<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1997
-------------------
Commission File Number 0-25498
CONCENTRA CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-2827026
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21 NORTH AVENUE
BURLINGTON, MA 01803-3301
(Address of principal executive offices)
(781) 229-4600
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 X No
--- ---
AS OF FEBRUARY 12, 1998, THERE WERE ISSUED AND OUTSTANDING 6,074,341 SHARES OF
THE REGISTRANT'S COMMON STOCK.
================================================================================
<PAGE> 2
CONCENTRA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
ITEM 1. Condensed Consolidated Financial Statements:
a) Condensed Consolidated Balance Sheets as of December 31, 1997
(unaudited) and March 31, 1997................................. 3
b) Condensed Consolidated Statements of Operations for the three-
and nine-months ended December 31, 1997 and 1996 (unaudited)... 4
c) Condensed Consolidated Statements of Cash Flows for the nine-
months ended December 31, 1997 and 1996 (unaudited)............ 5
d) Notes to Condensed Consolidated Financial
Statements.................................................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.................................. 12
Signatures........................................................ 13
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONCENTRA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
(Unaudited)
----------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,532 $ 3,890
Marketable securities -- 203
Accounts receivable, net of allowance for doubtful accounts of $1,224
and $125, respectively 4,181 13,128
Other current assets 1,819 1,615
-------- --------
Total current assets 8,532 18,836
Property and equipment, net 2,079 2,612
Capitalized software costs, net 1,965 1,878
Intangible assets, net 611 1,333
Other assets 290 372
-------- --------
Total assets $ 13,477 $ 25,031
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,830 $ 1,551
Accrued expenses 3,203 4,123
Income tax payable 263 273
Deferred revenue 1,631 2,898
Current portion of capital lease obligations 347 423
-------- --------
Total current liabilities 7,274 9,268
Capital lease obligations 549 611
Deferred revenue 58 84
Commitments and contingencies (Note B) -- --
Stockholders' equity:
Preferred stock - $.01 par value; 4,000,000 shares authorized, no
shares issued or -- --
outstanding
Common stock - $.00001 par value; 40,000,000 shares authorized,
6,074,341 and 5,499,211 shares issued and outstanding at
December 31, 1997 and March 31, 1997, respectively -- --
Additional paid-in capital
27,736 25,578
Accumulated deficit (21,721) (10,099)
Cumulative translation adjustment (419) (411)
-------- --------
Total stockholders' equity 5,596 15,068
-------- --------
Total liabilities and stockholders' equity $ 13,477 $ 25,031
======== ========
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 4
CONCENTRA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
-------- -------- -------- --------
Revenues:
<S> <C> <C> <C> <C>
Software licenses $ 622 $ 6,327 $ 3,524 $ 14,654
Services 1,983 1,604 7,146 5,242
Related party software and services 143 3 789 96
-------- -------- -------- --------
Total revenues 2,748 7,934 11,459 19,992
Operating expenses:
Cost of software licenses 411 531 1,840 1,502
Cost of services 1,351 1,000 3,511 2,641
Sales and marketing 3,401 3,839 10,005 10,297
Research and development 996 972 2,685 2,426
General and administrative 1,858 627 3,229 1,921
Restructuring charge -- -- 283 --
-------- -------- -------- --------
Total operating expenses 8,017 6.969 21,553 18,787
Income (loss) from operations (5,269) 965 (10,094) 1,205
Interest income 37 75 157 250
Interest expense (23) (26) (75) (79)
Other (expense) income (1,012) 55 (1,580) 462
-------- -------- -------- --------
Income (loss) before income taxes (6,267) 1,069 (11,592) 1,838
Provision for income taxes 10 267 30 460
-------- -------- -------- --------
Net income (loss) $ (6,277) $ 802 $(11,622) $ 1,378
======== ======== ======== ========
Basic income (loss) per common and
common equivalent share $ (1.10) $ 0.14 $ (2.08) $ 0.24
======== ======== ======== ========
Weighted average number of
common shares outstanding 5,693 5,852 5,582 5,700
======== ======== ======== ========
Diluted income (loss) per common and
common equivalent share $ (1.10) $ 0.14 $ (2.08) $ 0.24
======== ======== ======== ========
Weighted average number of diluted
common and common equivalent shares
outstanding 5,693 5,858 5,582 5,705
======== ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE> 5
CONCENTRA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
1997 1996
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(11,622) $ 1,378
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,867 1,708
Foreign exchange (gain) loss 79 (62)
Write off of intangible assets 372 --
Provision for bad debt 1,101 --
Loss on sale of marketable securities 14 --
Write down of other asset 82 --
Changes in operating assets and liabilities:
Accounts receivable 7,841 (5,140)
Other assets (191) (105)
Accounts payable 280 (370)
Accrued expenses (980) 172
Deferred revenue (1,302) (672)
Income taxes payable (10) 429
-------- -------
Net cash provided by (used in) operating activities (2,469) (2,662)
-------- -------
Cash flows from investing activities:
Purchase of property and equipment (163) (326)
Capitalized software costs (700) (720)
Purchase of intangible assets (104) (96)
Proceeds from sale of marketable securities 189 --
-------- -------
Net cash used in investing activities (778) (1,142)
-------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance cost 2,052 --
Proceeds from exercise of stock options 106 407
Principal payments under capital lease obligations (242) (190)
-------- -------
Net cash provided by (used in) financing activities 1,916 217
-------- -------
Effects of exchange rates on cash and cash equivalents (27) (302)
Net increase (decrease) in cash and cash equivalents (1,358) (3,889)
Cash and cash equivalents at beginning of year 3,890 9,121
-------- -------
Cash and cash equivalents at end of period $ 2,532 $ 5,232
======== =======
Supplemental disclosure of cash flow information:
Interest paid $ 75 $ 79
Income taxes paid $ 40 $ 31
Supplemental disclosure of non-cash investing and financing activities:
Equipment acquired under capital lease obligations $ 104 $ --
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE> 6
CONCENTRA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
Concentra Corporation (the "Company") and its wholly-owned foreign subsidiaries.
All significant intercompany transactions and balances have been eliminated. In
the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present such information fairly. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to Securities and Exchange Commission rules and
regulations. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997. Operating results for the three-month and nine-month periods
ended December 31, 1997 may not necessarily be indicative of the results to be
expected for any other interim period or for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. The most significant estimates in the financial statements
include but are not limited to accounts receivable, sales and return, and income
tax valuation allowances. Actual results could differ from those estimates.
The Company has adpoted the standards for calculating earnings per share
("EPS") pursuant to Statement of Financial Accounting Standards No. 128 ("SFAS
128") which supersedes APB Opinion No. 15, "Earnings Per Share" ("Opinion 15")
and replaces the presentation of primary EPS with a presentation of basic EPS.
Basic EPS is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding during the year of
computation. Diluted EPS is computed similarly to fully diluted EPS pursuant to
Opinion 15 with some modifications and is not materially different for the
three-month and nine-month periods ended December 31, 1997 and 1996. The
condensed consolidated financial statements for the three-month and nine-month
periods ended December 31, 1997 and 1996 have been restated to conform to SFAS
128.
Certain fiscal year 1997 balances have been reclassified to conform to
fiscal year 1998 presentation.
B. COMMITMENTS AND CONTINGENCIES
Lines of Credit
The Company's demand line of credit of $2,500,000 expired on June 30, 1997.
This line of credit contained financial covenants consisting of minimum tangible
capital base, ratio of total liabilities to tangible capital base and debt
service coverage. The Company would not currently be in compliance with these
covenants were the line of credit in effect and is negotiating with the
commercial lender to extend and amend the line of credit. The Company's
$1,750,000 equipment line of credit, collateralized by equipment, expired on
March 31, 1997. The Company is negotiating with the commercial lender to extend
and amend this line of credit. As of December 31, 1997, the Company had borrowed
$1,413,000 under the equipment line of credit. There can be no assurance the
Company will be successful in extending and amending the lines of credit, nor
can there be any assurance that such extended and amended lines of credit
6
<PAGE> 7
will be on similar terms as the existing agreements. Additionally, there can be
no assurance that alternative funding will be available if required.
Consulting Arrangements
During fiscal 1996, the Company entered into a $5,000,000 five-year
applications consulting services contract with a significant customer of the
Company. The five-year applications consulting services contract contains volume
pricing discounts subject to adjustments for increased costs. The Company has a
minimum commitment of $2,500,000 for outside applications services to be used by
the Company over a five-year period. The minimum commitment of $2,500,000 will
be paid in five yearly payments commencing December 31, 1996. These yearly
payments are $250,000, $500,000, $550,000, $600,000 and $600,000 for the five
calendar years beginning December 31, 1996, respectively. The Company recognizes
the consulting service expenses as incurred. The Company believes that the
minimum payment accruals will be fully utilized based on current forecasts.
However, given the significant sales fluctuations which may occur in any given
period, it is possible the minimum commitments would not be met, thus requiring
the Company to record a charge in excess of the services utilized. At December
31, 1997, the Company had fully used the minimum first-year commitment of
$250,000.
C. INVESTMENT IN LOANDATA.inc.
During fiscal 1997, the Company made an investment of $82,000 in
Loandata.inc., an e-commerce company developing the electronic underwriting of
car leases and loans using the SellingPoint product. Additional investments of
$143,000, $200,000 and $425,000 were made in the three-month periods ended June
30, 1997, September 30, 1997 and December 31, 1997, respectively. The Company
has recorded this as a majority owned subsidiary which it has consolidated in
the Company's results. Prior to the quarter ended December 31, 1997, the
Company, under the equity method, recognized its share of loss each reporting
period. Accordingly, the Company recorded a loss of $50,000 in the three-month
period ended June 30, 1997, a loss of $527,000 for the three-month period ended
September 30, 1997 and a loss of $933,000 for the three-month period ended
December 31, 1997. Such losses are recorded in other expense/income.
Additionally, included in the $527,000 loss and the $933,000 loss recorded for
the three-month periods ended September 30, 1997 and December 31, 1997 are
operating expenses of $152,000 and $79,000 respectively which represent
cross-functional work performed on the Loandata.inc. product. These operating
expenses have been reclassified primarily from cost of services and research and
development expenses.
On December 24, 1997, the Company entered into an agreement to acquire a
53.4% majority interest in a newly-created limited liability company that will
be the successor to the business of Loandata.inc. Loandata.inc. will contribute
all of its assets, including its proprietary technology, to the
newly-established subsidiary of the Company, in exchange for a minority interest
in the subsidiary.
D. PRIVATE PLACEMENT
On December 3, 1997, the Company completed a private placement of 470,589
shares of common stock at $4.25 per share, providing gross proceeds of $2.0
million. The Company intends to use the net proceeds of the private placement
for working capital and general corporate purposes.
E. AGREEMENT IN PRINCIPAL TO LICENSE ICAD SYSTEM
On December 30, 1997, the Company announced that it had agreed in principal
to license its ICAD System to a company created and financed by Electra Fleming,
a leading UK-based investment house. The new company will become the exclusive
worldwide distributor of the ICAD System and will be led by members of the ICAD
business unit team.
7
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Management's Discussion and Analysis of Financial Condition and Results of
Operations include certain forward-looking statements about the Company's
business and new products, revenues, expenditures and operating and capital
requirements. In addition, forward-looking statements may be included in various
other Company documents to be issued in the future and in various oral
statements by Company representatives to security analysts and investors from
time to time. Any such statements are subject to risks that could cause the
actual results or needs to vary materially. The Company discusses such risks in
detail in its Annual Report on Form 10-K for the year ended March 31, 1997.
RESULTS OF OPERATIONS
TOTAL REVENUES. Substantially all of the Company's revenues are derived
from the licensing of software products and the performance of related services.
The Company's total revenues decreased 65% to $2.7 million for the three-month
period ended December 31, 1997, from $7.9 million for the three-month period
ended December 31, 1996. The Company's total revenues decreased 43% to $11.5
million for the nine-month period ended December 31, 1997, from $20.0 million
for the nine-month period ended December 31, 1996. These decreases were
primarily due to the decrease in ICAD software license fees.
SOFTWARE LICENSES. Software license fees decreased 90% to $0.6 million for
the three-month period ended December 31, 1997, from $6.3 million for the
three-month period ended December 31, 1996, and decreased as a percentage of
revenues to 23% from 80%. Software license fees decreased 73% to $4.0 million
for the nine-month period ended December 31, 1997, from $14.7 million for the
nine-month period ended December 31, 1996, and decreased as a percentage of
revenues to 35% from 73%. The decreases were primarily due to the decrease in
ICAD software license revenues.
SERVICES. Service fees increased 24% to $2.0 million for the three-month
period ended December 31, 1997, from $1.6 million for the three-month period
ended December 31, 1996, and increased as a percentage of revenues to 72% from
20%. Service fees increased 28% to $6.7 million for the nine-month period ended
December 31, 1997, from $5.2 million for the nine-month period ended December
31, 1996, and increased as a percentage of revenues to 58% from 26%. Service
revenues are derived from customer support, consulting, and training services.
The increases were primarily due to higher consulting revenues.
RELATED PARTY SOFTWARE AND SERVICES. Revenues from related parties
increased to $0.1 million for the three-month period ended December 31, 1997
from $3,000 for the three-month period ended December 31, 1996, and increased as
a percentage of revenues to 5% from less than one percent. Revenues from related
parties increased to $0.8 million for the nine-month period ended December 31,
1997 from $0.1 million for the nine-month period ended December 31, 1996, and
increased as a percentage of revenues to 7% from less than one percent. The
increases were due to a software license sale and consulting agreement with a
related party.
COST OF SOFTWARE LICENSES. Cost of software licenses, consisting of the
amortization of capitalized software, license fees to third-party suppliers and
software duplication and fulfillment costs, decreased 23% to $0.4 million for
the three-month period ended December 31, 1997, from $0.5 million for the
three-month period ended December 31, 1996, and increased as a percentage of
software revenues to 66% from 8%. The dollar decrease for the three-month period
ended December 31, 1997 was primarily due to lower license fees to third
parties. This decrease was partially offset by an increase in the amortization
of capitalized software. Cost of software licenses increased 23% to $1.8 million
for the nine-month period ended December 31, 1997, from $1.5 million for the
nine-month period ended December 31, 1996, and increased as a percentage of
software revenues to 46% from 10%. The dollar and percentage increases for
8
<PAGE> 9
the nine-month period ended December 31, 1997 were primarily due to a write off
of an intangible asset amounting to $372,000 during the three-month period
ending June 30, 1997 and amortization of capitalized software.
COST OF SERVICES. Cost of services, consisting primarily of personnel costs
for customer support, training and applications consulting, increased 35% to
$1.4 million for the three-month period ended December 31, 1997, from $1.0
million for the three-month period ended December 31, 1996, and increased as a
percentage of service revenues to 68% from 62%. Cost of services increased 33%
to $3.5 million for the nine-month period ended December 31, 1997, from $2.6
million for the nine-month period ended December 31, 1996, and increased as a
percentage of service revenues to 53% from 50%. The increases for the three -
and nine-month periods ended December 31, 1997 were due primarily to the
outsourcing of additional personnel at higher rates to support consulting
services and increased headcount.
SALES AND MARKETING. Sales and marketing expenses, which include
distribution, pre-sales support and marketing costs, decreased 11% to $3.4
million for the three-month period ended December 31, 1997, from $3.8 million
for the three-month period ended December 31, 1996, and increased as a
percentage of revenues to 124% from 48%. The dollar decrease was primarily due
to decreased commissions associated with decreased revenues and a decrease in
salary related expenses due to a decrease in sales and marketing headcount.
Sales and marketing expenses decreased 3% to $10.0 million for the nine-month
period ended December 31, 1997, from $10.3 million for the nine-month period
ended December 31, 1996. As a percentage of revenues, sales and marketing
expenses increased to 87% for the nine-month period ended December 31, 1997,
compared to 52% for the comparable period in 1996. The dollar decrease for the
nine-month period ended December 31, 1997 was primarily due to the decreased
commissions associated with decreased revenues and decreased marketing. These
decreases were offset by an increase in marketing and promotional activities
during the three month period ended December 31, 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses, consisting
primarily of employee salaries and benefits and development costs remained
constant at $1.0 million for the three-month period ended December 31, 1997 and
December 31, 1996, but increased as a percentage of revenues to 36% from 12%.
Research and development expenses increased 11% to $2.7 million for the
nine-month period ended December 31, 1997, from $2.4 million for the nine-month
period ended December 31, 1996, and increased as a percentage of revenues to 23%
from 12%. The increases for the nine-month period ended December 31, 1997 were
primarily due to the addition of research and development employees associated
with the development of the Company's SellingPoint product.
GENERAL AND ADMINISTRATIVE. General and administrative expenses, consisting
primarily of expenses associated with the finance, human resources and
administrative departments, increased 196% to $1.9 million for the three-month
period ended December 31, 1997, from $0.6 million for the three-month period
ended December 31, 1996, and increased as a percentage of revenues to 68% from
8%. The increase was primarily due to an increase in the bad debt provision to
protect against currency issues in Asia and an increase in higher legal costs
associated with the transition of ICAD during the three-month period ended and
December 31, 1997. General and administrative expenses increased 68% to $3.2
million for the nine-month period ended December 31, 1997, from $1.9 million for
the nine-month period ended December 31, 1996, and increased as a percentage of
revenues to 28% from 10%. These increases for the nine-month period ended
December 31, 1997 were primarily due to higher legal costs and an increase in
the bad debt provision during the nine-month period December 31, 1997.
INTEREST INCOME. Interest income, consisting of interest from cash and cash
equivalents, for the three- and nine-month period ended December 31, 1997 was
$37,000 and $157,000, respectively. Interest income for the three - and
nine-month period ended December 31, 1996 was $75,000 and $250,000,
respectively.
9
<PAGE> 10
INTEREST EXPENSE. Interest expense for the three - and nine-month period
ended December 31, 1997 was $23,000 and $75,000, respectively. Interest expense
for the three - and nine-month period ended December 31, 1996 was $26,000 and
$79,000, respectively.
OTHER INCOME (EXPENSE). Other income (expense), consisting primarily of
recording of losses related to an investment in Loandata.inc., foreign exchange
gains (losses) on intercompany transactions, and marking to market certain
trading securities, for the three-month period ended December 31, 1997, was an
expense of $1,012,000, compared with income of $55,000 for the three-month
period ended December 31, 1996. Other income for the nine-month period ended
December 31, 1997, was an expense of $1,580,000 compared with income of $462,000
for the nine-month period ended December 31, 1996. During the three-month
periods ended September 30, 1997 and December 31, 1997, the Company adjusted the
investment in Loandata.inc, to recognize its proportionate share of losses.
Additionally, during the three month period ended September 30, 1997, the
Company sold its marketable security.
PROVISION FOR INCOME TAXES. The income tax provision for the three- and
nine-month periods ended December 31, 1997, was $10,000 and $30,000,
respectively, and relates to foreign taxes. The income tax provision for the
three- and nine-month period ended December 31, 1996, was $267,000 and $460,000,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Company had cash and cash equivalents of
approximately $2.5 million. The Company completed a private placement on
December 5, 1997 providing gross proceeds of $2.0 million. The Company had a
line of credit with a commercial lender, bearing interest at the bank's base
lending rate, which expired on June 30, 1997. Under this line of credit, as
amended, the Company had a $2,500,000 unsecured working capital line of credit.
The line of credit contained financial convenants, which consisted of minimum
tangible capital base, ratio of total liabilities to tangible capital base and
debt service coverage. The Company would not currently be in compliance with
these covenants were the line of credit in effect and is negotiating with the
commercial lender to extend and amend the line of credit. The Company's
$1,750,000 equipment line of credit, collateralized by equipment, expired on
March 31, 1997. The Company is negotiating with the commercial lender to extend
and amend the equipment line of credit. As of December 31, 1997, the Company had
borrowed $1,413,000 under the equipment line of credit. There can be no
assurance that the Company will be successful in extending and amending the
lines of credit nor can there be any assurance that such extended and amended
lines of credit will be on similar terms as the existing agreements.
Additionally, there can be no assurance that alternative financing will be
available if required.
During the nine-month period ended December 31, 1997, the Company had a net
loss of $11.6 million and generated a net cash decrease of $1.4 million. The
decrease in cash and cash equivalents was due primarily to $2.5 million used in
operating activities. The Company's operating activities included a decrease in
accounts receivable of $7.8 million. Investing activities included the private
placement of $2.0 million, capitalized software costs of $0.7 million and the
purchase of property and equipment for $0.2 million consisting primarily of
computer equipment.
During fiscal 1996, the Company entered into a $5,000,000 five-year
applications consulting services contract with a significant customer of the
Company. The five-year applications consulting services contract contains volume
pricing discounts subject to adjustments for increased costs. The Company has a
minimum commitment of $2,500,000 of outside applications services that will be
used by the Company over a five-year period. The minimum commitment of
$2,500,000 will be paid in five yearly payments commencing December 31, 1996.
These yearly payments are $250,000, $500,000, $550,000, $600,000 and $600,000
for the five calendar years beginning December 31, 1996, respectively. The
Company's policy is to recognize the consulting service expenses as incurred.
The Company believes that based on current forecasts the minimum payment
accruals will be utilized. However, given the significant sales fluctuations
which may occur in any given period, it is possible that the minimum commitment
would not
10
<PAGE> 11
be met, thus requiring the Company to record a charge in excess of the services
utilized. At December 31, 1997, the Company had used the minimum first-year
commitment of $250,000.
On December 24, 1997, the Company entered into an agreement to acquire a
53.4% majority interest in a newly-created limited liability company that will
be the successor to the business of Loandata.inc., an e-commerce company
developing the electronic underwriting of car leases and loans using the
SellingPoint product. Loandata.inc. will contribute all of its assets, including
its proprietary technology, to the newly-established subsidiary of the Company,
in exchange for a minority interest in the subsidiary.
On December 30, 1997, the Company announced that it had agreed in principal
to license its ICAD System to a company created and financed by Electra Fleming,
a leading UK-based investment house. The new company will become the exclusive
worldwide distributor of the ICAD System and will be led by members of the ICAD
business unit team.
The terms of the offer submitted by Electra Fleming call for the Company to
receive fixed payments of approximately $18.7 million over the next two years
plus variable payments until March 2001, based on ICAD revenues. Negotiations
and due diligence are progressing in anticipation of the execution of a formal
agreement. The transaction is subject to a number of conditions, including
completion of due diligence, commercial negotiations and final approval by
Electra's board of directors and Concentra's board of directors and
shareholders.
The Company believes that existing sources of liquidity and anticipated
funds from operations will satisfy the Company's working capital and capital
expenditure requirements at least through fiscal 1998 and fiscal 1999 provided
that the Electra Fleming transaction is completed. The Company is continuing to
explore alternative sources of financing.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
+3.01 Restated Certificate of Incorporation of the Registrant, as
amended to date
+3.02 Restated By-Laws of the Registrant.
++3.03 Certificate of Designations.
+4.01 Specimen Stock Certificate for Common Stock, $.00001 par value.
++4.02 Rights Agreement dated as of April 24, 1997, between the
Registrant and The First National Bank of Boston, as Rights
Agent.
++4.03 Form of Right Certificate.
++++10.25 Loandata LLC Operating Agreement.
+++10.26 Stock Purchase Agreement dated as of December 3, 1997 by and
between Concentra Corporation and the Purchasers named on the
signature page thereto.
++++27 Financial Data Schedule.
- -------------------------------------------------------------------------------
+ Previously filed as an Exhibit to the Registrant's Registration
Statement No. 33-86550.
++ Previously filed as an Exhibit to the Registrant's Form 8-K dated
April 24, 1997.
+++ Previously filed as an Exhibit to the Registrant's Form 8-K dated
December 3, 1997.
++++ Filed herewith.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K dated December 3, 1997
reporting the completion of a private placement of 470,589 shares of the
Company's common stock, $.00001 par value per share, at a purchase price of
$4.25 per share, in a transaction led by Special Situations Fund.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONCENTRA CORPORATION
Date: February 17, 1998
By: /s/ Alex Braverman
--------------------
Alex Braverman
Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
13
<PAGE> 1
EXHIBIT 10.25
LOANDATA LLC
OPERATING AGREEMENT
This Operating Agreement of Loandata LLC, a limited liability company
organized pursuant to the Massachusetts Limited Liability Company Act is entered
into and shall be effective as of the 22nd day of October 1997, by and between
Concentra Corporation, a Delaware corporation having its principal place of
business at 21 North Ave. Burlington, MA 01803 (the "Class A Member"), and
Loandata.inc., a Massachusetts corporation having its principal place of
business at 47 Lafayette St. Salem, MA 01970 (the "Class B Member").
WHEREAS, the parties have agreed to organize and operate a limited
liability company in accordance with the terms of, and subject to the conditions
set forth in, this Agreement;
NOW, THEREFORE, for good and valuable consideration, the parties, intending
legally to be bound, agree as follows:
SECTION I
DEFINED TERMS
The following capitalized terms shall have the meanings specified in this
Section I. Other terms are defined in the text of this Agreement, and,
throughout this Agreement, those terms shall have the meanings respectively
ascribed to them.
"Act" means the Massachusetts Limited Liability Company Act (Chapter 156C
of the Massachusetts General Laws) as amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any Member, the
deficit balance, if any, in the Member's Capital Account as of the end of the
relevant taxable year, after giving effect to the following adjustments:
(i) the deficit shall be decreased by the amounts which the Member is
obligated to restore pursuant to Section 4.4.2 or is deemed obligated to restore
pursuant to Regulation Section 1.704-1(b)(2)(ii)(c); and
(ii) the deficit shall be increased by the items described in Regulation
Section 1.704-1(b)(2)(ii)-(d)(4), (5), and (6).
1
<PAGE> 2
"Administrative Expense" means all costs of forming the Company and
operating the Company, including attorneys and accountants fees.
"Affiliate" means, with respect to any Member, any Person: (i) which owns
more than ten percent (10%) of the voting interests in the Member; or (ii) in
which the Member owns more than ten percent (10%) of the voting interests; or
(iii) in which more than ten percent (10%) of the voting interests are owned by
a Person who has a relationship with the Member described in clause (i) or (ii)
above.
"Agreement" means this Agreement, as amended from time to time.
"Board of Managers" means the individuals, acting as a board, having the
power and authority described in Section 5.1.
"Call Exercise Notice" means the notice given by the Class A Member in
connection with its exercise of its right to purchase the Interests of the Class
B Members pursuant to Section 6.3.
"Call Trigger Date" means the earliest of the following dates: (i)
September 30, 2000, (ii) the first anniversary of the date on which the Company
achieves $25,000,000 in Cumulative Revenues, or (iii) the date of termination of
the Services Agreement.
"Capital Account" means the account maintained by the Company for each
Member in accordance with the following provisions:
(i) a Member's Capital Account shall be credited with the Member's Capital
Contributions, the amount of any Company liabilities assumed by the Member (or
which are secured by Company property distributed to, or owned by, the Member),
the Member's distributive share of Profit and any item in the nature of income
or gain specially allocated to such Member pursuant to the provisions of Section
IV (other than Section 4.3.3); and
(ii) a Member's Capital Account shall be debited with the amount of money
and the fair market value of any Company property distributed to the Member, the
amount of any liabilities of the Member assumed by the Company (or which are
secured by property contributed by the Member to the Company), the Member's
distributive share of Loss and any item in the nature of expenses or losses
specially allocated to the Member pursuant to the provisions of Section IV
(other than Section 4.3.3).
If any Interest is transferred pursuant to the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
the Capital Account is attributable
2
<PAGE> 3
to the transferred Interest. If the book value of Company property is adjusted
pursuant to Section 4.3.3, the Capital Account of each Member shall be adjusted
to reflect the aggregate adjustment in the same manner as if the Company had
recognized gain or loss equal to the amount of such aggregate adjustment. It is
intended that the Capital Accounts of all Members shall be maintained in
compliance with the provisions of Regulation Section 1.704-1(b), and all
provisions of this Agreement relating to the maintenance of Capital Accounts
shall be interpreted and applied in a manner consistent with that Regulation.
"Capital Contribution" means the total amount of cash and the fair market
value of any other assets contributed (or deemed contributed under Regulation
Section 1.704-1(b)(2)(iv)(d)) to the Company by a Member, net of liabilities
assumed or to which the assets are subject.
"Cash Flow" for any taxable year means all cash funds derived from
operations of the Company (including interest received on reserves), without
reduction for any non-cash charges, but less cash funds used to pay current
operating expenses and Tax Distributions and to pay or establish reasonable
reserves for future expenses, debt payments, capital improvements, and
replacements as determined by the The Board of Managers. Cash Flow shall be
increased by the reduction of any reserve previously established.
"Change of Control of the Class A Member" shall be deemed to have occurred,
if after a Person (or a group of Persons acting in concert) becomes the
beneficial owner of fifty-one percent (51%) or more of the outstanding Common
Stock of the Class A Member, the Chief Executive Officer on the date of this
Agreement ceases to be a member of the Board of Managers of the Company and
either a Director or Executive Officer of the Class A Member.
"Class A Member" means each Person signing this Agreement as a Class A
Member and any Person who subsequently is admitted as a Class A Member of the
Company.
"Class B Member" means each Person signing this Agreement as a Class B
Member and any Person who subsequently is admitted as a Class B Member of the
Company.
"Class A Majority Voting Right" means the right of the members of the Board
of Managers designated by the Class A Member to cast additional votes at
meetings of the Board of Managers under certain circumstances described in
Section 5.1.4.4. The Class A Majority Voting Right shall be in effect for so
long as the initial Class A Member has not sold or transferred more than 50% of
the highest Percentage Interest at any time held by the Class A Member, or if
the Percentage Interest of the Class A Member falls below 25%, then so long as
the Class A Member has not sold more than 25% of its Percentage Interest after
its Percentage Interest fell below 25%. A sale or transfer pursuant to the
exercise of Co-Sale Rights under Section 6.2 or in connection
3
<PAGE> 4
with the sale of all or substantially all of the assets of the Class A Member or
of any business unit which contains the Interest of the Class A Member shall not
be considered a sale or transfer for purposes of determining the Class A
Majority Voting Right.
"Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provision of any succeeding law.
"Company" means the limited liability company organized in accordance with
this Agreement.
"Cumulative Revenue" means the revenue of the Company as determined in
accordance with generally accepted accounting principles, consistently applied,
for the period from the date of this Agreement through the date as of which such
Cumulative Revenue is being measured.
"Defined Market" means consumer and business lease and loan underwriting,
property and casualty insurance underwriting, extended warranties and other
related automotive transaction based businesses.
"Family Group" means a Person's spouse and lineal descendants and any trust
or other fiduciary solely for the benefit of such individual and/or such
individual's spouse and/or lineal descendants.
"Intellectual Property" means patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, tradenames,
copyrights, manufacturing processes, business plans and concepts, proprietary
technology, formulae, trade secrets, data and know-how.
"Interest" means a Member's share of the Profits and Losses of, and the
right to receive distributions from, the Company.
"LDI" means Loandata.inc., a Massachusetts corporation which is a Class B
Member, together with its successors and assigns.
"Member" means each Person signing this Agreement and any Person who
subsequently is admitted as a member of the Company in accordance with this
Agreement.
"Membership Rights" means all of the rights of a Member in the Company,
including a Member's: (i) Interest; (ii) right to inspect the Company's books
and records; and (iii) right to participate, to the extent provided in this
Agreement, the Certificate of Organization or the Act,
4
<PAGE> 5
in the management of and vote on matters coming before the Company.
"Minimum Gain" has the meaning set forth in Regulation Section 1.704-2(d).
Minimum Gain shall be computed separately for each Member in a manner consistent
with the Regulations under Code Section 704(b).
"Negative Capital Account" means a Capital Account with a balance of less
than zero.
"Percentage Interest" means, as to a Member, the percentage set forth after
the Member's name on Exhibit A, as amended from time to time.
"Person" means and includes an individual, corporation, partnership,
association, limited liability company, trust, estate, or other entity.
"Positive Capital Account" means a Capital Account with a balance greater
than zero.
"Profit" and "Loss" means, for each taxable year of the Company (or other
period for which Profit or Loss must be computed) the Company's taxable income
or loss determined in accordance with Code Section 703(a), with the following
adjustments:
(i) all items of income, gain, loss, deduction, or credit required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
computing taxable income or loss;
(ii) any tax-exempt income of the Company, not otherwise taken into account
in computing Profit or Loss, shall be included in computing taxable income or
loss;
(iii) any expenditures of the Company described in Code Section
705(a)(2)(B) (or treated as such pursuant to Regulation Section
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profit
or Loss, shall be subtracted from taxable income or loss;
(iv) gain or loss resulting from any taxable disposition of Company
property shall be computed by reference to the adjusted book value of the
property disposed of, notwithstanding the fact that the adjusted book value
differs from the adjusted basis of the property for federal income tax purposes;
(v) in lieu of the depreciation, amortization or cost recovery deductions
allowable in computing taxable income or loss, there shall be taken into account
the depreciation computed based upon the adjusted book value of the asset; and
5
<PAGE> 6
(vi) notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Section 4.3 hereof shall not be taken
into account in computing Profit or Loss.
"Regulations" means the income tax regulations, including any temporary
regulations, from time to time promulgated under the Code.
"Services Agreement" means the agreement pursuant to which LDI will provide
professional services to the Company.
"Tax Distribution" means those periodic distributions made in the amounts
and at the times as set forth in Section 4.1.1.
"Transfer" means, when used as a noun, any voluntary sale, hypothecation,
pledge, assignment, attachment, or other transfer, including specifically any
transfer incident to a divorce or separation, and, when used as a verb, means
voluntarily to sell, hypothecate, pledge, assign, or otherwise transfer.
SECTION II
FORMATION AND NAME; OFFICE; PURPOSE; TERM
2.1. ORGANIZATION. The parties hereby organize a limited liability company
pursuant to the Act and the provisions of this Agreement and, for that purpose,
will cause a Certificate of Organization in the form as set forth on Exhibit 2.1
to be prepared, executed and filed with the Secretary of The Commonwealth of
Massachusetts.
2.2. NAME OF THE COMPANY. The name of the Company shall be "Loandata LLC."
The Company may do business under that name and under any other name or names
upon which the Members agree. If the Company does business under a name other
than that set forth in its Certificate of Organization, then the Company shall
file a trade name certificate as required by law.
2.3. PURPOSE. The Company is organized principally for the purpose of
developing and marketing of consumer and business financing and insurance
systems and related financial instruments, and, in addition, may engage in any
other business permitted by the Act and the laws of any jurisdiction in which
the Company may do business.
2.4. TERM. The term of the Company shall begin upon the acceptance of the
6
<PAGE> 7
Certificate of Organization by the Secretary of The Commonwealth of
Massachusetts and shall continue in perpetuity , unless its existence is sooner
terminated pursuant to Section VII of this Agreement.
2.5. PRINCIPAL OFFICE. The principal office of the Company in The
Commonwealth of Massachusetts shall be located at 47 Lafayette St., Salem, MA
01970, or at any other place within The Commonwealth of Massachusetts determined
by the Board of Managers.
2.6. RESIDENT AGENT. The name and address of the Company's resident agent
in The Commonwealth of Massachusetts shall be Concentra Corporation, with an
address at 21 North Ave. Burlington, MA 01803. The Resident Agent shall promptly
provide all Members with copies of any notice which is received by it in its
capacity as Resident Agent for the Company.
2.7. MEMBERS. The name, present mailing address, taxpayer identification
number, Class, and Percentage Interest of each Member are set forth on Exhibit
A. Additional Members may be admitted to the Company, from time to time, with
the consent of the Board of Managers upon such terms and conditions as shall be
determined by the Board of Managers at the time of such admission, subject to
the Class A Member's rights under Sections 3.7 and 3.8. Exhibit A shall be
amended from time to time to reflect the admission of new Members.
SECTION III
MEMBERS; CAPITAL; CAPITAL ACCOUNTS
3.1. CAPITAL CONTRIBUTIONS. The Class A Member shall contribute to the
Company an aggregate amount of $850,000 in the form of $ 475,000 in cash and
promissory notes issued to the Class A Member by the Class B Member in the
aggregate original principal amount of $375,000 as set forth on Exhibit A-1. The
Class B Member shall contribute to the Company an aggregate value of $715,378
consisting of all of the assets of the Class B Member (including, without
limitation, all of the Intellectual Property of the Class B Member) as set forth
on Exhibit A-2, subject to the assumption by the Company of those liabilities of
the Class B Member set forth on Exhibit A-3, except that such contribution is
subject to the right, on LDI's part, to obtain back from the Company the license
described in Section 5.4.2, with respect to such Intellectual Property of the
Company as is necessary or convenient for LDI to engage in any business activity
permitted to be pursued by it pursuant to the terms set forth in Section 5.4.2
and such license shall permit LDI to grant a sublicense to any Affiliate
sufficient to enable such Affiliate to conduct such business activity to the
same extent that LDI itself could do so. Notwithstanding any termination of the
Series A Convertible Preferred Stock Purchase Agreement dated as of March 15,
1997 between LDI and the Class A Member, in connection with the assignment by
the
7
<PAGE> 8
Class B Member of its assets pursuant to this Section 3.1, LDI ratifies and
affirms to the Class A Member and the Company the accuracy of the
representations and warranties of LDI made in Article 2 of such Purchase
Agreement.
3.2. NO FURTHER REQUIRED CAPITAL CONTRIBUTIONS. No Member shall be required
to contribute any additional capital to the Company, and except as set forth in
the Act, no Member shall have any personal liability for any obligations of the
Company. Notwithstanding the foregoing, any Member may, with the consent of the
Board of Managers, make additional Capital Contributions to the Company, which
additional Capital Contributions will be recorded on supplements to Exhibit A.
3.3. NO INTEREST ON CAPITAL CONTRIBUTIONS. Members shall not be paid
interest on their Capital Contributions.
3.4. RETURN OF CAPITAL CONTRIBUTIONS. Except as otherwise provided in this
Agreement, no Member shall have the right to receive the return of any Capital
Contribution.
3.5. FORM OF RETURN OF CAPITAL. If a Member is entitled to receive a return
of a Capital Contribution, the Company may distribute cash, notes, property, or
a combination thereof to the Member in return of the Capital Contribution.
3.6. CAPITAL ACCOUNTS. A separate Capital Account shall be maintained for
each Member.
3.7. ADDITIONAL CAPITAL CONTRIBUTIONS BY THE CLASS A MEMBER.
3.7.1. At any time prior to the date on which the Company has received
an aggregate of $7,500,000 in Capital Contributions (other than by way of
contributions in the form of property) and capital from the funding of the
Vaults as contemplated in Section 3.9.1 (except prior to the End of Offer Period
relating to an Offer Notice pursuant to Section 3.7.2, during the pendency of a
Third Party Offer pursuant to Section 3.7.3, or prior to the End of New Offer
Period relating to a New Offer Notice pursuant to Section 3.7.4, in any of which
cases the rights of the Class A Member to make additional Capital Contributions
under this Section 3.7 shall be governed by the provisions of Sections 3.7.2,
3.7.3 or 3.7.4, as the case may be), and subject to the proviso set forth in the
last sentence of this Section 3.7.1, the Class A Member may, in its sole
discretion, by written notice to the Company elect to make additional Capital
Contributions to the Company on the terms set forth in this Section 3.7.1. Until
the dates indicated, the Class A Member may acquire the following additional
Percentage Interests in the Company pursuant to this Section 3.7.1 (or lesser
Percentage Interests on a proportionate basis for lesser Capital
8
<PAGE> 9
Contributions) by making the additional Capital Contribution set forth opposite
the respective Percentage Interests (with prior Capital Contributions from all
Members after the initial Capital Contributions made as of the date of this
Agreement and all capital received by the Company through the funding of the
Vaults as contemplated in Section 3.9.1 treated as Capital Contributions solely
for purposes of valuing the New Interest):
<TABLE>
<S> <C> <C>
$1,250,000 an additional 15.000% February 15, 1998
$2,250,000 an additional 11.765% June 1, 1998
$3,150,000 an additional 6.666% October 15, 1998;
</TABLE>
provided, however, that the Class A Member may not make an additional Capital
Contribution pursuant to this Section 3.7.1 after the date on which the Company
has received an aggregate of $4,350,000 in Capital Contributions (other than by
way of contributions in the form of property) and capital from the funding of
the Vaults as contemplated in Section 3.9.1 without the consent of a majority of
the Board of Managers, which majority includes at least one member who is not
designated by the Class A Member.
3.7.2. At any time when the Company determines to offer to issue and
sell a Membership Interest to any Person (the "New Interest"), the Company shall
first deliver to the Class A Member written notice of the Company's intention to
make such offer (the "Offer Notice"), which Offer Notice shall identify the
Person to whom the Company intends to extend such offer (the "Offeree"), specify
the amount of the Capital Contribution and all material terms associated with
the New Interest, and provide any other relevant details regarding the Offeree
and the terms of such offer as are available to the Company. By written notice
to the Company delivered no later than three (3) business days after its receipt
of the Offer Notice, the Class A Member may, in its sole discretion, elect to
make additional Capital Contributions to the Company in any amount up to the
amount of the Capital Contribution specified in the Offer Notice (i) on the
terms set forth in the Offer Notice or (ii) on the terms set forth in the last
sentence of Section 3.7.1, so long as the date of the Offer Notice is prior to
the appropriate date set forth in Section 3.7.1, in either of which events the
amount of the New Interest which the Company may offer to the Offeree shall be
reduced by the amount of the Class A Member's committed additional Capital
Contribution.
3.7.3. If the Class A Members fails, within three business day after
receipt of an Offer Notice to notify the Company of its intent to make an
additional Capital Contribution pursuant to Section 3.7.2 or if the Class A
Member elects to make an additional Capital Contribution in an amount less than
the full amount of the New Interest, then the Company may, promptly after the
earlier of such election or the expiration of the three-day period following the
Offer Notice (the "End of Offer Period"), extend to the Offeree by written
notice (the "Third
9
<PAGE> 10
Party Offer") an offer to issue and sell to such Offeree the New Interest (or
such portion thereof as the Class A Member has not elected to acquire pursuant
to Section 3.7.2) at the price and on the terms and conditions set forth in the
Offer Notice. If, within ten (10) business days of the End of Offer Period, the
Offeree and the Company have not entered into a binding agreement for the
purchase by the Offeree of the New Interest at the price and on the terms set
forth in the Offer Notice or if such New Interest is not actually acquired by
the Offeree at such pricing and on such terms within fifteen (15) business days
after the date of such agreement, then the Company may not issue and sell the
New Interest or any portion thereof without first complying again with the
provisions of this Section 3.7.3 or Section 3.7.2.
3.7.4. If in response to a Third Party Offer an Offeree extends to the
Company a counter-offer for the New Interest, or if the Company receives from
any Person an unsolicited offer to acquire an Interest, the Company shall cause
such offer or counter-offer to be placed in writing and shall promptly notify
the Class A Member in writing of such offer or counter-offer (the "New Offer
Notice"). The New Offer Notice shall identify the Person from whom the Company
has received such offer and shall contain a copy of the written offer. By
written notice to the Company delivered no later than ten (10) business days (in
the case of a counter-offer at a price equal to or greater than the applicable
price set forth in Section 3.7.1) or twenty (20) business days (in the case of
an unsolicited offer or a counter-offer at a price less than the applicable
price set forth in Section 3.7.1) after its receipt of the New Offer Notice, the
Class A Member may, in its sole discretion, elect to acquire all, or a portion
of, the Interest at the lower of the price specified in the New Offer Notice at
the same price and on the same terms and conditions as are specified in the New
Offer Notice or if prior to the dates set forth opposite the amounts in Section
3.7.1, at such terms which are then in effect pursuant to Section 3.7.1. If the
Class A Member declines to exercise its rights under this Section 3.7.4 or fails
to give notice of its intention to acquire the Interest in accordance with this
Section 3.7.4 prior to the expiration of such ten or twenty business day period,
as the case may be ("End of New Offer Period"), then the Company may, at any
time within ten (10) business days after the End of New Offer Period enter into
a binding agreement to issue and sell the Interest specified in the New Offer
Notice to the Person identified therein on terms and conditions no less
favorable to the Company than those specified in the New Offer Notice. If,
within ten (10) business days of the End of New Offer Period, the Company has
not entered into a binding agreement with the Person identified in the New Offer
Notice for the purchase by such Person of the Interest at the price and on the
terms set forth in the New Offer Notice or if such Interest is not actually
acquired by the Offeree at such pricing and on such terms within fifteen (15)
business days after the date of such agreement, then the Company may not issue
and sell such Interest or any portion thereof without first complying again with
the provisions of this Section 3.7.4.
10
<PAGE> 11
3.8. RIGHT TO MAINTAIN PERCENTAGE INTEREST.
3.8.1. At any time when the Company accepts or proposes to accept a
Capital Contribution from any Member (including a new Member being admitted to
the Company pursuant to Section 3.7) (a "New Contribution") after the date on
which the Company has received an aggregate of $4,350,000 in Capital
Contributions (other than by way of contributions in the form of property) and
capital from the funding of the Vaults as contemplated in Section 3.9.1, each
Member shall, as provided in Section 3.8.2, be entitled to make additional
Capital Contributions in an amount sufficient to permit such Member to retain
the Percentage Interest it held immediately prior to the Company's acceptance of
such New Contribution.
3.8.2 In the event that the Company proposes to accept a New
Contribution from any Person (other than the Class A Member pursuant to Section
3.7), it shall deliver to each Member written notice of its intention,
describing the terms upon which it proposes to accept such New Contribution (the
"Option Notice"). For a period of twenty (20) business days from the receipt of
the Option Notice, each Member shall have the right, subject to the conditions
set forth in Section 3.8.1 to make an additional Capital Contribution on terms
identical to those on which the Company has accepted or proposed to accept the
New Contribution, in such amount as shall result in the Percentage Interest of
such Member following the New Contribution and the additional Capital
Contribution's of all Members pursuant to this Section 3.8 being no less than
the Percentage Interest of such Member immediately prior to the Company's
acceptance of the New Contribution.
3.9. VAULT AND ADJUSTMENT OF PERCENTAGE INTERESTS.
3.9.1. The initial Members have explored the possibility of obtaining
capital or other financing for the Company's business through one or more
financing instruments known as Vehicle Asset Universal Leasing Trusts or other
means of securitizing financed assets and gaining tax benefits (the "Vaults").
The Class A Member and LDI plan to pursue such financing, subject to the
approval of the terms by the Board of Managers (which consent shall not be
unreasonably withheld). If the Vaults are created, the interests, tax and other
benefits associated therewith shall be allocated between the Class A Member and
LDI (outside of the Company) on a fifty/fifty basis notwithstanding that such
allocation is disproportionate to their respective Percentage Interests in the
Company (subject to the condition that the allocation of the benefits of the
Vaults will be adjusted, in the event the Class A Member issues shares of its
Common Stock to LDI upon the Class A Member's exercise of its Call Rights
pursuant to Section 6.3 (the "Call"), such that the stockholders of LDI (prior
to the Call) shall receive (including indirectly as stockholders of the Class A
Member) 50% of the benefits of the Vaults after the issuance to LDI of the Class
A Member's stock. The interest in the Vaults themselves are not subject to the
Call).
11
<PAGE> 12
3.9.2. In the event the Company obtains any non-dilutive, non-debt
capital through the funding of the Vaults prior to the date on which the Company
has received an aggregate $7,500,000 of Capital Contributions (other than by way
of contributions in the form of property), other debt or equity financing and
revenue generated by the Company, then upon the Company's receipt of such
capital, the Percentage Interests of the Members shall be adjusted in increments
as follows: for each $2,500,000, or portion thereof, in turn the percentages
shall be 1.5% (for the first $2.5 million), 2.5% (for the second $2.5 million),
4.2% (for the third $2.5 million) added to LDI's Percentage Interest (each
addition diluting the Interests of all Members including the Interest previously
held by LDI). In no case shall the adjustments based on this Section 3.9.2 cause
the Percentage Interest of LDI to exceed fifty percent (50%) as adjusted for any
additional Capital Contributions, dilution, or disposition of Interests and,
assuming that the amount made available to the Company through the Vaults is
$7,500,000). Notwithstanding the foregoing, the Company may not accept funding
through the Vaults, and no adjustment in the Percentage Interests of the Members
will be made, after the date on which the Company has received an aggregate of
$4,350,000 in Capital Contributions (other than by way of contributions in the
form of property) and capital from the funding of the Vaults as contemplated in
Section 3.9.1 without the consent of a majority of the Board of Managers.
3.10. LOANS. Any Member may (but shall have no obligation to), at any time,
make or cause a loan to be made to the Company in any amount and on those terms
upon which the Company and the Member agree.
SECTION IV
PROFIT, LOSS, AND DISTRIBUTIONS
4.1. DISTRIBUTIONS.
4.1.1. TAX DISTRIBUTIONS. The Members desire that the Company make Tax
Distributions in order to provide the Members the cash necessary to pay, when
due, federal and state income taxes on their shares of Profits of the Company.
4.1.1.1. With respect to any period for which any Member has
delivered to the Company written certification that such Member (or, if any
Member is a limited liability company or other pass-thru entity, the members of
such Member) will be liable for federal or state income tax on such Member's
allocated share of Profit of the Company, the Company shall use its best efforts
to make a Tax Distribution to its Members. The amount of the Tax Distributions
shall be calculated to ensure that each Member (or, if any Member is a limited
12
<PAGE> 13
liability company or other pass-thru entity, the members of such Member) shall
be able to make quarterly estimated tax payments on the portion of the estimated
income of the Company allocable to such Member.
4.1.1.2. For the purposes of computing the Tax Distributions, it
shall be assumed that all income deemed to be received by the Members from the
Company is taxable by the highest effective tax rate applicable to any Member
with respect to such Members' share of Profits of the Company. On any occasion
when a Tax Distribution is made to any Member, proportionate Tax Distributions
shall be made to all Members.
4.1.1.3. Tax Distributions shall be reduced by any amount paid or
required to be paid by the Company on behalf of any Member (or, on behalf of a
member of a Member) to any federal, state or local taxing authority.
4.1.2. DISTRIBUTIONS FROM CASH ON HAND. With respect to, and at the
end of, each fiscal year of the Company beginning with the fiscal year during
which the Call Trigger Date occurs, the Company will, at the written request of
any Member, distribute to the Members out of Cash on Hand such amount as the
requesting Member may specify, subject to the limitations set forth in this
Section 4.1.2. With respect to the year in which the Call Trigger Date occurs
and to the year next immediately following, the maximum amount distributable
under this Section 4.1.2 shall be the amount equal to twenty percent (20%) of
the Company's cash on hand at the end of such year (after making or reserving
for such year's Tax Distribution); with respect to the second, third and fourth
years following the year in which the Call Trigger Date occurs, the maximum
amount distributable under this Section 4.1.2 shall be the amount equal to
thirty-three (33%) of the Company's cash on hand at the end of such year (after
making or reserving for such year's Tax Distribution). In no event may a
distribution be made pursuant to this Section 4.1.2 if, and to the extent that,
(i) the amount of the Company's cash on hand following such distribution would
be less than (x) the aggregate amount of the Company's reasonably anticipated
expenses for the twelve months immediately following such distribution (in the
case of distributions made with respect to the year in which the Call Trigger
Date occurs and the four years immediately following such year) or (y) two times
the aggregate amount of the Company's reasonably anticipated expenses for the
twelve months immediately following such distribution (in the case of
distributions made with respect to all other years), and (ii) the amount of the
Company's cash on hand following such distribution would be less than the amount
of the Company's cash on hand at the end of the immediately preceding fiscal
year or that the Cash Flow for such period would be negative. In addition, so
long as the Class A Member has a class of securities registered under the
Securities Exchange Act of 1934 and publicly traded on any national securities
exchange, Nasdaq National Market or any automated quotation service, no
distribution may be made pursuant to this Section 4.1.2 if, and to the extent
that the cumulative
13
<PAGE> 14
distributions to any Member would exceed the amount which would cause the
purchase price payable to such Member upon exercise by the Class A Member of its
purchase rights under Section 6.3, as calculated in accordance with Section
6.3.1, to be a negative number. All distributions pursuant to this Section 4.1.2
shall be made to the Members in accordance with the respective Percentage
Interests.
4.1.3. ADDITIONAL DISTRIBUTIONS . From time to time, in the discretion
of the Board of Managers, the Company may, but shall not be obligated to, make
additional distributions to the Members. All such additional distributions shall
be made to the Members in accordance with the respective Percentage Interests.
4.2. ALLOCATION OF PROFIT OR LOSS. After giving effect to the special
allocations set forth in Section 4.3, for any fiscal year of the Company all
Loss shall be specially allocated to the Class A Member until such time as (i)
the Class A Member's Capital Account has been reduced to zero or (ii) Losses
have been allocated to the Class A Member pursuant to this Section 4.2 in an
aggregate amount equal to the aggregate amount of the Capital Contributions of
the Class A Member, and thereafter any further Loss shall be allocated to and
among the Members in accordance with their respective Percentage Interests,
provided, however, that to the extent an allocation of Loss to a Member would
produce a Negative Capital Account for that Member, such Loss shall be allocated
instead to the other Member to the extent of that other Member's Positive
Capital Account, and any remaining Loss shall be allocated among all Members in
accordance with their respective Percentage Interests. After giving effect to
the special allocations set forth in Section 4.3, for any fiscal year of the
Company, Profit shall be allocated to and among the Members in accordance with
their respective Percentage Interests.
4.3. REGULATORY ALLOCATIONS.
4.3.1. QUALIFIED INCOME OFFSET. No Member shall be allocated Losses or
deductions if the allocation causes a Member to have an Adjusted Capital Account
Deficit. If a Member receives (1) an allocation of Loss or deduction (or item
thereof) or (2) any distribution which causes the Member to have an Adjusted
Capital Account Deficit at the end of any taxable year, then all items of income
and gain of the Company (consisting of a pro rata portion of each item of
Company income, including gross income and gain) for that taxable year shall be
allocated to that Member before any other allocation is made of Company items
for that taxable year, in the amount and in proportions required to eliminate
the excess as quickly as possible. This Section 4.3.1 is intended to comply
with, and shall be interpreted consistently with, the "qualified income offset"
provisions of the Regulations promulgated under Code Section 704(b).
4.3.2. MINIMUM GAIN CHARGEBACK. Except as set forth in Regulation
Section
14
<PAGE> 15
1.704-2(f)(2), (3), and (4), if, during any taxable year, there is a net
decrease in Minimum Gain, each Member, prior to any other allocation pursuant to
this Section IV, shall be specially allocated items of gross income and gain for
such taxable year (and, if necessary, subsequent taxable years) in an amount
equal to that Member's share of the net decrease of Minimum Gain, computed in
accordance with Regulation Section 1.704-2(g). Allocations of gross income and
gain pursuant to this Section 4.3.2 shall be made first from gain recognized
from the disposition of Company assets subject to non-recourse liabilities
(within the meaning of the Regulations promulgated under Code Section 752), to
the extent of the Minimum Gain attributable to those assets, and thereafter,
from a pro rata portion of the Company's other items of income and gain for the
taxable year. It is the intent of the parties hereto that any allocation
pursuant to this Section 4.3.2 shall constitute a "minimum gain chargeback"
under Regulation Section 1.704-2(f).
4.3.3. CONTRIBUTED PROPERTY AND BOOK-UPS. In accordance with Code
Section 704(c) and the Regulations thereunder, as well as Regulation Section
1.704-1(b)(2)(iv)(d)(3), income, gain, loss, and deduction with respect to any
property contributed (or deemed contributed) to the Company shall, solely for
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of the property to the Company for federal
income tax purposes and its fair market value at the date of contribution (or
deemed contribution). If the adjusted book value of any Company asset is
adjusted as provided herein, subsequent allocations of income, gain, loss, and
deduction with respect to the asset shall take account of any variation between
the adjusted basis of the asset for federal income tax purposes and its adjusted
book value in the manner required under Code Section 704(c) and the Regulations
thereunder.
4.4. LIQUIDATION AND DISSOLUTION.
4.4.1. If the Company is liquidated, the assets of the Company
remaining following satisfaction of, or appropriate reserve for, all of the
Company's liabilities shall be distributed to the Members as follows:
First: To the Class A Member, an amount equal to the aggregate
amount of the Class A Member's Capital Contribution reduced by
the aggregate amount of distributions (other than Tax
Distributions) received by the Class A Member from the date of
this Agreement to the date of liquidation;
Second: To the Class B Member, an amount equal to the amount
determined by multiplying the amount distributed to the Class A
Member pursuant to item First above by a fraction, the numerator
of which is the
15
<PAGE> 16
Percentage Interest of the Class B Member and the denominator of
which is the Percentage Interest of the Class A Member;
Finally: The entire remaining balance of such assets, to the
Members in accordance with their Percentage Interests.
4.4.2. No Member shall be obligated to restore a Negative Capital
Account.
4.5. GENERAL.
4.5.1. Except as otherwise provided in this Agreement, the timing and
amount of all distributions shall be determined by the Board of Managers.
4.5.2. If any assets of the Company are distributed in kind to the
Members, those assets shall be valued on the basis of their fair market value,
and any Member entitled to any interest in those assets shall receive that
interest as a tenant-in-common with all other Members so entitled. The fair
market value of the assets shall be determined by the Board of Managers, acting
in good faith. The Profit or Loss for each unsold asset shall be determined as
if the asset had been sold at its fair market value, and the Profit or Loss
shall be allocated as provided in Section 4.2 and shall be properly credited or
charged to the Capital Accounts of the Members prior to the distribution of the
assets in liquidation pursuant to Section 4.4.
4.5.3. All Profit and Loss shall be allocated, and all distributions
shall be made, to the Persons shown on the records of the Company to have been
Members as of the last day of the taxable year for which the allocation or
distribution is to be made. Notwithstanding the foregoing, unless the Company's
taxable year is separated into segments, if there is a Transfer during the
taxable year, the Profit or Loss shall be allocated between the original Member
and the successor on the basis of the number of days each was a Member during
the taxable year; provided, however, the Company's taxable year shall be
segregated into two or more segments in order to account for Profit, Loss, or
proceeds attributable to any extraordinary non-recurring items of the Company.
4.6. TAX MATTERS PARTNER. The Class A Member shall be the "tax matters
partner" for purposes of Sections 6221-6233 of the Internal Revenue Code. The
tax matters partner shall promptly provide all Members with copies of any notice
which is received by it in its capacity as tax matters partner for the Company.
16
<PAGE> 17
SECTION V
MANAGEMENT: RIGHTS, POWERS, AND DUTIES
5.1. MANAGEMENT.
5.1.1. GENERAL. The Company shall be managed by a Board of Managers,
who shall (except to the extent specifically provided otherwise in this
Agreement) have, with respect to the Company, all of the duties, power and
authority exercisable by a board of directors of a corporation organized under
the General Corporation Law of the State of Delaware.
5.1.2. BOARD MEMBERSHIP. The Board of Managers shall initially consist
of five (5) Persons, three (3) of whom shall be designated Class A Managers and
shall be selected by the Class A Member and two (2) of whom shall be designated
Class B Managers and shall be selected by the Class B Member; provided, however,
that if the Class A Majority Voting Right lapses then each Member shall be
entitled to designate such number of members of the Board of Managers as most
practically parallels such Member's Percentage Interest. In exercising its
rights to designate members of the Board of Managers, each Member shall be
entitled to designate such Persons as such Member, in its sole discretion, deems
qualified; provided, however, that so long as the Class A Majority Voting Right
remains in effect following a Change of Control of the Class A Member, no Person
may be designated as a Class A Manager without the prior consent of the Class B
Member, which consent shall not be unreasonably withheld. The number of Persons
constituting the Board of Managers may, with the consent of the Class A Member
and the Class B Member, be increased from time to time in connection with the
admission of additional Members to the Company.
5.1.3. TERMS OF OFFICE. The Board of Managers shall be divided into
classes, each of whom shall serve for a term of five (5) years expiring in
succession; provided, however, that the terms of the initial Class A Managers
shall expire in 1999, 2000, and 2001 respectively, and the terms of the initial
Class B Members shall expire in 2002 and 2003 respectively. In the event of a
vacancy in any seat on the Board of Managers caused by the resignation, removal,
death, or disability of a member of the Board of Managers, the Member which
originally designated the member of the Board of managers whose resignation,
removal, death, or disability caused such vacancy shall be entitled to designate
a successor member of the Board of Managers to complete the unexpired term. A
Member who has designated a member of the Board of Managers shall be entitled,
at any time in the sole discretion of such Member, to remove such member of the
Board of Managers; no member of the Board of Managers may be removed except at
the direction of the Member which designated such Person to serve as a member of
the Board of Managers.
17
<PAGE> 18
5.1.4. MEETINGS OF THE BOARD OF MANAGERS.
5.1.4.1 Regular meetings of the Board of Managers may be held
without notice at such time and place as shall be determined from time to time
by the Board of Managers; provided that any member of the Board of Managers who
is absent when such a determination is made shall be duly given notice of the
determination. Special meetings of the Board of Managers may be held at any time
and place designated in a call by the Chairman of the Board or by any two or
more members of the Board of Managers. Notice of any special meeting shall be
given to each member of the Board of Managers at least 48 hours in advance of
the meeting; provided however, that unless at least one member other than those
designated by the Class A Member (or his or her proxy if a proxy has been
designated in accordance with Section 5.1.4.2) actually received notice of such
special meeting by personal receipt or other method in which receipt is
confirmed, notice of such special meeting shall be given at least five (5) days
in advance. A notice or waiver of notice of a meeting of the Board of Managers
need not specify the purposes of the meeting.
5.1.4.2. Members of the Board of Managers or any members of any
committee designated by the Board of Managers may participate in meetings of the
Board of Managers or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meetings. Any member of the Board of Managers or of
any committee thereof who is unable to attend a meeting of the Board of Managers
or of any committee, as the case may be, may, by a written instrument signed by
such member and filed with the records of the Board of Managers, designate
another member of the Board of Managers as his or her proxy to vote at such
meeting or to receive notice of any special meeting.
5.1.4.3 A majority of the total number of the whole Board of
Managers shall constitute a quorum at all meetings of the Board of Managers. In
the event one or more of the members of the Board of Managers shall be
disqualified to vote at any meeting, then the required quorum shall be reduced
by one for each such member so disqualified: provided, however, that in no case
shall less than one-third (1/3) of the total number of the whole Board of
Managers constitute a quorum. In the absence of a quorum at any such meeting, a
majority of the Board of Managers present may adjourn the meeting from time to
time without further notice other than announcement at the meeting, until a
quorum shall be present.
5.1.4.4 Each member of the Board of Managers shall be entitled to
one vote on all matters; provided, however, that in the event as a result of one
or more vacancies in the seats on the Board of Managers to be designated by the
Class A Member or an increase in the
18
<PAGE> 19
number of Persons serving on the Board of Managers, the members of the Board of
Managers designated by the Class A Member constitute less than a majority of the
entire Board of Managers, each member designated by the Class A Members shall be
entitled to such additional votes or fractional votes as shall permit the
members designated by the Class A Member to cast the majority of votes eligible
to be cast at any meeting of the Board of Managers so long as the Class A
Majority Voting Right is in effect. At any meeting of the Board of Managers at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action. Any action required or permitted to be taken at
any meeting of the Board of Managers or of any committee of the Board of
Managers may be taken without a meeting, if all members then in office of the
Board or committee, as the case may be, consent to the action in writing, and
the written consents are filed with the minutes of proceedings of the Board or
committee.
5.1.4.5 Notwithstanding any other provision of this Agreement,
the Company shall not take any of the following actions without the prior
consent of a majority of the members of the Board of Managers, which majority
includes at least member who is not designated by the Class A Member:
(i) admission of a new Member and determination of the terms on which
such new Member will be admitted to the Company;
(ii) acceptance of any additional Capital Contribution from any
Member, except pursuant to the exercise of rights under Sections 3.7 and 3.8;
(iii) the acceptance of a loan from any Member; or
(iv) the sale of all or substantially all of the assets of the
Company.
5.1.4.6 In exercising authority to manage the Company, the
members of the Board of Managers shall have the same fiduciary duties to the
Company and its Members as the directors of a corporation organized under the
General Corporation Law of the State of Delaware have to such corporation and
its stockholders. No member of the Board of Managers shall be disqualified from
voting on any matter relating to the relationship between the Company and any
Member (either with respect to such Member's rights and obligations under this
Agreement, the business relationship between the Company and such Member
(including without limitation, with respect to LDI, under the Services Agreement
or, with respect to the Class A Member, in connection with the performance of
professional services as contemplated in Section 5.3 or in connection with the
Company's rights and obligations under the Concentra Software License Agreement
and its Amendment #1, both dated March 15, 1997, assigned to the Company by
LDI), or otherwise) or in which any Member has an interest by reason of the fact
that such member of the Board of Managers was designated as a member of the
Board of Managers by the Member whose relationship with the Company is the
subject of, or may be affected, by such vote or in which such Member otherwise
has an interest.
19
<PAGE> 20
5.1.4.7. The Board of Managers may, by resolution passed by a
majority of the whole Board, which majority includes at least one member who is
not designated by the Class A Member, designate one or more committees, each
committee to consist of one or more of members of the Board of Managers. The
Board may designate one or more members of the Board of Managers as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members of the committee present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Managers 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 Managers and
subject to the provisions of this Agreement, shall have and may exercise all the
powers and authority of the Board of Managers in the management of the business
and affairs of the Company. Each such committee shall keep minutes and make such
reports as the Board of Managers may from time to time request. Except as the
Board of Managers may otherwise determine, any committee may make rules for the
conduct of its business, but unless otherwise provided by the Board of Managers
or in such rules, its business shall be conducted as nearly as possible in the
same manner as is provided in this Agreement for the Board of Managers.
5.2. MEETINGS OF AND VOTING BY MEMBERS.
5.2.1. A meeting of the Members may be called at any time by any
Member. Meetings of Members shall be held at the Company's principal place of
business or at any other place in Massachusetts designated by the Member calling
the meeting. Not less than ten (10) nor more than ninety (90) days before each
meeting, the Member calling the meeting shall give written notice of the meeting
to each Member. The notice shall state the time, place, and purpose of the
meeting. A Member may vote either in person or by written proxy signed by the
Member or by the Member's duly authorized attorney in fact. At any meeting of
Members, so long as the Class A Majority Voting Right is in effect, each Member
shall be entitled to cast a number of votes equal to the number of members of
the Board of Managers which such Member is entitled to designate pursuant to
Section 5.1.2. If the Class A Majority Voting Right is not in effect, then the
Members shall be entitled to votes proportionate to their respective Percentage
Interests.
5.2.2. With the consent of all of the Members, meetings of the Members
may be held anywhere outside of The Commonwealth of Massachusetts. A Member may
participate in a meeting of the Members by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time.
20
<PAGE> 21
5.2.3. Except as otherwise provided in this Agreement, any matter
coming before the Members shall be acted upon by majority of all votes entitled
to be cast, with each Member entitled to cast the number of votes determined in
accordance with Section 5.2.1. At any meeting of the Members, Members holding a
majority in Percentage Interests shall constitute a quorum.
5.2.4. In lieu of holding a meeting, the Members may vote or otherwise
take action by a written instrument indicating the unanimous consent of Members.
5.3. PERSONAL SERVICES. Except as otherwise provided in this Agreement or
in the Services Agreement, no Member shall be required to perform services for
the Company solely by virtue of being a Member. To the extent the rendering of
such services will not unreasonably interfere with the other business activities
of the Class A Member, the Class A Member will, at the request of the Company,
from time to time render professional services to and on behalf of the Company
at the Class A Member's then prevailing rate. Members shall be entitled to
compensation at reasonable rates for services performed for the Company either
pursuant to the Services Agreement or at the request of the Board of Managers.
Until the date on which the aggregate of (i) Capital Contributions (other than
by way of contributions in the form of property), (ii) other debt or equity
financing received by the Company and (iii) revenues generated by the Company's
operations exceeds $5,000,000, all payments due from the Company to the Class A
Member for services rendered shall be deferred. From time to time, at the
request of the Class A Member, the Company will execute and deliver to the Class
A member promissory notes, in form reasonably acceptable to the Class A Member,
in principal amount equal to the amount of deferred service fees owed by the
Company to the Class A Member, which note shall bear interest at the applicable
federal rate (as such rate is determined under the Code).
5.4. DUTIES OF PARTIES.
5.4.1. Except as otherwise expressly provided in Section 5.4.2.,
nothing in this Agreement shall be deemed to restrict in any way the rights of
any Member, or of any Affiliate of any Member, to conduct any other business or
activity whatsoever, and no Member shall be accountable to the Company or to any
other Member with respect to that business or activity so long as the business
or activity does not compete with the Company's business. The organization of
the Company shall be without prejudice to the Members' respective rights (or the
rights of their respective Affiliates) to maintain, expand, or diversify such
other interests and activities and to receive and enjoy profits or compensation
therefrom. Each Member waives any rights the Member might otherwise have to
share or participate in such other interests or activities of any other Member
or the Member's Affiliates.
21
<PAGE> 22
5.4.2. The Members contemplate that the Company will enter into a
Services Agreement with LDI During the term of such Services Agreement
(including any extension or replacement thereof), and for three (3) years after
the termination thereof, the LDI shall not engage in, and shall take all
necessary steps to prohibit its Affiliates from engaging in, any business
directly or indirectly competitive with the Company in the Defined Market or in
any other business activity of the Company. Furthermore, during the term of the
Services Agreement, LDI shall not engage in any business activity other than on
behalf of the Company unless, prior to commencing such other business activity,
LDI first delivers to the Board of Managers a business plan describing such
proposed business activity in reasonable detail and, after the Company thus
having been afforded a reasonable opportunity to pursue such business
opportunity for the benefit of the Company rather than of LDI, the Board of
Managers determines in the reasonable exercise of its judgment (i) that the
Company should not pursue such business activity and (ii) that the pursuit of
such activity by LDI will not be likely to interfere with LDI's performance of
its obligations under the Services Agreement. If the use of any of the
Intellectual Property of the Company (including, without limitation, the
Intellectual Property assigned to the Company by LDI as part of LDI's Capital
Contribution) is necessary or convenient for the conduct by LDI of any business
activity permitted to be pursued by LDI under this Section 5.4.2, so long as LDI
has given the Company notice and an opportunity to pursue for the Company's
benefit the proposed business in the manner set forth in the immediately
preceding sentence, the Company shall grant LDI a license to use such
Intellectual Property on commercially reasonable terms.
5.5. LIABILITY AND INDEMNIFICATION.
5.5.1. A Member shall not be liable, responsible, or accountable, in
damages or otherwise, to any other Member or to the Company for any act
performed by the Member with respect to Company matters, except for fraud, gross
negligence, or an intentional breach of this Agreement.
5.5.2. The Company shall indemnify each Person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company), by
reason of the fact that he is or was, or has agreed to become, a member of the
Board of Managers of the Company, or is or was serving, or has agreed to serve,
at the request of the Company, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, limited liability
company, joint venture, trust or other enterprise (all such Persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged
22
<PAGE> 23
to have been taken or omitted in such capacity, against all costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom, if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Person did not act in good
faith and in a manner which he reasonably believed to be in, or not opposed to,
the best interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Notwithstanding anything to the contrary in this Section 5.5, except as set
forth in Section 5.5.7 below, the Company shall not indemnify an Indemnitee
seeking indemnification in connection with a proceeding (or part thereof)
initiated by the Indemnitee unless the initiation thereof was approved by a
majority of the Board of Managers, which majority includes at least one member
who is not designated by the Class A Member.
5.5.3 The Company shall indemnify any Indemnitee who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Company to procure a judgment in its
favor by reason of the fact that he is or was, or has agreed to become, a member
of the Board of Managers of the Company, or is or was serving, or has agreed to
serve, at the request of the Company, as a director, officer or trustee of, or
in a similar capacity with, another corporation, partnership, limited liability
company, joint venture, trust or other enterprise, or by reason of any action
alleged to have been taken or omitted in such capacity, against all costs,
charges and expenses (including attorneys' fees) and amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such Person shall have been
adjudged to be liable to the Company unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such Person is fairly and unreasonably entitled to
indemnity for such costs, charges and expenses (including attorneys' fees) which
such court shall deem proper.
5.5.4. Notwithstanding the other provisions of this Section 5.5, to
the extent that an Indemnitee has been successful, on the merits or otherwise,
in defense of any action, suit or proceeding referred to in Sections 5.5.2 and
5.5.3, or in defense of any claim, issue or matter therein, or on appeal from
any such action, suit or proceeding, he shall be indemnified against all
23
<PAGE> 24
costs, charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection therewith.
5.5.5. As a condition precedent to his right to be indemnified, the
Indemnitee must notify the Company in writing as soon as practicable of any
action, suit, proceeding or investigation involving him for which indemnity will
or could be sought. With respect to any action, suit, proceeding or
investigation of which the Company is so notified, the Company will be entitled
to participate therein at its own expense and/or to assume the defense thereof
at its own expense, with legal counsel reasonably acceptable to such Indemnitee.
After notice from the Company to the Indemnitee of its election so to assume
such defense, the Company shall not be liable to the Indemnitee for any legal or
other expenses subsequently incurred by the Indemnitee in connection with such
claim, other than as provided below in this Section 5.5.5. The Indemnitee shall
have the right to employ his own counsel in connection with such claim, but the
fees and expenses of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Company, (ii) counsel to the Indemnitee shall have reasonably concluded that
there may be conflict of interest or position on any significant issue between
the Company and the Indemnitee in the conduct of the defense of such action or
(iii) the Company shall not in fact have employed counsel to assume the defense
of such action, in each of which cases the fees and expenses of counsel for the
Indemnitee shall be at the expense of the Company, except as otherwise expressly
provided by this Section 5.5. The Company shall not be entitled to assume the
defense of any claim brought by or in the right of the Company or as to which
counsel for the Indemnitee shall have reasonably made the conclusion provided
for in clause (ii) above.
5.5.6. Subject to the provisions of Section 5.5.7 below, in the event
that the Company does not assume the defense pursuant to Section 5.5.5 of any
action, suit, proceeding or investigation of which the Company receives notice
under this Section 5.5, any costs, charges and expenses (including attorneys'
fees) incurred by an Indemnitee in defending a civil or criminal action, suit,
proceeding or investigation or any appeal therefrom shall be paid by the Company
in advance of the final disposition of such matter, PROVIDED, HOWEVER, that the
payment of such costs, charges and expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that such Indemnitee is not
entitled to be indemnified by the Company as authorized in this Section 5.5.
5.5.7 Any indemnification or advancement of expenses pursuant to this
Section 5.5 shall be made promptly, unless the Company determines that such
Indemnitee did not meet
24
<PAGE> 25
the applicable standard of conduct set forth in Section 5.5.2 or 5.5.3, as the
case may be. Such determination shall be made in each instance by (a) a majority
vote of a quorum of the Board of Managers consisting of Persons who are not at
that time parties to the action, suit or proceeding in question ("disinterested
managers"), (b) if no such quorum is obtainable, a majority vote of a committee
of two or more disinterested managers, (c) a vote of Members holding a majority
in Percentage Interest, which shall consist of Members who are not at that time
parties to the action, suit or proceeding in question, (d) independent legal
counsel (who may be regular legal counsel to the Company) appointed for such
purpose by vote of the Board of Managers in the manner specified in clause (a)
or (b) above, or (e) a court of competent jurisdiction. The right to
indemnification or advances as granted by this Section 5.5 shall be enforceable
by the Indemnitee in any court of competent jurisdiction if the Company denies
such request, in whole or in part. Such Indemnitee's costs, charges and expenses
(including attorneys' fees) incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
proceeding shall also be indemnified by the Company. Unless otherwise provided
by law, the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Section 5.5 shall be on
the Company.
SECTION VI
TRANSFER OF INTERESTS AND WITHDRAWALS OF MEMBERS
6.1. TRANSFERS. Except as set forth in Section 6.2. or 6.3, no Member may
Transfer all, or any portion of, or any interest or rights in its Interest
without the written consent of a majority in Interest of the non-Transferring
Members. Each Member hereby acknowledges the reasonableness of this prohibition
in view of the purposes of the Company and the relationship of the Members. The
Transfer of any Interests in violation of the prohibition contained in this
Section 6.1 shall be deemed invalid, null and void, and of no force or effect.
Any Person to whom Interests are attempted to be transferred in violation of
this Section 6.1 shall not be entitled to vote on matters coming before the
Members, participate in the management of the Company, act as an agent of the
Company, receive distributions from the Company, or have any other rights in or
with respect to the Membership Rights.
6.2. RIGHT OF FIRST REFUSAL AND CO-SALE RIGHTS.
6.2.1. In the event any Member (a "Transferring Member") proposes to
sell, transfer, assign or otherwise dispose of (a "Transfer") all or any portion
of such Member's Interest (the "Offered Interest") (except as otherwise provided
below), such Transferring Member shall give to each other member written notice
specifying the Offered Interest, identifying the proposed transferee (if any)
and setting forth the terms and conditions (including price) on which
25
<PAGE> 26
the proposed transfer is to be made (the "Notice of Proposed Transfer"). Each
Member may elect to purchase its Pro Rata Portion of the Offered Interest at the
price and on the terms and conditions specified in the Notice of Proposed
Transfer by delivering written notice of such election to the Transferring
Member as soon as practicable but in any event within 30 days after delivery of
the Notice of Proposed transfer. For purposes of this Agreement, a Member's Pro
Rata Portion of any Offered Interest shall be determined by multiplying the
Offered Interest by a fraction, the numerator of which shall be the Percentage
Interest then held by such Member and the denominator of which shall be the
aggregate Percent Interest of all Members other than the Transferring Members.
In the event any Members do not fully exercise their rights under this Section
6.2.1 to purchase their entire Pro Rata Portion of the Offered Interest, the
Transferring Member shall promptly give the Class A Member (so long as the Class
A Member timely exercised in full its rights under this Section 6.2.1 to
purchase its Pro Rate Portion of the Offered Interest) written notice (the
"Further Offer Notice") thereof, and the Class A Member may elect to purchase
such Offered Interest at the price and on the terms and conditions specified in
the Notice of Proposed Transfer by delivering written notice of such election to
the Transferring Member as soon as practicable but in any event within 10 days
after delivery of the Further Offer Notice. The purchases and sales of the
Offered Interest to the several Members hereunder shall be separate
transactions; the closing of each such transaction shall take place as soon as
practicable but in any event within 15 days after a Member's election to
purchase its Pro Rata Portion of the Offered Interest.
6.2.2. In the event that the Members have not elected to purchase all
of the Offered Interest , the Transferring Member may, within 120 days after the
expiration of the offer period, Transfer the remaining portion of the Offered
Interest to one or more transferees at a price no less than the price specified
in the Notice of Proposed transfer and on other terms and conditions no more
favorable to the transferee(s) than specified in the Notice of Proposed
Transfer, subject to the provisions of Section 6.2.3 below.
6.2.3. Prior to effecting any Transfer , the Transferring Member shall
deliver a written notice (the "Sale Notice") to the Class A Member, specifying
in reasonable detail the identity of the proposed transferee(s) and the terms
and conditions of the Transfer. The Class A Member may elect to participate in
the contemplated Transfer by delivering written notice to the Transferring
Member within 30 days after receipt by such Class A Member of the Sale Notice.
If the Class A Member elects to participate in such Transfer, such Class A
Member will be entitled to sell in the contemplated Transfer, at a price and
otherwise on the same terms and conditions as the Transferring Member, a portion
of the Class A Member's Interest determined by multiplying (i) the Percentage
Interest to be sold in the contemplated Transfer by (ii) the quotient determined
by dividing (A) the Percentage Interest held by the Class A Member, by (B) the
Percentage Interest held by the Transferring Member immediately prior to the
proposed Transfer. Each
26
<PAGE> 27
Transferring Member shall use its best efforts to obtain the agreement of the
prospective transferee(s) to the participation of the Class A Member in any
contemplated Transfer, to the extent the Class A Member elects to participate in
the manner set forth above, and no Transferring Member shall Transfer any of his
Interest to the prospective transferee(s) if the prospective transferee(s)
declines to allow such participation of such Class A Member (except to the
extent provided below).
6.2.4. The restrictions on Transfer and the rights of first refusal
and co-sale set forth in this Section 6.2 shall not apply to any Transfer (i) in
the case of an individual, to or among such Member's Family Group or by will or
the laws of descent and distribution to such Member's Family Group, (ii) in the
case of an entity, to or among any other entity or entities 50% or more of whose
outstanding equity securities are beneficially owned by such entity or which
beneficially owns 50% or more of the outstanding equity securities of such
entity, (iii) in case of a flow-thru entity, proportionately to all stockholders
or members of such entity, or (iv) by way of or pursuant to the pledge of a
Member's Interest as collateral security for a loan made to such Member or to an
Affiliate or a member of the Family Group of such Member by a bank or other
financial institution (the persons to whom Transfers are permitted pursuant to
clauses (i), (ii), (iii) and (iv) being collectively referred to herein as
"Permitted Transferees"); provided, that the restrictions contained in this
Section 6.2 shall continue to be applicable to the transferred Interest after
any such Transfer; and provided further that the transferee(s) of such Interest
shall have agreed in writing to be bound by the provisions of this Agreement
(including the provisions of this Section 6.2) with respect to the Interest so
transferred. The Transfer of any equity interest in any Member that is a
partnership, corporation, limited liability company or other entity (other than
a Member which has a class of securities registered under the Securities
Exchange Act of 1934 and publicly traded on any national securities exchange,
the Nasdaq National Market or any automated quotation service) shall be deemed a
Transfer of a portion of such Member's Interest and shall be subject to the
restrictions on Transfer and the rights of first refusal and co-sale set forth
in this Section 6.2; PROVIDED, HOWEVER, any holder of an equity interest in a
Member may Transfer all or any portion of such equity interest without the
consent of the Class A Member (i) in the case of an individual, to or among such
individual's Family Group or by will or the laws of descent and distribution to
such individual's Family Group, (ii) in the case of an entity, to or among its
Affiliates, or (iii) by way of or pursuant to the pledge of an equity interest
in such Member as collateral security for a loan made to the holder of such
equity interest or to an Affiliate or a member of the Family Group of the holder
of such equity interest by a bank or other financial institution.
6.3. CALL RIGHT ON MEMBERSHIP INTERESTS.
6.3.1. At any time after the Call Trigger Date, the Class A
Member may, in its
27
<PAGE> 28
sole discretion, by written notice to any Member as hereinafter provided, elect
to purchase all, but not less than all, of the Interest of such Member at the
purchase price payable, in cash or so long as the Class A Member has a class of
securities registered under the Securities Exchange Act of 1934 and publicly
traded on any national securities exchange, Nasdaq National Market or any
automated quotation service, in shares of the Common Stock of the Class A Member
(valued at the closing price of such Common Stock as reported on its principal
trading market on the date of the Call Exercise Notice) or in any combination
thereof as the Class A Member determines in its sole discretion, to such Member
determined in accordance with the following formula:
1. MULTIPLY (i) the closing price of the Class A Member's common stock as
reported on its principal trading market on the date of the Call Exercise Notice
("SP") by (ii) the number of shares of the Class A Member's common stock
outstanding on such date ("SN"), and
2. MULTIPLY the product thereof by the amount determined by MULTIPLYING (i)
the amount of the Company's revenue (as determined in accordance with generally
accepted accounting principles, consistently applied) for the twelve-month
period ending on the last day of the month immediately preceding the date of the
Call Exercise Notice ("CR") by (ii) the Percentage Interest of such Member
("%I"), and
3. DIVIDE the product thereof by the consolidated revenue (as determined in
accordance with generally accepted accounting principles, consistently applied)
of the Class A Member for the four quarters ending on the last day of the
quarter immediately preceding the date of the Call Exercise Notice (or if the
Class A Member, in its sole discretion so elects, a reasonable adjustment to the
last day of the month immediately preceding the date of the Call Exercise
Notice) ("Rev"), then
4. ADD thereto the product determined by MULTIPLYING (i) the amount of the
Company's cash or cash equivalents as of the last day of the month immediately
preceding the date of the Call Exercise Notice ("COH"), less the aggregate
amount of the Company's short and long term debt as of the last day of the month
immediately preceding the date of the Call Exercise Notice ("Dbt"), less the
aggregate amount of the Company's reasonably anticipated expenses for the twelve
months immediately following the date of the Call Exercise Notice ("OpEx"), by
(ii) the Percentage Interest of such Member ("%I"), and
5. SUBTRACT therefrom the product determined by MULTIPLYING (i) the
percentage of the total outstanding Common Stock of the Class A Member that
would be represented by the shares of the Class A Member's Common Stock issuable
to such Member if the purchase price under this Section 6.3.1 were paid in
shares of the Class A Member's Common Stock ("S%") by (ii) the aggregate amount
of distributions received by the Class A Member from the Company from the
28
<PAGE> 29
date of this Agreement to the date of the Call Exercise Notice ("Dis").
For exemplary purposes only, the foregoing formula can be stated as follows:.
[(SP x SN x CR x %I) / Rev] + [(COH - Dbt - OpEx) x %I] - [S% x Dis]
Notwithstanding the foregoing, in no event shall the aggregate purchase price
payable by the Class A Member exceed the amount which would make the twelve
month period ending on the last day of the month immediately preceding the date
of the Call Exercise Notice less than ten percent (10%) accretive to the Class A
Member's earning per share (assuming, for purposes of such determination, the
purchase price is paid entirely in shares of the Common Stock of the Class A
Member) after normal forward-looking transaction adjustments and adjustments for
expenses or amortization or depreciation to be in accordance with generally
accepted accounting principles.
6.3.2. In the event the Class A Member elects to pay a portion of the
purchase price for the Interests being purchased from a Member pursuant to this
Section 6.3 in cash rather than in shares of the Common Stock of the Class A
Member and if the sale by the Member of its Interest would have otherwise been
tax-deferred if that portion of cash had been paid in shares of such Common
Stock, then the portion which is paid in cash shall be increased by ten percent
(10%).
6.4. NO OBLIGATION TO SELL. Except as provided in Sections 6.2 and 6.3
hereof, no Member shall have any obligation to sell or transfer (or to consider
or negotiate any offer to sell or transfer) all or any part of such Member's
Interest to the Company, any other Member or any third party.
SECTION VII
DISSOLUTION, LIQUIDATION, AND
TERMINATION OF THE COMPANY
7.1. EVENTS OF DISSOLUTION. The Company shall be dissolved upon the
happening of any of the following events:
7.1.1. upon the written agreement of Members entitled to cast a
majority of the votes at any meeting of the Members; provided however, that if
the Agreement to dissolve is made prior to the Call Trigger Date, such majority
shall include at least one Member who is not a Class A Member; or
29
<PAGE> 30
7.1.2 upon the sale of substantially all of the assets of the Company,
unless all the Members consent to continue the business of the Company within
ninety (90) days following the occurrence of such event.
7.2. PROCEDURE FOR WINDING UP AND DISSOLUTION. If the Company is dissolved,
the Board of Managers shall wind up its affairs. On winding up of the Company,
the assets of the Company shall be distributed, first, to creditors of the
Company, including Members who are creditors, in satisfaction of the liabilities
of the Company, and then to the Members in accordance with Section 4.4.
SECTION VIII
BOOKS, RECORDS, ACCOUNTING, AND TAX ELECTIONS
8.1. BANK ACCOUNTS. All funds of the Company shall be deposited in a bank
account or accounts opened in the Company's name. The Board of Managers shall
determine the institution or institutions at which the accounts will be opened
and maintained, the types of accounts, and the Persons who will have authority
with respect to the accounts and the funds therein.
8.2. BOOKS AND RECORDS. The Company shall keep or cause to be kept complete
and accurate books and records of the Company and supporting documentation of
the transactions with respect to the conduct of the Company's business. The
books and records shall be maintained in accordance with sound accounting
principles and practices and shall be available at the Company's principal
office for examination by any Member or the Member's duly authorized
representative at any and all reasonable times during normal business hours.
8.3. ANNUAL ACCOUNTING PERIOD. The annual accounting period of the Company
shall be its taxable year. The Company's taxable year shall be selected by the
Board of Managers, subject to the requirements and limitations of the Code.
8.4. REPORTS. Within ninety (90) days after the end of each taxable year of
the Company, the Board of Managers shall cause to be sent to each Person who was
a Member at any time during the taxable year then ended a financial statement of
the Company for the taxable year then ended. At the request of any Member, and
at the Company's expense, the Board of Managers shall cause an audit of the
Company's books and records to be prepared by independent accountants for the
period requested by the Member.
30
<PAGE> 31
SECTION IX
GENERAL PROVISIONS
9.1. ASSURANCES. Each Member shall execute all such certificates and other
documents and shall do all such filing, recording, publishing, and other acts as
the Members deem appropriate to comply with the requirements of law for the
formation and operation of the Company and to comply with any laws, rules, and
regulations relating to the acquisition, operation, or holding of the property
of the Company.
9.2. NOTIFICATIONS. Any notice, demand, consent, election, offer, approval,
request, or other communication (collectively, a "notice") required or permitted
under this Agreement must be in writing and either delivered personally or sent
by certified or registered mail, postage prepaid, return receipt requested or
sent by facsimile, e-mail or other electronic transmission (provided an
acknowledgment of receipt is generated by such transmission). A notice must be
addressed to a Member at the Member's last known address on the records of the
Company. A notice to the Company must be addressed to the Company's principal
office. A notice delivered personally will be deemed given when delivered in
hand to the addressee or to a responsible Person at the delivery address. A
notice delivered by facsimile, e-mail or other electronic transmission will be
deemed given when transmitted. A notice that is sent by mail will be deemed
given three (3) business days after it is mailed. Any party may designate, by
notice to all of the others, substitute addresses or addressees for notices;
and, thereafter, notices are to be directed to those substitute addresses or
addressees.
9.3. SPECIFIC PERFORMANCE. The parties recognize that irreparable injury
will result from a breach of any provision of this Agreement and that money
damages will be inadequate to fully remedy the injury. Accordingly, in the event
of a breach or threatened breach of one or more of the provisions of this
Agreement, any party who may be injured (in addition to any other remedies which
may be available to that party) shall be entitled to one or more preliminary or
permanent orders (i) restraining and enjoining any act which would constitute a
breach or (ii) compelling the performance of any obligation which, if not
performed, would constitute a breach.
9.4. COMPLETE AGREEMENT. This Agreement constitutes the complete and
exclusive statement of the agreement among the Members. It supersedes all prior
written and oral statements, including any prior representation, statement,
condition, or warranty.
9.5. AMENDMENT. This Agreement may be amended with the written consent of
Members entitled to cast a majority of the votes in any meeting of the Members,
which majority shall include at least one Member who is not a Class A Member.
31
<PAGE> 32
9.6. APPLICABLE LAW. All questions concerning the construction, validity,
and interpretation of this Agreement and the performance of the obligations
imposed by this Agreement shall be governed by the internal law, not the law of
conflicts, of The Commonwealth of Massachusetts.
9.7. SECTION TITLES. The headings herein are inserted as a matter of
convenience only, and do not define, limit, or describe the scope of this
Agreement or the intent of the provisions hereof.
9.8. BINDING PROVISIONS. This Agreement is binding upon, and inures to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, Personal and legal representatives, successors, and permitted
assigns.
9.9. JURISDICTION AND VENUE. Any suit involving any dispute or matter
arising under this Agreement may only be brought in the United States District
Court for the District of Massachusetts or any Massachusetts State Court having
jurisdiction over the subject matter of the dispute or matter. All Members
hereby consent to the exercise of Personal jurisdiction by any such court with
respect to any such proceeding.
9.10. TERMS. Common nouns and pronouns shall be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of the Person
may in the context require.
9.11. SEPARABILITY OF PROVISIONS. Each provision of this Agreement shall be
considered separable; and if, for any reason, any provision or provisions herein
are determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement which are valid.
9.12. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts each of which shall be deemed an original, and all of which,
when taken together, constitute one and the same document. The signature of any
party to any counterpart shall be deemed a signature to, and may be appended to,
any other counterpart.
IN WITNESS WHEREOF, the parties have executed, or caused this Agreement to
be executed, under seal, as of the date set forth above.
32
<PAGE> 33
ATTEST: MEMBERS:
CLASS A MEMBER: Concentra Corporation
/s/ Alex Braverman /s/ Lawrence W. Rosenfeld
- ------------------------------ ------------------------------------
CLASS B MEMBER: Loandata.inc.
/s/ Alex Braverman /s/ J. Tobias Reiley
- ------------------------------ ------------------------------------
33
<PAGE> 34
EXHIBIT A
MEMBERS
<TABLE>
<CAPTION>
Aggregate LLC
Class Percentage Percentage Interest Capital Contribution
Class A Member: Concentra Corporation
<S> <C> <C> <C>
100% 54.3% $850,000 paid at closing
Taxpayer ID# : 04-2827026
----------
Class B Member: Loandata.inc.
100% 45.7% Contributions of Property
totaling $715,378 and as
set forth in Exhibit A-2
and A-3.
Taxpayer ID# : 04-3287848
----------
</TABLE>
<PAGE> 35
CERTIFICATE OF ORGANIZATION
OF
LOANDATA LLC.
The undersigned, desiring to form a limited liability company pursuant to
the provisions of the Massachusetts Limited Liability Company Act (Chapter 156C
of the General Laws of the Commonwealth of Massachusetts), hereby certifies as
follows:
a. The federal employer identification number of the limited liability company
has not been issued.
b. The name of the limited liability company is Loandata LLC.
c. The street address in the Commonwealth of Massachusetts at which the
records of the limited liability company will be maintained is 21 North
Ave. Burlington, MA 01803.
d. The general character of the business of the limited liability company is
the development and marketing of consumer and business financing and
insurance systems and related financial instruments. In addition, the
limited liability company may engage in any lawful business permitted by
the Massachusetts Limited Liability Company Act.
e. The term of the limited liability company is perpetual.
f. The name and business address of the limited liability company's agent for
service of process required to be maintained by Section 5 of the
Massachusetts Limited Liability Company Act are: Concentra Corporation, 21
North Ave., Burlington, MA 01803
g. The names and business addresses of the initial mangers of the limited
liability company are:
Stephen J. Cucchiaro c/o Windward Capital, 50 Rowes Wharf, Suite 400,
Boston, MA 02101
James B. Nayduch c/o Loandata LLC, 47 Lafayette St., Salem, MA 01970
J. Tobias Reiley c/o Loandata LLC, 47 Lafayette St., Salem, MA 01970
Lawrence W. Rosenfeld c/o Concentra Corporation, 21 North Ave.,
Burlington, MA 01803
IN WITNESS WHEREOF, the undersigned authorized person, being an initial
manager of Loandata, LLC has, as of this 22nd day of October, 1997, executed
this Certificate of Organization, affirming thereby, under the penalties of
perjury, that the facts stated herein are true.
/s/ Lawrence W. Rosenfeld
- ---------------------------------------
Name: Lawrence W. Rosenfeld
---------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,532
<SECURITIES> 0
<RECEIVABLES> 4,181
<ALLOWANCES> 1,224
<INVENTORY> 0
<CURRENT-ASSETS> 8,532
<PP&E> 2,079
<DEPRECIATION> 5,917
<TOTAL-ASSETS> 13,477
<CURRENT-LIABILITIES> 7,274
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,596
<TOTAL-LIABILITY-AND-EQUITY> 13,477
<SALES> 2,748
<TOTAL-REVENUES> 2,748
<CGS> 1,762
<TOTAL-COSTS> 1,762
<OTHER-EXPENSES> 6,255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> (6,267)
<INCOME-TAX> 10
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,277)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
