made (a) to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $1,000 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment;
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to
be distributed per share to holders of shares of Common Stock, or (b) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Company shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
<PAGE>
greater or lesser number of shares of Common Stock, then, in each such case, the
aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (a) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Company shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then, in any such case, each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Company
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then, in each such case, the amount set forth
in the preceding sentence with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the nominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall not
be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of the Serial Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the Company
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, Software Publishing Corporation Holdings, Inc., has
caused this Certificate of Designations to be signed by Mark E. Leininger, its
President and Chief Operating Officer, and attested to by Marc E. Jaffe, its
Secretary, this 31st day of March, 1998.
SOFTWARE PUBLISHING
CORPORATION HOLDINGS, INC.
By:s/ Mark E. Leininger
Mark E. Leininger
President and Chief Operating Officer
[CORPORATE SEAL]
ATTEST:
By:
s/ Marc E. Jaffe
Marc E. Jaffe, Secretary
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
BY-LAWS
* * * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the city of Wilmington, County
of New Castle, State of Delaware.
The corporation may also have offices at such other places both within
and without the State of Delaware as the board of directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held at such place as may be fixed from time to time by the board of
directors either within or without the State of Delaware as shall be designated
from time to time by the board of directors and stated in the notice of the
meeting. Meetings of stockholders for any other purpose may be held at such time
and place, within or without the State of Delaware, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on the third
Thursday of April if not a legal holiday, and if a legal holiday, then on the
next secular day following, at 11:00 a.m., or at such other date and time as
shall be designated from time to time by the board of directors and stated in
the notice of meeting, at which they shall elect by a plurality vote those
directors whose terms have expired pursuant to the provisions of the Certificate
of Incorporation, and transact such other business as may properly be brought
before the meeting.
Section 3. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten nor more than fifty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of meeting,
or, if not specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, may be called only at the written request of the Chairmen of the
Board, the President, a majority of the Board of Directors or by stockholders
owning at least sixty-six and two-thirds percent (66-2/3%) of the entire voting
power of the corporation's capital stock. Such request shall state the purpose
or purposes of the proposed meeting.
<PAGE>
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose for which the meeting is called, shall be
given not less than ten nor more than fifty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 8. The holders of fifty (50%) percent of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of the
certificate of incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of incorporation
or certificates of designations, and preferences, each stockholder shall at
every meeting of the stockholders be entitled to one vote in person or by proxy
for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three years from its date,
unless the proxy provides for a longer period.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be not less than three nor more than eleven. No director need be a
stockholder of the corporation. Any director may be removed from office at any
time by the affirmative vote of stockholders of record holding a majority of the
outstanding shares of stock of the corporation entitled to vote, given at a
meeting of the stockholders called for that purpose.
Section 2. The board of directors shall be divided into three classes as
nearly equal in number as possible, and no class shall include less than two
directors. The terms of office of the directors initially classified shall be as
follows: that of Class I shall expire at the ^ annual meeting of stockholders in
1994, Class II at the second succeeding annual meeting of stockholders in 1995
and Class III at the third succeeding annual meeting of stockholders 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, including whenever there shall be fewer than the
maximum number of directors set forth in Section 1 of this Article III, 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.
Section 3. The business of the corporation shall be managed by its board of
directors, which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by these by-laws directed or
required to be exercised or done by the stockholders.
Section 4. The board of directors shall choose a chairman of the board of
directors who shall preside at all meetings of stockholders and directors.
<PAGE>
Section 5. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the president or
chairman of the board on two days' prior notice to each director, either
personally or by telephone, facsimile transmission, overnight courier mail or
telegram; special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of not less than two directors.
Section 8. At all meetings of the board one-half of the board of directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting form time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
or these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
Section 10. (a) Nominations for the election of directors may be made by
the Board of Directors or by any stockholder entitled to vote for the election
of directors. Such nominations other than by the Board of Directors shall be
made by notice in writing, delivered or mailed by first class United States
mail, postage prepaid, to the Secretary of the corporation not less than ninety
(90) days prior to the first anniversary of the date of the last meeting of
stockholders of the corporation called for the election of directors.
(b) Each notice shall set forth (i) the name, age and address of
the stockholder who intends to make the nomination and of the person or persons
to be nominated; (ii) a representation that the stockholder is a holder of
record of the corporation entitled to vote at the meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (iii) the name, age, business address and, if known, residence
address of each nominee proposed in such notice; (iv) the principal occupation
or employment of each such nominee; (v) a description of all arrangements or
understandings between the stockholder and each such nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (vi) such other
information regarding each such nominee as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board of Directors of the corporation; and (vii) the
consent of each such nominee to serve as a director of the corporation if so
elected.
(c) The Chairman of any meeting of stockholders may, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he or she should so determine,
the Chairman shall so declare to the meeting and the defective nomination shall
be disregarded.
(d) Except as required in the By-Laws no election need be by
written ballot.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member of any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
<PAGE>
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders of sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telephone, facsimile transmission,
overnight courier or telegram.
Section 2. Whenever any notice is required to be given under the provisions
of the statutes or of the certificate of incorporation or of these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a chairman of the board of directors, a president, one or
more vice-presidents, a secretary and a treasurer. The board of directors may
also choose additional vice-presidents, and one or more assistant secretaries
and assistant treasurers. Any number of offices may be held by the same person,
unless the certificate of incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a chairman of the board of directors, a
president, one or more vice-presidents, a secretary and a treasurer.
<PAGE>
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation shall
be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
CHAIRMAN OF THE BOARD
Section 6. The chairman of the board of directors shall be the chief
executive officer of the corporation unless the board of directors resolves
otherwise. He shall preside at all meetings of stockholders and directors.
Except where by law the signature of the president is required, the chairman of
the board of directors shall possess the same power as the president to sign all
certificates, contracts, and other instruments of the corporation which may be
authorized by the board of directors. During the absence or disability of the
president, he shall exercise all powers and discharge all duties of the
president.
THE PRESIDENT
Section 7. The president shall be the chief operating officer of the
corporation unless the board of directors resolves otherwise. In the absence of
the chairman of the board of directors, the president shall preside at all
meetings of the stockholders and the board of directors, shall have general and
active management of the business of the corporation and shall see that all
orders and resolutions of the board of directors are carried into effect.
The president shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. In the absence of the chairman of the board of directors or the
president or in the event of his inability or refusal to act, the vice president
(or in the event there be more than one vice president, the vice presidents in
the order designated, or in the absence of any designation, first any vice
presidents in the order of their election and then the remaining vice presidents
in the order of their election) shall perform the duties of the chairman of the
board of directors or the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the chairman of the board
of directors or the president. The vice presidents shall perform such other
duties and shall have other powers as the board of directors may from time to
time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all proceedings of the
meetings of the corporation and of the board of directors in a book to be kept
for that purpose and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the board of directors, and shall perform
such other duties as may be prescribed by the board of directors, the chairman
of the board of directors or the president, under whose supervision he shall be.
He shall have custody of the corporate seal of the corporation and he, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
<PAGE>
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries, in the order determined by the board of directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
TREASURER AND ASSISTANT TREASURER
Section 11. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all monies
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the chairman of the board of directors and
the president and board of directors, at its regular meetings, or when the board
of directors so requires, an account of all his transactions as treasurer and of
the financial condition of the corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, of if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election), shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
INDEMNIFICATION PROVISION
Section 15. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened pending or completed
action, suit or proceeding by reason of the fact that he is or was a director,
officer, employee or an agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
defense or settlement of such action, suit or proceeding, to the fullest extent
and in the manner set forth in and permitted by the General Corporation Law of
the State of Delaware, as from time to time in effect, and any other applicable
law, as from time to time in effect. Such right of indemnification shall not be
deemed exclusive of any other rights to which such director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of each such person.
The foregoing provisions of this Article shall be deemed to be a contract
between the corporation and each director, officer, employee or agent who serves
in such capacity at any time while this Article, and the relevant provisions of
the General Corporation Law of the State of Delaware and other applicable law,
if any, are in effect, and any repeal or modification thereof shall not affect
any rights or obligations then existing with respect to any state of facts then
or theretofore existing or any action, suit or proceeding theretofore existing ^
or any action, suit or proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of facts.
<PAGE>
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by the chairman
of the board of directors, the president or a vice president and the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitation or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock; provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Where a certificate is countersigned (1) by a transfer agent
other than the corporation or its employee, or (2) by a registrar other than the
corporation or its employee, any other signature on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance hereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall required
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
<PAGE>
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining property of the corporation, or for such other purpose
as the directors shall think conducive to the interest of the corporation, and
the directors may modify or abolish any such reserve in the manner in which it
was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by resolution
of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words, "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
<PAGE>
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended, repealed or new by-laws
may be adopted by the stockholders or by the board of directors, when such power
is conferred upon the board of directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors if notice of
such alteration, amendment, repeal or adoption of new by-laws be contained in
the notice of such special meeting or if the board of directors otherwise
determines.
Number SP _________ Shares ___________
SEE REVERSE FOR CERTAIN DEFINITIONS
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
CUSIP 833979 10 7
This is to certify that ________________________ is the owner of
_________________ fully-paid and non-assessable shares of Common Stock of the
par value of One-Tenth of One Cent ($.001) each of
Software Publishing Corporation Holdings, Inc.
transferable on the books of the Corporation by the registered owner hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed.
This Certificate is not valid until countersigned by the Transfer Agent.
This certificate and the shares represented hereby are issued and shall be
subject to all of the provisions of the Certificate of Incorporation and By-Laws
of the Corporation as the same now exist or may be amended hereafter, to all of
which the holder, by acceptance hereof assents.
WITNESS the facsimile seal of the Corporation and the signatures of its
duly authorized officers.
Dated: __________________
[Corporate Seal]
- ----------------------------------- -----------------------------------
Secretary Chief Executive Officer
Countersigned
American Stock Transfer & Trust Company
(New York, N. Y.)
By:________________________________
Authorized Signature
<PAGE>
[Reverse Side of Certificate]
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Any such request may be made to the Corporation or to the Transfer
Agent.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to the applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _____ Custodian _____
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint entants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _________________________
in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, _________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
____________________________________________________________________ Attorney to
transfer the said stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated ______________________________________
_____________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.
Signature(s) Guaranteed:
- -------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
This certificate also evidences and entitles the holder hereof to certain rights
as set forth in a Rights Agreement between Software Publishing Corporation
Holdings, Inc. and American Stock Transfer & Trust Company, dated as of March
31, 1998 (the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal executive
offices of Software Publishing Corporation Holdings, Inc. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. Software Publishing Corporation Holdings, Inc. will mail to the
holder of this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain circumstances, as set forth
in the Rights Agreement, Rights issued to any Person who becomes an Acquiring
Person (as defined in the Rights Agreement) may become null and void.
THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES
THAT IT WILL NOT SELL, ASSIGN, PLEDGE, HYPOTHECATE OR OTHERWISE TRANSFER THIS
PURCHASE OPTION EXCEPT AS HEREIN PROVIDED.
NOT EXERCISABLE PRIOR TO DECEMBER 5, 1996. VOID AFTER 5:00 P.M., NEW
YORK TIME, AUGUST 20, 2002.
PURCHASE OPTION
For the Purchase of _________ Shares of Common Stock
of
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
(F/K/A) ALLEGRO NEW MEDIA, INC.
(A Delaware Corporation)
No. PO __
1. Purchase Option.
THIS CERTIFIES THAT, for the sum of one hundred dollars, the receipt of
which is hereby acknowledged by Software Publishing Corporation Holdings, Inc.,
(f/k/a Allegro New Media, Inc.) (the "Company"), ____________________________
(the "Holder"), as registered owner of this Purchase Option, is entitled, at any
time or from time to time at or after December 5, 1996, and at or before 5:00
p.m., New York Time, August 20, 2002, but not thereafter, to subscribe for,
purchase and receive, in whole or in part, up to ______________________
(_________) shares of common stock of the Company, $.001 par value, (the "Common
Stock"). If August 20, 2002 is a day on which banking institutions are
authorized by law to close, then this Purchase Option may be exercised on the
next succeeding day which is not such a day in accordance with the terms herein.
During the period ending August 20, 2002 the Company agrees not to take any
action that would terminate the Purchase Option. This Purchase Option is
initially exercisable at the lesser of (a) $1.27 per share of Common Stock, or
(b) 120% of the price per share of any shares of Common Stock or the imputed
price per share of any shares of Common Stock included in any units (without
attributing any value to any warrant or any other derivative security included
in any unit), as applicable, of the Company sold by the Company to a source
introduced to the Company by M.S. Farrell & Co., Inc. on or prior to January 28,
1999, but in any event not less than $1.06 per share; provided, however, that
upon the occurrence of any of the events specified in Section 6 hereof, the
rights granted by this Purchase Option, including the exercise price per share
and the number of shares of Common Stock to be received upon such exercise,
shall be adjusted as therein specified. The term "Exercise Price" shall mean the
initial exercise price or the adjusted exercise price, depending on the context.
<PAGE>
This Purchase Option was originally issued pursuant to an Underwriting
Agreement, dated December 5, 1995, between the Company and M.S. Farrell & Co.,
Inc., which provides for the issuance of this Purchase Option (the "Underwriting
Agreement").
The holder(s) of this Purchase Option and any option issued upon the
transfer or assignment of this Purchase Option are referred to hereinafter
collectively as the Holder(s) of the Purchase Options or as the "Holder(s)".
2. Exercise.
2.1. Exercise Form. In order to exercise this Purchase Option, the exercise
form attached hereto must be duly executed and completed and delivered to the
Company, together with this Purchase Option and payment of the Exercise Price
for the Common Stock being purchased. To the extent the subscription rights
represented hereby shall not be exercised at or before 5:00 p.m., New York Time,
on August 20, 2002 this Purchase Option shall become and be void without further
force or effect, and all rights represented hereby shall cease and expire.
2.2. Legend. Each certificate for Common Stock purchased under this
Purchase Option shall bear a legend as follows unless such Common Stock has been
registered under the Act and the issuance complies with any applicable state
securities laws:
"The securities represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933,
as amended (the "Act"). The securities may not be sold, assigned, pledged,
hypothecated or otherwise transferred except pursuant to an effective
registration statement under the Act and in compliance with applicable
state securities laws, or the Company receives an opinion of counsel,
satisfactory to the Company, that such registration is not required
and that the sale, assignment, pledge, hypothecation or transfer is in
compliance with applicable state securities laws."
3. Transfer.
3.1. Permissible Transferees. This Purchase Option shall not be
transferred, sold, assigned or hypothecated for a period of one year commencing
on December 5, 1995, except that it may be transferred to any successors of M.S.
Farrell & Co., Inc., and may be assigned in whole or in part to any person who
is an officer, director of M.S. Farrell & Co., Inc., or officers, directors or
partners of any Selected Dealer in the public offering described in the
Underwriting Agreement. Any such assignment shall be effected by M.S. Farrell &
Co., Inc. (i) executing the form of assignment at the end hereof, and (ii)
surrender of this Purchase Option for cancellation to the Company accompanied by
a certificate signed by an officer of M.S. Farrell & Co., Inc., stating that
each transferee is a permitted transferee under this Section 3.1 hereof;
whereupon the Company shall issue, in the name or names specified by M.S.
Farrell & Co., Inc. (including M.S. Farrell & Co., Inc.) a new Purchase Option
or Purchase Options of like tenor and representing in the aggregate rights to
purchase the same number of shares of Common Stock as are purchasable hereunder.
<PAGE>
3.2. Transfer Of Purchase Option. Except as provided in Section 3.1 hereof,
the registered Holder of this Purchase Option, by its acceptance hereof, agrees
that it will not sell, assign, pledge, hypothecate or otherwise transfer this
Purchase Option except pursuant to an effective registration under the
Securities Act of 1933, as amended (the "Act") and in compliance with applicable
state securities laws, or unless the Company receives an opinion of counsel,
satisfactory to the Company, that such registration is not required and that the
sale, assignment, pledge, hypothecation or transfer is in compliance with
applicable state securities laws. In order to make any assignment, the Holder
must deliver to the Company the assignment form attached hereto duly executed
and completed, together with the Purchase Option. The Company shall immediately
transfer this Purchase Option on the books of the Company and shall execute and
deliver a new Purchase Option or Purchase Options of like tenor to the
appropriate assignee(s) expressly evidencing the right to purchase the number of
Shares purchasable hereunder or such portion of such number as shall be
contemplated by any such assignment.
3.3. Transfer Of Common Stock. The shares of Common Stock underlying this
Purchase Option, shall not be transferred unless (i) the Company has received
the opinion of counsel, satisfactory to the Company, that such shares may be
transferred pursuant to an exemption from registration under the Act and in
compliance with applicable state securities laws, or (ii) the transfer is made
pursuant to an effective registration statement under the Act and in compliance
with applicable state securities laws.
4. New Purchase Options To Be Issued.
4.1. Partial Exercise Or Transfer. Subject to the restrictions in Sections
2 and 3 hereof, this Purchase Option may be exercised or assigned in whole or in
part. In the event of the exercise or assignment hereof in part only, upon
surrender of this Purchase Option for cancellation, together with the duly
executed exercise or assignment form, the Company shall cause to be delivered to
the Holder without charge a new Purchase Option of like tenor to this Purchase
Option in the name of the Holder evidencing the right of the Holder to purchase
the number of shares of Common Stock purchasable hereunder as to which this
Purchase Option has not been exercised or assigned.
4.2. Lost Certificate. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Purchase Option and
of reasonably satisfactory indemnification, the Company shall execute and
deliver a new Purchase Option of like tenor and date. Any such new Purchase
Option executed and delivered as a result of such loss, theft, mutilation or
destruction shall constitute an additional contractual obligation on the part of
the Company.
5. Registration Rights.
5.1. Demand Registration.
5.1.1. Grant Of Right. The Company, upon written demand ("Initial Demand
Notice") of the Majority Holder(s) (as defined herein), agrees to register on
two occasions, all or any portion, as requested by the Majority Holders in the
Initial Demand Notice, of the Purchase Options and Common Stock issuable upon
<PAGE>
exercise of the Purchase Options (collectively the "Registrable Securities").
The demand for registration may be made at any time commencing on December 5,
1996 and up to 5:00 p.m., New York Time, on August 20, 2002. On such occasion,
the Company will file a Registration Statement covering the Registrable
Securities within ninety days after receipt of the Initial Demand Notice and use
its best efforts to have such registration statement declared effective promptly
thereafter. Should this registration or the effectiveness thereof be delayed by
the Company, the exercisability of the Purchase Options shall be extended for a
period of time equal to the delay in registering the Registrable Securities
caused by the Company. Moreover, if the Company fails to use its best efforts to
comply with the provisions of this Section 5.1.1, the Company shall, in addition
to any other equitable or other relief available to the Majority Holder(s),
including the Holder of this Purchase Option if such Holder communicated his
demand to the Company to include his Registrable Securities in such registration
statement, be liable for any and all incidental, special and consequential
damages (including, but not limited to, the loss of profit suffered as a result
of such failure, calculated by reference to the difference between the Exercise
Price and the Market Price for the Common Stock at the time the registration
would have been declared effective if the Company had used its best efforts)
sustained by the Majority Holder(s), including the holder of this Purchase
Option if such Holder communicated his demand to the Company to include his
Registrable Securities in such registration statement. The Company covenants and
agrees to give written notice of its receipt of any Initial Demand Notice by any
Holder(s) to all other registered Holders of the Purchase Options and the
Registrable Securities within thirty days from the date of the receipt of any
such Initial Demand Notice.
5.1.2. Terms. The Company shall bear all fees and expenses attendant
to registering the Registrable Securities on the first occasion only, with the
Holders bearing such fees and expenses after the first occasion, and the
Holder(s) shall pay any and all underwriting and broker-dealer discounts,
commissions and non-accountable expenses of any underwriter or broker-dealer
selected by the Holder(s) to sell the Registrable Securities, together with the
expenses of any legal counsel selected by the Holder(s) to represent them in
connection with the sale of the Registrable Securities. The Company agrees to
use its prompt best efforts to cause the filing required herein to become
effective and to qualify or register the Registrable Securities in such States
as are reasonably requested by the Holder(s); provided, however, that in no
event shall the Company be required to register the Registrable Securities in a
state in which such registration would cause (i) the Company to be obligated to
qualify to do business in such State or execute a general consent to service or
process, or (ii) the principal stockholders of the Company to be obligated to
escrow their shares of capital stock of the Company. The Company shall cause any
registration statement filed pursuant to the demand rights granted under Section
5. 1.1 to remain effective for a period equal to the greater of (i) sixteen
months from the date of the latest balance sheet of the audited financial
statements contained therein on the initial effective date of such registration
statement or (ii) one year from the initial effective date of such registration
statement.
5.1.3. Majority Holder(s). The term "Majority Holder(s)" as used
herein shall mean the Holder(s) of this and any Purchase Options issued upon the
assignment or transfer of this Purchase Option and/or the Common Stock issuable
upon exercise of this and such other Purchase Options who, in the aggregate, own
or who possess the right to acquire (because of ownership of this or such other
Purchase Options) in excess of fifty percent (50%) of the Common Stock issuable
<PAGE>
upon exercise of this and such other Purchase Options excluding those shares of
Common Stock which have been so issued and sold pursuant to any of the
provisions of Section 5 of this Option.
5.2. "Piggy-Back" Registration.
5.2.1. Grant Of Right. In addition to the demand right of
registration, the Holder(s) of the Purchase Options shall have the right
commencing on December 5, 1996 and up to 5:00 p.m., New York Time, on August 20,
2002, to include the Registrable Securities as part of any other registration of
securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-4 or
S-8 or any successor forms), provided, however, that if, in the written opinion
of the Company's managing underwriter or underwriters, if any, for such
offering, the inclusion of the Registrable Securities, when added to the
securities being registered by the Company or the selling stockholders), will
exceed the maximum amount of the Company's securities which can be marketed (i)
at a price reasonably related to their then current market value, or (ii)
without materially and adversely affecting the entire offering, then the Company
may exclude from such offering all or any portion of the Registrable Securities
requested to be so registered, provided, further, that if any Registrable
Securities are so excluded, then the number of securities to be sold by all
stockholders in such public offering shall be apportioned pro rata among all
such selling stockholders, including all Holder(s) of the Registrable
Securities, according to the total amount of securities of the Company owned by
said selling stockholders, including all Holder(s) of the Registrable
Securities. If, subsequent to exercise of the demand registration right referred
to in the preceding Section 5.1, any Registrable Securities requested to be
included in an offering ("Other Offering") pursuant to the "piggyback" rights
described in this Section are not so included because of the operation of the
first provision of the preceding sentence, then the Holder(s) of the Registrable
Securities shall have the right, to require the Company, at is expense, to
prepare and file a registration statement under the Act covering such
Registrable Securities and use its best efforts to cause such registration
statement to become effective as if the Holder(s) had a further demand
registration right as provided in Section 5.1 (but without the requirement that
such Holder(s) constitute "Majority Holder(s)"), provided, that if the
underwriter so requested, such Registrable Securities shall not be sold until
the expiration of 180 days from the effective date of the Other Offering.
5.2.2. Terms. The Company shall bear all fees and expenses attendant
to registering the Registrable Securities under the Act and in those states
selected by the Company for purposes of its offering, but the Holder(s) shall
pay any and all underwriting and broker-dealer discounts, commissions and
non-accountable expenses of any underwriter or broker-dealer selected by the
Holder(s) to sell the Registrable Securities, together with the expenses of any
legal counsel selected by the Holder(s) to represent them in connection with the
sale of the Registrable Securities. The Company shall qualify or register the
Registrable Securities in such additional states as are reasonably requested by
the Holder(s) and shall bear all costs and expenses, including reasonable
counsel fees and expenses, of the qualification or registration of the
Registrable Securities in such additional states. In the event of such a
proposed registration, the Company shall furnish the then Holder(s) of the
Registrable Securities with not less than twenty-five days written notice prior
to the proposed date of filing of such registration statement. Such notice to
the Holder(s) shall continue to be given for each registration statement filed
(during the period in which the Purchase Option is exercisable) by the Company
<PAGE>
until such time as all of the Registrable Securities have been registered. The
Holder(s) shall exercise the "piggyback" rights provided for herein by giving
written notice, within fifteen days of the receipt of the Company's notice of
its intention to file a registration statement. The Company shall cause any
registration statement filed pursuant to the above "piggyback" rights to remain
effective for at least nine months from the date that the Holder(s) of the
Registrable Securities are first given the opportunity to sell all of such
securities. Upon effecting any sale of the Registrable Securities, the Holders
shall advise the Company in writing of the date of such sale and the number of
Registrable Securities sold.
5.3. Come-Along Rights.
5.3.1. Key Stockholder Dispositions. If Barry A. Cinnamon (the "Key
Stockholder") proposes to sell, convey or otherwise transfer in a single
transaction or a series of related transactions, a number of shares of capital
stock of the Company which at the time of such transfer represents beneficial
ownership of ten percent (10%) or more of the capital stock of the Company then
outstanding, then such transferor(s) shall offer all Holders an opportunity, as
provided below, to sell their shares of Common Stock on the same terms and
conditions as those received by such transferor(s). Any transfer under this
Section 5.3.1 is herein referred to as "Come-Along Transfer" and the Key
Stockholder proposing to be a transferor under this Section 5.3.1 is herein
referred to as an "Offeror Stockholder".
5.3.2. Notice. Any Offeror Stockholder shall give not less than thirty
days prior written notice of the proposed Come-Along Transfer and its terms to
the Holders. If any Holder elects to participate in such Come-Along Transfer,
which election shall be made by written notice to the Issuer and to the Offeror
Stockholder within twenty days after notice of the Come-Along Transfer is given,
then such electing Holder (each an "Electing Holder") shall have the opportunity
and right (y) to sell to the purchasers) in such Come-Along Transfer up to all
of such Electing Holder's shares of Common Stock (upon the same terms and
conditions as the Offeror Stockholder), if the offer by the proposed purchasers)
in such Come-Along Transfer extends to all outstanding shares of Common Stock or
(z) in the event the offer is for less than all outstanding shares of Common
Stock, each Electing Holder shall have the opportunity and right to sell to the
purchasers) in such Come-Along Transfer (upon the same terms and conditions as
the Offeror Stockholder) up to that number of shares of Common Stock owned by
such Electing Holder as shall equal the product of (A) a fraction, the numerator
of which is the number of shares of Common Stock beneficially owned by such
Electing Holder as of the date of such Come-Along Transfer and the denominator
of which is the aggregate number of shares of Common Stock beneficially owned as
of the date of such Come-Along Transfer by the Offeror Stockholder and by all
Electing Holders, multiplied by (B) the number of shares of Common Stock which
the transferees) has (have) offered to acquire (by the purchase of shares of
Common Stock) in such Come-Along Transfer. The number of shares of Common Stock
to be sold by any Offeror Stockholder shall be reduced to the extent necessary
to provide for such sales of shares of Common Stock by Electing Holders.
5.3.3. Exceptions Permitted. This Section 5.3 shall not apply to the
sale or transfer of shares of Common Stock pursuant to Subsection 5.3.5 below;
provided, that such shares of Common Stock shall remain subject to this
Agreement.
<PAGE>
5.3.4. Non-Electing Holders. At any time within ninety days after the
expiration of the twenty day election period under Section 5.3.2 hereof
regarding a Come-Along Transfer, the Offeror Stockholder shall be free to sell
shares of Common Stock pursuant to such Come-Along Transfer, subject to rights
of participation exercised by Electing Holders pursuant to Section 5.3.2, and
such sales by an Offeror Stockholder shall be free of any further right of
participation pursuant to (or on no more favorable terms than) the bona fide
purchase offer from the proposed transferees) as specified in the notice
concerning the Come-Along Transfer which was given pursuant to Section 5.3.2
hereof. Shares proposed to be sold by an Offeror Stockholder pursuant to the
Come-Along Transfer but which are not so sold within ninety days shall be
subject to the restrictions of this Section 5.3.
5.3.5. Permitted Transfers. Notwithstanding anything to the contrary
contained herein:
(1) The Key Stockholder may transfer (inter vivos or
testamentary) all or part of his shares of Common Stock to his spouse, to his
children, to his parents, to his brother or sister, or to a trust for the
benefit of any such persons, provided that such shares of Common Stock shall
remain subject to this Agreement.
(2) The Key Stockholder may transfer all or part of his shares of
Common Stock to any entity which is directly or indirectly wholly-owned by such
Key Stockholder, which directly or indirectly owns such Key Stockholder of which
is directly or indirectly wholly-owned by a person or entity which also directly
or indirectly wholly owns such Key Stockholder, provided that such shares of
Common Stock shall remain subject to this Agreement.
5.4. General Terms.
5.4.1. Indemnification By Company. The Company shall indemnify the
Holder(s) of the Registrable Securities to be sold pursuant to any registration
statement hereunder and each person, if any, who controls such Holder(s) within
the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), and each underwriter (within the
meaning of the Act) of such Registrable Securities and each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act) such underwriter, against all loss, claim, damage, expense or
liability (including all reasonable attorneys' fees and other expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any or all of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained
(A) in such registration statement or an preliminary or final prospectus
constituting a part thereof or any amendment or supplement thereto
(collectively, the "Offering Documents"), or (B) in any blue sky application or
other document executed by the Company specifically for blue sky purposes or
based upon any other written information furnished by the Company or on its
behalf to any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information being hereinafter called a "Blue Sky Application"), or
(ii) the omission or alleged omission by the Company to state in the Offering
<PAGE>
Documents or in any Blue Sky Application a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and will reimburse the
Holder(s), each underwriter and each such controlling person for any legal or
other expenses reasonably incurred by each of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to any
one of the Holder(s) to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by such Holder for
use in the preparation of the Offering Documents or any such Blue Sky
Application.
5.4.1.1. Indemnification By The Holders. Each of the Holder(s) of
the Registrable Securities to be sold pursuant to any registration hereunder
agrees, severally but not jointly, to indemnify and hold harmless the Company
and each person, if any, who controls the Company within the meaning of the Act
or the Exchange Act and each underwriter (within the meaning of the Act) and
each person, if any, who controls such underwriter within the meaning of the Act
or the Exchange Act against all losses, claims, damages or liabilities
(including all reasonable attorneys' fees and other expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever), to which
each of them may become subject, under the Act, the Exchange Act or otherwise
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in the Offering Documents, or
(B) in any Blue Sky Application, or (ii) the omission or alleged omission to
state in the Offering Documents or in any Blue Sky Application a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; but
in each case, only if and to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon or in
conformity with written information furnished to the Company by such Holder
specifically for use in the preparation of the Offering Documents or any such
Blue Sky Application; and will reimburse the Company, each underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
each of them in connection with investigating or defending any such loss, claim,
damage, liability or action provided that such loss, claim, damage or liability
is found ultimately to arise out of or be based upon the circumstances described
in this Subsection 5.4.1.1.
5.4.1.2. Procedure. Promptly after receipt by an indemnified
party under this Section 5.4.1 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 5.4.1, notify in writing the indemnifying
party of the commencement thereof; and the omission so to notify the
indemnifying party will relieve the indemnifying party from any liability under
this Section 5.4.1 as to the particular item for which indemnification is then
being sought, but not from any other liability which it may have to any
indemnified party. In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
that it may wish, jointly with any other indemnifying party, similarly notified,
to assume the defense thereof, with counsel who shall be to the reasonable
satisfaction of such indemnified party, and after notice from the indemnifying
<PAGE>
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this paragraph 5.4.1 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. Any such indemnifying party shall not be
liable to any such indemnified party on account of any settlement of any claim
or action effected without the consent of such indemnifying party.
5.4.1.3. Contribution. If the indemnification provided for in
this Section 5.4.1 is unavailable to any indemnified party in respect to any
losses, claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, will
contribute to the amount paid or payable by such indemnified party, as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the Company on the one hand, and
of the Holder of the Registrable Securities who seeks contribution or from whom
contribution is sought on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand, and such Holder of the Registrable
Securities on the other hand, will be determined with reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the Company
or the Holder, and their relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
5.4.1.4. Equitable Considerations. The Company and the Holder
agree that it would not be just and equitable if contribution pursuant to this
Section 5.4.1 were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the immediately preceding paragraph.
5.4.2. Exercise of Purchase Options. Nothing contained in this
Purchase Option shall be construed as requiring the Holder(s) to exercise their
Purchase Options prior to or after the initial filing of any registration
statement or the effectiveness thereof.
5.4.3. Intentionally Deleted.
5.4.4. Documents Delivered To Holders. The Company shall furnish to
each of the Holder(s) participating in any of the foregoing offerings and to
each underwriter of any such offering, if any, a signed counterpart, addressed
to each of such Holder(s) or underwriter, of (i) an opinion of counsel to the
Company, dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under any underwriting agreement related thereto), and (ii), if
the offering results from the exercise of the demand registration right provided
in Section 5.1 or the exercise of the similar, but limited "demand" registration
right provided in Section 5.2 because the Holder(s) were unable to avail
themselves of their "piggyback" registration right, a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
<PAGE>
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities. The Company shall also deliver promptly to each of the Holder(s)
participating in the offering requesting same the correspondence and memoranda
described below and to the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times as any such Holder shall
reasonably request.
5.4.5. Underwriting Agreement. The Company shall enter into an
underwriting agreement with the managing underwriter(s) selected by any
Holder(s) whose Registrable Securities are being registered pursuant to Section
5. 1. Any such underwriters shall be reasonably satisfactory to the Company.
Such agreement shall be reasonably satisfactory in form and substance to the
Company, each Holder and such managing underwriter(s), and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type. The Holder(s) shall be
parties to any underwriting agreement relating to an underwritten sale of their
Registrable Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such underwriter(s) shall also be made to and for the benefit of such
Holder(s). Such Holder(s) shall not be required to make any representations or
warranties to or agreements with the Company or the underwriter(s) except as
they may relate to such Holder(s), their Registrable Securities and their
intended methods of distribution.
5.4.6. Documents To Be Delivered By Holder(s). Each of the Holder(s)
participating in any of the foregoing offerings shall furnish to the Company a
completed and executed questionnaire provided by the Company requesting
information customarily sought of selling security holders.
6. Adjustments to Exercise Price and Number of Securities.
6.1. Subdivision And Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
6.2. Adjustment In Number Of Shares. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 6, the number of shares of
Common Stock issuable upon the exercise of this Purchase Option shall be
adjusted to the nearest full number obtained by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares of Common
<PAGE>
Stock issuable upon exercise of this Purchase Option immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
6.3. Definition of Common Stock. For the purpose of this Purchase Option,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Certificate of Incorporation of the Company as amended through the
date hereof, or (ii) any other class of stock resulting from successive changes
or reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value. In
the event that the Company shall after the date hereof issue securities with
greater or superior voting rights than the shares of Common Stock outstanding as
of the date hereof, the Holder, at its option, may receive upon exercise of any
Purchase Option either shares of Common Stock or a like number of such
securities with greater or superior voting rights.
6.4. Merger Or Consolidation. In case of any consolidation of the Company
with, or merger of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the corporation
formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental Purchase Option providing that the holder of each Purchase Option
then outstanding or to be outstanding shall have the right thereafter (until the
stated expiration of such Purchase Option) to receive, upon exercise of such
Purchase Option, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such Purchase Option might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental Purchase Option shall provide for adjustments which
shall be identical to the adjustments provided in Section 6. The above provision
of this Section shall similarly apply to successive consolidations or mergers.
6.5. Non-Cash Dividends And Other Distributions. In the event that the
Company shall at any time prior to the exercise of all Purchase Options declare
a dividend (other than the payment of cash dividends) or otherwise distribute to
its stockholders any assets, property, rights, evidences of indebtedness,
securities (other than shares of Common Stock), whether issued by the Company or
by another, or any other thing of value, the Holder(s) of the unexercised
Purchase Options shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Purchase Options, the same
property, assets, rights, evidences of indebtedness, securities or any other
thing of value that they would have been entitled to receive at the time of such
dividend or distribution as if the Purchase Options had been exercised
immediately prior to such dividend or distribution. At the time of any such
dividend or distribution, the Company shall make appropriate reserves to ensure
the timely performance of the provisions of this Section 6.5.
6.6. Elimination Of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock upon the
exercise of the Purchase Option, nor shall it be required to issue scrip or pay
cash in lieu of any fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up or
<PAGE>
down to the nearest whole number of shares of Common Stock or other securities,
properties or rights.
7. Reservation And Listing. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of the Purchase Options, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable upon
the exercise thereof. The Company covenants and agrees that, upon exercise of
the Purchase Options and payment of the Exercise Price therefor, all shares of
Common Stock and other securities issuable upon such exercise shall be duly and
validly issued, fully paid and non-assessable and not subject to preemptive
rights of any stockholder. As long as the Purchase Options shall be outstanding,
the Company shall use its best efforts to cause all (i) shares of Common Stock
issuable upon exercise of the Purchase Options to be listed (subject to official
notice of issuance) on all securities exchanges (or, if applicable, qualified
for quotation on NASDAQ) on which the Common Stock of the Company may then be
listed and/or qualified for quotation; and during any period of time in which
such shares of Common Stock issuable upon exercise of the Purchase Options are
not so listed and/or qualified for quotation, the period of time in which the
Purchase Options may be exercised shall be extended for a corresponding period
of time.
8. Certain Notice Requirements.
8.1. Holder's Right To Receive Notice. Nothing herein shall be construed as
conferring upon the Holders the right to vote or consent or to receive notice as
a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Purchase Options and their exercise, any of the
events described in Section 8.2 shall occur, then, in one or more of said
events, the Company shall give written notice of such event at least fifteen
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution, conversion or exchange of securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of the
closing of the transfer books, as the case may be.
8.2. Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall take a record of the holders of its shares of Common Stock
for the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) the Company shall
offer to all the holders of its Common Stock any additional shares of capital
stock of the Company or securities convertible into to exchangeable for shares
of capital stock of the Company, or any option, right or warrant to subscribe
therefor, or (iii) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business shall be proposed.
8.3. Notice Of Change In Exercise Price. The Company shall, promptly after
an event requiring a change in the Exercise Price pursuant to Section 6 hereof,
send notice to the Holders of such event and change ("Price Notice"). The Price
<PAGE>
Notice shall describe the event causing the change and the method of calculating
same and shall be certified as being true and accurate by the Company's
President and Chief Financial Officer.
8.4. Transmittal Of Notices. All notices, requests, consents and other
communications under this Purchase Option shall be in writing and shall be
deemed to have been duly made when hand delivered, or mailed by express mail or
private courier service: (i) If to the registered Holder of the Purchase Option,
to the address of such Holder as shown on the books of the Company, or (ii) if
to the Company, to following address or to such other address as the Company may
designate by notice to the Holders: Software Publishing Corporation Holdings,
Inc., 111 North Market Street, San Jose, California 95113.
9. Miscellaneous.
9.1. Amendments. Any amendment or modification of this Purchase Option
shall require the written consent signed by the party against whom enforcement
of the modification or amendment is sought.
9.2. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Purchase Option.
9.3. Entire Agreement. This Purchase Option (together with the other
agreements and documents being delivered pursuant to or in connection with this
Purchase Option) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
9.4. Binding Effect. This Purchase Option shall inure solely to the benefit
of and shall be binding upon, the Holder and the Company and their permitted
assignees, respective successors, legal representatives and assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Purchase Option or
any provisions herein contained.
9.5. Governing Law; Submission To Jurisdiction Venue. This Purchase Option
shall be governed by and construed and enforced in accordance with the laws of
the State of New York, without giving effect to conflict of laws principles
thereof or the actual domiciles of the parties. The Company and the Holder
hereby agree that any action, proceeding or claim against either of them arising
out of, or relating in any way to this Purchase Option shall be brought and
enforced in any of the courts of the State of New York in New York County, New
York, or the United States District Court for the Southern District of New York,
and irrevocably submits to such jurisdiction. The Company and the Holder hereby
waive any objection to such jurisdiction and that such courts represent an
inconvenient forum. Any process or summons to be served upon the Company or the
Holder may be served by transmitting a copy thereof by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at the address
set forth in Section 8 hereof with respect to the Company and to the Holder at
<PAGE>
the following address: c/o M.S. Farrell & Co., Inc., 67 Wall Street, New York,
New York 10005, or such other address as the Holder may so notify the Company.
Such mailing shall be deemed personal service and shall be legal and binding
upon the Company and the Holder in any action, proceeding or claim.
9.6. Waiver, Etc. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Purchase Option shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Purchase Option or any provision hereof or the right of the
Company or any Holder to thereafter enforce each and every provision of this
Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of
any of the provisions of this Purchase Option shall be effective unless set
forth in a written instrument executed by the party or parties against whom or
which enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver of
any other or subsequent breach, non-compliance or non-fulfillment.
9.7. Absolute Owner. The Company may deem and treat the registered holder
of this Purchase Option as the absolute owner of this Purchase Option
(notwithstanding any notations of ownership or writing hereon made by anyone)
for all purposes and shall not be affected by any notice to the contrary.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Purchase Option to be
signed by its duly authorized officer as of the ___ day of ______, _____.
SOFTWARE PUBLISHING CORPORATION
HOLDINGS, INC.
By: ___________________________________
Mark E. Leininger
President
ATTEST:
- -------------------------------
Marc E. Jaffe, Secretary
<PAGE>
Form to be used to exercise Purchase Option:
Date: _______________________, 199___
The undersigned hereby elects irrevocably to exercise the within Purchase
Option and to purchase _______________ Shares of Common Stock of SOFTWARE
PUBLISHING CORPORATION HOLDINGS, INC. and hereby makes payment of $________ (at
the rate of $____ per Share) in payment of the Exercise Price pursuant thereto.
Please issue the Shares of Common Stock as to which this Purchase Option is
exercised in accordance with the instructions given below.
-----------------------------------
Signature
-----------------------------------
Signature Guaranteed
<PAGE>
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name: __ ___________________________________________________________________
(Print in Block Letters)
Address:____________________________________________________________________
Social Security Or Taxpayer Identification Number: ______________
NOTICE: The signature to this form must correspond with the name as written upon
the face of the within Purchase Option in every particular without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank, other
than a savings bank, or by a trust company or by a firm having membership on a
registered national securities exchange.
<PAGE>
Form to be used to assign Purchase Option:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the within
Purchase Option):
FOR VALUE RECEIVED, __________________________________ does hereby sell,
assign and transfer unto ____________________________ the right to purchase
____________ Shares of SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC. (the
"Company") evidenced by the within Purchase Option and does hereby authorize the
Company to transfer such right on the books of the Company.
Date:___________________, 199___
-------------------------------
Signature
-------------------------------
Signature Guaranteed
NOTICE: The signature to this form must correspond with the name as written upon
the face of the within Purchase Option in every particular without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank, other
than a savings bank, or by a trust company or by a firm having membership on a
registered national securities exchange.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH EXHIBIT I REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, AUGUST 20, 2002
No. __ ______ Warrants
WARRANT TO PURCHASE __________
SHARES OF SOFTWARE PUBLISHING
CORPORATION HOLDINGS, INC.
COMMON STOCK
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE certifies that _________________________, or
registered assigns, is the registered holder of Warrants (the "Warrants") to
purchase initially, at any time from the date hereof until 5:00 p.m., New York
time, on August 20, 2002 ("Expiration Date"), up to _________ fully paid and
nonassessable shares of common stock, $.001 par value ("Common Stock") of
Software Publishing Corporation Holdings, Inc. (f/k/a Allegro New Media, Inc.),
a Delaware corporation (the "Company"), at the initial exercise price, subject
to adjustment in certain events (the "Exercise Price"), of the lesser of (a)
$1.27 per share of Common Stock, or (b) 120% of the price per share of any
shares of Common Stock or the imputed price per share of any shares of Common
Stock included in any units (without attributing any value to any warrant or any
other derivative security included in any unit), as applicable, of the Company
sold by the Company to a source introduced to the Company by M.S. Farrell & Co.,
Inc. on or prior to January 28, 1999, but in any event not less than $1.06 per
share, upon surrender of this Warrant Certificate and payment of the Exercise
Price at the office of the Company located at 3A Oak Road, Fairfield, New Jersey
<PAGE>
07004 or any successor office, but subject to the conditions set forth herein
and in Exhibit I hereto. Payment of the Exercise Price shall be made by
certified or official bank check payable to the order of the Company or may be
made by tendering an amount of Warrants for cancellation with a value as
determined by the difference between the then current market price of the
underlying shares of Common Stock as of the date of exercise less the Exercise
Price of each Warrant.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void. If the Expiration Date shall in the
State of New York be a holiday or a day on which banks are authorized to close,
then the Expiration Date shall mean 5:00 P.M., New York Time, the next following
day which, in the State of New York is not a holiday or a day on which banks are
authorized to close.
The Warrants evidenced by this Warrant Certificate are subject to the
provisions of Exhibit I hereto, which Exhibit I is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
Exhibit I hereto provides that upon the occurrence of certain events the
Exercise Price and the type and/or number of the Company's securities issuable
thereupon may, subject to certain conditions, be adjusted. In such event, the
Company will, at the request of the holder, issue a new Warrant Certificate
evidencing the adjustment in the Exercise Price and the number and/or type of
securities issuable upon the exercise of the Warrants; provided, however, that
the failure of the Company to issue such new Warrant Certificates shall not in
any way change, alter, or otherwise impair the rights of the holder as set forth
in Exhibit I.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company located at 3A Oak Road, Fairfield, New
Jersey 07004, or any successor office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in Exhibit I,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in Exhibit I
hereto shall have the meanings assigned to them in Exhibit I hereto.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated __________________________
SOFTWARE PUBLISHING CORPORATION
HOLDINGS, INC.
By: _________________________
Mark E. Leininger
President
Attest:
By:____________________________
Marc E. Jaffe
Secretary
<PAGE>
FORM OF ELECTION TO PURCHASE
THE UNDERSIGNED hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ___________ shares of
Common Stock and herewith tenders in payment for such securities a certified or
official bank check payable to the order of Software Publishing Corporation
Holdings, Inc. in the amount of $___________, all in accordance with the terms
hereof. The undersigned requests that a certificate for such securities be
registered in the name of whose address is and that such Certificate be
delivered to whose address is .
Dated: __________________
Signature:_______________________________________
(Signature must conform in all respects to the
name of holder as specified on the face of the
Warrant Certificate.)
-------------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
-------------------------------------------------
Signature Guarantee
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED ____________________ hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Warrant Certificate on the books of the within
named Company, with full power of substitution.
Dated: ________________
Signature:_______________________________________
(Signature must conform in all respects to the
name of holder as specified on the face of the
Warrant Certificate.)
-------------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
-------------------------------------------------
Signature Guarantee
<PAGE>
EXHIBIT I
Section 1. Exercise of Warrant. The Warrants initially are exercisable at
an aggregate initial exercise price per share of common stock, $.001 par value
per share (the "Common Stock") of Software Publishing Corporation Holdings, Inc.
(f/k/a Allegro New Media, Inc.) (the "Company") set forth in Section 3 hereof
(subject to adjustment as provided in Section 5 hereof) payable by certified or
official bank check. Upon surrender of a Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the
Exercise Price (as hereinafter defined) for the shares of Common Stock purchased
at the Company's principal offices in California (presently located at 3A Oak
Road, Fairfield, New Jersey 07004, the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock underlying the Warrants). In the case of the purchase of less than
all the shares (the "Warrant Shares") of Common Stock purchasable under any
Warrant Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the shares of Common Stock purchasable thereunder.
Section 2. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock shall be made forthwith (and
in any event within ten (10) business days thereafter) without charge to the
Holder thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall be issued in the
name of, or in such names as may be directed by, the Holder thereof; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the Holder and the Company shall
not be required to issue or deliver such certificates unless or until the
persons or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Warrant
Shares shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the Board of
Directors and also by the Secretary or by any two Directors or by any one
Director and the Secretary of the Company under its corporate seal reproduced
thereon.
Section 3. Exercise Price.
3.1 Initial and Adjusted Exercise Price. Except as otherwise provided in
Section 5 hereof, the exercise price of each Warrant shall be the lesser of (a)
$1.27 per share of Common Stock, or (b) 120% of the price per share of any
shares of Common Stock or the imputed price per share of any shares of Common
Stock included in any units (without attributing any value to any warrant or any
other derivative security included in any unit), as applicable, of the Company
sold by the Company to a source introduced to the Company by M.S. Farrell & Co.,
Inc. on or prior to January 28, 1999, but in any event not less than $1.06 per
share of Common Stock. The adjustedexercise price shall be the price which shall
<PAGE>
result from time to time from any and all adjustments of the initial exercise
price in accordance with the provisions of Section 5 hereof.
3.2 Exercise Price. The term "Exercise Price" as used herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
Section 4. Restrictions on Transfer; Registration Rights.
4.1 Representations. The Holders of the Warrants agree to the following:
(a) Each Holder understands that the Warrants, or the Warrant
Shares, have not been registered under applicable state and federal securities
laws, and that such Warrants or Warrant Shares cannot be resold or transferred
unless they are so registered, or unless such transfer qualifies for an
exemption from such registration;
(b) Each Holder is acquiring the Warrants for investment
purposes only, and not with a view towards resale or distribution;
(c) Each Holder understands that all certificates which
represent the Warrants issued to him or her will bear a legend which
incorporates these restrictions; and
(d) Each Holder is familiar with the business and financial
condition of the Company, has been provided access and an opportunity to review
all material agreements, books and records of the Company and has been afforded
an opportunity to question the executive officers of the Company with respect to
the foregoing.
4.2 Restrictions on Transfer. Notwithstanding any provisions contained in
the Warrant Certificate to the contrary, these Warrants shall not be
transferable and the related Warrant Shares shall not be transferable except
upon the conditions specified in this Section 4, which conditions are intended,
among other things, to ensure compliance with the provisions of the 1933 Act in
respect of the transfer of the Warrants or the Warrant Shares. The Holders of
the Warrants further agree that they will not (a) transfer the Warrants prior to
delivery to the Company of an opinion of the Holder's counsel as provided for in
Section 4.3), which opinion shall be acceptable to counsel for the Company, or
(b) until registration of the Warrant Shares under the Securities Act has become
effective.
4.3 Opinion of Counsel. In connection with any transfer of the Warrants or
of the related Warrant Shares, the following provisions shall apply:
(a) If in the opinion of counsel, which counsel and opinion
shall be acceptable to the Company, the proposed transfer of the Warrants or the
Warrant Shares may be effected without registration of the Warrants of the
Warrant Shares under the 1933 Act, the Holders shall be entitled to transfer the
Warrants or the Warrant Shares in accordance with the proposed method of
disposition.
<PAGE>
(b) If in the opinion of counsel, which counsel and opinion
shall be acceptable to the Company, the proposed transfer of the Warrants or the
Warrant Shares may not be effected without registration of the Warrants or such
Warrant Shares under the Securities Act, the holder of the Warrants shall not be
entitled to transfer the Warrants or the Warrant Shares until registration is
effective.
4.4 Subsequent Holders. Anything contained herein to the contrary
notwithstanding, the provisions of this Section 4 shall be binding upon all
subsequent holders of the Warrants and the Warrant Shares, and the Company shall
not be required to issue all or any portion of the Warrants or the Warrant
Shares to such Holder unless such Holder agrees in writing in advance of such
issuance to be so bound. The provisions of this Section 4 shall survive the
Expiration Date.
4.5 Securities Act of 1933 Legend. The Warrant and the Warrant Shares have
not been registered under the Securities Act. Upon exercise of the Warrants, in
part or in whole, the certificates representing the Warrant Shares shall bear
the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
4.6 Required Registration.
(a) Piggyback Registration. If the Company shall determine to
register any of its securities (including any initial public offering of its
securities) either for its own account or the account of a security holder or
holders exercising their respective demand registration rights other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Rule 145 transaction (including securities registered on
form S-8 or form S-4), or a registration on any registration form that does not
permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) use its best efforts to include in any such
registration and any related qualification under blue sky laws or
other compliance), and in any underwriting involved therein, all the
Warrant Shares specified in a written request or requests, made by
any Holder and received by the Company within twenty (20) days after
the written notice from the Company described in clause (i) above is
<PAGE>
mailed or delivered by the Company. Such written request may specify
all or a part of a Holder's Warrant Shares.
The Holders agree to sell their Warrant Shares on the same terms as the
sale of other shares of Common Stock in the offering and agree to execute such
documents as shall be reasonably requested by the Company or its counsel in
connection with such offering.
If the registration of which the Company gives notice is for a registered
public offering involving an underwriting, the Company shall so advise the
Holders as a part of the written notice given pursuant to this Section. In such
event, the right of any Holder to registration pursuant to this Section shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Warrant hares in the underwriting to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company and the other holders of
securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
(b) Expenses of Registration. All registration expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section including filing fees, printing expenses, blue sky fees, and fees and
expenses of the Company's counsel and accountants) shall be borne by the
Company. All expenses incurred by the Holders for their own counsel or
accountants and all selling expenses relating to securities so registered
(including underwriter discounts and commissions) shall be borne by the holders
of securities so registered on the basis of the number of shares of securities
so registered on their behalf.
(c) Indemnification
(i) The Company will indemnify each Holder, each of its
officers, directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section, and each underwriter, if any, and each person
who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like), incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
<PAGE>
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by such Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent has not been unreasonably withheld).
(ii) Each Holder will, if Warrant Shares held by him are
included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and other Shareholder,
and each of their officers, directors, and partners, and each person controlling
such Holder or other Shareholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, other Shareholders,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein, provided, however, that the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld), and provided that in no event shall any indemnity
under this Section exceed the gross proceeds from the offering received by such
Holder.
Section 5. Adjustments to Exercise Price and Number of Shares.
5.1 Subdivision and Combination. In case the Company shall at any
time: (i) subdivide the outstanding shares of Common Stock into a larger number
of shares, (ii) combine the outstanding shares of Common Stock into a smaller
number of shares, (iii) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, or (iv) issue by reclassification of
its Common Stock any shares of its capital stock, the Exercise Price in effect
immediately after the record date for such dividend or distribution or the
effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such dividend, distribution, subdivision, combination or reclassification, and
of which the denominator shall be the number of shares of Common Stock
<PAGE>
outstanding immediately after such dividend, distribution, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event specified above shall occur.
5.2 Adjustment in Number of Warrant Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 5, the number of
Warrant Shares issuable upon the exercise of each Warrant shall be adjusted to
the nearest full share obtained by multiplying a number equal to the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
5.3 Definition of Common Stock. For the purpose of this Agreement,
the term "Common Stock" shall mean: (i) the class of stock designated as Common
Stock in the Certificate of Incorporation of the Company as may be amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value or from no par value to par
value.
5.4 Merger or Consolidation. (a) In case the Company after the date
hereof: (i) shall consolidate with or merge into any other person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(ii) shall permit any other person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving person but, in connection
with such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property, or (iii) shall transfer all or substantially all of its properties or
assets to any other person, or (iv) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of additional shares of Common Stock for
which adjustment in the Exercise Price is provided in this Section 5), then, and
in the case of each such transaction, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Agreement and
the Warrants, the Holders of the Warrants, upon the exercise thereof at any time
after the consummation of such transaction, shall be entitled to receive (at the
aggregate Exercise Price in effect at the time of such consummation for all
Common Stock issuable upon such exercise immediately prior to such consummation)
in lieu of the Common Stock, the highest amount of securities, cash or other
property to which such Holders would actually have been entitled as shareholders
upon such consummation if such Holders had exercised the rights represented by
the Warrants immediately prior thereto, subject to adjustments (subsequent to
such consummation) as nearly equivalent as possible to the adjustments provided
for in this Section 5.
5.5 Assumption of Obligations. Notwithstanding anything contained in
the Warrants to the contrary, the Company will not effect any of the
transactions described in clauses (i) through (iv) of Section 5.4 unless, prior
to the consummation thereof, each person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
the Warrants as provided herein shall assume, by written instrument delivered to
the Holders of the Warrants, the obligations of the Company under the Warrants
(including this Exhibit I) (and if the Company shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not release
<PAGE>
the Company from, any continuing obligations of the Company under this Exhibit I
and the Warrants) and such person shall have similarly delivered to such Holders
an opinion of counsel for such person stating that the Warrants including this
Exhibit I) shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this Section 5)
shall be applicable to the stock, securities, cash or property which such person
may be required to deliver upon any exercise of the Warrants or the exercise of
any rights pursuant hereto.
5.6 Dividends and Other Distributions. If, at any time or from time
to time after the date of this Warrant, the Company shall issue or distribute to
the holders of shares of Common Stock, evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Section 5.1, and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such non-excluded event being herein
called a "Special Dividend"), the Exercise Price shall be adjusted by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the then current market price of the Common Stock (defined as the
average for the thirty consecutive business days immediately prior to the record
date of the daily closing price of the Common Stock as reported by the national
securities exchange upon which the Common Stock is then listed or if not listed
on any such exchange, the average of the closing prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") Stock Market's National Market, or if not then listed on the NASDAQ
National Market, the average of the highest reported bid and lowest reported
asked prices as reported by the NASDAQ, or if not then publicly traded, as the
fair market price as determined by the Company's Board of Directors) less the
fair market value (as determined by the Company's Board of Directors) of the
evidences of indebtedness, cash, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then current market price per share of
Common Stock. An adjustment made pursuant to this Section 5.6 shall become
effective immediately after the record date of any such Special Dividend.
5.7 Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 5 are similar to, but not strictly
applicable but as to which the failure to make any adjustment would not fairly
protect the purchase rights represented by the Warrants including this Exhibit
1) in accordance with the essential intent and principles hereof then, in each
such case, the Holders collectively may appoint a firm of independent public
accountants of recognized national standing reasonably acceptable to the
Company, which shall give their opinion as to the adjustment, if any, on a basis
consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by the Warrants including
this Exhibit I). Upon receipt of such opinion the Company will promptly mail a
copy thereof to the Holders and shall make the adjustments described therein.
The fees and expenses of such independent public accountants shall be borne by
the Company. The issuance by the Company of shares of capital stock, including,
without limitation, shares of Common Stock, for consideration less than the
Exercise Price, or the issuance of convertible securities or derivative
securities, convertible into shares of capital stock at a conversion price or
<PAGE>
exercise price less than the Exercise Price shall be deemed an event that
requires an adjustment under this Section 5.7.
5.8 Notice of Adjustment Events. Whenever the Company contemplates
the occurrence of an event which would give rise to adjustments under this
Section 5, the Company shall mail to each Holder, at least thirty (30) days
prior to the record date with resect to such event or, if no record date shall
be established, at least thirty (30) days prior to such event, a notice
specifying: (i) the nature of the contemplated event, (ii) the date of which any
such record is to be taken for the purpose of such event, (iii) the date on
which such event is expected to become effective and (iv) the time, if any is to
be fixed, when the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable in connection with such event.
5.9 Notice of Adjustments. Whenever the Exercise Price or the kind of
securities or property issuable upon exercise of the Warrants, or both, shall be
adjusted pursuant to this Section 5, the Company shall make a certificate signed
by its President or a Vice President and by its Chief Financial Officer,
Secretary or Assistant Secretary, setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method of which such
adjustment was calculated (including a description of the basis on which the
Company made any determination hereunder), and the Exercise Price and the kind
of securities or property issuable upon exercise of the Warrants after giving
effect to such adjustment, and shall cause copies of such certificate to be
mailed (by first class mail postage prepaid) to each Holder promptly after each
adjustment.
5.10 Preservation of Rights. The Company will not, by amendment of
its Certificate of Incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of the Warrants (including this Exhibit 1) or the rights
represented thereby, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the Holders of the Warrants
against dilution or other impairment.
5.11 When No Adjustment Required. No adjustment in the Exercise Price
shall be required unless such adjustment would require an increase or decrease
of at least $0.05 per share of Common Stock; provided, however, that any
adjustments which by reason of this Section 5.11 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
provided further, however, that adjustments shall be required and made in
accordance with the provisions of this Section 5 (other than this Section 5.11)
not later than such time as may be required in order to preserve the tax-free
nature of a distribution to the Holders of the Warrants. All calculations under
this Section 5 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be. Anything in this Section 5 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Exercise Price, in addition to those required by this Section 5, as it in its
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.
<PAGE>
Section 6. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive of office of the Company,
for a new Warrant Certificate of like tenor and date representing in the
aggregate the right to purchase the same number of Warrant Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
Section 7. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants, nor shall it be required to issue scrip
or pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock.
Section 8. Reservation of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock as shall be issuable upon the exercise thereof. The
Company covenants and agrees that, upon exercise of the Warrants and payment of
the Exercise Price therefor, all shares of Common Stock shall be duly and
validly issued, fully paid, nonassessable and not subject to the preemptive
rights of any shareholder.
Section 9. Notices to Warrant Holders. Nothing contained in this
Exhibit I shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as having any
rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution payable; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a voluntary or involuntary dissolution,
liquidation or winding-up of the Company (other than in connection
<PAGE>
with a consolidation or merger) or any capital reorganization,
recapitalization or reclassification or a sale of all or
substantially all of its property, assets and business as an entirety
shall be proposed;
then, in any one or more of said events, the Company will mail to each Holder of
a Warrant a notice specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the a amount and character of such dividend, distribution or right, and (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding-up is to take place and the time, if any such time is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for the securities or other property deliverable upon
such reorganization, reclassification, recapitalization, consolidation, merger,
sale, dissolution, liquidation or winding-up. Such notice shall be mailed at
least thirty (30) days prior to the date therein specified.
Section 10. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given or made at the
time delivered by hand if personally delivered; five calendar days after mailing
if sent by registered or certified mail; when receipt is confirmed, if
telecopied; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee):
(a) If to the registered Holder of the Warrants, to
the address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section 1 hereof or to such other address as the Company may
designate by notice to the Holders.
Section 11. Successors. All the covenants and provisions of this
Exhibit I shall be binding upon and inure to the benefit of the Company,
the Holders and their respective successors and assigns hereunder.
Section 12. Governing Law. This Exhibit I and each Warrant shall be
governed and construed in accordance with the laws of the State of New York
applicable to contracts made and performed in the State of New York without
giving effect to the principles of conflicts of law thereof.
Section 13. Entire Agreement; Modification. This Exhibit I (including
the Warrant Certificate and the agreements with respect to registration rights)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
<PAGE>
Section 14. Severability. If any provision of this Exhibit I shall
be held to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision of this Exhibit I.
Section 15. Captions. The caption headings of the Sections of this
Exhibit I are for convenience of reference only and are not intended to be, nor
should they be construed as, part of this Exhibit I and shall be given no
substantive effect.
Section 16. Benefits of This Exhibit I. Nothing in this Exhibit I
shall be construed to give any person or corporation other than the Company and
the registered Holder(s) of the Warrant Certificates or Warrant Shares any legal
or equitable right, remedy or claim under this Exhibit I; and this Exhibit I
shall be for the sole and exclusive benefit of the Company and any registered
Holder(s) of the Warrant Certificates or Warrant Shares.
Section 4. Restrictions on Transfer; Registration Rights.
4.1 Representations. The Holders of the Warrants agree to the
following:
(a) Each Holder understands that the Warrants, or the Warrant
Shares, have not been registered under applicable state and federal securities
laws, and that such Warrants or Warrant Shares cannot be resold or transferred
unless they are so registered, or unless such transfer qualifies for an
exemption from such registration;
(b) Each Holder is acquiring the Warrants for investment
purposes only, and not with a view towards resale or distribution;
(c) Each Holder understands that all certificates which
represent the Warrants issued to him or her will bear a legend which
incorporates these restrictions; and
(d) Each Holder is familiar with the business and financial
condition of the Company, has been provided access and an opportunity to review
all material agreements, books and records of the Company and has been afforded
an opportunity to question the executive officers of the Company with respect to
the foregoing.
4.2 Restrictions on Transfer. Notwithstanding any provisions
contained in the Warrant Certificate to the contrary, these Warrants shall not
be transferable and the related Warrant Shares shall not be transferable except
upon the conditions specified in this Section 4, which conditions are intended,
among other things, to ensure compliance with the provisions of the 1933 Act in
respect of the transfer of the Warrants or the Warrant Shares. The Holders of
the Warrants further agree that they will not (a) transfer the Warrants prior to
delivery to the Company of an opinion of the Holder's counsel as provided for in
Section 4.3), which opinion shall be acceptable to counsel for the Company, or
(b) until registration of the Warrant Shares under the Securities Act has become
effective.
<PAGE>
4.3 Opinion of Counsel. In connection with any transfer of the
Warrants or of the related Warrant Shares, the following provisions shall apply:
(a) If in the opinion of counsel, which counsel and opinion
shall be acceptable to the Company, the proposed transfer of the Warrants or the
Warrant Shares may be effected without registration of the Warrants of the
Warrant Shares under the 1933 Act, the Holders shall be entitled to transfer the
Warrants or the Warrant Shares in accordance with the proposed method of
disposition.
(b) If in the opinion of counsel, which counsel and opinion
shall be acceptable to the Company, the proposed transfer of the Warrants or the
Warrant Shares may not be effected without registration of the Warrants or such
Warrant Shares under the Securities Act, the holder of the Warrants shall not be
entitled to transfer the Warrants or the Warrant Shares until registration is
effective.
4.4 Subsequent Holders. Anything contained herein to the contrary
notwithstanding, the provisions of this Section 4 shall be binding upon all
subsequent holders of the Warrants and the Warrant Shares, and the Company shall
not be required to issue all or any portion of the Warrants or the Warrant
Shares to such Holder unless such Holder agrees in writing in advance of such
issuance to be so bound. The provisions of this Section 4 shall survive the
Expiration Date.
4.5 Securities Act of 1933 Legend. The Warrant and the Warrant Shares
have not been registered under the Securities Act. Upon exercise of the
Warrants, in part or in whole, the certificates representing the Warrant Shares
shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
4.6 Required Registration.
(a) Piggyback Registration. If the Company shall determine to
register any of its securities (including any initial public offering of its
securities) either for its own account or the account of a security holder or
holders exercising their respective demand registration rights other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Rule 145 transaction (including securities registered on
form S-8 or form S-4), or a registration on any registration form that does not
permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
<PAGE>
(ii) use its best efforts to include in any such
registration and any related qualification under blue sky laws or
other compliance), and in any underwriting involved therein, all the
Warrant Shares specified in a written request or requests, made by
any Holder and received by the Company within twenty (20) days after
the written notice from the Company described in clause (i) above is
mailed or delivered by the Company. Such written request may specify
all or a part of a Holder's Warrant Shares.
The Holders agree to sell their Warrant Shares on the same terms as
the sale of other shares of Common Stock in the offering and agree to execute
such documents as shall be reasonably requested by the Company or its counsel in
connection with such offering.
If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to this
Section. In such event, the right of any Holder to registration pursuant to this
Section shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Warrant hares in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders of securities of the Company with registration rights to
participate therein distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected by the Company.
(b) Expenses of Registration. All registration expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section including filing fees, printing expenses, blue sky fees, and fees and
expenses of the Company's counsel and accountants) shall be borne by the
Company. All expenses incurred by the Holders for their own counsel or
accountants and all selling expenses relating to securities so registered
(including underwriter discounts and commissions) shall be borne by the holders
of securities so registered on the basis of the number of shares of securities
so registered on their behalf.
(c) Indemnification
(i) The Company will indemnify each Holder, each of its
officers, directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section, and each underwriter, if any, and each person
who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like), incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
<PAGE>
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by such Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent has not been unreasonably withheld).
(ii) Each Holder will, if Warrant Shares held by him are
included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and other Shareholder,
and each of their officers, directors, and partners, and each person controlling
such Holder or other Shareholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, other Shareholders,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein, provided, however, that the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld), and provided that in no event shall any indemnity
under this Section exceed the gross proceeds from the offering received by such
Holder.
Section 5. Adjustments to Exercise Price and Number of Shares.
5.1 Subdivision and Combination. In case the Company shall at any
time: (i) subdivide the outstanding shares of Common Stock into a larger number
of shares, (ii) combine the outstanding shares of Common Stock into a smaller
number of shares, (iii) declare a dividend on the outstanding shares of Common
<PAGE>
Stock payable in shares of Common Stock, or (iv) issue by reclassification of
its Common Stock any shares of its capital stock, the Exercise Price in effect
immediately after the record date for such dividend or distribution or the
effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such dividend, distribution, subdivision, combination or reclassification, and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such dividend, distribution, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event specified above shall occur.
5.2 Adjustment in Number of Warrant Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 5, the number of
Warrant Shares issuable upon the exercise of each Warrant shall be adjusted to
the nearest full share obtained by multiplying a number equal to the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
5.3 Definition of Common Stock. For the purpose of this Agreement,
the term "Common Stock" shall mean: (i) the class of stock designated as Common
Stock in the Certificate of Incorporation of the Company as may be amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value or from no par value to par
value.
5.4 Merger or Consolidation. (a) In case the Company after the date
hereof: (i) shall consolidate with or merge into any other person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(ii) shall permit any other person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving person but, in connection
with such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property, or (iii) shall transfer all or substantially all of its properties or
assets to any other person, or (iv) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of additional shares of Common Stock for
which adjustment in the Exercise Price is provided in this Section 5), then, and
in the case of each such transaction, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Agreement and
the Warrants, the Holders of the Warrants, upon the exercise thereof at any time
after the consummation of such transaction, shall be entitled to receive (at the
aggregate Exercise Price in effect at the time of such consummation for all
Common Stock issuable upon such exercise immediately prior to such consummation)
in lieu of the Common Stock, the highest amount of securities, cash or other
property to which such Holders would actually have been entitled as shareholders
upon such consummation if such Holders had exercised the rights represented by
the Warrants immediately prior thereto, subject to adjustments (subsequent to
such consummation) as nearly equivalent as possible to the adjustments provided
for in this Section 5.
<PAGE>
5.5 Assumption of Obligations. Notwithstanding anything contained in
the Warrants to the contrary, the Company will not effect any of the
transactions described in clauses (i) through (iv) of Section 5.4 unless, prior
to the consummation thereof, each person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
the Warrants as provided herein shall assume, by written instrument delivered to
the Holders of the Warrants, the obligations of the Company under the Warrants
(including this Exhibit I) (and if the Company shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the Company under this Exhibit I
and the Warrants) and such person shall have similarly delivered to such Holders
an opinion of counsel for such person stating that the Warrants including this
Exhibit I) shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this Section 5)
shall be applicable to the stock, securities, cash or property which such person
may be required to deliver upon any exercise of the Warrants or the exercise of
any rights pursuant hereto.
5.6 Dividends and Other Distributions. If, at any time or from time
to time after the date of this Warrant, the Company shall issue or distribute to
the holders of shares of Common Stock, evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Section 5.1, and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such non-excluded event being herein
called a "Special Dividend"), the Exercise Price shall be adjusted by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the then current market price of the Common Stock (defined as the
average for the thirty consecutive business days immediately prior to the record
date of the daily closing price of the Common Stock as reported by the national
securities exchange upon which the Common Stock is then listed or if not listed
on any such exchange, the average of the closing prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") Stock Market's National Market, or if not then listed on the NASDAQ
National Market, the average of the highest reported bid and lowest reported
asked prices as reported by the NASDAQ, or if not then publicly traded, as the
fair market price as determined by the Company's Board of Directors) less the
fair market value (as determined by the Company's Board of Directors) of the
evidences of indebtedness, cash, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then current market price per share of
Common Stock. An adjustment made pursuant to this Section 5.6 shall become
effective immediately after the record date of any such Special Dividend.
5.7 Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 5 are similar to, but not strictly
applicable but as to which the failure to make any adjustment would not fairly
protect the purchase rights represented by the Warrants including this Exhibit
1) in accordance with the essential intent and principles hereof then, in each
such case, the Holders collectively may appoint a firm of independent public
accountants of recognized national standing reasonably acceptable to the
Company, which shall give their opinion as to the adjustment, if any, on a basis
<PAGE>
consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by the Warrants including
this Exhibit I). Upon receipt of such opinion the Company will promptly mail a
copy thereof to the Holders and shall make the adjustments described therein.
The fees and expenses of such independent public accountants shall be borne by
the Company. The issuance by the Company of shares of capital stock, including,
without limitation, shares of Common Stock, for consideration less than the
Exercise Price, or the issuance of convertible securities or derivative
securities, convertible into shares of capital stock at a conversion price or
exercise price less than the Exercise Price shall be deemed an event that
requires an adjustment under this Section 5.7.
5.8 Notice of Adjustment Events. Whenever the Company contemplates
the occurrence of an event which would give rise to adjustments under this
Section 5, the Company shall mail to each Holder, at least thirty (30) days
prior to the record date with resect to such event or, if no record date shall
be established, at least thirty (30) days prior to such event, a notice
specifying: (i) the nature of the contemplated event, (ii) the date of which any
such record is to be taken for the purpose of such event, (iii) the date on
which such event is expected to become effective and (iv) the time, if any is to
be fixed, when the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable in connection with such event.
5.9 Notice of Adjustments. Whenever the Exercise Price or the kind of
securities or property issuable upon exercise of the Warrants, or both, shall be
adjusted pursuant to this Section 5, the Company shall make a certificate signed
by its President or a Vice President and by its Chief Financial Officer,
Secretary or Assistant Secretary, setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method of which such
adjustment was calculated (including a description of the basis on which the
Company made any determination hereunder), and the Exercise Price and the kind
of securities or property issuable upon exercise of the Warrants after giving
effect to such adjustment, and shall cause copies of such certificate to be
mailed (by first class mail postage prepaid) to each Holder promptly after each
adjustment.
5.10 Preservation of Rights. The Company will not, by amendment of
its Certificate of Incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of the Warrants (including this Exhibit 1) or the rights
represented thereby, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the Holders of the Warrants
against dilution or other impairment.
5.11 When No Adjustment Required. No adjustment in the Exercise Price
shall be required unless such adjustment would require an increase or decrease
of at least $0.05 per share of Common Stock; provided, however, that any
adjustments which by reason of this Section 5.11 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
provided further, however, that adjustments shall be required and made in
accordance with the provisions of this Section 5 (other than this Section 5.11)
not later than such time as may be required in order to preserve the tax-free
nature of a distribution to the Holders of the Warrants. All calculations under
<PAGE>
this Section 5 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be. Anything in this Section 5 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Exercise Price, in addition to those required by this Section 5, as it in its
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.
Section 6. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive of office of the Company,
for a new Warrant Certificate of like tenor and date representing in the
aggregate the right to purchase the same number of Warrant Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
Section 7. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants, nor shall it be required to issue scrip
or pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock.
Section 8. Reservation of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock as shall be issuable upon the exercise thereof. The
Company covenants and agrees that, upon exercise of the Warrants and payment of
the Exercise Price therefor, all shares of Common Stock shall be duly and
validly issued, fully paid, nonassessable and not subject to the preemptive
rights of any shareholder.
Section 9. Notices to Warrant Holders. Nothing contained in this
Exhibit I shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as having any
rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution payable; or
<PAGE>
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a voluntary or involuntary dissolution,
liquidation or winding-up of the Company (other than in connection
with a consolidation or merger) or any capital reorganization,
recapitalization or reclassification or a sale of all or
substantially all of its property, assets and business as an entirety
shall be proposed;
then, in any one or more of said events, the Company will mail to each Holder of
a Warrant a notice specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the a amount and character of such dividend, distribution or right, and (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding-up is to take place and the time, if any such time is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for the securities or other property deliverable upon
such reorganization, reclassification, recapitalization, consolidation, merger,
sale, dissolution, liquidation or winding-up. Such notice shall be mailed at
least thirty (30) days prior to the date therein specified.
Section 10. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given or made at the
time delivered by hand if personally delivered; five calendar days after mailing
if sent by registered or certified mail; when receipt is confirmed, if
telecopied; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee):
(a) If to the registered Holder of the Warrants, to
the address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section 1 hereof or to such other address as the Company may
designate by notice to the Holders.
Section 11. Successors. All the covenants and provisions of this
Exhibit I shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
<PAGE>
Section 12. Governing Law. This Exhibit I and each Warrant shall be
governed and construed in accordance with the laws of the State of New York
applicable to contracts made and performed in the State of New York without
giving effect to the principles of conflicts of law thereof.
Section 13. Entire Agreement; Modification. This Exhibit I (including
the Warrant Certificate and the agreements with respect to registration rights)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
Section 14. Severability. If any provision of this Exhibit I shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Exhibit I.
Section 15. Captions. The caption headings of the Sections of this
Exhibit I are for convenience of reference only and are not intended to be, nor
should they be construed as, part of this Exhibit I and shall be given no
substantive effect.
Section 16. Benefits of This Exhibit I. Nothing in this Exhibit I
shall be construed to give any person or corporation other than the Company and
the registered Holder(s) of the Warrant Certificates or Warrant Shares any legal
or equitable right, remedy or claim under this Exhibit I; and this Exhibit I
shall be for the sole and exclusive benefit of the Company and any registered
Holder(s) of the Warrant Certificates or Warrant Shares.
M.S. Farrell & Co., Inc.
67 Wall Street
New York, New York 10005
-------------------------------------------
Tel 212-495-5304 Fax 212-855-6480 Email [email protected]
November 20, 1997
VIA TELEFAX AND OVERNIGHT COURIER
Barry Cinnamon
President
Software Publishing Corporation Holdings, inc.
16 Passaic Avenue
Fairfield, NJ 07004
Re: Financial Advisory Agreement, As of November 20, 1997
Dear Mr. Cinnamon:
1. We are pleased to set forth in this agreement (the "Agreement") the
terms of the retention of M.S. Farrell & Co., Inc. ("MSF") by Software
Publishing Corporation Holdings, Inc., its affiliates, successors,
subsidiaries or assigns (collectively, the "Company").
2. MSF will assist the Company as its non-exclusive financial advisor.
In connection with MSF's activities on the Company's behalf, MSF will
refamiliarize itself with the business, operations, properties and
financial condition and prospects of the Company. MSF's services shall
include introducing the Company to the broker/dealer financial
community, advising the Company on potential acquisitions and/or
divestitures suitable for the Company, advising the Company on the
feasibility of future offerings both publicly and privately of debt
and/or equity of the Company, and such other investment banking services
as may be mutually agreed upon by MSF and the Company.
3. In connection with MSF"s activities on the Company's behalf, the
Company will cooperate with MSF and will furnish MSF with all
information and data concerning the Company and other parties as
appropriate (the "Information") which MSF deems appropriate and will
provide MSF with access to the Company's officers, directors, employees,
independent accountants and legal counsel. The Company represents and
warrants that all Information made available to MSF by the Company will
be complete and correct in all material respects and will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the
light of the circumstances under which such statements are made. The
Company acknowledges and agrees that, in rendering its services
hereunder, MSF will be using and relying on the Information without
independent verification thereof by MSF or independent appraisal by MSF
of any of the Company's assets. MSF does not assume responsibility for
the accuracy or completeness of the Information or any other information
regarding the Company (or any other party as appropriate).
<PAGE>
4. The Company agrees that the warrants (the "Warrants") to purchase
400,000 shares of common stock of Software Publishing Corporation
Holdings, Inc., f/k/a/ Allegro New Media, Inc. ("Software"), issued to,
among others, MSF, its employees and affiliates on or about August 20,
1995 and exercisable at a price of $6.875, shall be immediately
converted to warrants to purchase 340,000 shares of Software (i.e. the
number of shares exercisable by each warrant shall be reduced by fifteen
percent [15.0%]) each warrant with a new exercise price of $2.00 and; b)
that all of the options (the "Options") to purchase 103,300 shares
issued to MSF, its employees, and its affiliates on or about December 5,
1995 with an original exercise price of $6.l5 shall convert to 87,805
options (i.e., the number of shares exercisable by each option shall be
reduced by fifteen percent [15.0%]) each option with a new exercise
price of $2.00. All of the other original terms and conditions of such
warrants and options so converted shall remain the same. MSF and Richard
Klass hereby agree that no adjustment to the exercise price or number of
shares subject to the Warrants and the Options shall be made in
connection with the sale by Software of an aggregate of 961,000 shares
of Common Stock to Howard Milstein, Ronald Altman, Patriot Group, L.P.,
Dr. Gerold M. Fleischner and Stephen P. Rosenblatt.
5. If, at any time within one (1) year after the date of termination of
this Agreement, the Company enters into any Transaction, as defined
below, with any corporation, partnership or other entity identified by
the Company and substantially assisted in any way in such Transaction by
MSF during the term of this Agreement (a "Company Introduced Party"),
then the Company shall pay MSF at the time of and from the proceeds of
the initial closing of such Transaction (including subsequent follow up
transactions or financings):
a) 2% of the Aggregate Consideration (as defined below) of
such Transaction.
For purposes of clarity in this Agreement, the Company
is not obligated to seek MSF's assistance with a
Company Introduced Party transaction.
6. If, at any time within three years after the date of termination of
this Agreement, the Company enters into any Transaction with any
corporation, partnership or other entity identified to the Company by
MSF during the term of this Agreement (an "Introduced Party"), then the
Company shall pay MSF at the time of and from the proceeds of the
initial closing of such Transaction (including subsequent follow up
transactions or financings):
a) 7% of the Aggregate Consideration of such transaction
for the first $2 million value of such transaction, 5%
of the next $2 million Aggregate Consideration of such
transaction, 3% of the next $2 million Aggregate
Consideration of such transaction, and 2% of the
remaining Aggregate Consideration of such transaction.
7. The Company hereby agrees to give a five (5) business days prior
written notice to MSF before the consummation of any Transaction and
consents to inform MSF of the time and place of settlement of such
transaction(s) and permit attendance with counsel thereto. Subject to
paragraph 9 below, MSF shall be paid directly from the proceeds of the
closing(s), if and when such transaction(s) shall occur.
<PAGE>
8. As used in this Agreement, the term "Transaction" shall include, but
not be limited to, a) any merger, consolidation, reorganization,
recapitalization, business combination or other transaction pursuant to
which the Introduced Party is acquired by, or combined with, the
Company, (b) the acquisition, directly or indirectly, in whole or in
part by the Company of the assets or securities of the Introduced Party.
9. For purposes of this Agreement, "Aggregate Consideration" shall mean
the total value of all cash, securities, other property and any other
consideration, including, without limitation, any contingent earned or
other consideration, paid or payable, directly or indirectly, in
connection with the Transaction. The fair market value of any such
securities (whether debt or equity) or other property shall be
determined by the closing or last sales price of such securities on the
date of the consummation of the Transaction, provided, that if such
non-cash consideration is a class of publicly-traded securities, then
the fair market value thereof shall be the average of the closing prices
for the 20 trading days prior to the fifth trading day prior to the
consummation of the Transaction. If no public market exists for the
securities issued in the transaction, then the fair market value thereof
shall be mutually agreed upon the by Company's Board of Directors and
MSF in good faith.
Aggregate Consideration shall also be deemed to include the principal
value of any indebtedness, including, without limitation, pension
liabilities, guarantees and other obligations assumed directly or
indirectly, in connection with, or which survives the closing of the
Transaction.
If the Transaction involves a sale of all or a substantial part
of the operating assets of the Company, the term Aggregate Consideration
shall include (x) the value of any current assets not sold, minus (y)
the value of any current liabilities not assumed by the Buyer.
If the Aggregate Consideration receivable in the Transaction is
subject to increase by contingent payments related to future events,
MSF's fee shall be calculated on the basis of the actual consideration
receivable, and the entire amount of such fee shall be payable as such
consideration is paid to the Company. In addition, any amounts paid in
connection with a non-competition, consulting or similar agreement shall
be deemed to be a part of the Aggregate Consideration paid in the
Transaction.
If the Aggregate Consideration received or receivable in the
Transaction is subject to decrease related to future events, or any
portion of such Aggregate Consideration is placed in escrow or otherwise
withheld by any source(s) of capital awaiting the outcome of future
events, MSF's fee shall be proportionately escrowed provided, however,
that MSF shall be paid proportionately as funds are released from
escrow.
If the Aggregate consideration to be paid is computed in any other
foreign currency, the value of such foreign currency shall, for
purposes hereof, be converted to U.S. Dollars at the prevailing exchange
rate on the date or dates on which such consideration is payable.
In the event of a dispute, all such non-cash consideration shall
be evaluated in terms of the total amount of the Transaction by a
mutually agreed upon third party.
10. In addition to the fees described above, the Company agrees to
promptly reimburse MSF, upon request from time to time, for reasonable
out-of-pocket expenses incurred (including fees and disbursements of
<PAGE>
counsel, and of other consultants and advisors retained by MSF) in
connection with MSF's acting for the Company pursuant to this Agreement.
Such expenses shall not exceed $500.00 in any month without the written
permission of the Company.
11. Recognizing that transaction of the type contemplated by this
engagement sometimes result in litigation and that MSF's role is limited
to acting as the Company's financial advisor, the Company agrees to
indemnify MSF (and its directors, officers, agents, employees, and
controlling persons) to the full extent lawful against any and all
claims, losses and expenses as incurred (including all reasonable fees
and disbursements of MSF's and such persons counsel and all
out-of-pocket expenses incurred in any connection with investigation of
and preparation for any such pending or threatened claims and any
litigation or other proceedings arising therefrom, such fee,
disbursements and expenses to be reimbursed quarterly as incurred)
arising out of any actual or proposed Transaction or MSF's engagement
hereunder (provided, however, there shall be excluded from such
indemnification any such claim, loss or expense that arises primarily
out of or is based primarily upon any action or failure to act
undertaken at the request or with the consent of the Company, that is
found in a final judicial determination, or a settlement tantamount
thereto, to constitute willful, bad faith, or reckless misconduct on the
part of MSF). The foregoing agreement shall be in addition to any rights
that any indemnified party may have at common law.
12. The term of this Agreement shall be for a period of one year from
the date of execution hereof and shall automatically renew for an
additional one year period unless terminated in writing by either party
prior to any anniversary date of this Agreement.
13. The validity and interpretation of this Agreement shall be governed
by the law of the State of New York applicable to agreements made and to
be fully performed therein.
14. The benefits of this Agreement shall inure to the respective
successors and assigns of the parties hereto and of the indemnified
parties hereunder and their successors and assigns and representatives,
and the obligations and liabilities assumed in this agreement by the
parties hereto shall be binding upon their respective successors and
assigns.
<PAGE>
15. For the convenience of the parties hereto, any number of
counterparts of this Agreement may be executed by the parties hereto.
Each such counterpart shall be, and shall be deemed to be, an original
instrument, but all such counterparts taken together shall constitute
one and the same Agreement. This Agreement may not be modified or
amended except in writing signed by the parties hereto.
If the foregoing correctly sets forth our Agreement, please sign
the enclosed copy of this letter in the space provided and return it to
us.
Very truly yours,
M.S. FARRELL & COMPANY, INC.
By: /s/ Richard L. Klass
Richard L. Klass
Managing Director/Corporate Finance
RICHARD L. KLASS: For purposes of paragraph 4. only
By: /s/ Richard L. Klass
Richard L. Klass, personally
AGREED TO AND ACCEPTED:
Software Publishing Corporation Holdings, Inc., hereby accepts
the terms and provisions of, and agrees to be bound by the terms and
provisions of the foregoing letter, as of this 20th day of November
1997.
Software Publishing Corporation Holdings., Inc.
By: /s/Barry A. Cinnamon
Barry Cinnamon
President
Software Publishing Corporation Holdings., Inc.
AMENDMENT TO FINANCIAL ADVISORY AGREEMENT
DATED NOVEMBER 20, 1997
Whereas, M.S. Farrell & Co., Inc. ("MSF") and Software Publishing Corporation
Holdings, Inc., its affiliates, successors, subsidiaries or assigns
(collectively, the "Company") desire to modify the Financial Advisory Agreement
between them dated November 20, 1997 (the "Agreement"), the parties hereby agree
as follows:
1. MSF shall represent the Company, at such mutually convenient time as the
parties agree, at one or more Regional Investment Banker Association ("RIBA")
capital conferences as the Company's investment banking sponsor. As such MSF
shall advise the Company on its format, presentation, and slides or accompanying
materials, to the extent applicable.
2. MSF shall advise the Company on a non-exclusive basis regarding future merger
and acquisition proposals and proposed transactions to be entered into by the
Company.
3. MSF shall, at such appropriate time as mutually agreed to by the parties
hereto, introduce the Company to higher tier investment banks than MSF for the
purpose of raising capital and/or investment banking services.
4. At the execution of, and in consideration of, this amendment ("the
"Amendment") the Company shall forthwith adjust the Warrants and Options
(previously defined in the Agreement) to an exercise price equal to the lesser
of: a) $1.27 per share, or b) 120% per share of the price of any shares of
common stock or imputed price of any shares of common stock included in any
units (without attributing any value to any warrant or any other derivative
security included in any unit), as applicable of the Company sold by the Company
to a source introduced to the Company by MSF within the next 12 months;
provided, however, that the exercise price per share of the Warrants and Options
shall not in any event be less than $1.06, nor more than $1.27. The expiration
date of the Warrants and Options shall be extended to August 20, 2002.
Software Publishing Corporation Holdings., Inc.
By: /s/ Mark E. Leininger Date 1/28/98
Mark E. Leininger, Vice President and Chief Operating Officer
M.S. Farrell & Co., Inc.
By: /s/ Martin Schacker Date 1/28/98
Martin Schacker, Chairman
AMENDMENT NO. 1 TO ESCROW AGREEMENT
This Amendment No. 1 to Escrow Agreement is made as of April 1, 1997 by and
among Allegro New Media, Inc., a Delaware corporation (the "Company"), Serif
Inc., a Delaware corporation, Norman W. Alexander, as Stockholders'
Representative and as attorney-in-fact for the Stockholders (as such terms are
defined in the Escrow Agreement) ("Alexander" or the "New Stockholders'
Representative"), Moritt, Hock & Hamroff, LLP, as new Escrow Agent (the "New
Escrow Agent"), and Blau, Kramer, Wactlar & Lieberman, P.C., as former Escrow
Agent (the "Former Escrow Agent").
WHEREAS, the parties hereto, other than the New Escrow Agent and Alexander,
did, together with Gwyn Jones ("Jones" or the "Former Stockholders'
Representative"), enter into an Escrow Agreement, dated as of July 31, 1996 (the
"Escrow Agreement"); and
WHEREAS, in furtherance of a letter agreement, dated October 14, 1996,
between the Company and Jones, Jones, pursuant to authority granted under
Section 6.02 of the Escrow Agreement as the Stockholder entitled to a majority
of the Escrowed Property (as defined in the Escrow Agreement), and the authority
granted under Section 12.8 of the Reorganization Agreement (as defined in the
Escrow Agreement), the latter authority being consented to by the Company by the
Company's execution and delivery of this Amendment No. 1 to Escrow Agreement,
did appoint Alexander as the New Stockholders' Representative and
attorney-in-fact for the Stockholders; and
WHEREAS, the Company and New Stockholders Representative have determined it
to be appropriate and in their and the Stockholders' best interests to appoint
the New Escrow Agent as the escrow agent under the Escrow Agreement in
substitution of the Former Escrow Agent and, in connection therewith, amend the
Escrow Agreement in order to substitute the New Escrow Agent for the Former
Escrow Agent thereunder;
NOW, THEREFORE, in consideration of the mutual premises and covenants set
forth herein, the parties hereto agree as follows:
1. The Company and the Stockholders' Representative hereby appoint the New
Escrow Agent as successor escrow agent to the Former Escrow Agent pursuant to
the terms of and under the Escrow Agreement and the New Escrow Agent hereby
accepts such appointment.
2. In connection with the appointment of the New Escrow Agent, the Former
Escrow Agent has been directed to deliver all of the Escrowed Property to the
New Escrow Agent and the Former Escrow Agent has made such delivery
simultaneously with the execution and delivery of this Amendment No. 1 to Escrow
Agreement. The New Escrow Agent hereby acknowledges receipt of the Escrowed
Property.
3. The Company and the Stockholders' Representative hereby release the
Former Escrow Agent from any and all liability under the Escrow Agreement.
<PAGE>
4. For all purposes with respect to the Escrow Agreement, the New Escrow
Agent shall be substituted for the Former Escrow Agent as escrow agent
thereunder and the Escrow Agreement is hereby amended to the effect that (a)
references to "Blau, Kramer, Wactlar & Lieberman, P.C." henceforth shall be
deemed to refer to "Moritt, Hock & Hamroff, LLP", (b) and all references to the
address of the Escrow Agent , and the address for copies of all notices,
consents, requests, instructions, approvals and other communications given, made
or served upon the Company, shall be deemed to refer to "400 Garden City Plaza,
Suite 202, Garden City, New York 11530, Fax No. (516) 873-2010."
5. Except as otherwise provided herein, the terms and provisions of the
Escrow Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
ALLEGRO NEW MEDIA, INC.
By:/s/Barry A. Cinnamon
Barry A. Cinnamon, President
SERIF INC.
By:/s/Barry A. Cinnamon
Barry A. Cinnamon, President
/s/Norman W. Alexander
Norman W. Alexander, as Stockholders'
Representative and as Attorney-in-Fact for
the Stockholders
<PAGE>
BLAU, KRAMER, WACTLAR &
LIEBERMAN, P.C.,
as Former Escrow Agent
By:/s/Edward S. Wactlar
Name:
Title:
MORITT, HOCK & HAMROFF, LLP,
as New Escrow Agent
By:/s/Neil M. Kaufman
Neil M. Kaufman, Partner
AMENDMENT NO. 1 TO ESCROW AGREEMENT
This Amendment No. 1 to Escrow Agreement is made as of April 1, 1997 by and
among Allegro New Media, Inc., a Delaware corporation (the "Company"), Serif
(Europe) Limited, an English corporation, Norman W. Alexander, as Stockholders'
Representative and as attorney-in-fact for the Stockholders (as such terms are
defined in the Escrow Agreement) ("Alexander" or the "New Stockholders'
Representative"), Moritt, Hock & Hamroff, LLP, as new Escrow Agent (the "New
Escrow Agent"), and Blau, Kramer, Wactlar & Lieberman, P.C., as former Escrow
Agent (the "Former Escrow Agent").
WHEREAS, the parties hereto, other than the New Escrow Agent, Alexander and
the Trust, did, together with Gwyn Jones ("Jones" or the "Former Stockholders'
Representative"), enter into an Escrow Agreement, dated as of July 31, 1996 (the
"Escrow Agreement"); and
WHEREAS, in furtherance of a letter agreement, dated October 24, 1996,
between the Company and Jones and a Notice by the Trustees of the Serif (Europe)
Limited Employee Share Option Scheme (the "Scheme"), dated as of October 24,
1996, to the Company, Jones and the Scheme, collectively as the Stockholders
entitled to a majority of the Escrowed Property (as defined in the Escrow
Agreement) pursuant to authority granted under Section 6.02 of the Escrow
Agreement, and Jones, individually, pursuant to the authority granted under
Section 13.8 of the Reorganization Agreement (as defined in the Escrow
Agreement), this latter authority being consented to by the Company by the
Company's execution and delivery of this Amendment No. 1 to Escrow Agreement,
did appoint Alexander as the New Stockholders' Representative and
attorney-in-fact for the Stockholders; and
WHEREAS, the Company and New Stockholders Representative have determined it
to be appropriate and in their and the Stockholders' best interests to appoint
the New Escrow Agent as the escrow agent under the Escrow Agreement in
substitution of the Former Escrow Agent and, in connection therewith, amend the
Escrow Agreement in order to substitute the New Escrow Agent for the Former
Escrow Agent thereunder;
NOW, THEREFORE, in consideration of the mutual premises and covenants set
forth herein, the parties hereto agree as follows:
1. The Company and the New Stockholders' Representative hereby appoint the
New Escrow Agent as successor escrow agent to the Former Escrow Agent pursuant
to the terms of and under the Escrow Agreement and the New Escrow Agent hereby
accepts such appointment.
2. In connection with the appointment of the New Escrow Agent, the Former
Escrow Agent has been directed to deliver all of the Escrowed Property to the
New Escrow Agent and the Former Escrow Agent has made such delivery
simultaneously with the execution and delivery of this Amendment No. 1 to Escrow
Agreement. The New Escrow Agent hereby acknowledges receipt of the Escrowed
Property.
<PAGE>
3. The Company and the Stockholders' Representative hereby release the
Former Escrow Agent from any and all liability under the Escrow Agreement.
4. For all purposes with respect to the Escrow Agreement, the New Escrow
Agent shall be substituted for the Former Escrow Agent as escrow agent
thereunder and the Escrow Agreement is hereby amended to the effect that (a)
references to "Blau, Kramer, Wactlar & Lieberman, P.C." henceforth shall be
deemed to refer to "Moritt, Hock & Hamroff, LLP", (b) and all references to the
address of the Escrow Agent , and the address for copies of all notices,
consents, requests, instructions, approvals and other communications given, made
or served upon the Company, shall be deemed to refer to "400 Garden City Plaza,
Suite 202, Garden City, New York 11530, Fax No. (516) 873-2010."
5. Except as otherwise provided herein, the terms and provisions of the
Escrow Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
ALLEGRO NEW MEDIA, INC.
By:/s/Barry A. Cinnamon
Barry A. Cinnamon, President
SERIF INC.
By:/s/Barry A. Cinnamon
Barry A. Cinnamon, President
/s/Norman W. Alexander
Norman W. Alexander, as Stockholders'
Representative and as Attorney-in-Fact for
the Stockholders
<PAGE>
BLAU, KRAMER, WACTLAR &
LIEBERMAN, P.C.,
as Former Escrow Agent
By:/s/Edward S. Wactlar
Name:
Title:
MORITT, HOCK & HAMROFF, LLP,
as New Escrow Agent
By:/s/Neil M. Kaufman
Neil M. Kaufman, Partner
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
- and -
AMERICAN STOCK TRANSFER & TRUST COMPANY
Rights Agent
RIGHTS AGREEMENT
Dated as of March 31, 1998
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Certain Definitions............................ 1
Section 2. Appointment of Rights Agent.................... 3
Section 3. Issue of Right Certificates.................... 3
Section 4. Form of Right Certificates..................... 4
Section 5. Countersignature and Registration.............. 4
Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost
or Stolen Right Certificates.................. 4
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights................................ 5
Section 8. Cancellation and Destruction of Right Certificates 5
Section 9. Availability of Preferred Shares............... 6
Section 10. Preferred Shares Record Date................... 6
Section 11. Adjustment of Purchase Price, Number of Shares
or Number of Rights........................... 6
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares..................................... 10
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power....................... 11
Section 14. Fractional Rights and Fractional Shares........ 11
Section 15. Rights of Action............................... 12
Section 16. Agreement of Right Holders..................... 12
Section 17. Right Certificate Holder Not Deemed a Shareholder 12
Section 18. Concerning the Rights Agent.................... 13
Section 19. Merger or Consolidation or Change of Name of
Rights Agent.................................. 13
Section 20. Duties of Rights Agent......................... 13
Section 21. Change of Rights Agent......................... 15
Section 22. Issuance of New Right Certificates............. 15
Section 23. Redemption..................................... 15
Section 24. Exchange....................................... 16
Section 25. Notice of Certain Events....................... 17
Section 26. Notices........................................ 17
Section 27. Supplements and Amendments..................... 18
Section 28. Successors..................................... 18
Section 29. Benefits of this Agreement..................... 18
Section 30. Severability................................... 18
Section 31. Governing Law.................................. 18
Section 32. Counterparts................................... 18
Section 33. Descriptive Headings........................... 18
Signatures..................................... 18
Exhibit A Form of Certificate of Amendment............... A - 1
Exhibit B Form of Right Certificate...................... B - 1
Exhibit C Summary of Rights to Purchase Preferred Shares. C - 1
<PAGE>
Agreement, dated as of March 31, 1998, between Software Publishing
Corporation Holdings, Inc., a Delaware corporation (the "Company"), and American
Stock Transfer & Trust Company (the "Rights Agent").
WHEREAS, the Board of Directors of the Company has authorized and declared
a dividend of one preferred share purchase right (a "Right") for each Common
Share (as hereinafter defined) of the Company outstanding at the close of
business on April 30, 1998 (the "Record Date"), each Right representing the
right to purchase one one-thousandth of a Preferred Share (as hereinafter
defined), upon the terms and subject to the conditions herein set forth, and has
further authorized and directed the issuance of one Right with respect to each
Common Share (as hereinafter defined) that shall become outstanding between the
Record Date and the earliest of the Distribution Date, the Redemption Date and
the Final Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter defined) of 20% or more of the Common Shares of the
Company then outstanding, but shall not include the Company, any Subsidiary (as
such term is hereinafter defined) of the Company, any employee benefit plan of
the Company or any Subsidiary of the Company, or any entity holding Common
Shares for or pursuant to the terms of any such plan. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 20% or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of 20% or more of the Common Shares of the Company then outstanding by
reason of share purchases by the Company and shall, after such share purchases
by the Company, become the Beneficial Owner of any additional Common Shares of
the Company, then such Person shall be deemed to be an "Acquiring Person."
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing provisions
of this paragraph (a), then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as in effect on the date of this
Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than these Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities tendered pursuant
to a tender or exchange offer made by or on behalf of such Person or any of
<PAGE>
such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or understanding
(other than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of securities)
for the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of any
securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in New York are authorized or obligated by law
or executive order to close.
(e) "Close of business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that, if such date is not a Business
Day, it shall mean 5:00 P.M., New York City time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the Company shall mean the
shares of common stock, par value $.001 per share, of the Company. "Common
Shares" when used with reference to any Person other than the Company shall mean
the capital stock (or equity interest) with the greatest voting power of such
other Person or, if such other Person is a Subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(h) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
(i) "Person" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.
(j) "Preferred Shares" shall mean shares of Junior Participating Preferred
Stock, Series A, par value $.001 per share, of the Company, having the rights
and preferences set forth in the Form of Certificate of Designation attached to
this Agreement as Exhibit A.
(k) "Redemption Date" shall have the meaning set forth in Section 7 hereof.
(l) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that a Person has become an
Acquiring Person.
(m) "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall, prior to the Distribution Date, also
<PAGE>
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the
tenth day after the Shares Acquisition Date or (ii) the tenth business day (or
such later date as may be determined by action of the Board of Directors prior
to such time as any Person becomes an Acquiring Person) after the date of the
commencement by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Common Shares for or pursuant to the terms of any
such plan) of, or of the first public announcement of the intention of any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan) to
commence, a tender or exchange offer the consummation of which would result in
any Person becoming the Beneficial Owner of Common Shares aggregating 20% or
more of the then outstanding Common Shares (including any such date which is
after the date of this Agreement and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of Common
Shares. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign and the Company will send
or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing
one Right for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the close of business on the Record Date, at the address of such holder shown on
the records of the Company. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration
Date), the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (c)) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
"This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights Agreement between
Software Publishing Corporation Holdings, Inc. and American Stock Transfer
& Trust Company, dated as of March 31, 1998 (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of Software Publishing
Corporation Holdings, Inc. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate. Software Publishing
Corporation Holdings, Inc. will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of a written
request therefor. Under certain circumstances, as set forth in the Rights
Agreement, Rights issued to any Person who becomes an Acquiring Person (as
defined in the Rights Agreement) may become null and void."
<PAGE>
With respect to such certificates containing the foregoing legend, until
the Distribution Date, the Rights associated with the Common Shares represented
by such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with the Common Shares which are
no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or securities
market on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 22 hereof, the Right Certificates
shall entitle the holders thereof to purchase such number of one one-thousandths
of a Preferred Share as shall be set forth therein at the price per one
one-thousandth of a Preferred Share set forth therein (the "Purchase Price"),
but the number of such one one-thousandths of a Preferred Share and the Purchase
Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates shall
be executed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, its President, any of its Vice Presidents, or its Treasurer,
either manually or by facsimile signature, shall have affixed thereto the
Company's seal or a facsimile thereof, and shall be attested by the Secretary or
an Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates shall
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Right Certificates had not ceased to be such officer of the Company; and
any Right Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 14 hereof, at any time after the close of business
on the Distribution Date, and at or prior to the close of business on the
earlier of the Redemption Date or Final Expiration Date, any Right Certificate
or Right Certificates (other than Right Certificates representing Rights that
have become void pursuant to Section 11(a)(ii) hereof or that have been
exchanged pursuant to Section 24 hereof) may be transferred, split up, combined
or exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-thousandths of a
Preferred Share as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the principal office of the Rights Agent. Thereupon,
the Rights Agent shall countersign and deliver to the person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.
<PAGE>
Upon receipt by the Company and Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein), in whole or in part, at
any time after the Distribution Date upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the Rights Agent at the principal office of the Rights Agent, together with
payment of the Purchase Price for each one one-thousandth of a Preferred Share
as to which the Rights are exercised, at or prior to the earliest of (i) the
close of business on April 30, 2008 (the "Final Expiration Date"), (ii) the time
at which the Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date") or (iii) the time at which such Rights are exchanged as
provided in Section 24 hereof.
(b) The Purchase Price for each one one-thousandth of a Preferred Share
purchasable pursuant to the exercise of a Right shall initially be $1.00, and
shall be subject to adjustment from time to time as provided in Section 11 or 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the shares to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof, by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares certificates for the number of Preferred Shares to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests or (B) requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a Preferred Share as are to
be purchased (in which case, certificates for the Preferred Shares represented
by such receipts shall be deposited by the transfer agent with the depositary
agent), and the Company hereby directs the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section
14 hereof, (iii) after receipt of such certificates or depositary receipts,
cause the same to be delivered to or upon the order of the registered holder of
such Right Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt, deliver such cash to or
upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to such
holder's duly authorized assigns, subject to the provisions of Section 14
hereof.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by the Rights Agent,
and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Rights Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Right Certificates
and, in such case, shall deliver a certificate of destruction thereof to the
Company.
Section 9. Availability of Preferred Shares. The Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held in its
<PAGE>
treasury, the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with Section 7. The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such Preferred Shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Shares transfer books of the Company are closed, such person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification
of the Preferred Shares (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock
issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, such holder would
have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 and to the limitation set forth
in the next paragraph of this Agreement, in the event any Person becomes an
Acquiring Person, each holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-thousandths of a
Preferred Share for which a Right is then exercisable, in accordance with
the terms of this Agreement and in lieu of Preferred Shares, such number of
Common Shares of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the number of one
<PAGE>
one-thousandths of a Preferred Share for which a Right is then exercisable
and dividing that product by (y) 50% of the then current per share market
price of the Company's Common Shares (determined pursuant to Section 11(d)
hereof) on the date of the occurrence of such event. In the event that any
Person shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that
are or were acquired or beneficially owned by any Acquiring Person (or any
Associate or Affiliate of such Acquiring Person) shall be void and any
holder of such Rights shall thereafter have no right to exercise such
Rights under any provision of this Agreement. No Right Certificate shall be
issued pursuant to Section 3 that represents Rights beneficially owned by
an Acquiring Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate thereof; no Right Certificate shall
be issued at any time upon the transfer of any Rights to an Acquiring
Person whose Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof or to any nominee of such Acquiring Person,
Associate or Affiliate; and any Right Certificate delivered to the Rights
Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence shall be cancelled.
(iii) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Company shall take all such action as may be
necessary to authorize additional Common Shares for issuance upon exercise
of the Rights. In the event the Company shall, after good faith effort, be
unable to take all such action as may be necessary to authorize such
additional Common Shares, the Company shall substitute, for each Common
Share that would otherwise be issuable upon exercise of a Right, a number
of Preferred Shares or fraction thereof such that the current per share
market price of one Preferred Share multiplied by such number or fraction
is equal to the current per share market price of one Common Share as of
the date of issuance of such Preferred Shares or fraction thereof.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Shares entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase Preferred Shares (or shares having the same rights, privileges and
preferences as the Preferred Shares ("equivalent preferred shares")) or
securities convertible into Preferred Shares or equivalent preferred shares at a
price per Preferred Share or equivalent preferred share (or having a conversion
price per share, if a security convertible into Preferred Shares or equivalent
preferred shares) less than the then current per share market price of the
Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of additional
Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and, in the event that such rights, options or warrants are not
so issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
<PAGE>
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and, in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the
purpose of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for the 30
consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however, that in the event that the current
per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend
or distribution on such Security payable in shares of such Security or
securities convertible into such shares or (B) any subdivision, combination
or reclassification of such Security and prior to the expiration of 30
Trading Days after the ex-dividend date for such dividend or distribution,
or the record date for such subdivision, combination or reclassification,
then, and in each such case, the current per share market price shall be
appropriately adjusted to reflect the current market price per share
equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New
York Stock Exchange or, if the Security is not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed
on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted
to trading on any national securities exchange, the last quoted price or,
if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by The Nasdaq Stock Market ("Nasdaq")
or such other automated quotation system then in use, or, if on any such
date the Security is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market
maker making a market in the Security selected in good faith by the Board
of Directors of the Company. The term "Trading Day" shall mean a day on
which the principal national securities exchange, Nasdaq or other automated
quotation system on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be
determined in accordance with the method set forth in Section 11(d)(i). If
the Preferred Shares are not publicly traded, the "current per share market
price" of the Preferred Shares shall be conclusively deemed to be the
current per share market price of the Common Shares as determined pursuant
to Section 11(d)(i) (appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof),
multiplied by one thousand. If neither the Common Shares nor the Preferred
Shares are publicly held or so listed or traded, "current per share market
price" shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-millionth of a
<PAGE>
Preferred Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a) hereof,
the holder of any Right thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one thousandths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least ten days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a Preferred Share issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-thousandths of
a Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
<PAGE>
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-thousandth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date of the
Preferred Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that the Company, in its sole discretion, shall determine to be
advisable in order that any consolidation or subdivision of the Preferred
Shares, issuance wholly for cash of any Preferred Shares at less than the
current market price, issuance wholly for cash of Preferred Shares or securities
which by their terms are convertible into or exchangeable for Preferred Shares,
dividends on Preferred Shares payable in Preferred Shares or issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by
the Company to holders of its Preferred Shares shall not be taxable to such
stockholders.
(n) In the event that, at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then, in any such case, (A)
the number of one one-thousandths of a Preferred Share purchasable after such
event upon proper exercise of each Right shall be determined by multiplying the
number of one one-thousandths of a Preferred Share so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
Common Shares outstanding immediately before such event and the denominator of
which is the number of Common Shares outstanding immediately after such event
and (B) each Common Share outstanding immediately after such event shall have
issued with respect to it that number of Rights which each Common Share
outstanding immediately prior to such event had issued with respect to it. The
adjustments provided for in this Section 11(n) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. In the event, directly or indirectly, at any time after a Person has
become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with, or merge
with and into, the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Shares shall be changed into or exchanged for stock or other
securities of any other Person (or the Company) or cash or any other property or
(c) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one or more transactions,
assets or earning power aggregating 50% or more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person other
than the Company or one or more of its wholly-owned Subsidiaries, then, and in
each such case, proper provision shall be made so that (i) each holder of a
Right (except as otherwise provided herein) shall thereafter have the right to
receive, upon the exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-thousandths of a Preferred Share for
<PAGE>
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of such
other Person (including the Company as successor thereto or as the surviving
corporation) as shall equal the result obtained by (A) multiplying the then
current Purchase Price by the number of one one-thousandths of a Preferred Share
for which a Right is then exercisable and dividing that product by (B) 50% of
the then current per share market price of the Common Shares of such other
Person (determined pursuant to Section 11(d) hereof) on the date of consummation
of such consolidation, merger, sale or transfer, (ii) the issuer of such Common
Shares shall thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations and duties of the
Company pursuant to this Agreement, (iii) the term "Company" shall thereafter be
deemed to refer to such issuer and (iv) such issuer shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
Common Shares thereafter deliverable upon the exercise of the Rights. The
Company shall not consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such issuer shall have executed and
delivered to the Rights Agent a supplemental agreement so providing. The Company
shall not enter into any transaction of the kind referred to in this Section 13
if, at the time of such transaction, there are any rights, warrants, instruments
or securities outstanding or any agreements or arrangements which, as a result
of the consummation of such transaction, would eliminate or substantially
diminish the benefits intended to be afforded by the Rights. The provisions of
this Section 13 shall similarly apply to successive mergers or consolidations or
sales or other transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The Company shall
not be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Right Certificates with regard to which
such fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right. For the purposes
of this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other automated quotation system then in use or,
if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected in good faith by the Board
of Directors of the Company. If on any such date no such market maker is making
a market in the Rights, the fair value of the Rights on such date as determined
in good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-thousandth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-thousandth of a Preferred
Share may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts.
In lieu of fractional Preferred Shares that are not integral multiples of
one one-thousandth of a Preferred Share, the Company shall pay to the registered
holders of Right Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one Preferred Share. For the purposes of this Section 14(b), the
current market value of a Preferred Share shall be the closing price of a
<PAGE>
Preferred Share (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right, by the acceptance of the Right, expressly waives
such holder's right to receive any fractional Rights or any fractional shares
upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in such holder's own behalf and
for such holder's own benefit, enforce and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder's right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in whose
name the Right Certificate (or, prior to the Distribution Date, the associated
Common Shares certificate) is registered as the absolute owner thereof and of
the Rights evidenced thereby notwithstanding any notations of ownership or
writing on the Right Certificates or the associated Common Shares certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof) or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by the Rights
Agent hereunder and, from time to time, on demand of the Rights Agent, the
Rights Agent's reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement and the exercise
and performance of the Rights Agent's duties hereunder. The Company also agrees
to indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
<PAGE>
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by the Rights Agent in
connection with, the Rights Agent's administration of this Agreement in reliance
upon any Right Certificate or certificate for the Preferred Shares or Common
Shares or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement or other paper or document believed by the
Rights Agent to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper person or persons, or otherwise upon the
advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which the Rights Agent may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and, in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and, in case at that time any
of the Right Certificates shall not have been countersigned, the Rights Agent
may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by the Rights Agent in good faith and in accordance with such
opinion.
(b) Whenever in the performance of the Rights Agent's duties under this
Agreement, the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any Acquiring Person
and the determination of "current market price") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
any one of the Chairman of the Board, Chief Executive Officer, President, any
Vice President, Treasurer or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by the Rights Agent under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for the Rights Agent's own negligence, bad faith or willful
misconduct.
<PAGE>
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except the Rights Agent's countersignature thereof) or be required
to verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except the Rights Agent's countersignature
thereof); nor shall the Rights Agent be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Right
Certificate; nor shall the Rights Agent be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Section 3, 11,
13, 23 or 24, or the ascertaining of the existence of facts that would require
any such change or adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice that such change or
adjustment is required); nor shall the Rights Agent, by any act hereunder, be
deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares to be issued pursuant to this Agreement or
any Right Certificate or as to whether any Preferred Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that the Company will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of the Rights Agent's duties
hereunder from any one of the Chairman of the Board, Chief Executive Officer,
President, any Vice President, Secretary or Treasurer of the Company, and to
apply to such officers for advice or instructions in connection with the Rights
Agent's duties, and the Rights Agent shall not be liable for any action taken or
suffered by the Rights Agent in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested or contract with or lend money to the Company or
otherwise act as fully and freely as though the Rights Agent was not Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in the Rights Agent or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; provided that reasonable care was exercised
in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk the Rights Agent's own funds or otherwise incur any financial liability
in the performance of any of the Rights Agent's duties hereunder or in the
exercise of the Rights Agent's rights, if there shall be reasonable grounds for
believing that repayment of such funds or adequate indemnification against such
risk or liability is not reasonably assured to the Rights Agent.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
<PAGE>
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after the Company has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit such holder's Right Certificate for inspection by the
Company), then the incumbent Rights Agent or the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and doing business
under the laws of the United States or of the State of New York (or of any other
state of the United States so long as such corporation is authorized to do
business as a banking institution in the State of New York), in good standing,
having an office in the State of New York, which is authorized under such laws
to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has, at the
time of appointment as Rights Agent, a combined capital and surplus of at least
$50 million. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if such successor Rights
Agent had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by such predecessor Rights Agent hereunder,
and execute and deliver any further assurance, conveyance, act or deed necessary
for the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares or Preferred Shares, and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at the Company's option, issue new Right Certificates evidencing Rights in such
form as may be approved by the Company's Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Board of Directors of the Company may, at
its option, at any time prior to such time as any Person becomes an Acquiring
Person, redeem all, but not less than all, the then outstanding Rights at a
redemption price of $.001 per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
The redemption of the Rights by the Company's Board of Directors may be made
effective at such time, on such basis and with such conditions as the Board of
Directors, in its sole discretion, may establish.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23, and without any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within ten days after such action of the Company's Board of Directors ordering
the redemption of the Rights, the Company shall mail a notice of redemption to
all the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the payment
of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
or in Section 24 hereof, and other than in connection with the purchase of
Common Shares prior to the Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
<PAGE>
Rights that have become void pursuant to the provisions of Section 11(a)(ii)
hereof) for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.
Each such notice of exchange will state the method by which the exchange of
the Common Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 11(a)(ii) hereof)
held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be necessary to authorize
such additional Common Shares, the Company shall substitute, for each Common
Share that would otherwise be issuable upon exchange of a Right, a number of
Preferred Shares or fraction thereof such that the current per share market
price of one Preferred Share multiplied by such number or fraction is equal to
the current per share market price of one Common Share as of the date of
issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares. In lieu
of such fractional Common Shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
paragraph (d), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company shall propose
to (i) pay any dividend payable in stock of any class to the holders of its
Preferred Shares or to make any other distribution to the holders of Preferred
Shares (other than a regular quarterly cash dividend), (ii) offer to the holders
of Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, (iii) effect any reclassification of Preferred
Shares (other than a reclassification involving only the subdivision of
outstanding Preferred Shares), (iv) effect any consolidation or merger into or
with, or to effect any sale or other transfer (or to permit one or more of the
Company's Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
the Company's Subsidiaries (taken as a whole) to, any other Person, (v) effect
the liquidation, dissolution or winding up of the Company or (vi) declare or pay
any dividend on the Common Shares payable in Common Shares or effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
<PAGE>
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of the Common Shares and/or Preferred Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least ten days prior to the record date for
determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least ten days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall occur,
then the Company shall as soon as practicable thereafter give to each holder of
a Right Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, addressed (until
another address is filed in writing with the Rights Agent in the same manner of
a notice prescribed by this Section 26) as follows:
Software Publishing Corporation Holdings, Inc.
3 Oak Road
Fairfield, New Jersey 07004
with a copy to: Kaufman & Associates, LLC
50 Charles Lindbergh Boulevard
Suite 206
Mitchel Field, New York 11553
Attention: Neil M. Kaufman, Esq.
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by certified or registered mail, return receipt requested,
postage prepaid, addressed (until another address is filed in writing with the
Company in the same manner of a notice prescribed by this Section 26) as
follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company may from time to time
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order to cure any ambiguity, correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein or make any other provisions with respect to the Rights which
the Company may deem necessary or desirable, any such supplement or amendment to
be evidenced by a writing signed by the Company and the Rights Agent; provided,
however, that from and after such time as any Person becomes an Acquiring
Person, this Agreement shall not be amended in any manner which would adversely
affect the interests of the holders of Rights.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
<PAGE>
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts to be made and performed
entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
SOFTWARE PUBLISHING
CORPORATION HOLDINGS, INC.
By:s/ Mark E. Leininger
Mark E. Leininger
President and Chief Operating Officer
ATTEST:
By:s/ Marc E. Jaffe
Marc E. Jaffe, Secretary
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By:s/ Herbert J. Lemmer
Name: Herbert J. Lemmer
Title: Vice President
ATTEST:
By:s/ Susan Silber
Name: Susan Silber
Title: Assistant Secretary
<PAGE>
Exhibit A
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
FORM
of
CERTIFICATE OF DESIGNATIONS
of the
JUNIOR PARTICIPATING PREFERRED STOCK, SERIES A
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), hereby
certifies that the following resolution was duly adopted by the Board of
Directors of the Corporation at a duly convened meeting thereof held on March
31, 1998, at which meeting a quorum of the directors was present and acting
throughout:
RESOLVED, that, pursuant to Article Fourth of the
Certificate of Incorporation, as amended, which creates and authorizes
1,939,480 shares of Preferred Stock of the par value of $.001 per share
(hereinafter called the "Serial Preferred Stock"), of which no shares are
currently issued and outstanding so that all 1,939,480 shares of Serial
Preferred Stock have the status of authorized but unissued shares and are
available for issuance, the Board of Directors of the Corporation hereby
establishes a series of Serial Preferred Stock to consist of 100,000
shares, and hereby fixes the powers, designation, preferences and relative,
participating, optional and other rights of such series of Serial Preferred
Stock, and the qualifications, limitations and restrictions thereof, in
addition to those set forth in said Article Fourth, as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Junior Participating Preferred Stock, Series A" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 100,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Company convertible
into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of Common Stock, par
value $.001 per share (the "Common Stock"), of the Company, and of any other
junior stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of January, April, July and October
in each year (each such date being referred to herein as a "Quarterly Dividend
<PAGE>
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (i) $10 or (ii) subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash dividends, and
1,000 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Company shall
at any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the amount to which holders
of shares of Series A Preferred Stock were entitled immediately prior to such
event under clause (ii) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Company shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (a) of this Section immediately after
the Company declares a dividend or distribution on the Common Stock (other than
a dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $10 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or, unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events, such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 50 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series F Preferred Stock
shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Company. In
the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then, in each
such case, the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Serial Preferred Stock or any similar stock,
or by law, the holders of shares of Series A Preferred Stock and the holders of
<PAGE>
shares of Common Stock and any other capital stock of the Company having general
voting rights shall vote together as one class on all matters submitted to a
vote of shareholders of the Company.
(c) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred
Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred
Stock; provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Company ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares of
stock ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(b) The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company unless
the Company could, under paragraph (a) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall, upon their cancellation, become authorized but unissued shares of Serial
Preferred Stock and may be reissued as part of a new series of Serial Preferred
Stock subject to the conditions and restrictions on issuance set forth herein,
in the Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Serial Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Company, no distribution shall be made (a) to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $1,000 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment;
<PAGE>
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to
be distributed per share to holders of shares of Common Stock, or (b) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Company shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then, in each such case, the
aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (a) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Company shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then, in any such case, each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Company
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then, in each such case, the amount set forth
in the preceding sentence with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the nominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall not
be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of the Serial Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the Company
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, Software Publishing Corporation Holdings, Inc., has
caused this Certificate of Designations to be signed by Mark E. Leininger, its
President and Chief Operating Officer, and attested to by Marc E. Jaffe, its
Secretary, this 31st day of March, 1998.
<PAGE>
SOFTWARE PUBLISHING
CORPORATION HOLDINGS, INC.
By:
Mark E. Leininger
President and Chief Operating Officer
[CORPORATE SEAL]
ATTEST:
By:
Marc E. Jaffe, Secretary
<PAGE>
Exhibit B
Form of Right Certificate
Certificate No. R - ___ ________ Rights
NOT EXERCISABLE AFTER APRIL 30, 2008 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
RIGHT CERTIFICATE
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
This certifies that _____________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of March 31, 1998 (the "Rights Agreement"), between Software
Publishing Corporation Holdings, Inc., a Delaware corporation (the "Company"),
and American Stock Transfer & Trust Company (the "Rights Agent"), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 P.M., New York City time, on
April 30, 2008, at the principal office of the Rights Agent, or at the office of
its successor as Rights Agent, one one-thousandth of a fully paid non-assessable
share of Junior Participating Preferred Stock, Series A, par value $.001 per
share (the "Preferred Shares"), of the Company, at a purchase price of $1.00 per
one one-thousandth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-thousandths of a Preferred Share which
may be purchased upon exercise hereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of April 30, 1998, based
on the Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one-thousandths of a
Preferred Share which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, Company and holders of the Right Certificates. Copies of the
Rights Agreement are on file at the principal executive offices of the Company
and the above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
<PAGE>
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$.001 per Right or (ii) may be exchanged in whole or in part for Preferred
Shares or shares of the Company's Common Stock, par value $.001 per share.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but, in lieu thereof, a
cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of ________________, ____
SOFTWARE PUBLISHING
CORPORATION HOLDINGS, INC.
By:
Mark E. Leininger
President and Chief Operating Officer
ATTEST:
By:
Marc E. Jaffe, Secretary
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:
Authorized Signature
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Right Certificate.)
FOR VALUE RECEIVED _______________________ hereby sells, assigns and
transfers unto _________
_________________________________________________________ (Please print name and
address of transferee) this Right Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
______________________________________________________ Attorney, to transfer the
within Right Certificate on the books of the within-named Company, with full
power of substitution.
Dated: ______________, ____
- --------------------------------------------------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (a bank,
stock broker, savings and loan association or credit union with membership in an
approved signature guarantee program) pursuant to Rule 17Ad-15 of the Securities
Exchange Act of 1934.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
Signature: _____________________________________________________________________
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the Right
Certificate.)
To: SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
The undersigned hereby irrevocably elects to exercise _____________ Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that certificates for such
Preferred Shares be issued in the name of:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
<PAGE>
Please insert social security or other identifying number: _____________________
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
Please insert social security or other identifying number: _____________________
Dated: ________________, ____
- --------------------------------------------------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (a bank,
stock broker, savings and loan association or credit union with membership in an
approved signature guarantee program) pursuant to Rule 17Ad-15 of the Securities
Exchange Act of 1934.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
Signature: _____________________________________________________________________
-------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase, as
the case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored.
<PAGE>
Exhibit C
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
On March 31, 1998, the Board of Directors of Software Publishing
Corporation Holdings, Inc. (the "Company") declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of common stock, par
value $.001 per share (the "Common Shares"), of the Company. The dividend is
payable on April 30, 1998 (the "Record Date") to the shareholders of record on
that date. Each Right entitles the registered holder to purchase from the
Company one one-thousandth of a share of Junior Participating Preferred Stock,
Series A, par value $.001 per share (the "Preferred Shares"), of the Company at
a price of $1.00 per one one-thousandth of a Preferred Share (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement, dated as of March 31, 1998 (the "Rights
Agreement"), between the Company and American Stock Transfer & Trust Company, as
Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) ten days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") have acquired beneficial ownership of 20% or more of the outstanding
Common Shares or (ii) ten business days (or such later date as may be determined
by action of the Board of Directors prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of the outstanding Common Shares (the earlier of such dates
being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as of the Record
Date, by such Common Share certificate with a copy of this Summary of Rights
attached thereto.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Shares. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Share certificates issued after the
Record Date upon transfer or new issuance of Common Shares will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for Common Shares outstanding as of the Record
Date, even without such notation or a copy of this Summary of Rights being
attached thereto, will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Common Shares
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on April 30, 2008 (the "Final Expiration Date"), unless the Rights are
earlier redeemed or exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-thousandths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
<PAGE>
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $10 per share but will be entitled to an aggregate
dividend of 1,000 times the dividend declared per Common Share.
In the event of liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $1,000 per share but
will be entitled to an aggregate payment of 1,000 times the payment made per
Common Share. Each Preferred Share will have 1,000 votes, voting together with
the Common Shares. Finally, in the event of any merger, consolidation or other
transaction in which Common Shares are exchanged, each Preferred Share will be
entitled to receive 1,000 times the amount received per Common Share. These
rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-thousandth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the Right. In the event that any person or group of affiliated
or associated persons becomes an Acquiring Person, proper provision shall be
made so that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the right
to receive upon exercise that number of Common Shares having a market value of
two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Shares, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, at an exchange ratio of one Common Share, or one
one-thousandth of a Preferred Share (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges),
per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and, in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Common Shares, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.001 per Right (the "Redemption Price").
The redemption of the Rights may be made effective at such time on such basis
with such conditions as the Board of Directors, in its sole discretion, may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, except that, from and
after such time as any person or group of affiliated or associated persons
becomes an Acquiring Person, no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
<PAGE>
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A, dated
April 1, 1998. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
Exhibit 21
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
List of Subsidiaries
State or Other Jurisdiction of
Name Incorporation or Organization
Software Publishing Corporation. . . . . . . . . . . . . . . . . . . . Delaware
Serif Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Serif (Europe) Limited . . . . . . . . . . . . . . . . . . . . . . . . England
Software Publishing Corporation Europe . . . . . . . . . . . . . . . California
Software Publishing Corporation SPC (Italia) s.r.l.. . . . . . . . . . Italy
Software Publishing International Corporation (FSC). . . . . . . . . . Barbados
Software Publishing Asia Pacific Corporation . . . . . . . . . . . . .California
Software Publishing Corporation Netherlands. . . . . . . . . . . . . .California
Software Publishing Corporation Belgium. . . . . . . . . . . . . . . .California
Software Publishing Deutschland GmbH . . . . . . . . . . . . . . . . . Germany
Software Publishing France, SARL . . . . . . . . . . . . . . . . . . . France
Software Publishing Corporation (Scandinavia) AB . . . . . . . . . . . Sweden
Software Publishing Limited. . . . . . . . . . . . . . . . . . . .United Kingdom
Grafox Limited . . . . . . . . . . . . . . . . . . . . . . . . . .United Kingdom
Precision Software Limited . . . . . . . . . . . . . . . . . . . .United Kingdom
PSL GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
Digital Paper, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . .California
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-13059) pertaining to the 1994 Long Term Incentive Plan of
Software Publishing Corporation Holdings, Inc. and in the Registration Statement
(Form S-8 No. 333-19169) pertaining to the Outside Director and Advisor Stock
Option Plan of Software Publishing Corporation Holdings, Inc. and in the
Registration Statement (Form S-8 No. 333-19059) pertaining to the Software
Publishing Corporation 1987 Stock Option Plan, the Software Publishing
Corporation 1989 Stock Option Plan and the Software Publishing Corporation 1991
Stock Option Plan each of Software Publishing Corporation Holdings, Inc. and in
the related Prospectuses of our report dated April 14, 1997 with respect to the
consolidated financial statements of Software Publishing Corporation Holdings,
Inc. included in this Annual Report (Form 10-KSB) for the year ended December
31, 1997.
/s/ Ernst & Young, LLP
Ernst & Young, LLP
Hackensack, New Jersey
April 15, 1998
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in (a) the Registration
Statement, as amended (No. 333-13059), of Software Publishing Corporation
Holdings, Inc. (the "Company") pertaining to the Company's 1994 Long Term
Incentive Plan, (b) the Company's Registration Statement (No. 333-19169)
pertaining to the Company's Outside Director and Advisor Stock Option Plan and
(c) the Company's Registration Statement (Form S-8 No. 333-19059) pertaining to
the Software Publishing Corporation's 1987 Stock Option Plan, Software
Publishing Corporation's 1989 Stock Option Plan and Software Publishing
Corporation's 1991 Stock Option Plan, of our Report, dated April 15, 1998, which
included an explanatory paragraph about the existence of substantial doubt
regarding the Company's ability to continue as a going concern and an emphasis
paragraph regarding a contingency with respect to the financial statements of
the Company included in the Company's Annual Report on Form 10-KSB, for the year
ended December 31, 1997, filed with the Securities and Exchange Commission.
/s/ Richard A. Eisner & Company, LLP
Richard A. Eisner & Company, LLP
New York, New York
April 15, 1998
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement,
(Form S-8 No. 333- 13059) of Software Publishing Corporation Holdings, Inc. (the
"Company") pertaining to the Company's 1994 Long Term Incentive Plan, the
Company's Registration Statement (Form S-8 No. 333-19169) pertaining to the
Company's Outside Director and Advisor Stock Option Plan and the Company's
Registration Statement (Form S-8 No. 333-19059) pertaining to the Company's 1987
Stock Option Plan, the Company's 1989 Stock Option Plan and the Company's 1991
Stock Option Plan, of our Report dated 14 April 1998, with respect to the
financial statements of Serif (Europe) Limited included in the Company's Annual
Report on Form 10-KSB for the year ended 31 December 1997, filed with the
Securities and Exchange Commission.
s/Ernst & Young
Ernst & Young
Chartered Accountants
Nottingham, United Kingdom
14 April, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Dec-31-1997
<CASH> 2,586,753
<SECURITIES> 173,600
<RECEIVABLES> 1,947,102
<ALLOWANCES> 623,000
<INVENTORY> 567,336
<CURRENT-ASSETS> 4,981,382
<PP&E> 1,062,784
<DEPRECIATION> 493,896
<TOTAL-ASSETS> 10,629,502
<CURRENT-LIABILITIES> 7,301,331
<BONDS> 0
0
0
<COMMON> 9,011
<OTHER-SE> 3,134,395
<TOTAL-LIABILITY-AND-EQUITY> 10,629,502
<SALES> 17,156,865
<TOTAL-REVENUES> 17,156,865
<CGS> 4,155,749
<TOTAL-COSTS> 4,155,749
<OTHER-EXPENSES> (3,603,117)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,720,731)
<INCOME-TAX> 47,035
<INCOME-CONTINUING> (9,767,766)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,767,766)
<EPS-PRIMARY> (1.19)
<EPS-DILUTED> (1.19)
</TABLE>
