PROGINET CORPORATION
FILING TYPE: 10SB12G
DESCRIPTION: REGISTRATION STATEMENT
FILING DATE:
PERIOD END: N/A
PRIMARY EXCHANGE: OTC-BB / CDNX
TICKER: N/A
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12 (g) OF THE SECURITIES EXCHANGE ACT OF 1934
PROGINET CORPORATION
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(Name of Small Business Issuer in Its Charter)
DELAWARE 11-3264929
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 GARDEN CITY PLAZA, GARDEN CITY, NEW YORK 11530
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(Address of Principal Executive Offices) (Zip Code)
(516) 248-2000
Telephone Number
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which
to be Registered Each Class is to be Registered
Common Stock, par value $0.001 OTC Bulletin Board
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TABLE OF CONTENTS
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Special Note Regarding Forward-Looking Statements.....................................................2
Part I...................................................................................................2
Item 1. Description of Business......................................................................2
BUSINESS............................................................................................2
RISK FACTORS........................................................................................2
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........2
GENERAL.............................................................................................2
RESULTS OF OPERATIONS...............................................................................2
LIQUIDITY AND CAPITAL RESOURCES.....................................................................2
ACQUISITIONS........................................................................................2
IMPACT OF THE YEAR 2000.............................................................................2
Item 3. Description of Property......................................................................2
Item 4. Security Ownership of Certain Beneficial Owners and Management...............................2
Item 5. Directors, Executive Officers, Promoters and Control Persons.................................2
DIRECTORS AND EXECUTIVE OFFICERS....................................................................2
COMMITTEES..........................................................................................2
FAMILY RELATIONSHIPS................................................................................2
Item 6. Executive Compensation.......................................................................2
Item 7. Certain Relationships and Related Transactions...............................................2
Item 8. Description of Securities....................................................................2
Part II..................................................................................................2
Item 1. Market Price Of and Dividends On The Registrant's Common Equity and Other Shareholder Matters2
Item 2. Legal Proceedings............................................................................2
Item 3. Changes In and Disagreements with Accountants................................................2
Item 4. Recent Sales of Unregistered Securities Issuances............................................2
Item 5. Indemnification of Directors and Officers....................................................2
PART F/S..................................................................................................
Index.........................................................................................FS- Index
Independent Auditors'Report........................................................................FS-1
Balance Sheets -July 31, 1999 and July 31, 1998....................................................FS-2
Statements of Operations - Years Ended July 31, 1999 and July 31, 1998.............................FS-3
Statements of Stockholders'Equity - Years Ended July 31, 1999 and July 31, 1998....................FS-4
Statements of Cash Flows- Years Ended July 31, 1999 and July 31, 1998..............................FS-5
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Notes to Financial Statements......................................................................FS-6
Balance Sheets -January 31, 2000 and July 31, 1999................................................FS-14
Statements of Operations-Three Months and Six Months Ended January 31, 2000 and January 31, 1999..FS-15
Statements of Cash Flows - Six Months Ended January 31, 2000 and January 31, 1999.................FS-16
Notes to Unaudited Financial Statements .........................................................FS-17
Part III................................................................................................24
Item 1. Index to Exhibits...........................................................................24
Item 2. Description of Exhibits.....................................................................25
SIGNATURES..............................................................................................26
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This registration statement on Form 10-SB contains forward-looking statements
that involve risks and uncertainties that address:
- Business strategies;
- Proginet's financial condition and results of operations;
- Forecasts;
- Trends, including growth, in the information technology
market;
- New products ; and
- Year 2000 computer problems.
Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"intends," "plans," "should," "seeks," "pro forma," "anticipates," "estimates,"
"continues," or other variations thereof (including their use in the negative),
or by discussions of strategies, opportunities, plans or intentions. Such
statements include but are not limited to statements under the captions "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," as well as captions elsewhere
in this document. A number of factors could cause results to differ materially
from those anticipated by such forward-looking statements, including those
discussed under "Risk Factors" and "Business."
In addition, such forward-looking statements necessarily depend upon assumptions
and estimates that may prove to be incorrect. Although we believe that the
assumptions and estimates reflected in such forward-looking statements are
reasonable, we cannot guarantee that our plans, intentions or expectations will
be achieved. The information contained in this registration statement, including
the section discussing risk factors, identifies important factors that could
cause such differences.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS
Proginet Corporation (Proginet or the Company) develops and markets two software
product lines. One is a batch file transfer software product used to link
mainframe computer systems to local area networks (LANs) and the Internet,
primarily for Microsoft Windows, Novell Netware, OS400 and UNIX platforms. The
other is a security password management software product that enables multiple
and disparate security systems, on multiple computers, to function as one. The
Company sells its products in the U.S. through its telemarketing and sales force
and internationally directly and indirectly through distributors, and through
Original Equipment Manufacturer (OEM) partners in Europe and the United States.
The Company also provides software maintenance services. The Company's stock is
traded on the Canadian Stock Exchange, CDNX, (formerly, the Vancouver Stock
Exchange), listed as PRF.U.
GENERAL DEVELOPMENT OF THE BUSINESS
Proginet was incorporated in New York in 1985 as The Teleprocessing Connection,
Inc (TCI) and changed its name in 1990 to Proginet Corp. In 1995, Proginet Corp.
merged with a Delaware corporation and became Proginet Corporation.
Proginet is a Long Island, New York-based software development company that
provides software solutions for seamlessly integrating IBM mainframes and
midrange computers with Microsoft Windows NT and other distributed client/server
environments. The Company's products address the systems management software
space, including password management, enterprise managed data transfer, and
Internet managed data transfer. Proginet's first product was XCOM, a
multi-platform file transfer application. XCOM was sold to Legent Corporation in
1990 and is a major product within Computer Associates' Unicenter-TNG family of
products. After the sale of the XCOM line, Proginet focused on research and
development, placing a particular emphasis on the development of MVS-to-Windows
communication and connectivity solutions. The Company collaborated closely with
Novell in 1993 and 1994, with Novell selling its micro-to-mainframe business and
technology to Proginet (Network Navigator and IND$FILE) and later taking an
equity option in the Company in consideration for the transfer of that
technology in May of 1995. Proginet was able to raise $1.8 million of capital
through an Initial Public Offering on the Vancouver Stock Exchange. This capital
infusion enabled Proginet to develop new technology to take advantage of the
explosive growth in Windows-to-MVS connectivity requirements that began that
year.
Through its work with Microsoft, the Proginet management team realized the
appeal of being able to manage secure environments across disparate systems from
a single location. Extensive co-development between the two organizations began
in the fall of 1995. SecurPass, a password management technology, came to
fruition as a result of this co-development in late 1997. To date, the close
working relationship with Microsoft has yielded additional benefits including
collaboration on the development of Fusion FTMS, a comprehensive systems
management application for secure and reliable data delivery and replication.
Proginet acquired the mainframe software business of Microsoft (TransAccess) at
the end of 1996, providing the Company with a recurring revenue stream. At that
time Microsoft took a minority equity stake in the Company, and entered into a
comprehensive marketing and sales agreement.
In November of 1996, Proginet acquired the assets of KnowledgeNet, Inc., which
developed NetWrk, a product similar to Proginet's but specialized for the AS/400
area. This acquisition allowed Proginet to expand product coverage to include
the AS/400 and UNIX platforms.
Proginet has developed three principal products: Fusion FTMS, a managed file
transfer software product; SecurPass, a password management software; and
CyberFusion, an advanced technology to move information over the Internet.
PRODUCTS
The following is a brief description of the principal products currently
marketed by Proginet. Proginet has designed its products with an emphasis on
ease of use, security and management both to enhance and protect its customers'
investments in different networking hardware and software, and to provide its
customers with
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flexibility for future investments.
Proginet's information movement technology allows users to send their
information over internal networks and the Internet, confident that no one other
then the intended recipient can read or receive the information.
Proginet's information movement software is currently being used by some of the
largest corporations in the world. Proginet offers five software solutions for
moving information between computers. CyberFusion is designed for Internet file
transfer and the other four are designed for internal network file transfers.
Proginet currently offers the following products in the information movement
space:
o CyberFusion provides secure reliable information movement across the
Internet. This product includes some of the strongest encryption available
including DES, Triple DES, Blowfish and Blowfish Long, along with extensive
features to allow for the automation of information movement needs.
o Fusion FTMS manages high-speed file transfers between OS/390 hosts, LAN
servers, and desktops, throughout an enterprise environment.
o TransAccess is a data access and middleware solution for cross-platform
data retrieval, update, and transaction processing. TransAccess enables
enterprise-wide distributed applications across an extensive range of
computing platforms.
o Network Navigator is a batch file transfer capability between client/server
and MVS environments.
o Proginet also provides a version of IND$FILE, called IND$FILE Plus. While
the time sharing option (TSO) version of IND$FILE, sold by IBM, is already
the industry standard for exchanging files between personal computers and
IBM mainframes, Proginet's VTAM - based IND$FILE Plus provides added value
and security to all IBM mainframe users.
Proginet's password management technology addresses the problem of "too many
passwords" that affects individual users from small to large corporate
enterprises. The individual user may have many passwords to access the different
systems in a typical environment. Often they resort to writing passwords on a
"Post-It". Such practices cause enterprises to have an exposure when users write
the password down or choose simple passwords that are easier to remember.
Another consequence develops when users create complex passwords for improved
security and then forget their passwords, creating a significant burden for help
desk personnel.
SecurPass, with its password synchronization technology, password management
features, and extendable application program interfaces (APIs), allows
enterprises to gain control over users' passwords. By utilizing the password
management and password synchronization technology in SecurPass, a company can
specify the rules for creating a password, and have those rules enforced among
all of the security systems throughout the company. The capabilities in
SecurPass allow a user to specify one password, and have that password allow the
user to gain access to all of the systems needed. When a password is reset,
SecurPass propagates the password change throughout the environment to ensure
that all passwords are secure and in-sync.
Enterprises need to address this exposure to ensure that they maintain necessary
security and trust with their customers. Proginet believes enterprises must
simplify and consolidate their security administration functions, as a first
step to regaining and keeping control over their security password environments.
STRATEGY
Proginet's strategy has been and continues to be to develop state-of-the-art
technology applications for information movement and password management.
Proginet implements its strategy by investing in a highly qualified and
motivated research and development team, that produces and brings to market
unique and creative products geared to the Internet. Such technology includes
encryption and management features to assure secure and reliable transfers.
The Company's product strategy is to expand with new products specifically
designed for the Internet. Proginet's current product lines are mature,
functional products with large installed bases. The additional development of
existing products is focused on increasing the ease of product deployment and
usability.
New product development will be specifically geared toward the Internet,
e-business and the wireless transmission marketplaces.
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The criteria used in evaluating, and determining R&D priorities are as follows:
1. Products must enable powerful use of the Internet.
2. Products must focus on Proginet's core strengths (multi-platform,
manageability, secure information movement).
3. Viral marketing functionality, whereby customers and their partners can
add incrementally to sales by propagating product marketing once the
products are installed.
4. Business and technologies must be synergistic.
5. Products must have wide appeal.
6. Each product must stand on its own in terms of revenue generation
potential.
Proginet continually evaluates new technology that has great impact on the
Internet and determines how this new technology may fit into Proginet's
strategy. Two recent examples of this approach are Linux, now available in the
CyberFusion family of products, and LDAP, now being implemented in the SecurPass
line.
SALES AND MARKETING
Proginet's sales strategy is comprised of three sales models: direct sales in
the U.S; indirect sales through distribution partners in over 20 countries
around the world; and alliances with partners who integrate Proginet's
technology with their technology and sell the combined product(s). This last
model is commonly referred to as OEM.
The direct sales model includes a direct telemarketing and sales force comprised
of Proginet employees augmented by the use of outside telemarketing services
related to lead generation for the direct sales force. Leads are turned over to
the Proginet's internal direct sales force, who then cover the entire sales
process. The direct sales model covers the entire sales cycle from lead
generation through trial evaluation process, typically 30 to 60 days, to the
signing of a software license agreement. Proginet estimates that the "typical"
sales cycle averages about 90 days and Proginet closes approximately two-thirds
of trials started.
The indirect sales model is built on the premise that presence and knowledge in
local markets is paramount to establishing necessary business relationships and
closing sales. Therefore, distributor partnerships are established in local
markets (countries) and Proginet commits significant resources to train and
support distributors to sell Proginet software in their countries. The
distributors' role is to act as agents, make the marketplace aware of Proginet's
technology and explain how the technology can be used in their business
environments. Proginet backs-up the distributors with authorized assistance and
support, customer installations and training whenever necessary. The distributor
agreement specifies that they cannot sell competitors' products.
The OEM sales model is based on the ability of an outside software company with
complementary technology to sell, install and support Proginet's technology.
These OEMs incorporate Proginet's technology to provide services to other
customers.
The indirect and OEM sales models accounted for approximately 50% of Proginet's
new license revenue in the fiscal quarter ended January 31,2000, a significant
increase over the 22% of new license revenues in the same period in the previous
year.
Proginet's marketing strategy is centered on communicating the Company's message
for corporate visibility to investors and the Company's product solutions to the
marketplace. The corporate visibility program is centered upon an investor
relations program, which provides communications on corporate activities to
investors, and a corporate awareness program, which includes advertising and
participation in many industry trade shows and related programs.
Proginet's product marketing strategy includes a comprehensive program that
identifies market needs, positions Proginet's product messages to address these
needs, and pursues several methods to deliver Proginet's message to the
identified target audiences. The methods include advertising, trade show and
industry conference participation, and direct mail campaigns. Additionally,
Proginet pursues specific vertical markets, including healthcare, retail and
financial services, with programs designed specifically for these vertical
markets.
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CUSTOMERS
Proginet has established a worldwide user base of more than 400 companies in
over 20 countries engaged in the financial, telecommunications, healthcare,
government, and other industry sectors. No one customer represents 10% or more
of Proginet's revenues.
SUPPLIERS
Proginet is not reliant on any particular supplier for any of its operating
needs. Any products required can be purchased from a number of sources.
EMPLOYEES
As of March 1, 2000, Proginet had 38 salaried employees, and two consultants on
retainer.
COMPETITION
Several companies in the marketplace provide technologies that are similar, or
are perceived by the marketplace to be similar, to Proginet's technology.
Competitive information is difficult to obtain and statistics on the number of
customers and products sold are not disclosed by either private or public
companies. For example, Computer Associates and IBM bundle product offerings and
they themselves do not fully know what products are specifically used by
customers. The information in this section was compiled from public sources as
well as from discussions with Proginet's partners, vendors, and customers.
Proginet believes the information to be reasonably accurate. However, there is
no way to substantiate the estimates provided.
The information movement market is vast, with large and small players targeting
many market segments, typically in the client server space. Some large players
in this space including Computer Associates and Sterling Commerce, provide file
transfer products for both the client server and mainframe spaces, in which
Proginet competes.
We believe that the principal competitive factors in our market include: brand
recognition, brand selection, price, accessibility, customer service,
reliability, scalability, speed, and emerging Internet technology. Proginet also
believes that with the introduction of CyberFusion for advanced managed file
transfer over the Internet, the Company is well positioned to compete in this
emerging market for business to business (B2B) file transfer.
Many of our competitors have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing and
other resources. Certain of our competitors may devote greater resources to
marketing and promotional campaigns, adopt more aggressive pricing policies and
devote substantially more resources to web site and systems development. If our
competitors are able to offer products and services on more favorable terms, we
may experience reduced operating margins, loss of market share and a diminished
brand franchise. We cannot assure you that we will compete successfully against
our current and future competitors. Competitive pressures created by any one of
our competitors, or by our competitors collectively, could have a material
adverse effect on our business, prospects, financial condition and results of
operations.
The Company's information movement technology products compete with major
computer and communication systems vendors including IBM, Computer Associates
and Sterling Commerce, as well as smaller companies such as MicroTempus,
Firesign and Hilgraeve Systems.
Of the smaller players, most of these have developed "bottom-up" file transfer
applications from a PC or UNIX platform as the foundation. These platforms have
been inherently unstable, or unreliable, when compared with the IBM mainframe.
Proginet's experience and expertise in this space enables the Company to develop
software with higher levels of compliance to standards for up time, reliability,
security, and scalability. The design requirement for 100 percent reliability
originated in the mainframe world and is the reason that, at this time, almost
70 percent of the world's data resides on IBM mainframes. Proginet's expertise
in this area provides Proginet an advantage over the competition, when
reliability, scalability and security are of paramount importance.
In the password management market, we believe Proginet has two key advantages:
(1) its expertise in mainframe development and, (2) its relationship with
Microsoft.
The mainframe is the platform where data security measures are most mature.
Consequently, customers are
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reliant upon the mainframe and mainframe security packages for protecting their
most critical data. Proginet's knowledge of the mainframe positions the Company
to leverage this reliance, and positions the Company to develop strategic
relationships with other mainframe - specific vendors.
The Company's password management technology product line competes with major
software vendors, including IBM and Computer Associates, as well as smaller
companies such as Axent and Blockade.
Proginet's relationship with Microsoft has positioned the Company to exploit the
most advanced elements of security provided by Microsoft in its own products.
Proginet builds upon Microsoft security, while the other vendors merely replace
it. Proginet's compliance with native Windows security ensures that the security
components of all applications, which are BackOffice compliant, will also be
fully compliant with Proginet's offering.
Proginet's technological relationship with Microsoft has also enabled Proginet
to provide a product that is server-centric, requiring no code on the client
desktop. This enables customers to perform far simpler and less costly
installation and maintenance than the many other products in the marketplace
that require specific desktop code.
Proginet's long-term strategy is to build upon its relationship with Microsoft,
remain at the forefront of new Microsoft technology and expand offerings related
to the Internet.
GOVERNMENT REGULATION
Proginet has received authorization from the United States Commerce Department
to export strong encryption that will ensure the security of critical business
information transferred worldwide via the Internet. Other than this
authorization, the Company is not subject to direct regulation by any government
agency, other than regulations applicable to businesses in general.
INTELLECTUAL PROPERTY
Proginet does not possess any patents. Proginet relies on a combination of
trademark, copyright and trade secret laws to protect its proprietary rights.
Proginet has registered the trademarks IND$File and TransAccess in the United
States. In addition, Proginet owns most of the Internet domain names for its
products.
RISK FACTORS
Investing in Proginet involves a high degree of risk. Potential investors should
carefully consider the risks described below and the other information in this
registration statement, in evaluating any investment in the Company's
securities.
WE HAVE EXPERIENCED HISTORICAL LOSSES
We have incurred significant losses in the past. In fiscal year 1998, our losses
were nearly $2,000,000. While we did have a modest profit in 1999, we expect to
increase our operating expenses significantly to expand our marketing
operations, and increase our level of capital expenditures to further develop
and maintain our proprietary software. Such increases in operating expense
levels and capital expenditures will adversely affect short-term operating
results, and therefore we believe that we may incur losses in the future. We
cannot assure you that we will achieve profitability or generate positive cash
flow from operations.
WE CANNOT ACCURATELY PREDICT OUR REVENUES
In light of our history and the rapidly evolving nature of the markets in which
we compete, our revenues are difficult to predict. We expect to experience
significant fluctuations in our future quarterly operating results due to a
variety of factors, many of which are outside of our control. Factors that may
adversely affect our quarterly operating results include the following:
- The level of use of the Internet by businesses;
- The announcement or introduction of new services and products
by us and our competitors;
- Customer demand and acceptance of the products and services we
offer;
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- Expenditures relating to expansion of our business;
- The termination of existing relationships or failure to
develop new relationships with our business partners; and
- General economic conditions and economic conditions specific
to the Internet and on-line commerce.
We also face unforeseeable seasonal sales fluctuations related to our increasing
focus on B2B Internet commerce. Due to the above factors, our operating results
likely will fluctuate in the future, making period-to-period comparisons
difficult and possibly unreliable. Any change in the above factors could reduce
our gross margins in future periods. If our operating results fall below the
expectations of our stockholders and/or securities analysts and investors, the
trading price of our common stock would likely decrease significantly. (See
"Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.")
WE MUST MANAGE OUR GROWTH
We believe that we must expand our present operations significantly in order to
maximize potential growth. This expansion will likely place a significant strain
on our management, operational and financial resources. We may hire new
employees for a number of key managerial and technical positions, and we will
need to integrate them into our management team. In order to manage our growth,
we must continue to implement and improve our operational and financial systems,
expand existing operations, attract and retain superior management and train,
manage and expand our employee base. We cannot assure you that we will manage
the expansion of our operations effectively, that our systems, procedures, or
controls will support our operations adequately or that our management will
implement our business plan successfully. If we cannot manage our growth
effectively, then our business, financial condition and results of operations
could suffer a material adverse effect.
WE EXPECT THAT WE WILL REQUIRE ADDITIONAL FUNDING TO EXPAND OUR BUSINESS; GROWTH
AND ACQUISITIONS MAY STRAIN OUR MANAGEMENT, OPERATIONAL AND FINANCIAL RESOURCES
We expect that we will require additional financing in order to expand our
business. Our working capital requirements in the foreseeable future will depend
on a variety of factors, including our ability to implement our business plan.
We cannot assure you that we will successfully negotiate or obtain additional
financing, or that we will obtain financing on terms favorable or acceptable to
us. We do not have any commitments for additional financing. Our ability to
obtain additional capital depends on market conditions, the national economy and
other factors outside of our control. If we do not obtain adequate financing or
such financing is not available on acceptable terms, our ability to finance our
expansion, develop or enhance services or products or respond to competitive
pressures would be limited significantly. Our failure to secure necessary
financing could have a material adverse effect on our business, prospects,
financial condition and results of operations. (See "Item 2- Management's
Discussion and Analysis of Financial Condition and Results of Operations.")
OUR REVENUES DEPEND UPON KEY ALLIANCES
We currently have over 20 distributors worldwide and may continue to enter into
contractual strategic alliances. Our revenues in the past have depended and in
the future will continue to depend, in part, on these relationships. We cannot
assure you that any of these alliances will develop successfully, if at all, or
that these alliances will generate revenues or earnings for us. If we fail to
manage these relationships successfully, or if our alliances or partners fail to
perform as we expect, we could suffer substantial losses in sales and customers.
Any such losses would have a material adverse effect on our business, results of
operations and financial condition.
WE DEPEND ON OUR ABILITY TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS
We believe that our trademarks and other proprietary rights are important to our
success and competitive position. However, we do not possess any patents. We
rely on a combination of trademark, copyright and trade secret laws to protect
our proprietary rights. We have registered the "IND$File" and "TransAccess"
trademarks in the United States. We cannot assure you that we will secure
significant protection for our proprietary rights or that claims will not be
made against us in connection with our proprietary rights. The actions we take
to establish and protect our trademarks and other proprietary rights may be
inadequate to
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prevent imitation of our services or products or to prevent others from claiming
violations of their trademarks and proprietary rights by us. In addition, others
may develop similar technology independently or assert rights on our trademarks
and other proprietary rights. The laws of other countries may afford us little
or no effective protection of our intellectual property.
INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND COULD IMPAIR OUR
BUSINESS
Other parties may assert infringement or unfair competition claims against us.
We cannot predict whether third parties will assert claims of infringement
against us, or whether any past or future assertions or prosecutions will harm
our business. If we are forced to defend against any such claims, whether they
are with or without merit or are determined in our favor, then we may face
costly litigation, diversion of technical and management personnel, or product
shipment delays. As a result of such a dispute, we may have to develop
non-infringing technology or enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may be unavailable on terms
acceptable to us, or at all. If there is a successful claim of product
infringement against us and we are unable to develop non-infringing technology
or license the infringed or similar technology on a timely basis, it could have
a material adverse effect on our business, financial condition and results of
operations.
OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO ADAPT TO RAPIDLY CHANGING
TECHNOLOGIES IN OUR INDUSTRY
The market in which we compete is characterized by rapidly changing technology,
evolving industry standards, frequent new service and product announcements,
introductions and enhancements, and changing customer demands. These market
characteristics are exacerbated by the emerging nature of the Internet and the
introduction by companies from multiple industries of web-based products and
services. Accordingly, our future success will depend on our ability to adapt to
these changes and to improve the performance, features and reliability of our
products in response to competitive offerings, emerging technology and evolving
demands of the marketplace. If we fail to adapt to these changes, there would be
a material adverse effect on our business, results of operations and financial
condition. In addition, the widespread adoption of new Internet, networking or
telecommunications technologies or other technological changes could require us
to make substantial expenditures to modify or adapt our products or
infrastructure, which could have a material adverse effect on our business,
results of operations and financial condition.
If the infrastructure or complementary services necessary to make the Internet a
viable commercial marketplace are not developed or if the Internet does not
become a viable commercial marketplace, our business, results of operations and
financial condition will be materially adversely affected.
THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OPERATIONS
Our performance depends substantially on the continued services and performance
of our senior management and other key personnel, particularly Kevin M. Kelly,
Chief Executive Officer.
Although Proginet has management continuity agreements for Mr. Kevin M. Kelly
and Mr. James F. Kelly, Senior Vice President and director of strategic
planning, Proginet does not have any employment agreements nor does it have "key
man" life insurance for any officers. Our performance also depends on our
ability to retain and motivate our other officers and key employees. We have
relatively few senior personnel, and thus the loss of any single individual
could interrupt our operations significantly. The loss of the services of any of
our executive officers or other key employees could have a material adverse
effect on our business, prospects, financial condition and results of
operations. Our future success depends on our ability to identify, attract,
hire, train, retain and motivate other highly skilled technical, managerial and
marketing personnel. Competition for such personnel is intense, and we cannot
assure you that we will succeed in attracting and retaining such personnel. Our
failure to attract and retain the necessary technical, managerial and marketing
personnel could have a material adverse effect on our business, prospects,
financial condition and results of operations.
THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE, AND MANY OF OUR
COMPETITORS ARE LARGER AND HAVE SIGNIFICANTLY GREATER RESOURCES THAN WE DO
We believe that the principal competitive factors in our market include: brand
recognition, brand selection, price, accessibility, customer service,
reliability, scalability, and speed.
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Many of our competitors have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing and
other resources. Certain of our competitors may devote greater resources to
marketing and promotional campaigns, adopt more aggressive pricing policies and
devote substantially more resources to web site and systems development. If our
competitors are able to offer products and services on more favorable terms, we
may experience reduced operating margins, loss of market share and a diminished
brand franchise. We cannot assure you that we will compete successfully against
our current and future competitors. Competitive pressures created by any one of
our competitors, or by our competitors collectively, could have a material
adverse effect on our business, prospects, financial condition and results of
operations.
INSECURE TRANSMISSION OF CONFIDENTIAL INFORMATION AND THIRD PARTY MISCONDUCT
COULD HURT BUSINESS CONFIDENCE IN INTERNET COMMERCE
Many businesses are concerned about transmitting confidential information, such
as customer or confidential business data, over the Internet. Confidence in
secure transmissions is a significant barrier to Internet commerce and
communications. We rely on encryption technology to transmit confidential
information. In addition, servers are vulnerable to computer viruses, physical
or electronic break-ins, deliberate attempts by third parties to exceed the
capacity of systems and similar disruptive problems. Computer viruses, break-ins
or other problems caused by third parties could lead to interruptions, delays,
loss of data or cessation in service to users of our products. The law relating
to the liability of Internet services for information carried on or disseminated
through their services currently is unsettled. It is possible that claims could
be made against companies under both U.S. and foreign law for defamation, libel,
invasion of privacy, negligence, copyright or trademark infringement or other
theories based on the nature and content of the materials disseminated through
their services. Concerns regarding liability for information disseminated over
the Internet and the adoption of any additional laws for regulations may
decrease the growth of the Internet, which could decrease the demand for our
Internet transfer products and harm our business.
ADDITIONAL REGULATIONS COULD BE IMPOSED ON OUR INDUSTRY
We are not currently subject to direct regulation by any government agency other
than regulations applicable to businesses generally, which include export
regulations on encryption software for which Proginet has received exemptions
from the U.S. Commerce Department. However, due to the increasing popularity and
use of the Internet, it is possible that a number of laws and regulations may be
adopted with respect to the Internet, covering issues such as privacy, pricing
and characteristics and quality of products and services. Furthermore, the
growth and development of the market for Internet commerce may prompt calls for
more stringent protection laws that may impose additional burdens on those
companies conducting business over the Internet.
INTEGRATING NEW ACQUISITIONS INTO OUR BUSINESS MAY BE DIFFICULT
If appropriate opportunities present themselves, we intend to acquire
businesses, technologies, services or products that we believe will grow our
business. We currently have no understandings, commitments or agreements with
respect to any material acquisition and no material acquisition currently is
being pursued. We cannot assure you that we will be able to identify, negotiate
or finance future acquisitions successfully, or integrate such acquisitions into
our current business. The process of integrating an acquired business,
technology, service, product or personnel may result in unforeseen operating
difficulties and expenditures, and may absorb significant management attention
that would otherwise be available for ongoing development of our business.
Moreover, we cannot assure you that the anticipated benefits of any acquisition
will be realized. Any future acquisitions of other businesses, technologies,
services or products might require us to obtain additional equity or debt
financing, which may not be available on terms favorable to us, or available at
all, and such financing, if available, might result in substantial dilution to
our stockholders.
RULE 144
Under Rule 144, a person who is not deemed to have been one of our "affiliates"
at any time during the 90 days preceding a stock sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
such shares without complying with the manner of sale, notice filing, volume
limitation or notice provisions of Rule 144. Therefore, unless otherwise
restricted, "144 shares" may be sold upon the effectiveness of this registration
statement, which will increase the number of tradable shares (float) in the
marketplace.
9
<PAGE>
RULE 701
In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchase shares from us in connection with a
compensatory stock or option plan or other written agreement before the
effective date of this registration statement, is entitled to resell such shares
90 days after the effective date of this registration statement in reliance on
Rule 144, without having to comply with certain restrictions, including the
holding period, contained in Rule 144.
The SEC has indicated that Rule 701 applies to typical stock options granted by
an issuer before it becomes subject to the reporting requirements of the
Securities Exchange Act of 1934, along with the shares acquired upon exercise of
such options (including exercises after the date of this registration
statement). Securities issued in reliance on Rule 701 are restricted securities
and, beginning 90 days after the effective date of this Registration Statement,
may be sold without compliance with paragraphs (a), (d), and (e) of Rule 144 and
shares may be sold by "affiliates" under Rule 144 without compliance with its
one year minimum holding period requirement under paragraph (d). If those
individuals who hold vested options, a total of approximately 700,000, were to
exercise a portion or all of their options, this could have a diluting effect on
the existing holders of Proginet common stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
You should read the following discussion in conjunction with our financial
statements and the notes thereto included elsewhere in this registration
statement. All statements in this registration statement related to Proginet's
ongoing financial operations and expected future results constitute
forward-looking statements. The actual results may differ materially from those
anticipated or expressed in such statements. (See "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS".)
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999
Revenues for the three months ended January 31, 2000 were $1,252,506, an
increase of 2%, compared to $1,227,864 for the comparable period in 1999.
Software sales and license revenues were $619,569, a decrease of $91,823 from
the $711,392 for the comparable period of 1999. Despite delayed trials, due to
Year 2000 concerns of prospective customers, Proginet was able to close fifteen
new software licenses in this quarter.
Software maintenance fees increased $44,965 to $557,437 compared to $512,472 for
the comparable period in 1999. This increase is related to increased maintenance
fees from previously licensed software products.
Other revenues for the three months ended January 31, 2000 increased to $75,500
from $4,000 for the comparable period ended January 31, 1999. This revenue is
related to consulting services that are typically provided on an ad-hoc basis,
in response to requests for support from existing customers. Consulting revenue
can vary considerably from period to period.
Cost of revenues increased to $418,524 from $307,920 in the comparable period in
1999, an increase of $110,604 or 36%. This increase includes increased
amortization expense of $58,863 related to developed software now available for
sale, increases in technical support costs of $7,406 related to support in
obtaining new customers and maintenance support for $44,335.
Operating expenses were $954,311, an increase of 31% over expenses of $727,655
for the comparable period last year. Research and development declined to
$95,877 from $135,851 last year, reflective of reduced staffing levels assigned
to R&D activities. Selling and marketing increased by 72% to $223,132 from
$129,700, as the Company increased expenditures for marketing direct mail
campaigns, telemarketing services for lead generation, and vertical marketing
campaigns for the healthcare and retail industries.
General and administrative expenses were $635,302 for the three months ended
January 31, 2000 compared to $462,104 for the comparable period in 1999. This
increase of 37% is primarily the result of a one-time charge of approximately
$195,000 to reserves for potential losses on payments due from a bankrupt
international distributor.
10
<PAGE>
For the three months ended January 31, 2000, Proginet reported an operating loss
of $120,329 compared to operating income of $192,289 for the same period of
1999. The Company incurred a net loss of $109,223 compared to net income of
$203,693 for the comparable quarter ended January 31, 1999.
On a six-month basis revenues were $1,984,035 or 16% below the 1999 six-month
revenues for the comparable 1999 period of $2,374,299. Software sales and
licenses were $854,422 for the six months ended January 31, 2000 compared to
$1,289,086. The decline is primarily related to the Year 2000 "lockdown."
Software maintenance fees were $1,054,113, relatively flat to the $1,026,438 for
the comparable six months of 1999. Other revenues related to consulting fees
were $75,500 for the six months ended January 31, 2000 compared to $58,775 for
1999, consistent with normal business fluctuation.
Cost of revenues increased to $789,023 from $616,705 in the comparable period in
1999, an increase of $172,318. This increase includes increased amortization
expense of $114,033 related to developed software now available for sale, and
increases in technical support costs of $13,950, related to support of obtaining
new customers.
Operating expenses were $1,655,157, an increase of 14% over expenses of
$1,451,560 for the comparable period last year. Research and development
declined to $192,204 from $290,817 last year, reflective of reduced staffing
levels assigned to R&D activities. Selling and marketing increased by 40% to
$449,750 from $321,360, as the Company increased expenditures for marketing
direct mail campaigns, telemarketing services for lead generation, and vertical
marketing campaigns for the healthcare and retail industries.
General and administrative expenses were $1,013,203 for the six months ended
January 31, 2000 compared to $839,383 for the comparable period in 1999. This
increase of 21% is primarily the result of a one-time charge of approximately
$195,000 to reserves for potential losses on payments due from a bankrupt
international distributor.
On a six-month basis, Proginet reported an operating loss of $460,145 compared
to operating income of $306,034 for the same six-month period of 1999. This
decline of approximately $766,000 is the result of reduced revenues and
increased expenses as described above. Proginet reported a loss before income
taxes of $437,595 for the six months ended January 31, 2000 compared to income
before income taxes of $339,366 for the six months ended January 31, 1999.
FISCAL PERIODS ENDED JULY 31, 1999 AND JULY 31, 1998
Total revenues increased to $4,174,163 in fiscal 1999 from $3,644,926 in fiscal
1998, an increase of 15%. Software license revenues increased by $564,872, or
38%, to $2,063,436. This increase is attributable to sales of Proginet's
SecurPass password management software, which produced over $1 million in
license revenues in its first full year of availability. The SecurPass license
revenue offset declines in sales from Proginet's older software products.
Software maintenance fees remained flat at $2,048,409 compared to 1998 software
maintenance fees of $2,060,952. While Proginet did increase software maintenance
fees for new products licensed, these increases were offset by declines in
software maintenance fees from some of the Company's older software products
that were dropped by customers.
Other revenues were $62,318 compared to $85,410 for 1998. These revenues are for
consulting services provided to customers who request specific support for
installations of Proginet's software. Proginet does not promote consulting
services but does respond to specific customer requests.
Cost of revenues increased from $1,186,490 to $1,314,368, an increase of 11%,
resulting in part from the amortization of previously developed software that
began to be amortized in 1999, in recognition of the Company's developed
products now being made commercially available for sale.
Operating expenses declined to $2,898,014 from $4,843,402, a reduction of
$1,945,388, or 40%, in 1999 compared to 1998. Research and development costs
were $511,678, relatively flat compared to 1998 research and development expense
of $509,119, as Proginet committed the same level of resources for the ongoing
research and development activities related to new products.
Selling and marketing expenses were $525,738 in 1999 compared to $2,062,095 in
1998. These results represent a reduction of $1,536,357, or 75%. These
significant reductions were achieved by the complete re-organization of
marketing and sales activities, including, management changes, a shift to more
aggressive
11
<PAGE>
outsourced telesales selling models instead of direct sales calls, and an
increased emphasis on sales through an indirect model, which includes
international distributors and OEM's to sell Proginet's software.
General and administrative expenses in 1999 were $1,860,598, a reduction of
$411,590 or 18%, compared to general and administrative expenses of $2,272,188
in 1998. These reductions were achieved by across - the - board decreases
including facilities cost, telecommunications cost, professional services cost,
supplies and administrative support staff costs.
Proginet experienced an operating loss of $38,219 for 1999 compared to an
operating loss of $2,384,966 for 1998. The Company reported net income of
$19,533 for 1999 compared to a net loss of $1,930,112 for 1998.
LIQUIDITY AND CAPITAL RESOURCES
Proginet's liquidity position improved substantially in fiscal 1999 with an
increase in cash, cash equivalents, and short-term investments of $958,661 or
131% over July 1998. Cash, cash equivalents and short-term investments increased
to $1,691,163 as a result of improved profitability and substantial improvement
in the collection of accounts receivable. For the six months ended January 31,
2000 Proginet's cash, cash equivalents, and short-term investments decreased
$117,451 to $1,573,712. Proginet's liquidity position is adequate to achieve its
operating plan for the next 12 months.
During fiscal 1999 Proginet purchased 861,000 shares comprised of 800,000 shares
from two former employees and 61,000 shares pursuant to Proginet's authorized
stock repurchase program. In addition, the Company issued 1,260,000 shares of
common stock to Microsoft Corporation pursuant to the terms of an agreement
entered into in December 1996 and amended in October 1998.
ACQUISITIONS
If opportunities present themselves, Proginet may acquire businesses,
technologies, services and/or products that we believe will grow our business.
The Company currently has no understandings, commitments or agreements with
respect to any material acquisitions and no material acquisitions currently are
being pursued.
IMPACT OF THE YEAR 2000
Many computer systems and software products were coded to accept only two-digit
entries in the date code field and could not reliably distinguish dates
beginning on January 1, 2000 from dates prior to the Year 2000. Many companies'
software and computer systems were upgraded or replaced in order to correctly
process dates beginning in 2000 and to comply with the "Year 2000" requirements.
The Company reviewed its internal programs and determined that there were no
significant Year 2000 issues within our systems or services.
As of March 1, 2000 there have been no reports of internal system problems and
no reports of any significant problems with the Company's software as a result
of the Year 2000 situation. Proginet does not expect any adverse impact from
Year 2000.
ITEM 3. DESCRIPTION OF PROPERTY
Proginet maintains its headquarters at 200 Garden City Plaza, Garden City, New
York, 11530 where a majority of its employees are located. At present, a second
facility located in Chicago, Illinois, which had served as a development lab, is
subleased to another party for $6,883 per month, until the lease expiration.
<TABLE>
<CAPTION>
- ----------------------------------- ------------------ --------------- ---------------------- --------------
<S> <C> <C> <C> <C>
Description Location Square Ft. Lease Expiration Current
Annual Cost
- ----------------------------------- ------------------ --------------- ---------------------- --------------
Headquarters Garden City, NY 9,804 February 28, 2006 $211,525
- ----------------------------------- ------------------ --------------- ---------------------- --------------
Subleased to another Tenant Chicago, IL 6,068 December 31, 2002 $12,074*
- ----------------------------------- ------------------ --------------- ---------------------- --------------
</TABLE>
* Amount is net of related sublease revenue.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to Proginet regarding
the ownership of Proginet's common stock. The information is as of February 29,
2000. This table lists the following:
12
<PAGE>
(i) Each stockholder known to Proginet to be a beneficial owner of
five percent or more of Proginet's common stock;
(ii) Each director of the Company;
(iii) Each executive officer of the Company (as such term is defined
under the caption "Executive Compensation--Summary of Cash and
Certain Other Compensation"); and
(iv) All current directors and officers of Proginet Corporation as
a group.
Beneficial ownership has been determined in accordance with rules of the
Securities and Exchange Commission, and unless otherwise indicated, represents
shares for which the beneficial owner has sole voting and investment power. The
number of shares of common stock beneficially owned includes any shares issuable
pursuant to stock options that may be exercised within 60 days after January 31,
2000. Shares issuable pursuant to such options are deemed outstanding for
computing the percentage of the person holding such options but are not deemed
to be outstanding for computing the percentage of any other person.
13
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------- ----------------------------------- -----------------------------------
Name and Address of Beneficial Amount and Nature of Beneficial Percent of Class (2) %
Owner (1) Ownership (2)
- ------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
Bathurst Ltd. 1,827,336 (3) 12.91
P.O. Box 25
Brittanic House
Provideniales
Turks and Caicos Isle
British West Indies
- ------------------------------------- ----------------------------------- -----------------------------------
Microsoft Corporation 1,360,000 9.61
One Microsoft Way
9N-1264
Redmond, WA
- ------------------------------------- ----------------------------------- -----------------------------------
James F. Kelly 775,006 5.47
- ------------------------------------- ----------------------------------- -----------------------------------
Kevin M. Kelly 721,604 (4) 5.10
- ------------------------------------- ----------------------------------- -----------------------------------
Kevin Bohan 250,935 (4) 1.77
- ------------------------------------- ----------------------------------- -----------------------------------
E. Kelly Hyslop 223,700(4) 1.58
Ard na Gaoithe
Knockeen, Goleen
W.Cork, Ireland
- ------------------------------------- ----------------------------------- -----------------------------------
John C. Daily 212,000 (4) 1.50
18 Holly Lane
Rye, NY 10580
- ------------------------------------- ----------------------------------- -----------------------------------
Stephen Sternbach 17,500 .12
11 Phaeton Drive
Melville, NY 11747
- ------------------------------------- ----------------------------------- -----------------------------------
Arne H. Johnson 32,000 (4) .22
- ------------------------------------- ----------------------------------- -----------------------------------
All the Officers and Directors as a 2,242,745 15.84
Group
- ------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
(1) Unless otherwise indicated, the address of each beneficial owner is the
care of Proginet Corporation, 200 Garden City Plaza, Garden City, New
York 11530
(2) A person is deemed to be the beneficial owner of securities, which may
be acquired by such person within 60 days from the date of this
registration statement upon the exercise of options, warrants or
convertible securities. Each beneficial owner's percentage of ownership
is determined by assuming all options, warrants or convertible
securities that are held by such person (but not held by any other
person) and which are exercisable or convertible within 60 days of this
registration statement have been exercised or converted. Percent of
Class (third column above) assumes a base of 14,156,780 including
13,595,180 shares of common stock outstanding as of March 15, 2000 and
561,600 vested options.
(3) Bathurst Ltd. has entered into an agreement with Proginet Corporation
whereby Bathurst Ltd. agreed to vote all shares it owns consistent with
the vote of the Board of Directors of the Company through December 31,
2000.
(4) The amount of beneficial ownership includes both common stock held and
vested options owned and executable within 60 days after February 29,
2000. The specific number of options for each individual is as follows;
Kevin M. Kelly - 219,600, Kevin Bohan - 40,000, E.Kelly Hyslop -
75,000, John C. Daily - 170,000, Stephen Sternbach - 15,000, Arne H.
Johnson - 32,000, and all officers and directors as a group 561,600.
14
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth certain information with respect to the directors
and executive officers of Proginet Corporation.
<TABLE>
<CAPTION>
- ------------------------------------- ----------------------------------- -----------------------------------
Name Age Position
- ------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
John C. Daily 54 Director, Chairman
- ------------------------------------- ----------------------------------- -----------------------------------
Kevin M. Kelly 53 Director, President and Chief
Executive Officer
- ------------------------------------- ----------------------------------- -----------------------------------
James F. Kelly 34 Director, Senior Vice President
and Corporate Secretary
- ------------------------------------- ----------------------------------- -----------------------------------
E. Kelly Hyslop Not Available Director
- ------------------------------------- ----------------------------------- -----------------------------------
Stephen Sternbach 45 Director
- ------------------------------------- ----------------------------------- -----------------------------------
Kevin Bohan 30 Vice President, Sales
- ------------------------------------- ----------------------------------- -----------------------------------
Arne H. Johnson 51 Vice President, Development and
Marketing
- ------------------------------------- ----------------------------------- -----------------------------------
- ------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE MANAGEMENT TEAM
KEVIN M. KELLY, PRESIDENT AND CHIEF EXECUTIVE OFFICER, DIRECTOR Mr.
Kelly is the President and Chief Executive Officer of Proginet. Mr. Kelly became
president of Proginet in June of 1994, and had previously served as an outside
director for 2 years. From 1992 to June 1994, Mr. Kelly served as Chief
Operating Officer of CDC Systems, where he managed a company of over 1500
employees. He was also Senior Vice President of Nationar Bank in New York from
1984 to 1992, and previously he was Division Executive and Vice President of
Chase Manhattan Bank. Mr. Kelly holds a Bachelor of Science degree in
Mathematics from Iona College.
JAMES F. KELLY, CO-FOUNDER, SENIOR VICE PRESIDENT, CORPORATE SECRETARY,
DIRECTOR Mr. Kelly is a co-founder of the Company, and has been the Senior Vice
President of Proginet since May 1995. Mr. Kelly started with Proginet in 1985
where he served as head of Quality Assurance as well as lead developer on
several platforms for the XCOM project. In August of 1988, Mr. Kelly served as a
communications analyst at Prudential-Bache Securities. In September of 1989, Mr.
Kelly returned to Proginet as Senior Vice President of Engineering with
responsibility for the entire development effort. In 1996, Mr. Kelly moved over
to head the research efforts for the Company, including the merger and
acquisition strategy. Mr. Kelly has been active in professional and engineering
organizations on four continents and has been the author of more than one dozen
technical articles for McGraw-Hill and Ziff Davis publications. Mr. Kelly holds
a Bachelors of Science degree in Computer Science from Manhattan College.
ARNE H. JOHNSON, VICE PRESIDENT DEVELOPMENT AND MARKETING Mr. Johnson
has been with Proginet since June 1997 where he has been Manager of Product
Development and Marketing. Previously, he served as President of Huntington
Consulting Group from 1992 to June 1997, where his clients included J.P. Morgan
Investment Management. Mr. Johnson also served as Senior Vice President and Vice
President of Nationar Bank from 1985 to 1992, and as Vice President of Chase
Manhattan Bank from 1978 to 1985. Mr. Johnson holds a Bachelors Degree in
Systems Engineering from Polytechnic Institute of New York and a Masters of
Business Administration from Pace University.
KEVIN BOHAN, VICE PRESIDENT SALES AND CUSTOMER RELATIONS Mr. Bohan has
served as Vice President of Customer Support for Proginet since 1998. He joined
the Company in 1989 as a Network Engineer, and became manager of Customer
Support in 1994. Previously, Mr. Bohan served on the Board of Directors of
OSINET Corporation and has served as Chairman of the North American
15
<PAGE>
Open System Implementers Workshop at the United States National Institute of
Standards and Technology. His standards work included work on directory
services. Mr. Bohan holds a Bachelor of Arts degree in Accounting from Iona
College.
BOARD OF DIRECTORS
JOHN C. DAILY, CHAIRMAN OF THE BOARD
Mr. Daily has been Chairman of the Board since December 1998 and a Director of
the Company since 1993. He has been Senior Vice President and Principal of
Christian & Timbers, an executive search firm, since June 1996. Mr. Daily has
also served as Senior Vice President of Handy HRM from 1994 to June 1996 and
President and Chief Executive Officer of Image Business Systems from June 1994
to December 1994.
DR. E. KELLY HYSLOP Dr. Hyslop has been a Director of the Company since
September 1996. Dr. Hyslop recently retired from medical practice. He has been
involved with many investment groups, assisting in the raising of capital for
emerging growth companies.
STEPHEN STERNBACH Mr. Sternbach has been a Director of the Company
since November 1999. Mr. Sternbach has been the President and Chief Executive
Officer of Star Multi Care Services, Inc, a health care provider based on Long
Island, since 1986. Star Multi Care is publicly traded on the NASDAQ Stock
Exchange under the symbol SMCS.
ELECTION OF OFFICERS AND DIRECTORS
Proginet's executive officers are elected by the Board of Directors on an annual
basis and serve until their successors are duly elected and qualified. All of
the current Directors were selected as Directors of Proginet Corporation
pursuant to a vote of the Stockholders of Proginet at Proginet Corporation's
Annual General Meeting on November 16, 1999.
COMMITTEES
The Board of Directors has established three committees: Audit, Compensation,
and Nominating.
AUDIT
The Audit Committee functions as an overseer of the Company's financial
reporting process and internal controls.
The Audit Committee has responsibilities, including, but not limited to, the
following:
1. Recommend which firm to engage as independent auditors, and
whether to terminate that relationship.
2. Review independent auditors' compensation, the proposed terms
of engagement, and its independence.
3. Serve as a channel of communication between the independent
auditors and the board.
4. Review the findings of the independent auditors, including any
qualifications in the opinion, related management letter and
management's responses to recommendations made by the
independent auditor in connection with the audit.
5. Review the Company's annual financial statements.
6. Review the procedures employed by the Company in preparing
published financial statements and related management
commentaries.
7. Meet periodically with management to review the Company's
major financial risk exposures.
16
<PAGE>
The Audit Committee meets with Proginet's independent auditors prior to the
completion of the audit to review the findings of the independent audit.
CURRENT MEMBERSHIP
Mr. John Daily is the Chairman of the Audit Committee, and Dr. Kelly Hyslop and
Mr. Stephen Sternbach are members of the committee.
COMPENSATION
The Compensation Committee recommends to the board the annual salary, bonus,
stock options, and other benefits, direct and indirect, of the senior executives
of the Company.
The Compensation Committee has responsibilities, including, but not limited to,
the following:
1. Review and recommend to the board, the annual salary, bonus,
stock options, and other benefits, direct and indirect, of the
senior executives of the company.
2. Review new executive compensation programs; review on a
periodic basis the operation of the Company's executive
compensation programs to determine whether they are properly
coordinated; establish and periodically review policies for
the administration of executive compensation programs.
3. Review and approve employee incentive compensation programs,
including profit sharing and other employee bonus programs.
4. Establish and periodically review policies in the area of
management perquisites.
5. Plan for executive development and succession.
6. Review and recommend to the board or determine the
compensation of directors.
CURRENT MEMBERSHIP
Mr. Sternbach is the Chairman of the Compensation Committee, and Mr. Daily and
Dr. Hyslop are members of the committee.
NOMINATING
The Nominating Committee recommends to the board and to the stockholders,
nominees for election to the board.
The Nominating Committee has responsibilities, including, but not limited to,
the following:
1. Propose the slate of nominees of directors to be elected by
the stockholders (and any directors to be elected by the board
to fill vacancies).
2. Recommend to the board of directors, the directors to be
selected for membership on the various board committees.
CURRENT MEMBERSHIP
Dr. Hyslop is the Chairman of the Nominating Committee, and Mr. Kevin Kelly and
Mr. Stephen Sternbach are members of the committee.
FAMILY RELATIONSHIPS
Kevin Bohan is the nephew of Kevin M. Kelly. There are no other family
relationships among any of the directors or executive officers of the Company.
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<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
The following table sets out the compensation received by the Company's Chief
Executive Officer and the Company's other executive officers whose total salary
and bonus exceeded $100,000 during the year ended July 31, 1999 (the Named
Executive Officers).
<TABLE>
<CAPTION>
Annual Compensation Long -Term Compensation
<S> <C> <C> <C> <C> <C> <C>
- ------------------------ ---- ------------ --------- ----------- ----------- -------------------
$(US) Awards Payouts
- ------------------------ ---- ------------ --------- ----------- ----------- -------------------
Name and Principal Other Comp Options All Other
Position FY Salary $ Bonus $ $ Granted Compensation $
Kevin M. Kelly 99 200,000 0 0 80,000 0
Chief Executive 98 200,000 0 0 0 0
Officer and President 97 200,000 77,000 0 0 0
- ------------------------ ---- ------------ --------- ----------- ----------- -------------------
Joseph T. Mohen (1) 99 168,000 0 0 0 0
Executive Vice 98 168,000 0 0 0 0
President 97 120,000 31,250 0 0 0
- ------------------------ ---- ------------ --------- ----------- ----------- -------------------
James F. Kelly 99 110,000 0 8,500 (2) 20,000 0
Senior Vice President 98 110,000 0 0 0 0
97 95,000 19,000 0 0 0
- ------------------------ ---- ------------ --------- ----------- ----------- -------------------
Arne Johnson 99 145,000 0 0 25,000 0
Vice President Product 98 145,000 0 0 0 0
Development and 97 36,250 0 0 50,000 0
Marketing
- ------------------------ ---- ------------ --------- ----------- ----------- -------------------
Kevin Bohan 99 80,000 20,547 0 40,000 0
Vice President of 98 80,000 20,000 0 40,000 0
Sales and Customer 97 71,250 0 0 0 0
Support
- ------------------------ ---- ------------ --------- ----------- ----------- -------------------
</TABLE>
(1) Mr. Joseph T. Mohen resigned as an officer of the Company in October 1998
and entered into an employment agreement as "Chief of Strategic Alliances"
expiring September 30, 1999 after which time Mr. Mohen was no longer
associated with the Company.
(2) Commission earned on sales achieved for Indirect Channels license revenue.
STOCK OPTIONS
The following table provides information with respect to the stock option grants
made to the Named Executive Officers during the 1999 fiscal year under Proginet
Corporation's 1997 Stock Incentive Plan. No stock appreciation rights were
granted during such fiscal year to the Named Executive Officers.
<TABLE>
<CAPTION>
- ------------------- ----------- ---------------- ------------ ----------------------
% of total
Securities options
under granted to Exercise
Options employee(s) in price
Name granted # fiscal year ($U.S.) Expiration Date
- ------------------- ----------- ---------------- ------------ ----------------------
<S> <C> <C> <C> <C>
Kevin M. Kelly 80,000 19.70 .71 3/1/09
- ------------------- ----------- ---------------- ------------ ----------------------
Kevin Bohan 40,000 9.85 .71 3/1/09
- ------------------- ----------- ---------------- ------------ ----------------------
Arne Johnson 25,000 6.16 .71 3/1/09
- ------------------- ----------- ---------------- ------------ ----------------------
James F. Kelly 20,000 4.93 .71 3/1/09
- ------------------- ----------- ---------------- ------------ ----------------------
</TABLE>
There were no options exercised by Named Executive Officers of the Company for
the fiscal year ended July 31, 1999.
OPTION GRANTS
Under the Company's 1995 stock option plan, a total of 482,600 stock options
have been granted, as of February 29, 2000 at an exercise price of $.75 per
share. Of the options granted under the 1995 plan, 482,600 have been vested and
0 are unvested.
18
<PAGE>
Under the Company's 1997 stock option plan, a total of 1,246,700 stock options
have been granted at an average exercise price of $.67 per share. As of March
15, 2000, of the options granted under the 1997 plan, 227,800 have vested and
1,018,900 are unvested.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING
ALUE OF UNEXERCISED IN THE OPTIONS
UNEXERCISED OPTIONS AT MONEY
V
FISCAL YEAR-END (1) FISCAL YEAR-END
- --------------------------------------------------------------------------------------------------------------
NAME OF EXECUTIVE OFFICER EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Kevin M. Kelly 219,000 80,000 $0.00 $0.00
- --------------------------------------------------------------------------------------------------------------
Joseph T. Mohen 0 0 $0.00 $0.00
- --------------------------------------------------------------------------------------------------------------
James F. Kelly 0 20,000 $0.00 $0.00
- --------------------------------------------------------------------------------------------------------------
Arne Johnson 16,000 59,000 $0.00 $0.00
- --------------------------------------------------------------------------------------------------------------
Kevin Bohan 40,000 40,000 $.0.00 $0.00
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) None of the Named Executive Officers exercised any of his options during the
Company's last completed fiscal year ended July 31, 1999.
DIRECTOR COMPENSATION
Proginet compensates its non-employee directors by granting 30,000 options for
each year of service. Additionally, the Chairman of the Board receives an
additional 15,000 options. Proginet also compensates directors for reasonable
expenses incurred in attending meetings of the Board of Directors.
MANAGEMENT CONTRACTS AND CHANGE-IN-CONTROL AGREEMENTS
The Company has entered into "management agreements" with two key employees,
Kevin M. Kelly and James F. Kelly. When a change of control in the Company
occurs, these agreements provide for:
A lump sum payment equal to the present value of the aggregate of the
executive's base compensation (equal to the highest rate of base compensation in
effect during the three-year period immediately preceding the termination) for
the eighteen month period following the termination and the aggregate amount of
annual bonuses (equal to the highest aggregate amount of such bonuses that the
executive received in any one of the three years preceding the termination) that
the executive would have received for the eighteen month period following the
termination.
Continuation at the Company's expense of all benefits to which the executive was
entitled prior to termination for a period of eighteen months. These agreements
are attached as Exhibit 10.7.
There are no other Management Contracts or Change in Control Agreements for any
of the executives or employees of the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Bathurst Ltd. has entered into an agreement with Proginet whereby Bathurst Ltd.
has agreed to vote all shares it owns consistent with the votes of the Board of
Directors of the Company through December 31, 2000. See Exhibit 10.
The Company has a one million-dollar profession liability policy for directors
and officers liability coverage. The policy was obtained through a competitive
bidding process consistent with industry practice. The Company obtained such
insurance coverage from Hooghuis Inc., where the Company's CEO's daughter,
Bernadette Kelly, is employed. The transaction was at arms length and the fees
paid were competitive.
Mr. Joseph T. Mohen resigned as an officer of the Company in October 1998 and
entered into an employment agreement as "Chief of Strategic Alliances" expiring
September 30, 1999, after which time Mr. Mohen was no
19
<PAGE>
longer associated with Proginet Corporation. At such time, Mr. Mohen agreed to
sell 750,000 shares of Proginet common stock to the Company for $.31 a share,
the market price of the stock. Of the $232,500 purchase price, $50,000 was paid
on the date of the agreement. The remainder is being paid over a 36-month
period.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
Proginet's Certificate of Incorporation authorizes the issuance of an aggregate
of 40,000,000 shares of common stock, par value $.001 per share, and the
issuance of 10,000,000 shares of preferred stock, par value $.01 per share. As
of February 29, 2000, there were 13,595,180 shares of common stock outstanding
held by over three hundred stockholders of record.
The following summarizes the rights of holders of common stock:
- Each holder of shares of common stock is entitled to one vote
per share on all matters to be voted on by stockholders
generally, including the election of directors;
- There are no cumulative voting rights;
- Holders of common stock may not take action by written consent
in lieu of a meeting;
- Holders of common stock are entitled to dividends and other
distributions as may be declared from time to time by the
Board of Directors out of any funds legally available for that
purpose;
- Upon the liquidation, dissolution or winding up of the
Company, the holders of shares of common stock will be
entitled to share ratably in the distribution of all Company
assets remaining available for distribution after satisfaction
of all of the Company's liabilities and the payment of the
liquidation preference of any outstanding preferred stock; and
- The holders of common stock have no preemptive or other
subscription rights to purchase shares of our stock, nor are
they entitled to the benefits of any redemption or sinking
fund provisions.
WARRANTS
Proginet entered into an agreement with Mallory Factor Inc. (MFI) whereby MFI
will provide guidance and support on a "Strategic Corporate and Communications
Counseling Program" for Proginet. The terms of the agreement are subject to
approval of the Canadian Venture Exchange (CDNX) and provide for granting of up
to 500,000 warrants at a price of $.54 depending upon achievement of
pre-arranged goals. The first 150,000 warrants vest upon regulatory approval of
the agreement and the next 100,000 vest provided that Proginet's stock price
reaches $1.25. The next 250,000 vest, if and only if, two criteria are
satisfied; Proginet's achievement of a listing on the United States
Over-the-Counter Bulletin Board and Proginet's stock price goes to established
thresholds. When Proginet's stock price reaches $2.25, then 100,000 warrants
will vest; when Proginet's price reaches $3.25, then 100,000 additional warrants
will vest; and when Proginet's price reaches $4.25, the final 50,000 warrants
will vest.
ANTI-TAKEOVER EFFECTS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS.
Some provisions of the Company's Certificate of Incorporation and Bylaws may be
deemed to have an anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by our stockholders. These provisions include:
- Stockholder Action; Special Meeting Of Stockholders. The Company's
Certificate of Incorporation provides that stockholders may not take
action by written consent, but rather only at a duly called annual or
special meeting of stockholders. This may limit stockholders' ability
to alter corporate policies or actions with which they disagree.
- Authorized But Unissued Shares. The authorized but unissued shares of
common stock and preferred stock are available for future issuance
without stockholder approval. These additional
20
<PAGE>
shares may be utilized for a variety of corporate purposes, including
future public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved common stock and preferred stock could
render more difficult or discourage an attempt to obtain control of
Proginet by means of a proxy contest, tender offer, merger or
otherwise.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is CIBC Mellon Trust
Company.
21
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Since May of 1995, Proginet common stock has traded on the Vancouver Stock
Exchange, under the symbol PRF.U. The ".U" extension indicates that the shares
are traded in U.S. dollars. In December 1999, the Vancouver Stock Exchange
merged with the Calgary Stock Exchange and is now called the Canadian Venture
Exchange, CDNX.
Proginet's stock is held by over three hundred holders of record.
The following table sets forth, for the fiscal quarters indicated, the reported
high and low bid information for Proginet's common stock as reported on the
CDNX. The quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not represent actual transactions.
<TABLE>
<CAPTION>
Year Quarter High Low
- ---------- -------------------------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
2000 QTR 2 2.20 0.52
QTR 1 0.84 0.54
- ---------- -------------------------------------------- -------------------------- --------------------------
1999 QTR 4 0.89 0.40
QTR 3 1.25 0.49
QTR 2 0.70 0.29
QTR 1 0.60 0.23
- ---------- -------------------------------------------- -------------------------- --------------------------
1998 QTR 4 0.75 0.30
QTR 3 1.75 0.60
QTR 2 2.20 1.20
QTR 1 4.50 2.00
- ---------- -------------------------------------------- -------------------------- --------------------------
</TABLE>
DIVIDENDS
Proginet has not paid dividends and does not anticipate paying dividends in the
foreseeable future. The Board of Directors intends to retain earnings, if any,
to finance growth. Accordingly, any payment of dividends by Proginet in the
future will depend upon the need for working capital and the financial condition
of the Company at the time.
ITEM 2. LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions in the ordinary
course of business. In the opinion of management, based on advice from its legal
counsel, the ultimate disposition of these matters will not have a material
adverse effect on the financial statements of the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Proginet has not changed its accountants in the last three fiscal years, and
there are no disagreements with its accountants concerning accounting and
financial disclosure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES ISSUANCES
The Company issued 1,260,000 shares of common stock in October 1998 to Microsoft
Corporation pursuant to an agreement between the companies in December 1996.
When these securities were issued under the exemption afforded by Section 4 (2)
of the Securities Act of 1933, the Company relied on representations made by the
purchaser that: 1) it was an "accredited investor" as that term is defined in
Rule 501 of Regulation D promulgate under the Securities Act; and 2) it was
taking the shares for its own account for investment purposes, and without any
view towards the resale or redistribution of the issued securities. There were
no broker fees or commissions paid related to this transaction.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware provides, in
general, that a corporation incorporated under the laws of the State of
Delaware, such as the Company, may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than a derivative action by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of
22
<PAGE>
the Company as a director, officer, employee or agent of another enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. In the case of a derivative action, a Delaware corporation may
indemnify any such person against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification will be made in
respect of any claim, issue or matter as to which such person will have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnity for such expenses.
Our certificate of incorporation provides that directors will not be personally
liable for monetary damages to us or our stockholders for breach of fiduciary
duty as a director, except for liability resulting from a breach of the
director's duty of loyalty to us or our stockholders, intentional misconduct or
willful violation of law, actions or inactions not in good faith, an unlawful
stock purchase or payment of a dividend under Delaware law, or transactions from
which the director derives improper personal benefit. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission. Our certificate of incorporation also
authorizes us to indemnify our officers, directors and other agents, by bylaws,
agreements or otherwise, to the fullest extent permitted under Delaware law. We
have entered into an indemnification agreement with each of our directors and
officers which may, in some cases, be broader than the specific indemnification
provisions contained in our certificate of incorporation or as otherwise
permitted under Delaware law. Each indemnification agreement may require us,
among other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as a director or
officer, against liabilities arising from willful misconduct of a culpable
nature, and to obtain directors' and officers' liability insurance if available
on reasonable terms.
Proginet currently has a $1,000,000 D&O policy for its directors and officers
through Rock River Insurance Company. Hooghuis, Inc. is Sentry/Rock River's
exclusive worldwide Underwriting Manager for directors and officers liability
coverage.
<PAGE>
<TABLE>
<CAPTION>
PART F/S
INDEX
<S> <C>
AUDITED FINANCIAL STATEMENTS - YEARS ENDED JULY 31, 1999 AND JULY 31, 1998 PAGE NO.
Independent Auditors' Report FS- 1
Balance Sheets FS- 2
Statements of Operations FS- 3
Statements of Stockholders' Equity FS- 4
Statements of Cash Flows FS- 5
Notes to Financial Statements FS- 6
UNAUDITED FINANCIAL STATEMENTS - PERIODS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999
Balance Sheets FS- 14
Statements of Operations FS- 15
Statements of Cash Flows FS- 16
Notes to Financial Statements FS- 17
</TABLE>
FS-Index
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Proginet Corporation:
We have audited the accompanying balance sheets of Proginet Corporation as of
July 31, 1999 and 1998, and the related statements of operations, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Proginet Corporation as of July
31, 1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
Melville, New York KPMG LLP
September 14, 1999
FS-1
<PAGE>
PROGINET CORPORATION
Balance Sheets
July 31, 1999 and 1998
ASSETS 1999 1998
---- ----
Current assets:
Cash and cash equivalents $ 605,456 206,005
Short-term investments 1,085,707 526,497
Accounts receivable, net 520,343 960,139
Notes receivable from employees - 12,000
Other receivable - 525,000
Prepaid expenses 99,750 132,881
------------ ---------
Total current assets 2,311,256 2,362,522
------------ ---------
Property and equipment, net 504,096 699,048
Capitalized software development costs, net 3,571,427 3,065,916
Deferred contract costs, net - 30,854
Purchased software, net 1,188,892 2,223,304
Other assets 45,701 47,548
------------ ---------
Total assets $ 7,621,372 8,429,192
============ ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 263,124 365,070
Deferred revenue 731,721 797,426
Current portion of notes payable 55,877 -
Acquisition obligation payable with common stock - 1,170,000
------------ ---------
Total current liabilities 1,050,722 2,332,496
------------ ---------
Notes payable, net of current portion 93,128 -
Unbilled rent 123,561 108,958
------------ ---------
Total liabilities 1,267,411 2,441,454
------------ ---------
Commitments and contingencies (notes 8 and 9)
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, none issued - -
Common stock, $.001 par value, 40,000,000 shares
authorized, 14,140,000 shares issued 14,140 14,140
Additional paid-in capital 11,632,391 12,495,246
Treasury stock, 539,820 and 938,820 shares in
1999 and 1998, respectively (243,255) (1,452,800)
Accumulated deficit (5,049,315) (5,068,848)
------------ ---------
Total stockholders' equity 6,353,961 5,987,738
------------ ---------
Total liabilities and stockholders' equity $ 7,621,372 8,429,192
============ ==========
See accompanying notes to financial statements.
FS-2
<PAGE>
PROGINET CORPORATION
Statements of Operations
Years ended July 31, 1999 and 1998
1999 1998
---- ----
Revenues:
Software sales and licenses $ 2,063,436 1,498,564
Software maintenance fees 2,048,409 2,060,952
Other 62,318 85,410
------------ ---------
4,174,163 3,644,926
Cost of revenues 1,314,368 1,186,490
------------ ---------
Gross profit 2,859,795 2,458,436
------------ ---------
Operating expenses:
Research and development 511,678 509,119
Selling and marketing 525,738 2,062,095
General and administrative 1,860,598 2,272,188
------------ ---------
2,898,014 4,843,402
------------ ---------
Operating loss (38,219) (2,384,966)
Other income (expense):
Interest income 46,160 74,526
Other, net 11,592 380,328
------------ ---------
Income (loss) before income taxes 19,533 (1,930,112)
Income tax expense - -
------------ ---------
Net income (loss) $ 19,533 (1,930,112)
============ ==========
Basic and diluted net loss per common share $ 0.00 (0.15)
============ ==========
Weighted average common shares outstanding 13,485,254 13,253,675
============ ==========
See accompanying notes to financial statements.
FS-3
<PAGE>
PROGINET CORPORATION
Statements of Stockholders' Equity
Years ended July 31, 1999 and 1998
<TABLE>
<CAPTION>
Common Stock Additional Accum-
-------------------- paid-in Treasury ulated
Shares Amount capital stock deficit Total
------ ------ ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance - July 31, 1997 14,111,000 $ 14,111 12,467,146 (1,349,812) (3,138,736) 7,992,709
Exercise of stock options 29,000 29 28,100 -- -- 28,129
Purchase of treasury stock -- -- -- (102,988) -- (102,988)
Net loss -- -- -- -- ( 1,930,112) (1,930,112)
---------- ---------- ---------- ---------- ----------- -----------
Balance - July 31, 1998 14,140,000 14,140 12,495,246 (1,452,800) (5,068,848) 5,987,738
Purchase of treasury stock -- -- -- (283,310) -- (283,310)
Issuance of shares in connection
with Microsoft transaction -- -- (862,855) 1,492,855 -- 630,000
Net income -- -- -- -- 19,533 19,533
---------- ---------- ---------- ---------- ----------- -----------
Balance - July 31, 1999 14,140,000 $ 14,140 11,632,391 (243,255) (5,049,315) 6,353,961
=========== ========== =========== =========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
FS-4
<PAGE>
PROGINET CORPORATION
Statements of Cash Flows
Years ended July 31, 1999 and 1998
1999 1998
---- ----
Net income (loss) $ 19,533 (1,930,112)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization 1,396,441 1,318,774
Decrease in accounts receivable 439,796 25,585
Decrease in notes receivable from employees 12,000 145,000
Decrease (increase) in prepaid expenses 33,131 (41,478)
Decrease (increase) in other receivable 525,000 (525,000)
Decrease in other assets 1,847 2,904
Decrease in accounts payable
and accrued expenses (101,946) (542,076)
Increase (decrease) in deferred revenue (65,705) 6,680
Increase in unbilled rent 14,603 18,589
------------ ---------
Net cash provided by (used in)
operating activities 2,274,700 (1,521,134)
------------ ---------
Proceeds from sale of (purchase of)
short-term investments, net (559,210) 2,405,475
Capitalized software development costs (1,174,112) (1,272,307)
Capital expenditures (7,622) (113,381)
Proceeds from sale of assets - 25,000
------------ ---------
Net cash provided by investing activities (1,740,944) 1,044,787
------------ ---------
Increase in notes payable 149,005 -
Proceeds from exercise of options - 28,129
Purchase of treasury stock (283,310) (102,988)
------------ ---------
Net cash used in financing activities (134,305) (74,859)
------------ ---------
Increase (decrease) in cash and cash
equivalents 399,451 (551,206)
Cash and cash equivalents at beginning of year 206,005 757,211
------------ ---------
Cash and cash equivalents at end of year $ 605,456 206,005
=========== ==========
Supplemental disclosures:
Income taxes paid $ - -
=========== ==========
Interest paid $ - -
=========== ==========
See accompanying notes to financial statements.
FS-5
<PAGE>
PROGINET CORPORATION
Notes To Financial Statements
July 31, 1999 and 1998
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Proginet Corporation (the Company) develops and markets two software product
lines. The first is a batch file transfer software product used to link
mainframe computer systems to local area networks (LANs), primarily for
Microsoft Windows, Novell Netware, OS400 and UNIX platforms. The second is a
security password management software product that enables multiple and
disparate security systems, on multiple computers, to function as one. The
Company sells its products in the U.S. through its telemarketing and sales force
and internationally directly and indirectly through distributors, and through
OEM partners in Europe and the United States. The Company also provides software
maintenance services. The Company's stock is traded on the Vancouver Stock
Exchange, listed as PRF.U&V.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid debt instruments with a maturity of
three months or less at the time of purchase to be cash equivalents. Short-term
investments, amounting to $1,085,707 and $526,497 at July 31, 1999 and 1998,
respectively, consisted of a liquid reserve mutual fund. The Company has
classified its investments as "available for sale" and the market value equaled
the cost at July 31, 1999 and 1998.
REVENUE RECOGNITION
During fiscal 1998, the Company adopted the provisions of Statement of Position
No. 97-2, "Software Revenue Recognition", which did not have a significant
impact on the financial statements. Revenue from the sale or license of software
products is recognized when persuasive evidence of an arrangement exists, the
software has been delivered, product customization is complete, the software's
selling price is fixed or determinable and collection of the resulting
receivable is probable.
Software maintenance fees are deferred and recognized as revenue ratably over
the term of the contract, typically one year.
Cost of revenues primarily consists of product costs, amortization of
capitalized software development costs and salaries and consulting fees relating
to providing customer software support under maintenance contracts.
Based on the terms of a signed software license agreement with a European
customer, the Company recognized $1,080,000 of revenue in the third quarter of
fiscal 1997 when the product was delivered to the customer. In the fourth
quarter of fiscal 1997, the Company reduced software license revenues by
$1,080,000 as a result of a customer dispute over the terms of such agreement,
including the customer's assertion that the contract was not binding. In the
fourth quarter of fiscal 1998, the Company recognized $375,000 of other income,
which is net of related expenses of $150,000, for the resolution of this
dispute. Such amount was collected in August 1998.
ACCOUNTS RECEIVABLE
The Company continually reviews accounts for collectibility and establishes an
allowance for doubtful accounts. As of July 31, 1999 and 1998, there was an
allowance for doubtful accounts of $127,500 and $198,600, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
straight-line method over the assets' useful lives, generally five years.
Leasehold improvements are amortized over the lesser of the economic life of the
asset or the lease term.
FS-6
<PAGE>
PROGINET CORPORATION
Notes To Financial Statements
July 31, 1999 and 1998
RESEARCH AND DEVELOPMENT COSTS
Research and development costs consist of salaries and other costs related to
the development and enhancement of computer software programs. Software
development costs are capitalized upon the establishment of product
technological feasibility until the product is available for general release to
the public. The establishment of technological feasibility and the ongoing
assessment of recoverability of capitalized software development costs require
considerable judgment by management with respect to certain factors including,
but not limited to, the timing of technological feasibility, anticipated future
gross revenues, estimated economic life and changes in software and hardware
technologies. Software development costs not capitalized are expensed as
research and development as incurred.
Amortization of capitalized software development costs, included in cost of
revenues, and amounting to $668,601 and $460,859 for fiscal 1999 and 1998,
respectively, is provided on a product-by-product basis at the greater of the
amount computed using the ratio of current gross revenues for a product to the
total of current and anticipated future gross revenues or the straight-line
method over the remaining estimated economic life of the product. Amortization
commences once a product becomes available for sale to customers. Generally, an
original estimated economic life of five years is assigned to capitalized
software development costs. Capitalized software development costs are net of
accumulated amortization of $2,128,126 and $1,459,525 at July 31, 1999 and 1998,
respectively.
DEFERRED CONTRACT COSTS
Deferred contract costs represented the costs of obtaining servicing rights from
Novell. Such amounts were amortized over the five-year life of the contract.
Amortization of deferred contract costs in fiscal 1999 and 1998 were $30,854 and
$37,020, respectively. The deferred contract costs were fully amortized as of
July 31, 1999.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the tax bases of assets and
liabilities and their financial reporting amounts based on enacted tax laws and
statutory tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's financial instruments approximate their
carrying values in the financial statements because of the short-term maturity
of these instruments.
LONG-LIVED ASSETS
The Company reviews long-lived assets such as plant and equipment and certain
identifiable intangibles to be held and used or disposed of for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If the sum of the expected cash flows,
undiscounted and without interest, is less than the carrying amount of the
asset, an impairment loss is recognized as the amount by which the carrying
amount of the asset exceeds its fair value.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company records compensation expense for employee and director stock options
and warrants if the current market price of the underlying stock exceeds the
exercise price on the date of the grant. On August 1, 1996, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation".
The Company has elected not to implement the fair value based accounting method
for employee and director stock options and warrants, but has elected to
disclose the pro forma net earnings and pro forma earnings per share including
compensation expense for employee and director stock option and warrant grants
made as if the fair value method had been applied.
FS-7
<PAGE>
PROGINET CORPORATION
Notes To Financial Statements
July 31, 1999 and 1998
EARNINGS PER SHARE
The Company adopted SFAS No. 128, "Earnings Per Share", in fiscal 1998. Under
this standard, the Company presents basic and diluted earnings per share (EPS).
Basic EPS is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding and dilutive EPS adds the
dilutive effect of stock options and warrants. There were no dilutive common
stock equivalents in fiscal 1999 or 1998 and therefore the basic and diluted EPS
calculations were identical. Options outstanding to purchase 1,222,100 and
1,025,000 shares of common stock at July 31, 1999 and 1998, respectively, (note
7) were not included in the fiscal 1999 and 1998 computations of diluted EPS
because they were antidilutive.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(2) ACQUISITIONS
On December 17, 1996, the Company acquired its TransAccess software product line
from Microsoft, which enables transaction processing across a diverse range of
platforms within the enterprise network. The Company received an existing
software product and assumed maintenance contracts with deferred revenue of
$324,246 on the date of acquisition. The purchase price consisted of 100,000
shares of common stock issued at closing, which were not tradable until June
1998, and $2.1 million of common stock to be issued in October 1998 (the number
of shares issued was to be based on the average price of the common stock during
the twenty days prior to the payment date), which become tradable from two to
three years after the closing date. The fair value of the 100,000 shares of
common stock and shares subsequently issuable, based on an independent
appraisal, was $246,000 and $1,170,000, respectively. The total cost of the
acquired product and technology was $1,800,246, including $60,000 of transaction
costs, which was recorded as purchased software and is being amortized over five
years. In October 1998, the Company and Microsoft settled certain issues
relating to this matter and amended the agreement which allowed Proginet to
satisfy all obligations to Microsoft by issuing and delivering to Microsoft
1,260,000 shares of Proginet common stock from treasury. In connection with the
settlement, the acquisition obligation and purchased software carrying amounts
were reduced by $540,000. Accumulated amortization at July 31, 1999 and 1998 was
$800,520 and $582,000, respectively.
On November 26, 1996, the Company acquired substantially all of the assets and
assumed certain liabilities of KnowledgeNet, Inc. for $1,080,000 plus 100,000
shares of common stock, with a fair value of $328,000 based on an independent
appraisal. KnowledgeNet develops and markets software which facilitates
multi-platform connectivity in corporate data processing systems. The
acquisition was accounted for as a purchase. The total cost of the acquisition,
including assumed liabilities and related expenses was $1,657,000, which was
allocated as follows:
Purchased software $ 1,379,000
Fixed assets 223,000
Accounts receivable 50,000
Cash 5,000
-------------
$ 1,657,000
=============
FS-8
<PAGE>
PROGINET CORPORATION
Notes To Financial Statements
July 31, 1999 and 1998
The fair value of the purchased software was based on an independent appraisal
and its net book value at July 31, 1999 and 1998 was $729,166 and $1,005,058.
The Company is currently amortizing this asset over 5 years.
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at July 31:
1999 1998
---------------------------------
Computer and other equipment $ 931,130 922,732
Furniture and fixtures 273,425 274,201
Leasehold improvements 101,790 101,790
-------------- -------------
1,306,345 1,298,723
Less accumulated depreciation
and amortization (802,249) (599,675)
-------------- --------------
$ 504,096 699,048
============== ==============
Depreciation and amortization expense for the years ended July 31, 1999 and 1998
was $202,574 and $236,256, respectively.
(4) RELATED PARTY TRANSACTIONS
The Company had notes receivable from employees, amounting to $12,000 at July
31, 1998, bearing interest at 7%. At July 31, 1999, the notes were fully
satisfied.
During fiscal 1999, Joseph T. Mohen, the founder of Proginet, resigned. At such
time, Mr. Mohen agreed to sell 750,000 shares of Proginet common stock to the
Company for $.31 a share, the market price of the stock. Of the $232,500
purchase price, $50,000 was paid on the date of the agreement. The remainder is
being paid over a 36 month period and is included in the accompanying balance
sheet as notes payable.
(5) INCOME TAXES
The following is a reconciliation of the tax provision with the amount obtained
by applying the statutory U.S. federal income tax rate to the income (loss)
before income taxes:
<TABLE>
<CAPTION>
1999 1998
------------- --------------
<S> <C> <C>
Expense (benefit) at statutory rate $ 3,000 (656,000)
Increases (reductions) in taxes due to:
Nondeductible expenses 1,000 5,000
State tax expense, net of federal benefit (86,000) -
Increase in valuation allowance 222,000 651,000
NOL utilization (53,000) -
Change in deferred taxes due to differences
in rate booked at beginning of year (87,000) -
------------- --------------
Income tax provision $ - -
============== ==============
</TABLE>
FS-9
<PAGE>
PROGINET CORPORATION
Notes To Financial Statements
July 31, 1999 and 1998
At July 31, 1999, the Company had available federal net operating loss (NOL)
carryforwards and research and development tax credit (R&D) carryforwards
expiring in the following fiscal years:
R&D NOL
2007 $ 54,000 -
2008 31,000 -
2009 29,000 174,000
2010 42,000 1,064,000
2011 - 1,519,000
2012 32,000 1,395,000
2013 34,000 3,427,000
----------- -------------
$ 222,000 7,579,000
=========== =============
For income tax purposes, the Company utilizes the cash method of accounting for
revenues and expenses. The types of temporary differences, which represent items
that are reflected in the financial statements and the tax return at different
times that give rise to a significant portion of the deferred tax asset
(liability) and their approximate tax effects are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
Deferred tax assets:
<S> <C> <C>
Net operating loss carry forward $ 2,776,000 2,567,000
Accounts payable and other 109,000 161,000
Deferred revenue 304,000 271,000
Deferred contract costs 77,000 63,000
Purchased software 383,000 217,000
Property and equipment - 53,000
Research and development credit carryforward 222,000 188,000
Unbilled rent 52,000 -
--------------- ---------------
Gross deferred tax asset 3,923,000 3,520,000
Valuation allowance (2,150,000) (1,928,000)
--------------- ---------------
Net deferred tax asset 1,773,000 1,592,000
Deferred tax liabilities:
Capitalized software development costs 1,466,000 1,042,000
Accounts receivable 265,000 326,000
Other receivable 29,000 179,000
Prepaid expenses 12,000 45,000
Prepaid expenses 1,000 -
--------------- ----------------
Gross deferred tax liabilities 1,773,000 1,592,000
--------------- ----------------
Net deferred tax asset $ - -
=============== ================
</TABLE>
FS-10
<PAGE>
PROGINET CORPORATION
Notes To Financial Statements
July 31, 1999 and 1998
At July 31, 1999 and 1998 the Company has provided a valuation allowance against
its net deferred tax assets as the Company does not believe realization is more
likely than not in light of operating losses in recent years.
(6) TREASURY STOCK
In October 1997 which was subsequently renewed in December 1998, the Board of
Directors authorized the Company to purchase up to 300,000 shares of its common
stock. The Company purchased 61,000 and 54,500 shares in fiscal 1999 and 1998,
respectively, under these authorizations. In conjunction with the settlement
between the Company and Joseph Mohen (as discussed in footnote 4), the Company
purchased 750,000 shares in fiscal 1999. In addition, the Company purchased from
two other former employees 50,000 shares in each of fiscal 1999 and 1998. The
total cost of these stock repurchases were $283,310 and $102,988 in fiscal 1999
and 1998, respectively. Subsequent to July 31, 1999 and through September 8,
1999, the Company repurchased an additional 5,000 shares at a cost of $3,745.
(7) STOCK OPTION PLAN
Under the 1997 Stock Option Plan and 1994 Equity Incentive Plan, as amended, the
Company has reserved in the aggregate 2,000,000 shares of common stock for
grants to employees, directors and consultants. Grants under the plan can be in
the form of qualified or non-qualified stock options. Qualified stock options
(which are intended to qualify as incentive stock options under Section 422A of
the United States Internal Revenue Code) may be awarded only to employees of the
Company and must have an exercise price of not less than 100% of the fair market
value of the Company's common stock on the grant date (110% for qualified
options granted to any 10% or greater stockholder of the Company).
Transactions involving the plans are summarized as follows:
<TABLE>
<CAPTION>
SHARES SUBJECT WEIGHTED AVERAGE
TO OPTION EXERCISE PRICE
<S> <C> <C>
Outstanding at July 31, 1997 1,737,300 $2.37
Granted 374,400 $1.73
Cancelled (1,086,700) $2.68
-------------
Outstanding at July 31, 1998 1,025,000 $1.80
Granted 432,100 $0.71
Cancelled (235,000) $1.76
-------------
Outstanding at July 31, 1999 1,222,100 $0.74
============= =====
</TABLE>
FS-11
<PAGE>
PROGINET CORPORATION
Notes To Financial Statements
July 31, 1999 and 1998
As of July 31, 1999, 763,300 of the outstanding options are exercisable and have
a weighted average exercise price of $.75. The remaining outstanding options
vest at various dates during the following fiscal years:
2000 259,400
2001 191,900
2002 7,500
-------
458,800
=======
All options have been granted with exercise prices at the market price of the
stock at the date of the grant. Of the above options 315,600 vest only if
certain specific performance criteria are met, generally aggressive Company
revenue targets or identified individual goals. Stock option compensation
expense related to these options was $0 for fiscal 1999 and 1998, respectively.
On January 30, 1998, the exercise price of 145,800 options were repriced to
$1.28, the market value of the stock on that date. On March 2, 1999, the
exercise price of 824,000 options were repriced to $.75 which was greater than
the market value of the stock on that date.
The Company applies APB Opinion No.25 in accounting for its stock option grants
and, accordingly, no compensation cost has been recognized in the financial
statements for its stock options, which have exercise prices equal to or greater
than the fair value of the stock on the date of grant. Had the Company
determined compensation cost based on the fair value at the grant date for its
stock options under SFAS No.123, the Company's net income (loss) and net loss
per share would have been the following pro forma amounts:
<TABLE>
<CAPTION>
1999 1998
------------------ -------------------
<S> <C> <C>
Net income (loss):
As reported $ 19,533 (1,930,112)
Pro forma (214,289) (2,150,574)
Basic net loss per share:
As reported - (.15)
Pro forma (.02) (.16)
</TABLE>
Pro forma net loss reflects only options granted in fiscal 1996 and thereafter.
Therefore, the full impact of calculating compensation cost for stock options
under the fair value method is not reflected in the pro forma net loss amounts
presented above because compensation cost is reflected over the options' vesting
period and compensation cost for options granted prior to August 1, 1995 was not
considered.
The per share weighted average fair value of stock options granted during fiscal
1999 and 1998 was $.56 and $.70, respectively, on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: expected dividend yield of 0% for fiscal 1999 and 1998; risk free
interest rate of 5.3% and 5.5% in fiscal 1999 and 1998, expected stock
volatility of 102% and 94% in 1999 and 1998, respectively, and an expected
option life of approximately five years for both years. These assumptions are
used for these calculations only and they do not necessarily represent an
indication of management's expectations of future developments.
FS-12
<PAGE>
PROGINET CORPORATION
Notes To Financial Statements
July 31, 1999 and 1998
(8) MANAGEMENT AGREEMENTS
The Company has entered into "management agreements" with two key employees.
When a change of control in the Company occurs, these agreements provide for:
o A lump sum payment equal to the present value of the aggregate of the
executive's base compensation (equal to the highest rate of base
compensation in effect during the three-year period immediately
preceding the termination) for the eighteen month period following
the termination and the aggregate amount of annual bonuses (equal to
the highest aggregate amount of such bonuses that the executive
received in any one of the three years preceding the termination)
that the executive would have received for the eighteen month period
following the termination.
o Continuation at the Company's expense of all benefits to which the
executive was entitled prior to termination for a period of eighteen
months.
(9) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
As of July 31, 1999, the future minimum lease payments under noncancelable
operating leases for office space and equipment was as follows:
Year ended July 31:
2000 $ 302,094
2001 313,201
2002 324,752
2003 274,582
2004 240,728
Thereafter 388,527
----------------
$ 1,843,884
================
Total rent expense for the years ended July 31, 1999 and 1998, was $195,616 and
$281,998, respectively.
LITIGATION AND CLAIMS
The Company is involved in various claims and legal actions in the ordinary
course of business. In the opinion of management, based on advice from its legal
counsel, the ultimate disposition of these matters will not have a material
adverse effect on the financial statements.
(10) BUSINESS AND CREDIT CONCENTRATIONS AND EXPORT SALES
Revenue for the years ended July 31, 1999 and 1998 included sales in foreign
countries of approximately $550,000 and $337,000, respectively. As of July 31,
1999 and 1998, two customers accounted for approximately 67% and 35%,
respectively, of total accounts receivable.
FS-13
<PAGE>
<TABLE>
<CAPTION>
PROGINET CORPORATION
Balance Sheets
January 31, 2000 and July 31, 1999
JANUARY 31, JULY 31,
ASSETS 2000 1999
(UNAUDITED)
---------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 303,075 605,456
Short-term investments 1,270,637 1,085,707
Accounts receivable, net 578,600 520,343
Prepaid expenses 83,009 99,750
---------------- ---------------
Total current assets 2,235,321 2,311,256
---------------- ---------------
Property and equipment, net 432,240 504,096
Capitalized software development costs, net 3,686,900 3,571,427
Purchased software, net 937,534 1,188,892
Other assets 45,701 45,701
---------------- ---------------
Total assets $ 7,337,696 7,621,372
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 321,718 263,124
Deferred revenue 841,061 731,721
Current portion of notes payable 55,877 55,877
---------------- ---------------
Total current liabilities 1,218,656 1,050,722
---------------- ---------------
Notes payable, net of current portion 65,189 93,128
Unbilled rent 127,287 123,561
---------------- ---------------
Total liabilities 1,411,132 1,267,411
---------------- ---------------
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
none issued - -
Common stock, $.001 par value, 40,000,000 shares authorized,
14,140,000 shares issued 14,140 14,140
Additional paid-in capital 11,646,335 11,632,391
Treasury stock, 544,820 and 539,820 shares in 2000 and 1999,
respectively (247,000) (243,255)
Accumulated deficit (5,486,911) (5,049,315)
---------------- ---------------
Total stockholders' equity 5,926,564 6,353,961
---------------- ---------------
Total liabilities and stockholders' equity $ 7,337,696 7,621,372
================ ===============
</TABLE>
See accompanying notes to financial statements.
FS-14
<PAGE>
PROGINET CORPORATION
Statements of Operations
Three Months and Six Months Ended January 31, 2000 and January 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
2000 1999 2000 1999
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Software sales and licenses $ 619,569 711,392 $ 854,422 1,289,086
Software maintenance fees 557,437 512,472 1,054,113 1,026,438
Other 75,500 4,000 75,500 58,775
--------------- -------------- --------------- ---------------
1,252,506 1,227,864 1,984,035 2,374,299
Cost of revenues 418,524 307,920 789,023 616,705
--------------- -------------- --------------- ---------------
Gross profit 833,982 919,944 1,195,012 1,757,594
--------------- -------------- --------------- ---------------
Operating expenses:
Research and development 95,877 135,851 192,204 290,817
Selling and marketing 223,132 129,700 449,750 321,360
General and administrative 635,302 462,104 1,013,203 839,383
--------------- -------------- --------------- ---------------
954,311 727,655 1,655,157 1,451,560
--------------- -------------- --------------- ---------------
Operating income (loss) (120,329) 192,289 (460,145) 306,034
Other income (expense):
Interest income 17,705 10,633 34,929 22,852
Other, net (6,599) 771 (12,379) 10,480
--------------- -------------- --------------- ---------------
Income (loss) before income taxes (109,223) 203,693 (437,595) 339,366
Income tax expense - - - -
=============== ============== =============== ===============
Net income (loss) $ (109,223) 203,693 $ (437,595) 339,366
=============== ============== =============== ===============
Basic and diluted net income (loss) per
common share $ (0.01) 0.02 $ (0.03) 0.03
=============== ============== =============== ===============
Weighted average common shares outstanding 13,595,180 13,338,346 13,596,013 13,234,846
=============== ============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
FS-15
<PAGE>
<TABLE>
<CAPTION>
PROGINET CORPORATION
Statements of Cash Flows
Six Months Ended January 31, 2000 and January 31, 1999
(Unaudited)
SIX MONTHS ENDED
JANUARY 31,
2000 1999
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (437,595) 339,366
Adjustments to reconcile net income (loss) to cash provided by
operating activities:
Depreciation and amortization 738,237 672,713
Decrease in accounts receivable (253,998) 294,941
Provision for doubtful accounts 195,740 (33,391)
Investor relations warrant expense 13,944 -
Decrease in notes receivable from employees - 12,000
Decrease in prepaid expenses 16,742 33,315
Increase in accounts payable
and accrued expenses 58,592 165,766
(Decrease) in notes payable (27,938) -
Increase (decrease) in deferred revenue 109,340 (54,349)
Increase in unbilled rent 3,722 8,418
------------- ------------
Net cash provided by operating activities 416,786 1,438,779
------------- ------------
Cash flows from investing activities:
Purchase of short-term investments, net (184,930) (322,853)
Capitalized software development costs (500,742) (589,018)
Capital expenditures (29,749) (3,304)
------------- ------------
Net cash used in investing activities (715,421) (915,175)
------------- ------------
Cash flows from financing activities:
Purchase of treasury stock (3,746) (270,380)
------------- ------------
Net cash used in financing activities (3,746) (270,380)
--------------- ------------
Increase (decrease) in cash and cash equivalents (302,381) 253,224
Cash and cash equivalents at beginning of period 605,456 202,516
------------- ------------
Cash and cash equivalents at end of period $ 303,075 455,740
============= ============
</TABLE>
See accompanying notes to financial statements.
FS-16
<PAGE>
PROGINET CORPORATION
Notes To Unaudited Financial Statements
Six Months Ended January 31, 2000 and January 31, 1999
1. INTERIM FINANCIAL DATA
The accompanying unaudited financial statements have been prepared by Proginet
Corporation ("Proginet" or "the Company") in accordance with generally accepted
accounting principles. In the opinion of management, the accompanying unaudited
financial statements contain all adjustments, consisting only of those of a
normal recurring nature, necessary for a fair presentation of the Company's
financial position, results of operations and cash flows at the dates and for
the periods indicated. These financial statements should be read in conjunction
with the audited financial statements and notes related thereto included herein
for the years ended July 31, 1999 and 1998.
These results of the three- and six-month periods ended January 31, 2000 are not
necessarily indicative of the results to be expected for the full fiscal year.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. INVESTOR RELATIONS AGREEMENT
In the first quarter of fiscal 2000 Proginet entered into an agreement with
Mallory Factor Inc. (MFI) whereby MFI will provide guidance and support on a
"Strategic Corporate and Communications Counseling Program" for Proginet. The
terms of the entire agreement are subject to approval of the Canadian Venture
Exchange (CDNX) and provide for granting of up to 500,000 warrants exercisable
at a price of $.54 per share depending upon achievement of pre-determined goals.
The first 150,000 warrants vest upon regulatory approval of the agreement and
the next 100,000 vest provided that Proginet stock price reaches $1.25. The next
250,000 vest, if and only if, two criteria are satisfied: (i) Proginet's
achievement of a listing on the United States OTC:BB and (ii) Proginet's stock
price reaching established thresholds. When Proginet's stock price reaches
$2.25, then 100,000 warrants will vest; when Proginet's stock price reaches
$3.25, then 100,000 additional warrants will vest; and when Proginet's stock
price reaches $4.25, the final 50,000 warrants will vest. During the six months
ended January 31, 2000 Proginet recognized a non-cash expense of $13,944
relating to this agreement. The expense relates to the first 250,000 warrants.
3. DISTRIBUTOR BANKRUPTCY
In the second quarter of fiscal 2000, one of Proginet's international
distributors filed for protection from creditors, analogous to bankruptcy, in
its local country. Proginet has recorded a charge of $195,740 to reserve for
losses on payments due from this distributor. The charge is included in general
and administrative expenses in the accompanying unaudited statement of
operations.
4. CREDIT LINE
On January 12, 2000, Proginet established a line of credit in the amount of
$100,000 with Citibank. The interest rate is variable, based on prime plus 1%.
As of January 31, 2000 the Company has not borrowed against this line of credit.
5. RESEARCH AND DEVELOPMENT
Research and development costs not capitalized in connection with a specific
product are expensed in the period incurred. Such expenses are based on
management's estimate of time spent and costs incurred in connection with
research and development.
6. CAPITALIZED SOFTWARE
Capitalized software development costs consist of costs that are directly
related to programmers and facilities that develop software, which has reached
technical feasibility. These costs are $242,346 for the three months ended
January 31, 2000; $500,742 for the six months ended January 31, 2000; $270,031
for the three months ended January 31, 1999; and $589,018 for the six months
ended January 31, 1999.
FS-17
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
- ----------------------- -----------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT NAME
<S> <C>
- ----------------------- -----------------------------------------------------------------------------------
3(i) Certificate of Incorporation.
- ----------------------- -----------------------------------------------------------------------------------
3(ii) Bylaws of the Registrant.
- ----------------------- -----------------------------------------------------------------------------------
9 Shareholder Voting Agreement between Bathhurst, Ltd. and the Company, dated
September 20, 1999.
- ----------------------- -----------------------------------------------------------------------------------
10.1 Form of Employee Confidential Information and Non-Competition Agreement.
- ----------------------- -----------------------------------------------------------------------------------
10.2 Form of Confidential Information And Non-Competition Agreement For Consultants.
- ----------------------- -----------------------------------------------------------------------------------
10.3 Investor Relations Agreement.
- ----------------------- -----------------------------------------------------------------------------------
10.4 Form of Software License Agreement.
- ----------------------- -----------------------------------------------------------------------------------
10.5 Form of Distributor Agreement.
- ----------------------- -----------------------------------------------------------------------------------
10.6 Form of OEM Agreement.
- ----------------------- -----------------------------------------------------------------------------------
10.7 Form of Management Continutity Agreement.
- ----------------------- -----------------------------------------------------------------------------------
10.8 Independent Directors Stock Option Plan, amended and restated as of February 21,
1995.
- ----------------------- -----------------------------------------------------------------------------------
10.9 1995 Equity Incentive Plan, amended and restated as of December 5, 1995.
- ----------------------- -----------------------------------------------------------------------------------
10.10 1997 Stock Option Plan.
- ----------------------- -----------------------------------------------------------------------------------
10.11 Form of Incentive Stock Option Agreement.
- ----------------------- -----------------------------------------------------------------------------------
10.12 Asset Purchase Agreement between the Company and Microsoft, dated as of December
17, 1996.
- ----------------------- -----------------------------------------------------------------------------------
10.13 Amendment to Asset Purchase Agreement between the Company and Microsoft, dated
October 28, 1998.
- ----------------------- -----------------------------------------------------------------------------------
10.14 Stock Redemption Agreement between the Company and Joseph T. Mohen, dated October
20, 1998.
- ----------------------- -----------------------------------------------------------------------------------
10.15 Stock Purchase Agreement between Joseph T. Mohen and Bathhurst Ltd., dated as of
July 12, 1999.
- ----------------------- -----------------------------------------------------------------------------------
10.16 Consulting Agreement between the Company and Mallory Factor, Inc., dated
September 22, 1999.
- ----------------------- -----------------------------------------------------------------------------------
27 Financial Data Schedule.
- ----------------------- -----------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<PAGE>
ITEM 2. DESCRIPTION OF EXHIBITS
See Item 1 above.
25
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
PROGINET CORPORATION, INC.
(Registrant)
/s/ Kevin M. Kelly
------------------
Date: March 24, 2000 By: Kevin M. Kelly
President and CEO
/s/ James F. Kelly
------------------
Date: March 24, 2000 By: James F. Kelly
Corporate Secretary
26
EXHIBIT 3(i)
CERTIFICATE OF INCORPORATION
OF
PROGINET CORPORATION
* * * * *
1. The name of the corporation is:
Proginet Corporation
2. The address of its registered office in the State of Delaware is 1209
Orange Street, Wilmington, DE 19801, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is 20,000,000 common shares, $.001 par value per
share.
5A. The name and mailing address of the sole incorporator is as follows:
Name Mailing Address
---- ---------------
Donna B. Potember c/o Gadsby & Hannah
125 Summer Street
Boston, MA 02110
5B. The name and mailing address of each person, who shall serve as the
directors until the first annual meeting of the stockholders or until
successors are elected and qualified, are as follows:
Name Mailing Address
---- ---------------
Joseph T. Mohen 50 Charles Lindbergh Boulevard
Uniondale, NY 11553
Kevin M. Kelly 50 Charles Lindbergh Boulevard
Uniondale, NY 11553
James F. Kelly 50 Charles Lindbergh Boulevard
Uniondale, NY 11553
6. The corporation is to have perpetual existence.
<PAGE>
7. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter
or repeal the bylaws of the corporation.
8. Elections of directors need not be by written ballot unless the bylaws
of the corporation shall so provide.
Meetings of the stockholders may be held within or without the State
of Delaware, as the bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in applicable statutes) outside the State of
Delaware at such place or places as may be designated form time to time by the
board of directors or in the bylaws of the corporation.
Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
Duty of Care
9. A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (I) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (II) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (III) under Section 174 of
<PAGE>
the General Corporation Law of Delaware, or (IV) for any transaction from which
the director derived an improper personal benefit. If the General Corporation
Law of Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of Delaware, as so amended. Any repeal
or modification of the provisions of this Article 9 by the stockholders of the
corporation shall not adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or modification.
Indemnification
10.1 The corporation shall indemnify any person who was or is a
party or witness, or is threatened to be made a party or witness, to any
threatened, pending or completed action, suit or proceeding (including without
limitation, an action, suit or proceeding by of in the right of the
corporation), whether civil, criminal, administrative or investigative
(including a grand jury proceeding), by reason of the fact that he or she (a) is
or was a director or officer of the corporation or, (b) as a director or officer
of the corporation, is or was serving at the request of the corporation as a
director, officer, employee, agent, partner, or trustee (or in any similar
position) of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, to the fullest extent authorized or permitted
by the General Corporation Law of Delaware and any other applicable law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the corporation to provide
broader indemnification rights than said law permitted the corporation to
provide prior to such amendment), against expenses (including attorney's fees),
judgements, fines and other amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding, or in
connection with any appeal thereof; provided, however, that, except as provided
in Section 10.2 of the Article with respect to proceedings to enforce rights to
indemnification, the corporation shall indemnify any such person in connection
with an action, suit or proceeding (or part thereof) initiated by such person
only if the initiation of such action, suit or proceeding (or part thereof) was
authorized by the Board of Directors. Such right to indemnification shall
include the right to payment by the corporation of expenses incurred in
connection with any such action, suit or proceeding in advance of its final
disposition; provided, however, that the
<PAGE>
payment of such expenses incurred by a director or officer in advance of the
final disposition of such action, suit or proceeding shall be made only upon
delivery to the corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article 10 or otherwise.
10.2 Any indemnification or advancement of expenses required under
this Article 10 shall be made promptly, and in any event within sixty days, upon
the written request of the person entitled thereto. If a determination by the
corporation that the person is entitled to indemnification pursuant to this
Article 10 is required, and the corporation fails to respond within sixty days
to a written request for indemnity, the corporation shall be deemed to have
approved such request. If the corporation denies a written request for indemnity
or advancement of expenses, in whole or in part, or of payment in full pursuant
to such request is not made within sixty days, the right to indemnification and
advancement of expenses as granted by this Article shall be enforceable by the
person in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his or her right to
indemnification, in whole or part, in any such action or proceeding shall also
be indemnified by the corporation. It shall be a defense to any such action
(other than an action brought to enforce a claim for the advancement of expenses
pursuant to this Article 10 where the required undertaking has been received by
the corporation) that the claimant has not et the standard of conduct set forth
in the General Corporation Law of Delaware, but the burden of providing such
defense shall be on the corporation. Neither the failure of the corporation
(including the Board of Directors, independent legal counsel or the
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of Delaware, nor the fact that there has been an actual
determination by the corporation (including the Board of Directors, independent
legal council or the stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
<PAGE>
10.3 The indemnification and advancement of expenses provided by, or
granted pursuant to this Article 10 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitles under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent, and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Any repeal or modification of the provisions of this Article 10 shall
not affect any obligation of the corporation or any right regarding
indemnification and advancement of expenses of a director, officer, employee or
agent with respect to any threatened, pending or completed action, suit or
proceeding for which indemnification or the advancement of expenses is
requested, in which the alleged cause of action accrued at any time prior to
such repeal or modification.
10.4 The corporation may purchase and maintain insurance, at its
expense, to protect itself and any person who is a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
the corporation would have the power to indemnify him or her against such
liability under the provisions of this Article 10, the General Corporation Law
of Delaware or otherwise.
10.5 If this Article 10 or any portion thereof shall be invalidated
on any ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each director and officer of the corporation as to
expenses (including attorney's fees), judgements, fines and amounts paid in
settlement with respect to any action, suit or pending, whether civil, criminal,
administrative or investigative, including without limitation, a grand jury
proceeding and an action, suit or proceeding by or in the right of the
corporation, to the fullest extent permitted by any applicable portion of this
Article 10 that shall not have been invalidated, by the General Corporation Law
of Delaware or by any other applicable law.
<PAGE>
11. The corporation reserves the right to amend, alter, change or
repeal any provision contained in the certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation. THE UNDERSIGNED,
being the sole incorporator hereinbefore named, for the purpose of forming a
corporation pursuant to the General Corporation Law of Delaware, does make this
certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
20th day of July, 1994.
---------------------------------
Donna B. Potember
Sole Incorporator
EXHIBIT 3(ii)
BY-LAWS
OF
PROGINET CORPORATION
A DELAWARE CORPORATION
ARTICLE 1
---------
STOCKHOLDERS
------------
1. Place of Meetings. All meetings of stockholders shall be held at the
principal office of the corporation unless a different place (anywhere in
the United States) is fixed by the Directors or the President and stated in
the notice of the meeting.
2. Annual Meetings. An annual meeting of the stockholders entitled to vote
shall be held on the Third Tuesday in October at 11:00 o'clock A.M. If it
shall not have been held on the date fixed or by adjournment therefrom, a
meeting in lieu of the annual meeting shall be held within six (6) months
after the end of the fiscal year.
3. Special Meetings. Special meetings of the stockholders entitled to vote may
be called by the Chairman of the Board of Directors, the President, or by a
majority of the Directors, and shall be called by the Secretary, or in case
of the death, absence, incapacity or refusal of the Secretary, by any other
officer, on written application of one or more stockholders who are
entitled to vote and who hold at least ten percent (10%) interest of the
capital stock entitled to vote, stating the date, time, place and purpose
of the meeting.
4. Notice of Meetings. A written notice of every meeting of stockholders,
stating the date, time, place and purpose for which the meeting is called
shall be given by the Secretary or other person calling the meeting not
less than ten (10) nor more than sixty (60) days before the meeting, to
each stockholder entitled to vote threat and to each stockholder who, by
the Certificate of Incorporation or By-Laws, is entitled to such notice, by
leaving such notice with him or at his residence or usual place of
business, or by mailing it postage prepaid and addressed to him at his
address as it appears on the books of the corporation. No notice of any
regular or special meeting of the stockholders need be given to any
stockholder if a written waiver of notice executed before or after the
meeting by the stockholder, or his attorney thereunto authorized, is filed
with the records of the meeting.
5. Adjournments. Any meeting of the stockholders may be adjourned to any other
time and to any other place in the United States by the stockholders
present or represented at the meeting, although less than a quorum, or by
any officer entitled to preside or to act as Secretary of such meeting if
no stockholder is present. It shall not be necessary to notify any
stockholder of any adjournment. Any business that could have been
transacted at any adjournment thereof.
<PAGE>
6. Quorum of Stockholders. At any meeting of the stockholders, more than fifty
percent (50%) in interest of the capital stock issued and outstanding and
entitled to vote shall constitute a quorum.
7. Votes and Proxies. Each stockholder shall have one (1) vote for each share
of stock having voting owner owned by him. Stockholders may vote in person
or by proxy. No proxy that is dated more than six (6) months before the
meeting named therein shall be accepted. Proxies shall be filed with the
Secretary of the meeting, or of any adjournment thereof, before being
voted. Except as otherwise limited therein, proxies shall entitle the
persons named therein to vote at any adjournment of such meeting, but shall
not be valid after final adjournment of such meeting. A proxy with respect
to stock held in the name of two (2) or more persons shall be valid if
executed by one (1) of them unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the contrary from any one
(1) of them. A proxy purporting to be executed by or on behalf of a
stockholder shall be deemed valid unless challenged at or prior to its
exercise.
8. Action at Meeting. When a quorum is present, the holders of a majority of
the stock present or represented and voting on a matter (or if there are
two (2) or more classes of stock entitled to vote as separate classes then,
in the case of each such class, the holders of a majority of the stock of
that class present or represented and voting on a matter) shall decide any
matter to be voted on by the stockholders, except where a larger vote is
required by law, the Certificate of Incorporation or these By-Laws. Any
election by stockholders shall be determined by a plurality of the votes
cast by the stockholders entitled to vote at the election. No ballot shall
be required for any such election unless requested by a stockholder present
or represented at the meeting and entitled to vote in the election. The
corporation shall not-directly or indirectly vote any share of its stock.
9. Action without Meeting. Any action to be taken by the stockholders at a
meeting may be taken without a meeting, without prior notice and without a
vote, if a written consent(s), setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote thereon were present and
voted and shall be delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of
business, or an officer or agent of the corporation having custody of the
book in which proceedings of stockholder meetings are recorded. Delivery
made to a corporation's registered office shall be by hand or by certified
or registered mail, return receipt requested.
<PAGE>
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
1. Powers. The business of the corporation shall be managed by a board of
Directors which may exercise all the powers of the corporation except as
otherwise provided by law, the Certificate of Incorporation or these
By-Laws. In the event of a vacancy in the Board of Directors, the remaining
Directors, except as otherwise provided by law, may exercise the powers of
the full Board until the vacancy is filled.
2. Election. A Board of Directors consisting of such number not less than one
(1) as shall be fixed by the Directors and shall be elected by the
stockholders at each annual meeting. A Director need not be a stockholder.
3. Tenure. The Directors shall hold office until the next annual meeting of
stockholders and thereafter until their successors are chosen and
qualified, except as otherwise provided in these By-Laws. Any Director may
resign by giving written notice of his resignation to the corporation at
its principal office or to the President, Secretary or Directors, and such
resignation shall become effective upon receipt unless another time is
specified therein.
4. Removal. A Director may be removed from office with or without cause at any
meeting of the stockholders by vote of the stockholders holding more than
fifty percent (50%) in interest of the capital stock issued and outstanding
and entitled to vote in the election of Directors, or for cause by vote of
a majority of the Directors then in office. A Director may be removed for
cause only after reasonable notice and opportunity to be heard before the
body proposing to remove him.
5. Meetings. Regular meetings of the directors may be held without notice at
such places and at such times as the directors may from time to time
determine, provided that any director who is absent when such determination
is made shall be given notice of the determination. A regular meeting of
the Directors shall be held without notice at the same place as the annual
meeting of stockholders, or the special meeting held in lieu thereof,
following such meeting of stockholders. Special meetings of the Directors
may be called by the Chairman of the Board of Directors, the President or
two (2) or more Directors.
6. Notice of Meetings. Notice of the date, time, place and purpose of every
special meeting of the Directors shall be given to each Director by the
Secretary, or in case of the death, absence, incapacity or refusal of the
Secretary, by the officer or one of the Directors calling the meeting.
Notice shall be given to each Director in person or by telephone or by
telegram sent to his business or home address at least twenty-four (24)
hours in advance of the meeting, or by written notice mailed to his
business or home address at least forty-eight (48) hours in advance of the
meeting. Notice need not be given to any Director if a written waiver of
notice executed by him before or after the meeting is filed with the
records of the meeting, or to any Director who attends the meeting without
objecting to the lack of notice prior to the meeting
<PAGE>
or at the commencement thereof. A waiver of notice of a Directors' meeting
need not specify the purposes of the meeting.
7. Quorum of Directors. At any meeting of the Directors, a majority of the
Directors at the time in office shall constitute a quorum, but a less
number may adjourn any meeting from time to time without further notice.
Unless otherwise provided by law or these By-Laws, business may be
transacted by vote of a majority of those in attendance at any meeting at
which a quorum is present.
8. Vacancies and Newly Created Directorships. Unless otherwise provided in the
Certificate of Incorporation , vacancies and newly created directorships
resulting from any increase in the authorized number of Directors elected
by all of the stockholders having the right to vote as a single class may
be filled by a majority of the Directors then in office. Although less than
a quorum, or by a sole remaining Director.
9. Chairman of the Board of Directors. The Board of Directors may elect a
Chairman of the board of Directors from among its members, who shall serve
at the pleasure of the board and shall preside at all meetings of the
Directors and at all meetings of the stockholders.
10. Committees. The Board of Directors may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided
in the resolution of the board, shall have and may exercise the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation with the exception of any authority the
delegation of which is prohibited by Section 141 of the General Corporation
Law, and may authorize the seal of the corporation to be affixed to all
papers which may require it.
11. Action without Meeting. Any action that may be taken by the Directors at a
meeting may be taken without a meeting if all Directors entitled to vote
thereon consent thereto by a writing filed with the records of the
Directors' meetings. Such consent shall be treated for all purposes as a
vote at a meeting of the Directors.
12. Presumption of Assent. A Director who is present at a meeting of the
Directors at which any action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
recorded in the minutes of the meeting or unless he shall file his written
dissent to such action with the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by certified mail to the
Secretary of the corporation immediately after the
<PAGE>
adjournment of the meeting. Such right of dissent shall not apply to a
Director who voted at the meeting in favor of such action.
13. Action by Telephone. The Board of Directors or any committee designated
thereby may participate in a meeting of such board or committee by means of
a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the
same time, and participation by such means shall constitute presence in
person at a meeting.
ARTICLE III
-----------
OFFICERS
--------
1. Enumeration. The officers of the corporation shall consist of a Chairman, a
President, a Treasurer, a Secretary, and such other officers, including one
or more Vice Chairmen, Executive Vice Presidents, Vice President's,
Assistant Treasurers and Assistant Secretaries as the Directors may
determine.
2. Election. The Chairman, President, Treasurer and Secretary shall be elected
annually by the Directors at their first meeting following the annual
meeting of stockholders. Other officers may be chosen by the Directors at
such meeting or at any other meeting.
3. Qualification. No officer need be a Director or a stockholder. Any two or
more offices may be held by the same person. The Secretary shall be a
resident of Delaware unless the corporation has a resident agent appointed
for the purpose of service of process. Any officer may be required by the
Directors to give bond for the faithful performance of his duties to the
corporation in such amount and with such sureties as the directors may
determine.
4. Tenure. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the Chairman, the President, Treasurer and
Secretary shall hold office until the first meeting of the directors
following the annual meeting of stockholders and thereafter until his
successor is chosen and qualified; and all other officers shall hold office
until the first meeting of the Directors following the annual meeting of
stockholders, unless a shorter term is specified in the vote choosing or
appointing them. Any officer may resign by delivering his written
resignation to the corporation at its principal office or to the President
or Secretary, and such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of
some other event.
5. Vacancies. Any vacancy in any office may be filled by the Directors at a
meeting called for that purpose. When any officer is, in the opinion of the
Directors, unable to perform his duties, they may by vote appoint a
temporary officer to act until further vote by them, with power to perform
all or part of the duties of such officer.
<PAGE>
6. Removal. The Directors may remove any officer with or without cause by a
vote of a majority of the Directors then in office, provided, that an
officer may be removed for cause only after reasonable notice and
opportunity to be heard by the Board of Directors.
7. Chairman. The Chairman shall be the chief executive officer of the
corporation and shall, subject to the direction of the Directors, have
general supervision and control of its business. Any vice Chairman shall
have such powers as the Directors may from time to time designate.
8. President and Vice President. The President shall be the chief operating
officer of the Corporation and shall, subject to the direction of the
Directors, have general supervision and control of its business. Any Vice
President shall have such powers as the Directors may from time to time
designate.
9. Treasurer and Assistant Treasurer. The Treasurer shall have general charge
of the financial affairs of the corporation and shall cause to be kept
accurate books of account. He shall have custody of all funds, securities,
and valuable documents of the corporation, except as the Directors may
otherwise provide. Any Assistant Treasurer shall have such powers as the
directors may from time to time designate.
10. Secretary and Assistant Secretaries. The Secretary shall keep a record of
the meetings of the stockholders and of the Directors. Unless a Transfer
Agent is appointed, the Secretary shall keep or cause to be kept at the
principal office of the corporation or at his office, the stock and
transfer records of the corporation, which are contained the names of all
stockholders and the record address and the amount of stock held by each.
Any Assistant Secretary shall have such powers as the Directors may from
time to time designate. In the absence of the Secretary from any meeting of
stockholders, an Assistant Secretary, if one be elected, otherwise a
Temporary Secretary designated by the person presiding at the meeting,
shall perform the duties of the Secretary.
11. Other Powers and Duties. Each officer shall, subject to these By-Laws, have
in addition to the duties and powers specifically set forth in these
By-Laws, such powers as the directors may from time to time designate.
ARTICLE IV
----------
CAPITAL STOCK
-------------
1. Certificates of Stock. Each stockholder shall be entitled to a certificate
of the capital stock of the corporation in such form as may be prescribed
from time to time by the Directors. The certificate shall be signed by the
Chairman, the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, but when a
certificate is countersigned by a transfer agent or a registrar, other than
a Director, officer or employee of the corporation, such signatures may be
facsimiles. In case any officer who has singed or whose
<PAGE>
facsimile signature has been placed on such certificate shall have ceased
to be such officer before such certificate is issued, it may be issued by
the corporation with the same effect as if he were such officer at the time
of its issue.
Every certificate for shares of stock that are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-Laws or
any agreement to which the corporation is a party, shall have the
restriction noted conspicuously on the certificate and shall also set forth
on the face or back either the full text of the restriction or a statement
of the existence of such restriction and a statement that the corporation
will furnish a copy to the holder of such certificate on written request
and without charge. Every certificate issued when the corporation is
authorized to issue more than one class or series of stock shall set forth
on its face or back either the full text of the references, voting powers,
qualifications and special and relative rights of the shares of each class
and series authorized to be issued or a statement of the existence of such
preferences, powers, qualifications and rights, and a statement that the
corporation will furnish a copy thereof to the holder of such certificate
on written request and without charge.
2. Transfer on Books. All shares of stock shall be transferable on the books
of the corporation except when closed as provided by the By-Laws, upon
surrender of the certificate therefor duly endorsed, or accompanied by a
separate document containing an assignment of the certificate or a power of
attorney to sell, assign, or transfer the same, or the shares represented
thereby, with all such endorsements or signatures guaranteed if required by
the corporation. The corporation shall be entitled to recognize as
exclusive the rights of a person registered on its books as the owner of
legal title to shares, to the full extent permitted by law. The
stock-transfer and other books of the corporation may be closed by order of
the Directors for sixty (60) days or any lesser period previous to any
meeting of stockholders or any day appointed for the payment of a dividend
or for any other purpose.
3. Lost Certificates. In case any certificate of stock of the corporation
shall be lost or destroyed, a new certificate may be issued in lieu thereof
on reasonable evidence of such loss or destruction, and upon such indemnify
being given within the limits permitted by law as the Directors may require
for the protection of the corporation or any transfer agent or registrar.
4. Issue of Stock. Unless otherwise voted by the Incorporator or stockholders,
the whole or any part of any unissued balance of the authorized capital
stock of the corporation or the whole or any part of any capital stock of
the corporation held in its treasury may be issued or disposed of by vote
of the Directors in such manner, for such consideration, and on such terms
as the Directors may determine.
5. No Fractional Shares. The Corporation shall issue no fractional shares to
any stockholder and upon any action which would required such issuance but
for this provision, the Corporation shall, in lieu of such issuance, pay in
cash the fair value
<PAGE>
of fractions of a share as of the time when those entitled t receive such
fractions are determined.
ARTICLE V
---------
MISCELLANEOUS PROVISIONS
------------------------
1. Fiscal Year. The fiscal year of the corporation shall end on the last day
in July each year.
2. Seal. The seal of the corporation shall bear its name and the year of its
incorporation or such other device or inscription as the directors may
determine.
3. Execution of Instruments. All deeds, leases, transfers, contracts, bonds,
notes and other obligations authorized to be executed by an officer of the
corporation in its behalf shall be signed by the Chairman, the President or
the Treasurer except as the Directors may generally or in particular cases
otherwise determine.
4. Voting of Securities. Except as the Directors may otherwise designate, the
Chairman, the President or Treasurer may waive notice of, and appoint any
person or persons to act as proxy or attorney in fact for this corporation
(with or without power of substitution) at any meeting of stockholders or
shareholders of any other corporation or organization, the securities of
which may be held by this corporation.
5. Certificate of Incorporation. All references in these By-Laws to the
Certificate of Incorporation shall be deemed to be to the Certificate of
Incorporation of the corporation, as amended and in effect from time to
time.
6. Depository of Incorporation. Any Chairman, President, Vice President or
Treasurer, together with the Secretary or any Assistant Secretary, shall
designate the banks and the name, whether it be the Corporate name or the
name of one of them or the name of other persons connected with the
Corporation or tradenames, in which such accounts shall be opened and kept
and shall designate the persons who shall have authority on behalf of the
Corporation to sign checks against such funds, to the extent of such funds
in said accounts only, and the persons who shall have authority to endorse
and make payable to the order of said banks, checks, drafts and other
negotiable instruments, for deposit in said banks, and to deposit such
checks, drafts and other negotiable instruments in said accounts.
ARTICLE VI
----------
AMENDMENTS
----------
These By-Laws may be amended at any annual or special meeting by vote of the
stockholders holding a majority of the shares having voting power, provided that
the nature or substance of the proposed amendment shall be stated in the notice
of the meeting. These By-Laws may also be amended by a majority of the Board of
Directors then in office. Not later than the time of giving notice of the
meeting of stockholders
<PAGE>
next following the adoption of an amendment by the Directors, notice thereof
stating the substance of such change shall be given to the stockholders. The
authority of the board of Directors to amend the By-Laws shall be subject to the
limitations that no change may be made in the date fixed. in the By-Laws for an
annual meeting of stockholders within sixty (60) days before the date stated in
the By-Laws and that notice of any change in the date of annual meeting of
stockholders shall be given to all stockholders at least twenty (20) days before
the new date is fixed.
EXHIBIT 9
BATHURST LTD
P.O. Box 25
Brittanic House
Provideniales
Turks and Caicos Isle
British West Indies
September 20, 1999
Proginet Corporation
200 Garden City Plaza
Garden City, NY 11530
Attention: Kevin M. Kelly
President and Chief Executive Officer
Gentlemen:
Bathurst Ltd. ("Bathurst") today acquired from Joseph T. Mohen
1,827,336 shares of the common stock, par value $.01 per share (the "Shares"),
of Proginet Corporation ("Proginet") pursuant to a Stock Purchase Agreement
dated as of July 12, 1999 by and between Mr. Mohen and Bathurst. Section 1.5 of
the Stock Purchase Agreement provides that Bathurst shall enter into a
Shareholder Voting Agreement with Proginet agreeing to vote the Shares with the
Board of Directors of Proginet through December 31, 2000.
In order to effectuate such agreement, Bathurst hereby irrevocably and
unconditionally agrees that, through and including December 31, 2000, Bathurst
will vote all of the Shares in connection with any meeting of shareholders of
Proginet (whether annual or special) or written consent of shareholders in lieu
of a meeting on each matter submitted to the meeting or as to which consent in
lieu of a meeting is sought in accordance with the recommendation in respect of
such matter made to the shareholders of Proginet by the Board of Directors of
Proginet.
In furtherance of Bathurst's obligation pursuant to this letter
agreement, Bathurst hereby agrees that, no later than ten (10) days prior to any
meeting of shareholders of Proginet (whether annual or special) or written
consent in lieu of a meeting of the shareholders of Proginet, Bathurst shall
execute and deliver a proxy, which proxy shall be coupled with an interest, to
the transfer agent for the shares of Common Stock of Proginet in the case of a
meeting, or to
<PAGE>
-2-
Proginet in the case of a written consent in lieu of a meeting, with respect to
that number of shares of Common Stock owned by Bathurst (of record and
beneficially) on the record date for such meeting or consent (or, if no record
date has been set, on the date as of which transfer books have been closed for
such meeting or consent) (the "Proxy Shares"), which proxy shall direct the
proxy or proxies named therein to vote all Proxy Shares on each matter submitted
to the meeting or as to which consent is sought in accordance with the
recommendation in respect of such matter made to shareholders of Proginet by the
Board of Directors of Proginet. In the event that the Seller fails to deliver
any such proxy within the ten (10) day period set forth above, the Seller shall,
automatically and with no further action required by any party, be deemed to
have granted an irrevocable proxy to Parker Chapin Flattau & Klimpl, LLP, which
proxy shall be coupled with an interest, to effectuate the vote of the Proxy
Shares as contemplated in this paragraph for such meeting or consent in lieu of
a meeting.
Bathurst represents and warrants that it will not sell any of the
Shares to a "U.S. person" (as that term is defined in Rule 902 of the General
Rules and Regulations under the United States Securities Act of 1933, as
amended) unless an exemption for such sale is available to it.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes any other agreement, whether
written or oral, that may have been made or entered into between them relating
to the matters contemplated hereby.
This Agreement may be amended, modified, superseded or canceled, and
any of the terms, representations, warranties or covenants hereof may be waived,
only by written instrument executed by both of the parties hereto or, in the
case of a waiver, by the party waiving compliance.
This Agreement may be executed in one or more counterparts, each of
which may be executed by one or more of the parties hereto, but all of which,
when taken together, shall constitute one agreement binding upon all of the
parties hereto. This Agreement may be executed via facsimile.
<PAGE>
If the foregoing sets forth our understanding, kindly confirm the same
by so indicating below.
Very truly yours,
BATHURST LTD.
By: _______________________________
Name:
Title:
Confirmed and Agreed To:
PROGINET CORPORATION
By: ____________________________
Name: Kevin M. Kelly
Title: President
EXHIBIT 10.1
PROGINET CORPORATION
CONFIDENTIAL INFORMATION AND NON-COMPETITION AGREEMENT
FOR CONSULTANTS
THIS AGREEMENT is made and entered into this _____ day of _______________, ____,
by and between PROGINET CORPORATION., a Delaware corporation ("PROGINET") and
____________________, residing at
________________________________________________ ("Consultant").
BACKGROUND
- ----------
PROGINET is in the business of conceiving, acquiring, developing,
commercializing, marketing, and selling and/or licensing computer software
programs and providing services to facilitate and enhance the use of such
programs by its customers.
As a consultant of PROGINET, PROGINET will disclose to Consultant considerable
confidential, proprietary, and trade secret information relating to the
developments, products, markets, and customers of PROGINET, all of which were
obtained at great effort and expense to PROGINET;
PROGINET will provide information to the Consultant relating to the products,
markets, and customers of PROGINET. Such information will include the disclosure
to the Consultant of confidential, proprietary, and trade secret information of
PROGINET and its customers, and suppliers and will make the Consultant extremely
valuable to competitors of PROGINET; and
As a condition of Consultant's acceptance of assignment with PROGINET,
Consultant agrees to the non-competition and confidentiality covenants contained
herein, and recognizes that such covenants are essential to PROGINET's
legitimate business interests.
NOW, THEREFORE, with the intent to be legally bound hereby, the parties agree as
follows:
1. PROTECTION OF CONFIDENTIAL INFORMATION; RESTRICTIONS ON ACTIVITIES.
A. Consultant recognizes and acknowledges that he or she will
perform unique services for PROGINET as assigned from time to
time by PROGINET. While performing such services, PROGINET
will provide Consultant with, or Consultant will have access
to confidential, proprietary, and trade secret information of
PROGINET, all of which were obtained by PROGINET at great
effort and expense. Such information must be maintained in
confidence by Consultant to protect PROGINET's and its
customers and suppliers legitimate interests in its
investments and its business. Consultant acknowledges that
these restrictions are required for the reasonable protection
of PROGINET, and for PROGINET's reliance on the confidence in
Consultant.
B. Consultant recognizes and acknowledges that the confidential,
proprietary, and trade secret information of PROGINET,
including (without limitation) information regarding PROGINET
inventions, discoveries, acquisitions, product designs,
product improvements, product flow charts, file layouts,
formulas, equipment, marketing and business plans, methods,
research, source codes, object codes, program documentation
and related user information manuals, as well as its
confidential customer information, including customer lists
and pricing policies (hereinafter referred to as "Confidential
Information"), are valuable, special, and unique assets which
are owned by PROGINET, and, along with confidential,
proprietary, and trade secret information disclosed by third
parties to PROGINET, are regularly used in the business of
PROGINET. Consultant will not (except with PROGINET's prior
written consent), while providing services to PROGINET or
thereafter, directly or indirectly, disclose or
-1-
<PAGE>
allow the disclosure of any Confidential Information to any
person, firm, corporation, association, government (except as
required by law), or other entity for any reason or purpose
whatsoever, nor shall Consultant, directly or indirectly, make
use of any such Confidential Information for his or her own
purposes or for the benefit of any person, firm, corporation,
association, or other entity (except PROGINET) under any
circumstances. During the term of his or her assignment,
Consultant shall, at the request of PROGINET, execute such
assignments, certificates, or other instruments as PROGINET
may from time to time deem necessary or desirable to evidence,
maintain, perfect, protect, enforce, or defend its rights,
title and interests in or to any such Confidential
Information.
C. Consultant agrees that all software developed and all
Confidential Information relating to PROGINET's business that
Consultant shall use or prepare or come into contact with
shall remain the sole and exclusive property of PROGINET.
Consultant further agrees to deliver such property to PROGINET
immediately at the earlier of the termination of his or her
assignment by PROGINET or at the request of PROGINET.
2. NON-COMPETITION BY CONSULTANT.
During the term of Consultant's assignment with PROGINET,
Consultant shall not, directly or indirectly, either as an
consultant, employer, consultant, agent, principal, partner,
stockholder (of more than one percent (1%) of the outstanding
capital stock), corporate officer, director, or in any other
individual or representative capacity, engage or participate
in any business that is in competition, in any manner
whatsoever, with the business of PROGINET.
3. RESTRICTIONS ON POST-ASSIGNMENT ACTIVITIES.
A. Consultant recognizes that the limited protection afforded to
PROGINET by the covenants contained in this Section 3 are
based upon the following:
(1) PROGINET has expended and will continue to expend
substantial time, money, and effort in developing and
acquiring (i) computer software programs and related
user information manuals and the expertise to produce
such in which the designs, source and object codes,
manuals, and specifications are valuable trade
secrets, and (ii) a valuable list of customers and
information about their technical problems and needs,
computer software purchasing and licensing habits,
idiosyncrasies, and internal computer software
purchasing and licensing procedures which are also
trade secrets of PROGINET, and (iii) goodwill with
its customers and in the computer products industry
and business community in general;
(2) Consultant will, in the course of his or her
assignment, be personally entrusted with and/or
exposed to Confidential Information;
(3) PROGINET, during the term of this Agreement and after
its termination, will be engaged on a worldwide basis
in the highly competitive computer software program
industry and computer software program services
industry in which many firms, including PROGINET,
compete;
(4) PROGINET will further develop its substantial,
worldwide computer software business through the
development and acquisition of certain patents,
copyrights, technology, and associated trade secrets
and know-how, relating to computer software programs;
(5) Consultant could become a competitor of PROGINET
after having access to PROGINET's training and
experience, financial records, contracts, patents,
copyrights, computer software technology, and
Confidential Information;
-2-
<PAGE>
(6) PROGINET may suffer great loss and irreparable harm
if Consultant's assignment with PROGINET is
terminated and thereafter he or she entered, directly
or indirectly, into competition with PROGINET.
B. In consideration of both the payments and benefits provided to
Consultant as a consultant of PROGINET and under this
Agreement, as well as the wide access PROGINET will grant to
Consultant to review and become familiar with the Confidential
Information, Consultant agrees that during and for a period of
three (3) years after termination of his or her assignment, no
matter what the cause of that termination, he or she shall not
for any reason, directly or indirectly, whether as an
employee, consultant, partner, proprietor or investor, for
himself or on behalf of, or in conjunction with any person,
partnership, or corporation do any one or more of the
following:
(1) Install or base any proprietary software of proginet
nor engage in the marketing, solicitation, licensing,
or selling of any product or service which performs
functions the same as, similar to, or directly
competitive with, those being marketed, licensed, or
sold by PROGINET at the time of such termination to
any customer of PROGINET during the three (3) year
period prior to Consultant's termination of
assignment, without Proginets written consent.
(2) Use any Confidential Information that was acquired by
Consultant as an consultant of PROGINET (i) in order
to acquire a competitive advantage, or (ii) in any
manner such that it would have a detrimental effect
upon PROGINET's business.
(3) Engage in any activity for the purpose of inducing,
encouraging, offering, or arranging for the
assignment or engagement by anyone other than
PROGINET of any consultant, officer, director, agent,
consultant, or sales representative of PROGINET or
attempt to engage any of them in a manner which would
deprive PROGINET of their services or place them in a
conflict of interest with PROGINET.
C. PROGINET and Consultant agree that Consultant may continue to
provide his or her services to other third parties without
interruption, after his or her termination from PROGINET
without limitation except that he or she shall not disclose
information as provided for herein, nor directly or indirectly
compete with PROGINET as provided for herein. However the
parties agree that the Consultant shall be free to provide his
or her services to the companies listed on Schedule I, if any
which shall not be deemed competition with PROGINET, if said
Schedule I is signed at this time by a duly authorized officer
of PROGINET.
D. PROGINET and Consultant agree that the covenants set forth in
this Agreement shall accrue to the benefit of PROGINET,
irrespective of any reason for termination of Consultant's
assignment, or Consultant's performance as an consultant of
PROGINET and that termination of this Agreement for any reason
shall not terminate Consultant's obligations hereunder.
E. The parties acknowledge that they have attempted to limit
Consultant's activities only to the extent necessary to
protect PROGINET's legitimate interests. Consequently, the
parties hereby agree that, if the scope or enforceability of
the covenants contained in this Agreement are in any way
disputed at any time, a court or other trier of fact may
modify and enforce the covenants to the extent that it
believes to be reasonable under the circumstances existing at
that time.
4. DISCLOSURE OF INFORMATION TO PROGINET.
-3-
<PAGE>
A. Consultant further agrees that he or she shall not (i)
disclose to PROGINET or its consultants or otherwise use in
connection with Consultant's assignment with PROGINET, any
confidential information obtained by Consultant from
Consultant's prior employers or other persons for whom
Consultant was a consultant or (ii) in any other manner breach
their terms of any such agreement or understanding with any
such prior employer or other person.
B. Consultant agrees that all technology, proposes
-4-
<PAGE>
5. FEDERAL REGULATIONS.
Consultant shall comply with United States Government regulations
applicable to contracts between the agencies of the United States
Government (or their contractors) and PROGINET which relate either to
patent rights or to the safeguarding of information pertaining to the
defense of the United States.
6. NOTICE TO SUBSEQUENT EMPLOYERS.
Consultant agrees that upon termination of his or her assignment, no
matter what the cause of that termination, he or she will notify any
new employer, partner, associate, or any other person, firm or
corporation with whom Consultant becomes associated in any business
capacity whatsoever, of the provisions of this Agreement, and PROGINET
may give similar notice thereof.
7. NOTICE OF PREVIOUS AGREEMENTS.
Consultant confirms that he/she is not a party to or otherwise bound by
any other agreement restricting the use of information, confidential or
otherwise, in the possession of Consultant or relating to the transfer
of any invention to any person or entity other than PROGINET.
8. NOTICE.
Any notice required under this Agreement shall be given in writing.
Notice to the Consultant shall be (i) delivered in person to
Consultant, or (ii) sent by a recognized air courier to Consultant's
residence as reflected on the records of PROGINET. Notice to PROGINET
shall be sent by a recognized air courier to PROGINET's principal
office.
9. INJUNCTIVE RELIEF.
Consultant acknowledges and agrees that it would be difficult and may
be impossible to fully compensate PROGINET for damages resulting from
the breach or threatened breach of the provisions of this Agreement,
and accordingly agrees that PROGINET shall be entitled to temporary and
injunctive relief, including temporary restraining orders, preliminary
injunctions, and permanent injunctions to enforce such provisions in
any actions or proceedings instituted in any court of competent
jurisdiction. This provision with respect to injunctive relief shall
not, however, diminish PROGINET's right to claim and recover damages.
10. DEFENSES.
The existence of any claim or cause of action by Consultant against
PROGINET, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by PROGINET of the covenants
made by Consultant herein.
11. WAIVER.
The failure of PROGINET to object to any conduct in violation of any of
the covenants made by Consultant herein shall not be deemed a waiver by
PROGINET, but PROGINET may, if it wishes, specifically waive any part
or all of those covenants to the extent that such waiver is set forth
in writing duly authorized by an officer of PROGINET.
-5-
<PAGE>
12. GOVERNING LAW.
The parties agree that this Agreement shall be interpreted and enforced
in accordance with the laws of the State of New York, exclusive of its
provisions relating to conflicts of laws. In addition, the Consultant
and PROGINET hereby submit to the jurisdiction of the federal and/or
state courts, as the case may be, sitting in Nassau County, New York,
in connection with any action arising from or relating to the
enforcement, interpretation or application of the terms of this
Agreement.
13. ASSIGNMENT.
The parties agree that PROGINET may assign Consultant to render
services to a subsidiary or any other related company and in all
events, the obligations contained herein with respect to Consultant
shall apply to PROGINET, its subsidiaries, and any other company in
which PROGINET shall have a majority interest. Nothing in this
Agreement shall preclude PROGINET from consolidating or merging into or
with, or transferring all or substantially all of its assets to,
another corporation which assumes this Agreement and all obligations
and undertakings of PROGINET hereunder. Upon such a consolidation,
merger, or transfer of assets and assumption, the term "PROGINET" as
used herein shall mean such other corporation and this Agreement shall
continue in full force and effect. The obligations and duties of
Consultant hereunder shall be personal and not assignable or delegable
by Consultant in any manner whatsoever.
14. SEVERABILITY.
In the event that any portion of this Agreement shall be held to be
invalid or unenforceable, it is agreed that the same shall not affect
any other portion of this Agreement, but that the remaining terms and
conditions or portions thereof shall remain in full force and effect,
and that if any aspect of the restrictive covenants of this Agreement
shall nevertheless be effective for such period of time and such areas
as may be determined to be reasonable by a Court of competent
jurisdiction.
15. FINAL AGREEMENT.
This Agreement supersedes any previous oral or written communications,
representations, understandings, or agreements between the parties
relating to the subject matter hereof.
No alterations, amendments, changes, or additions to this Agreement
shall be binding upon either party unless reduced to writing and signed
by both parties.
16. ASSIGNMENT-AT-WILL.
The Consultant should be aware that the policies and programs of
Proginet may be amended at any time, and that, depending upon the
particular circumstances of a given situation, Proginet's actions may
vary from written policy. As such, the contents of any policy,
procedures, or other documents, DO NOT CONSTITUTE THE TERMS OF A
CONTRACT OF Assignment. Nothing contained in this document should be
construed as a guarantee of continued assignment. Rather, assignment
with the Company is solely based upon the terms mutually agreed to in a
written agreement between the parties." Any written or oral statement
to the contrary by a supervisor, corporate officer or other agent of
Proginet is invalid and should not be relied upon by any consultant or
applicant for assignment.
THIS AGREEMENT IS NOT A CONTRACT FOR Assignment OF THE Consultant.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties intending to be legally bound hereby have set
their hands and seals hereto on the day and year first above written, and
Consultant hereby acknowledges receipt of a copy of this Agreement.
WITNESS: PROGINET CORPORATION
________________________________ _______________________________________(Seal)
(Company Official)
WITNESS:
________________________________ Name:__________________________________(Seal)
(Consultant)
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<PAGE>
SCHEDULE "A"
INVENTIONS
MADE OR CONCEIVED
PRIOR TO ASSIGNMENT
-------------------
WITNESS: PROGINET CORPORATION
________________________________ _______________________________________(Seal)
(Company Official)
WITNESS:
________________________________ Name:__________________________________(Seal)
(Consultant)
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<PAGE>
SCHEDULE "B"
DISCLOSURE OF PREVIOUS AGREEMENTS
---------------------------------
A list and description of all obligations or agreements of the Consultant made
prior to the date of this Agreement concerning protection of confidential
information and non-competition made by the Consultant.
WITNESS: PROGINET CORPORATION
________________________________ _______________________________________(Seal)
(Company Official)
WITNESS:
________________________________ Name:__________________________________(Seal)
(Consultant)
-9-
EXHIBIT 10.2
PROGINET CORPORATION
CONFIDENTIAL INFORMATION AND NON-COMPETITION AGREEMENT
THIS AGREEMENT is made and entered into this __ day of (month, year), by and
between PROGINET CORPORATION, a Delaware corporation ("PROGINET") and
___________ residing at _________("Employee").
BACKGROUND
- ----------
PROGINET is in the business of conceiving, acquiring, developing,
commercializing, marketing, and selling and/or licensing computer software
programs and providing services to facilitate and enhance the use of such
programs by its customers.
As an employee of PROGINET, PROGINET will disclose to Employee considerable
confidential, proprietary, and trade secret information relating to the
developments, products, markets, and customers of PROGINET, all of which were
obtained at great effort and expense to PROGINET;
PROGINET will provide training to the Employee relating to the products,
markets, and customers of PROGINET. Such training will include the disclosure to
the Employee of confidential, proprietary, and trade secret information of
PROGINET and its customers, and suppliers and will make the Employee extremely
valuable to competitors of PROGINET; and
As a condition of Employee's acceptance of employment with PROGINET, Employee
agrees to the non-competition and confidentiality covenants contained herein,
and recognizes that such covenants are essential to PROGINET's legitimate
business interests.
NOW, THEREFORE, in consideration of these premises and the mutual covenants and
promises contained herein and of the considerations provided to Employee as an
employee of PROGINET, and with the intent to be legally bound hereby, the
parties agree as follows:
1. PROTECTION OF CONFIDENTIAL INFORMATION; RESTRICTIONS ON ACTIVITIES.
A. Employee recognizes and acknowledges that he or she will
perform unique services for PROGINET as assigned from time to
time by PROGINET. While performing such services, PROGINET
will provide Employee with, or Employee will have access to
confidential, proprietary, and trade secret information of
PROGINET, all of which were obtained by PROGINET at great
effort and expense. Such information must be maintained in
confidence by Employee to protect PROGINET's legitimate
interests in its investments and its business. Employee
acknowledges that these restrictions are required for the
reasonable protection of PROGINET, and for PROGINET's reliance
on the confidence in Employee.
B. Employee recognizes and acknowledges that the confidential,
proprietary, and trade secret information of PROGINET,
including (without limitation) information regarding PROGINET
inventions, discoveries, acquisitions, product designs,
product improvements, product flow charts, file layouts,
formulas, equipment, marketing and business plans, methods,
research, source codes, object codes, program documentation
and related user information manuals, as well as its
confidential customer information, including customer lists
and pricing policies (hereinafter referred to as "Confidential
Information"), are valuable, special, and unique assets which
are owned by PROGINET, and, along with confidential,
proprietary, and trade secret information disclosed by third
parties to PROGINET, are regularly used in the business of
PROGINET. Employee will not (except with PROGINET's prior
written consent), while in the employ of PROGINET, or
thereafter, directly or indirectly, disclose or allow the
disclosure of any Confidential Information to any person,
firm, corporation, association, government (except as required
by law), or other entity for any reason or purpose whatsoever,
nor shall Employee, directly or indirectly, make use of any
such Confidential Information for his or her own purposes or
for the
-1-
<PAGE>
benefit of any person, firm, corporation, association, or
other entity (except PROGINET) under any circumstances. During
the term of his or her assignment, Employee shall, at the
request of PROGINET, execute such assignments, certificates,
or other instruments as PROGINET may from time to time deem
necessary or desirable to evidence, maintain, perfect,
protect, enforce, or defend its rights, title and interests in
or to any such Confidential Information.
C. Employee agrees that all software developed and all
Confidential Information relating to PROGINET's business that
Consultant shall use or prepare or come into contact with
shall remain the sole and exclusive property of PROGINET.
Consultant further agrees to deliver such property to PROGINET
immediately at the earlier of the termination of his or her
assignment by PROGINET or at the request of PROGINET.
2. NON-COMPETITION BY CONSULTANT.
During the term of Employee's assignment with PROGINET,
Employee shall not, directly or indirectly, either as an
employee, employer, consultant, agent, principal, partner,
stockholder (of more than ten percent (10%) of the outstanding
capital stock), corporate officer, director, or in any other
individual or representative capacity, engage or participate
in any business that is in competition, in any manner
whatsoever, with the business of PROGINET.
3. RESTRICTIONS ON POST-EMPLOYMENT ACTIVITIES.
A. Employee recognizes that the limited protection afforded to
PROGINET by the covenants contained in this Section 3 are
based upon the following:
(1) PROGINET has expended and will continue to expend
substantial time, money, and effort in developing and
acquiring (i) computer software programs and related
user information manuals and the expertise to produce
such in which the designs, source and object codes,
manuals, and specifications are valuable trade
secrets, and (ii) a valuable list of customers and
information about their technical problems and needs,
computer software purchasing and licensing habits,
idiosyncrasies, and internal computer software
purchasing and licensing procedures which are also
trade secrets of PROGINET, and (iii) goodwill with
its customers and in the computer products industry
and business community in general;
(2) Employee will, in the course of his or her
assignment, be personally entrusted with and/or
exposed to Confidential Information;
(3) PROGINET, during the term of this Agreement and after
its termination, will be engaged on a worldwide basis
in the highly competitive computer software program
industry and computer software program services
industry in which many firms, including PROGINET,
compete;
(4) PROGINET will further develop its substantial,
worldwide computer software business through the
development and acquisition of certain patents,
copyrights, technology, and associated trade secrets
and know-how, relating to computer software programs;
(5) Employee could become a competitor of PROGINET after
having access to PROGINET's training and experience,
financial records, contracts, patents, copyrights,
computer software technology, and Confidential
Information;
(6) PROGINET may suffer great loss and irreparable harm
if Employee's employment with PROGINET is terminated
and thereafter he or she entered, directly or
indirectly, into competition with PROGINET.
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<PAGE>
B. In consideration of both the payments and benefits provided to
Employee as an Employee of PROGINET and under this Agreement,
as well as the wide access PROGINET will grant to Employee to
review and become familiar with the Confidential Information,
Employee agrees that during and for a period of one (1) year
after termination of his or her employment, no matter what the
cause of that termination, he or she shall not for any reason,
directly or indirectly, whether as an employee, consultant,
partner, proprietor or investor, for himself or on behalf of,
or in conjunction with any person, partnership, or corporation
do any one or more of the following:
(1) Engage in the marketing, solicitation, licensing, or
selling of any product or service which performs
functions the same as, similar to, or directly
competitive with, those being marketed, licensed, or
sold by PROGINET at the time of such termination to
any customer of PROGINET within any geographic
territory to which Employee was assigned
responsibility by PROGINET during the one (1) year
period prior to Employee's termination of employment.
(2) Use any Confidential Information that was acquired by
Employee as an employee of PROGINET (i) in order to
acquire a competitive advantage, or (ii) in any
manner such that it would have a detrimental effect
upon PROGINET's business.
(3) Engage in any activity for the purpose of inducing,
encouraging, offering, or arranging for the
employment or engagement by anyone other than
PROGINET of any employee, officer, director, agent,
consultant, or sales representative of PROGINET or
attempt to engage any of them in a manner which would
deprive PROGINET of their services or place them in a
conflict of interest with PROGINET.
C. PROGINET and Employee agree that the covenants set forth in
this Agreement shall accrue to the benefit of PROGINET,
irrespective of any reason for termination of Employee's
employment, or Employee's performance as an employee of
PROGINET and that termination of this Agreement for any reason
shall not terminate Employee's obligations hereunder.
D. The parties acknowledge that they have attempted to limit
Employee's activities only to the extent necessary to protect
PROGINET's legitimate interests. Consequently, the parties
hereby agree that, if the scope or enforceability of the
covenants contained in this Agreement are in any way disputed
at any time, a court or other trier of fact may modify and
enforce the covenants to the extent that it believes to be
reasonable under the circumstances existing at that time.
4. DISCLOSURE OF INFORMATION TO PROGINET.
Employee further agrees that he or she shall not (i) disclose to
PROGINET or its employees or otherwise use in connection with
Employee's employment with PROGINET, any confidential information
obtained by Employee from Employee's prior employers or other persons
for whom Employee was a consultant or (ii) in any other manner breach
their terms of any such agreement or understanding with any such prior
employer or other person.
5. FEDERAL REGULATIONS.
Employee shall comply with United States Government regulations
applicable to contracts between the agencies of the United States
Government (or their contractors) and PROGINET which relate either to
patent rights or to the safeguarding of information pertaining to the
defense of the United States.
6. NOTICE TO SUBSEQUENT EMPLOYERS.
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<PAGE>
Employee agrees that upon termination of his or her employment, no
matter what the cause of that termination, he or she will notify any
new employer, partner, associate, or any other person, firm or
corporation with whom Employee becomes associated in any business
capacity whatsoever, of the provisions of this Agreement, and PROGINET
may give similar notice thereof.
7. NOTICE OF PREVIOUS AGREEMENTS.
Employee confirms that he/she is not a party to or otherwise bound by
any other agreement restricting the use of information, confidential or
otherwise, in the possession of Employee or relating to the transfer of
any invention to any person or entity other than PROGINET.
8. NOTICE.
Any notice required under this Agreement shall be given in writing.
Notice to the Employee shall be (i) delivered in person to Employee, or
(ii) sent by a recognized air courier to Employee's residence as
reflected on the records of PROGINET. Notice to PROGINET shall be sent
by a recognized air courier to PROGINET's principal office.
9. INJUNCTIVE RELIEF.
Employee acknowledges and agrees that it would be difficult and may be
impossible to fully compensate PROGINET for damages resulting from the
breach or threatened breach of the provisions of this Agreement, and
accordingly agrees that PROGINET shall be entitled to temporary and
injunctive relief, including temporary restraining orders, preliminary
injunctions, and permanent injunctions to enforce such provisions in
any actions or proceedings instituted in any court of competent
jurisdiction. This provision with respect to injunctive relief shall
not, however, diminish PROGINET's right to claim and recover damages.
10. DEFENSES.
The existence of any claim or cause of action by Employee against
PROGINET, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by PROGINET of the covenants
made by Employee herein.
11. WAIVER.
The failure of PROGINET to object to any conduct in violation of any of
the covenants made by Employee herein shall not be deemed a waiver by
PROGINET, but PROGINET may, if it wishes, specifically waive any part
or all of those covenants to the extent that such waiver is set forth
in writing duly authorized by an officer of PROGINET.
12. GOVERNING LAW.
The parties agree that this Agreement shall be interpreted and enforced
in accordance with the laws of the State of New York, exclusive of its
provisions relating to conflicts of laws. In addition, the Employee and
PROGINET hereby submit to the jurisdiction of the federal and/or state
courts, as the case may be, sitting in Nassau County, New York, in
connection with any action arising from or relating to the enforcement,
interpretation or application of the terms of this Agreement.
-4-
<PAGE>
13. ASSIGNMENT.
The parties agree that PROGINET may assign Employee to render services
to a subsidiary or any other related company and in all events, the
obligations contained herein with respect to Employee shall apply to
PROGINET, its subsidiaries, and any other company in which PROGINET
shall have a majority interest. Nothing in this Agreement shall
preclude PROGINET from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another
corporation which assumes this Agreement and all obligations and
undertakings of PROGINET hereunder. Upon such a consolidation, merger,
or transfer of assets and assumption, the term "PROGINET" as used
herein shall mean such other corporation and this Agreement shall
continue in full force and effect. The obligations and duties of
Employee hereunder shall be personal and not assignable or delegable by
Employee in any manner whatsoever.
14. SEVERABILITY.
In the event that any portion of this Agreement shall be held to be
invalid or unenforceable, it is agreed that the same shall not affect
any other portion of this Agreement, but that the remaining terms and
conditions or portions thereof shall remain in full force and effect,
and that if any aspect of the restrictive covenants of this Agreement
shall nevertheless be effective for such period of time and such areas
as may be determined to be reasonable by a Court of competent
jurisdiction.
15. FINAL AGREEMENT.
This Agreement supersedes any previous oral or written communications,
representations, understandings, or agreements between the parties
relating to the subject matter hereof.
No alterations, amendments, changes, or additions to this Agreement
shall be binding upon either party unless reduced to writing and signed
by both parties.
16. EMPLOYMENT-AT-WILL.
The Employee should be aware that the policies and programs of PROGINET
may be amended at any time, and that, depending upon the particular
circumstances of a given situation, PROGINETt's actions may vary from
written policy. As such, the contents of any policy, procedures, or
other documents, DO NOT CONSTITUTE THE TERMS OF A CONTRACT OF
EMPLOYMENT. Nothing contained in this document should be construed as a
guarantee of continued employment. Rather, employment with the Company
is on an "at will" basis. This means that the employment relationship
may be terminated at any time by either the Employee or Proginet for
any reason not expressly prohibited by law. Any written or oral
statement to the contrary by a supervisor, corporate officer or other
agent of Proginet is invalid and should not be relied upon by any
employee or applicant for employment.
THIS AGREEMENT IS NOT A CONTRACT FOR EMPLOYMENT OF THE EMPLOYEE.
IN WITNESS WHEREOF, the parties intending to be legally bound hereby have set
their hands and seals hereto on the day and year first above written, and
Employee hereby acknowledges receipt of a copy of this Agreement.
WITNESS: PROGINET CORPORATION
____________________________________ __________________________________(Seal)
(Company Official)
WITNESS:
____________________________________ Name:_____________________________(Seal)
(EMPLOYEE)
-5-
<PAGE>
-6-
<PAGE>
SCHEDULE "A"
INVENTIONS
MADE OR CONCEIVED
PRIOR TO EMPLOYMENT
-------------------
WITNESS: PROGINET CORPORATION
____________________________________ __________________________________(Seal)
(Company Official)
WITNESS:
____________________________________ Name:_____________________________(Seal)
(EMPLOYEE)
-7-
EXHIBIT 10.5
[PROGINET LOGO OMITTED]
DISTRIBUTOR AGREEMENT 3/23/00
- --------------------------------------------------------------------------------
PROGINET CORPORATION
DISTRIBUTOR AGREEMENT
<PAGE>
0. Recitals.................................................................3
1. Ownership................................................................3
2. Grant of Rights..........................................................3
3. Term.....................................................................3
4. Invoicing, Fees, and Payment Terms.......................................4
5. Client(s) Software License Agreements....................................5
6. Marketing Responsibilities and Other Duties of DISTRIBUTOR...............6
7. Product Supply, Staffing and Education...................................6
8. Technical Support........................................................6
9. Reports and Audit Rights.................................................6
10. Non-Compete..............................................................7
11. Warranty and Indemnity...................................................7
12. Termination..............................................................7
13. Confidentiality..........................................................7
14. Miscellaneous............................................................8
15. Signatures...............................................................9
Exhibit A Product Descriptions...........................................10
Exhibit B Trademarks of Proginet Corporation.............................10
Exhibit C Territories and Minimal Annual Quota...........................10
Exhibit D Trial License Agreement........................................11
Exhibit E Software and License Fees......................................12
Exhibit F Distributor Program Levels.....................................13
Exhibit G Distributor's Software License Agreement.......................14
Exhibit H DISTRIBUTOR Function Requirements..............................15
Exhibit I Termination Process............................................16
Exhibit J Contract Summary Form..........................................18
<PAGE>
0. RECITALS
THIS DISTRIBUTOR AGREEMENT is made as of ------------, by and between
Proginet Corporation, a Delaware corporation, having a principal place of
business at 200 Garden City Plaza, Garden City, New York, 11530 USA
["PROGINET"], and ____________ a corporation organized under the laws of
------------ having a principal place of business at ------------
["DISTRIBUTOR"].
WHEREAS, PROGINET is the owner and/or lawful licensor of certain PRODUCTS,
including computer software programs, as such term is hereinafter defined;
and
NOW, THEREFORE, in consideration of the mutual promises and covenants as
herein contained, it is agreed between DISTRIBUTOR and PROGINET as follows:
1. OWNERSHIP
A. DISTRIBUTOR agrees that the PRODUCTS, as listed in EXHIBIT A,
TRADEMARKS, as listed in EXHIBIT B, and all ideas, discoveries,
inventions, programs, routines, sequences and works of authorship
embodied therein, and all copyright, trade secret, and other right,
title and interest therein, are the sole property of PROGINET, and
that by this Agreement, DISTRIBUTOR shall gain no right, title or
interest in the PRODUCTS. DISTRIBUTOR shall at all times represent
that the PRODUCTS are the property of PROGINET and that DISTRIBUTOR is
acting as an authorized DISTRIBUTOR for PROGINET.
2. GRANT OF RIGHTS
A. Subject to the provisions of this Agreement, PROGINET hereby grants to
DISTRIBUTOR the following non-exclusive, non-transferable rights in
the TERRITORY (See EXHIBIT C):
1. the right to market and offer for sale licenses of PRODUCTS from
PROGINET to CLIENT(S); 2. the right and license to use the
PRODUCTS for demonstration purposes to the CLIENT(S); and
B. The rights referred to in SECTION 2.A herein above are subject to
DISTRIBUTOR'S meeting of Minimum Annual Revenue Quotas for each
TERRITORY as specified in EXHIBIT C hereto.
C. PROGINET reserves the right to market, license, sell, install and
service the PRODUCTS for any CLIENT, either directly or through a
related person or company in the TERRITORY. DISTRIBUTOR may register a
prospect via a signed Trial License Agreement, attached as EXHIBIT D
with Proginet. That prospect will be "protected" for a period of up to
ninety (90) days.
D. Any dispute between DISTRIBUTOR and any other representative, agent or
DISTRIBUTOR of PROGINET shall be arbitrated by PROGINET, in its sole
discretion, in accordance with the written agreements between Proginet
and its DISTRIBUTOR(s), and PROGINET'S then-current marketing
policies. This relates only to DISTRIBUTOR to DISTRIBUTOR Disputes.
PROGINET'S decision regarding such dispute shall be final and binding
on the parties involved. PROGINET will establish and issue procedures
to be followed by all parties to mitigate conflict between all such
parties.
E. Any dispute, controversy or claim arising out of or in connection with
this Agreement between DISTRIBUTOR and PROGINET, or any breach
thereof, shall be settled exclusively and finally by arbitration in
accordance with the commercial arbitration rules of the American
Arbitration Association, and judgment upon such an award rendered by
the arbitrator may be entered in any court having jurisdiction
thereof. A decision of the arbitrator shall be binding and conclusive
on the parties hereto and shall not be subject to any appeal. All
limitations of liability set forth in this Agreement, shall be binding
and given full force and effect in any such arbitration. The fees and
expenses of any arbitration hereunder, including of the arbitrator,
shall be advanced equally by the parties, and each party shall be
responsible for its own attorneys' fees in connection with an
arbitration. Notwithstanding the foregoing, the parties' final
responsibility for all arbitration fees and related attorneys' fees
and expenses shall be subject to the final decision of the arbitrator.
3. TERM
A. The term of this Agreement shall be valid for an initial period of two
years from the EFFECTIVE DATE. The EFFECTIVE DATE of the contract will
be the Agreement date as depicted in the section above.
<PAGE>
4. INVOICING, FEES, AND PAYMENT TERMS
A. PROGINET's recommended prices prevailing at the Effective Date are set
out in EXHIBIT E. The "Recommended Retail Price" ("Fees") shall be
binding upon the DISTRIBUTOR. However, the DISTRIBUTOR shall have the
right to establish a different selling price upon written approval
from PROGINET. Whether the price set with the customer is the
"Recommended Retail Price" or a price that has been pre-approved in
writing by PROGINET, the DISTRIBUTOR will receive the percentage of
the sale as defined in EXHIBIT F. Proginet receives the remaining
balance of the sale.
B. PROGINET shall provide DISTRIBUTOR from time to time with a list of
its recommended prices for the resale of the Products, Maintenance,
and other services ("Recommended Retail Prices").
C. DISTRIBUTOR will handle all invoicing of Customer, with a copy of the
invoice being sent simultaneously to the Customer and to the following
address:
Proginet Corporation
200 Garden City Plaza
Garden City, New York 11530
United States of America
Attention: Accounts Receivable
or via FAX to +1.516.248.3360
The invoice will specify that payment is to be made directly to
DISTRIBUTOR. PROGINET will bill DISTRIBUTOR the full license amount
and provide a commission credit as specified in this agreement. Once
payment is received, the DISTRIBUTOR will wire PROGINET's portion to
the following bank account:
Bank Name: CITIBANK NA
Bank Address: 204 OLD COUNTRY ROAD
MINEOLA, NEW YORK 11501
USA
ABA Number: 021000089
Account Number:: 234 14 118
Company Name: PROGINET CORPORATION
D. DISTRIBUTOR shall pay PROGINET within ten (10) calendar days after the
date of DISTRIBUTOR's actual receipt of payment from CLIENT(S),
customers, licensees or any other source from which PROGINET is due
monies. DISTRIBUTOR shall make all payments to PROGINET's designated
bank (as stated in 4C) via direct wire transfer in U.S. Dollars.
E. DISTRIBUTOR shall promptly notify PROGINET of all wire transfers by
FAX. Payment is due in cleared funds at PROGINET's designated bank
account.
F. In addition to any other rights belonging to PROGINET, a late fee of
18% per annum is due from DISTRIBUTOR to PROGINET for every month or
fraction thereof, for which payment is late, after the first thirty-
(30) days. If PROGINET brings any proceeding for collection of any
sums due or to enforce any provisions of the Agreement, DISTRIBUTOR
shall pay to PROGINET all expenses incurred by PROGINET in such
collection or enforcement including consul fees, and all monies that
shall be deemed and awarded in such proceedings.
G. If DISTRIBUTOR should fail to remit payment(s) due PROGINET within the
time period specified, PROGINET may, at its sole discretion, provide
DISTRIBUTOR with fifteen (15) days written notice of PROGINET's intent
to terminate this Agreement in accordance with SECTION 12 hereof.
Termination by PROGINET for failure to remit payments(s) shall not
excuse DISTRIBUTOR from its obligations to pay PROGINET the amounts
due to PROGINET.
H. Maintenance fees paid by customer shall be recognized and earned
according to the United States version of General Accepted Accounting
Practices (GAAP), and can not be recognized by either party until they
are earned. In the event of termination of this agreement, the
unearned portion of Distributor portion of the maintenance for each
customer that is held by DISTRIBUTOR must be returned to PROGINET.
I. DISTRIBUTOR shall bear all applicable taxes including but not limited
to franchise sales, use, reason, property, ad valorem, value added,
stamp or other taxies levies, customs, duties or other imposts or fees
(hereinafter collectively called ("tax") levied by the government of
the market areas, and DISTRIBUTOR shall pay any such tax directly.
DISTRIBUTOR shall reimburse PROGINET for any additional local tax paid
by Proginet. This tax clause will apply during and after termination
of this agreement whenever PROGINET must pay and/or collect a tax from
DISTRIBUTOR according to applicable law as interpreted by the revenue
authorities of the taxing unit. DISTRIBUTOR shall hold PROGINET
harmless for any taxes collected and not remitted to appropriate
taxing authorities.
<PAGE>
J. In the event that funds are remitted by a customer in a currency other
than U.S. Dollars, the following rules apply:
1) DISTRIBUTOR must remit to PROGINET a U.S. Dollar amount that has
been converted to the specified amount in the signed contract
between the distributor, client, and Proginet, and must use an
exchange rate that falls within 30 days of the day the contract
was signed.
2) If DISTRIBUTOR fails to lock in a rate within the 30 days as
specified above, PROGINET will book the sale based on the rate on
the 30th day following the signed contract. DISTRIBUTOR is
obligated to pay the U.S. Dollar amount based on this locked
rate.
5. CLIENT(S) SOFTWARE LICENSE AGREEMENTS
A. All licenses of PRODUCTS from PROGINET to CLIENT (S) shall be pursuant
to a Software License Agreement between DISTRIBUTOR , CLIENT (S), and
Proginet. , and PROGINET will provide DISTRIBUTOR with a copy of our
standard Software License Agreement (SLA).B. PROGINET recommends that
DISTRIBUTOR use PROGINET's standard Software License Agreement (SLA).
If DISTRIBUTOR does not use PROGINET's Standard Software License
Agreement, then DISTRIBUTOR must sign an Affirmation that states that
the Software License Agreement that is signed is consistent with
PROGINET'S Standard Software License Agreement in all material aspects
as they relate to definitions, ownership, license granted, general
conditions, maintenance, services excluded, fees and payment terms,
liability/warranty, escrow of source code, remedy limitations,
non-disclosure, audit, governing law, compliance with laws,
termination, modification, serviceability, assignment notice, and
other provisions and counterparts. Similar to PROGINET's SLA, the
DISTRIBUTOR'S SLA must be a tri-party agreement that is to be signed
by the Customer, DISTRIBUTOR and PROGINET. This agreement is attached
hereto as EXHIBIT G.
As to local jurisdiction, it is agreed that the contract is in
compliance with all business and legal issues and consistent with
regional software license agreements. Any material diversion from any
of the above sections must be reflected in writing to PROGINET at the
time of license submission to PROGINET. Such license must be approved
by Proginet, in writing, for such agreement to be binding.
C. The SOFTWARE LICENSE FEES and MAINTENANCE FEES at which DISTRIBUTOR
offers the PRODUCTS for license are set forth in a price list annexed
hereto as EXHIBIT E. EXHIBIT may, at any time, be changed by PROGINET
upon thirty (30) days prior written notice to DISTRIBUTOR. Any offers
that are documented to be outstanding will be honored by PROGINET at
the early price levels.
D. PROGINET shall use its best efforts to communicate changes in its
prices, terms, conditions and/or agreement forms to DISTRIBUTOR at
least thirty (30) calendar days in advance of their becoming
effective. In promoting licenses of PRODUCTS in the TERRITORY,
DISTRIBUTOR shall quote to CLIENT (S) only the most recent terms,
conditions and agreement forms, and shall quote PROGINET'S SOFTWARE
LICENSE FEES and MAINTENANCE FEES for the PRODUCTS, separately, from
each other and from DISTRIBUTOR'S quotes for any services as may be
offered by DISTRIBUTOR to the CLIENT (S). Any offers made by
DISTRIBUTOR on the basis of then current pricing shall be binding on
Proginet for a period of ninety (90) days. Any prices which have been
approved by Proginet, that are included in the customer contract for
future upgrades will prevail over Proginet standard pricing.
E. A duplicate executed copy of each CLIENT (S) contract, shall be
promptly furnished to PROGINET by DISTRIBUTOR. DISTRIBUTOR is to
provide a copy of the executed Software License Agreement to PROGINET
within five (5) days of the date of execution.
F. A PRODUCT license shall be considered complete upon:
1. the acceptance and signature by DISTRIBUTOR and PROGINET of an
approved form Software License Agreement signed by the CLIENT;
and
2. PROGINET'S timely receipt of a copy of a fully executed Software
License Agreement; and Contract Summary Form (EXHIBIT J),
including the Distributors Affirmation Form (if applicable), and
3. either (a) PROGINET'S receipt of payment in full of the SOFTWARE
LICENSE FEES and first year's MAINTENANCE FEES or (b) PROGINET'S
written approval of a schedule of payments of such fees
specifically applicable to a particular CLIENT.
G. DISTRIBUTOR shall assist CLIENT (S) in the completion of Software
License Agreements in the standard form provided by PROGINET and shall
instruct CLIENT (S) to make all payments of SOFTWARE LICENSE FEES and
MAINTENANCE FEES directly to DISTRIBUTOR. All Software License
Agreements shall be subject to acceptance or rejection, by PROGINET,
in its sole discretion.
<PAGE>
H. Each license granted under the Sales License Agreement authorizes the
Licensee to use a single Licensed Program in machine readable form on
a single Central Processing Unit (CPU) ("Designated CPU") or at a
single workstation ("Seat") as set forth in Schedule "A". If the
Designated CPUs cannot be used because of equipment malfunctions,
Licensee may temporarily use a Licensed Product on another CPU at the
Site. Licensee may, in case of emergency, temporarily use the Licensed
Products on other CPUs at another location, subject to prior written
notice to and written approval by Proginet. Licensee may replace or
upgrade the Designated CPU upon written notice to and approval by
Proginet, contingent upon the following paragraph.
I. If at the time a Designated CPU is replaced or upgraded, a license on
the new Designated CPU would be at a greater cost than would a license
on the original Designated CPU. The Licensee will be invoiced for the
difference between the license fee for the original Designated CPU and
the new Designated CPU.
6. MARKETING RESPONSIBILITIES AND OTHER DUTIES OF DISTRIBUTOR
A. DISTRIBUTOR shall use its best efforts to promote and support licenses
of PRODUCTS in the TERRITORY and to meet or exceed Minimum Annual
Revenue Quotas in accordance with this Agreement.
B. DISTRIBUTOR SHALL PROVIDE ALL OF THE SERVICES SPECIFIED IN EXHIBIT F
FOR THE LEVEL OF MEMBERSHIP SPECIFIED AND AGREED TO BY THE DISTRIBUTOR
AND PROGINET IN EXHIBIT F, AND AS SPECIFIED IN SECTION 4B.
7. PRODUCT SUPPLY, STAFFING AND EDUCATION
A. PROGINET will supply DISTRIBUTOR with the PRODUCTS, documentation, and
technical information by electronic media, which may include compact
discs, diskettes, tapes or other binary form.
B. PROGINET will maintain the PRODUCTS and supply DISTRIBUTOR with one
copy of the revised PRODUCTS, documentation or such materials as may
be reasonably requested by DISTRIBUTOR to enable DISTRIBUTOR to
provide LEVEL ONE (1) SUPPORT,, as defined in Section 8Ato customers
of the PRODUCTS in the TERRITORY.
8. TECHNICAL SUPPORT
A. DISTRIBUTOR will be responsible for providing LEVEL ONE (1) SUPPORT.
LEVEL ONE (1) SUPPORT includes communication directly with customers
and prospective customers, including phone calls, faxes, and
electronic mail that include questions relating to PRODUCTS
functionality, computing environment, and pre-requisite software.
DISTRIBUTOR shall be solely responsible for providing all CLIENTS in
the TERRITORY with first level technical support. DISTRIBUTOR will
collect diagnostic information from CLIENTS and prospective customers
and forward such information electronically (machine-readable format)
to PROGINET.
B. DISTRIBUTOR shall not incorporate, or authorize any other person to
incorporate, any PRODUCTS, in whole or in part, in any other computer
software PRODUCTS except with the prior written consent of PROGINET.
9. REPORTS AND AUDIT RIGHTS
A. DISTRIBUTOR shall render the following written reports to PROGINET.
1. Commencing on the first full month after the effective date of
this Agreement, during the remainder of the term of this
Agreement, DISTRIBUTOR will provide, on or before the fifth (5TH)
day of each month, a written Monthly Sales Report with information
on all sales and trial activity. A section of this report will be
dedicated to recommend PRODUCT enhancements with time parameters
based on customer usage and feedback.
2. On a quarterly basis, the DISTRIBUTOR will provide on or before
the fifth (5TH) day of the following month an analysis of the
marketplace with changes from the previous quarter as well as a
further review of sales performance within the marketplace with
prior quarterly comparisons.
<PAGE>
10. NON-COMPETE
A. During the term of this Agreement and any extensions or renewals
hereof, DISTRIBUTOR, its principals, agents, and employees, will not
directly or indirectly engage anywhere in the TERRITORY in the
promotion, marketing, distribution, sale or licensing of, or act as
sales agent, representative or distributor of, any computer software
program or other product which competes with the PRODUCTS, or related
PRODUCTS, or authorize any other person to engage in any of such acts;
among other related PRODUCTS are expressly included IBM mainframe file
transfer and security PRODUCTS for IBM or "plug compatible" mainframe
computers, including any that use the "370," "390," "XA" or "ESA"
architectures, and Microsoft Windows NT and related PRODUCTS. This is
meant to only affect the period of this agreement. DISTRIBUTOR may
work with a competitor of Proginet's if they wish to resign as a
distributor of Proginet's Products.
B. DISTRIBUTOR shall not, without PROGINET'S prior written approval,
directly or indirectly, engage in or have a financial interest in the
production, reproduction, sale, licensing, distribution or servicing
of any software, program or product which competes directly with the
PRODUCTS.
11. WARRANTY AND INDEMNITY
A. PROGINET REPRESENTS THAT THE PRODUCTS WILL SUBSTANTIALLY CONFORM TO
ITS SPECIFICATIONS AS DESCRIBED IN THE USER MANUAL, BUT PROGINET DOES
NOT WARRANT THAT THE PRODUCTS WILL BE ERROR-FREE.
B. DISTRIBUTOR AGREES AND ACKNOWLEDGES THAT THIS IS NEITHER A CUSTOM
SOFTWARE AGREEMENT, NOR A CONTRACT TO DEVELOP SOFTWARE. PROGINET MAKES
NO OTHER WARRANTY AS TO THE DESIGN, CAPABILITY, CAPACITY OR
SUITABILITY OF ITS PRODUCTS. ANY STATEMENTS MADE BY PROGINET OR ITS
EMPLOYEES, INCLUDING BUT NOT LIMITED TO, STATEMENTS REGARDING
CAPACITY, SUITABILITY FOR USE, OR PERFORMANCE OF ITS PRODUCTS SHALL
NOT BE DEEMED A WARRANTY OR REPRESENTATION BY PROGINET FOR ANY
PURPOSE, NOR GIVE RISE TO ANY LIABILITY OR OBLIGATION OF PROGINET.
PROGINET DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE PRODUCTS
WILL MEET ANY LICENSEE'S REQUIREMENTS OR THAT THE OPERATION OF THE
PRODUCTS WILL BE UNINTERRUPTED OR ERROR FREE.
C. THE ONLY WARRANTIES (AND REMEDIES FOR BREACH THEREOF) MADE BY PROGINET
WITH RESPECT TO THE PRODUCTS SHALL BE THOSE MADE TO DISTRIBUTOR IN
THIS AGREEMENT AND TO CLIENT(S) IN THE AUTHORIZED FORM OF SOFTWARE
LICENSE AGREEMENT. DISTRIBUTOR SHALL NOT MAKE OR GIVE, AND SHALL
INDEMNIFY, DEFEND AND HOLD PROGINET HARMLESS AGAINST ANY LOSS,
LIABILITY OR EXPENSE (INCLUDING COSTS AND PROGINET'S REASONABLE
ATTORNEYS' FEES) ARISING OUT OF OR IN CONNECTION WITH ANY
REPRESENTATION, WARRANTY, PROMISE OR ASSURANCE MADE BY DISTRIBUTOR
WITH RESPECT TO THE PRODUCTS. PROVIDED THAT DISTRIBUTOR FULFILLS ALL
OF THE REQUIRED POLICIES AND PROCEDURES OF PROGINET, PROGINET AGREES
TO HOLD DISTRIBUTOR HARMLESS OF ANY CLAIMS FROM CUSTOMERS IF PROGINET
FAILS TO TAKE APPROPRIATE MEASURES TO FIX TECHNICAL PROBLEMS WHICH ARE
CAUSING SEVERE PRODUCTION IMPACT AND/OR BUSINESS LOSS, DESPITE
DISTRIBUTOR HAVING NOTIFIED PROGINET OFF SUCH A SITUATION, THROUGH
PROGINET'S STANDARD PROBLEM REPORTING METHODS, AND ESCALATIONS.
D. IN NO EVENT SHALL PROGINET BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT,
PUNITIVE, INCIDENTAL OR SPECIAL DAMAGES.
12. TERMINATION
A. For cause, due to breach of contract as outlined within this agreement,
either party may terminate this Agreement, by giving the other party
written notice to such effect, in which case this Agreement shall terminate
ninety (90) days from and after the date of such notice, otherwise the
Agreement shall be valid for the term described in Clause 3. Upon receipt
of the Termination Letter, the process as described in EXHIBIT I
TERMINATION PROCESS.
13. CONFIDENTIALITY
A. DISTRIBUTOR agrees that the CONFIDENTIAL INFORMATION is confidential
and may contain trade secrets belonging to or in the custody of
PROGINET.
1. DISTRIBUTOR acknowledges that the PRODUCTS are proprietary,
embody trade secrets and are not in the public domain and that
PROGINET does not, by this Agreement, convey or otherwise give up
any rights or OWNERSHIP of the PRODUCTS to DISTRIBUTOR or to
anyone else.
2. DISTRIBUTOR acknowledges that the placement of a copyright,
patent pending, patented or other similar notice within or on any
media containing CONFIDENTIAL INFORMATION does not constitute
publication or otherwise impair the confidential nature thereof.
3. DISTRIBUTOR further acknowledges that unauthorized use or
disclosure of any of the CONFIDENTIAL INFORMATION will cause
irreparable harm to PROGINET. Therefore, during the term of this
Agreement and thereafter for so long as the CONFIDENTIAL
INFORMATION is not in the public domain, through no act or
failure to act on the part of DISTRIBUTOR,
<PAGE>
DISTRIBUTOR shall: (a) use or disclose the CONFIDENTIAL
INFORMATION only as authorized under this Agreement and only to
the extent necessary to perform its obligations hereunder; (b)
use reasonable care to prevent other parties from gaining access
to the CONFIDENTIAL INFORMATION; (c) take all reasonable steps to
prevent duplication of or unauthorized access to the CONFIDENTIAL
INFORMATION by any employee of DISTRIBUTOR or other party; (d)
under PROGINET authorization, allow its employees and/or agents
access to the CONFIDENTIAL INFORMATION only for the fulfillment
of DISTRIBUTOR'S obligations under this Agreement and, prior to
allowing such access, notify each employee and any DISTRIBUTOR
agent in writing of DISTRIBUTOR'S confidentiality obligations
arising hereunder, and (e) ensure that all copyright, patent,
trade or service confidentiality and nondisclosure labels or
notices are applied in accordance with this Agreement and are not
removed.
14. MISCELLANEOUS
A. Neither PROGINET nor DISTRIBUTOR shall, without the other party's
written consent, knowingly employ, solicit or offer employment to any
employee, agent or contractor of the other party while DISTRIBUTOR is
providing services to such other party.
B. It is expressly agreed that in the event of any breach of this
Agreement by either party hereto, the non-breaching party may not have
an adequate remedy at law and therefore, the parties agree that, in
addition to the other remedies, such aggrieved party shall be entitled
to injunctive or other equitable relief to enforce the performance
hereof.
C. Neither this Agreement nor any of DISTRIBUTOR'S rights or duties
hereunder shall be assigned or otherwise delegated or transferred by
DISTRIBUTOR without PROGINET'S prior written consent.
D. This Agreement creates no relationship of joint ventures, partners,
associates or parties hereto acting as principals. Distributor is an
agent for Proginet.
E. If any provision of this Agreement is found to be illegal, invalid or
unenforceable, such finding shall not affect the legality, validity or
enforceability of the other provisions of this Agreement.
F. This Agreement and its exhibits shall constitute the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all other agreements and understandings between the parties
with respect to such subject matter.
G. This Agreement shall be governed by the laws of the State of New York,
United States of America, without giving effect to principles of
conflicts of laws.
<TABLE>
<CAPTION>
- ------------------------------------------------------- -----------------------------------------------------
DISTRIBUTOR Proginet
- ------------------------------------------------------- -----------------------------------------------------
<S> <C>
Proginet Corporation
200 Garden City Plaza
Garden City, New York 11530
Attention: President
Tel: +1.516.248.2000
FAX: +1.516.248.4398
- ------------------------------------------------------- -----------------------------------------------------
With a copy to:
- ------------------------------------------------------- -----------------------------------------------------
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Tel: +1.212.7046.6000
Fax: +1.212.704.6288
Attn: James Alterbaum, Esq.
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>
<PAGE>
15. SIGNATURES
IN WITNESS WHEREOF, PROGINET and DISTRIBUTOR each has caused this Agreement to
be executed on its behalf by its duly authorized officer.
<TABLE>
<CAPTION>
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
Agreed: Agreed:
- ------------------------------------------------------ ------------------------------------------------------
PROGINET CORPORATION
- ------------------------------------------------------ ------------------------------------------------------
- ------------------------------------------------------ ------------------------------------------------------
Title Title
- ------------------------------------------------------ ------------------------------------------------------
Date Date:
- ------------------------------------------------------ ------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A PRODUCT DESCRIPTIONS
(1) SecurPass(TM) - a network utility that automatically synchronizes the
security passwords of Windows NT LAN users with their corresponding
mainframe passwords. This reduces the number of passwords users must
use to get access to their applications or data.
SecurPass is a security administration application, which enables
disparate information security systems to work as one. SecurPass helps
corporate security administrators, help desk staff and end users
manage the complexities of multi-platform environments. SecurPass
"harmonizes" native Microsoft Windows NT security with standard IBM
mainframe, Novell, and UNIX security systems, providing password
synchronization between different environments. SecurPass is the only
solution of its kind, which does not require code at every desktop.
SecurPass was jointly developed by Proginet and Microsoft,
guaranteeing total support and compliance with Microsoft Windows NT,
Microsoft BackOffice, and all other Microsoft components used in the
enterprise.
(2) CyberFUSION(TM) - provides secure and reliable file transfer between
internal and remote users, business partners and customers across both
corporate networks and the Internet. CyberFUSION data transmissions
combine enterprise-strength automation, remote execution,
administration, and audit with industry standard encryption and
compression.
(3) FUSION FTMS(TM)- a multi-protocol file transfer management system
designed to improve the management and cost efficiencies of
information transfer between distributed Windows NT LANs and MVS
enterprise servers.
(4) IND$File(R) Plus - IND$File(R) Plus is an IBM mainframe based software
product that allows a PC user to send and receive files to and from a
mainframe computer.
<TABLE>
<CAPTION>
EXHIBIT B TRADEMARKS OF PROGINET CORPORATION
- ---------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Proginet(TM) Fusion FTMS(TM) Net/WrkNT(TM) Net/WrkVMS(TM)
- ---------------------------- -------------------------- -------------------------- --------------------------
Host.FTAM(TM) Fusion SERVER(TM) Net/WrkWIN(TM) NetWrk36(TM)
- ---------------------------- -------------------------- -------------------------- --------------------------
FTAM.FUSION(TM) SecurPass(TM) Net/Wrk6000(R) NetWrkVISION(TM)
- ---------------------------- -------------------------- -------------------------- --------------------------
IND$File(R) CyberFUSION(TM) Net/Wrk HPUX(TM) Net/WrkSecure(TM)
- ---------------------------- -------------------------- -------------------------- --------------------------
IND$File(R) Plus Net/Wrk400(R) Net/WrkMVS(TM) Net/WrkOS2(TM)
- ---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
Trademarks of Novell Inc. under license to Proginet Corporation:
- ---------------------------- --------------------------
Network Navigator for MVS NetWare Navigator
- ---------------------------- --------------------------
EXHIBIT C TERRITORIES AND MINIMAL ANNUAL QUOTA
The amount for each Minimum Annual Revenue Quota shall mean the amount
of gross U.S. dollars actually collected and deposited by PROGINET for
revenues received for new licenses of the Product during the
applicable quota year. The following Minimum Annual Revenue Quotas
shall commence on the effective date of this Agreement, and continue
for each "quota year" thereafter for the term of this Agreement as
indicated.
<TABLE>
<CAPTION>
- ------------------------------------------- -------------------------------------- ------------------------------
TERRITORY YEAR ENDED MINIMUM QUOTA
<S> <C> <C>
- ------------------------------------------- -------------------------------------- ------------------------------
- ------------------------------------------- -------------------------------------- ------------------------------
- ------------------------------------------- -------------------------------------- ------------------------------
- ------------------------------------------- -------------------------------------- ------------------------------
</TABLE>
<PAGE>
EXHIBIT D TRIAL LICENSE AGREEMENT
In accordance with the delivery and installation of the Proginet Software
Product, hereinafter referred to as "Product", Proginet Corporation, hereinafter
referred to as "Licensor", and --------------------------, hereinafter referred
to as "Trial Licensee", agree to the following:
1. Trial Licensee accepts the Product shipment on ________________ for
installation and evaluation for thirty (30) days at the Site listed below and on
the Central Processing Unit(s) listed below.
2. Trial Licensee acknowledges and agrees that the Product is proprietary to
Licensor, and Trial Licensee agrees to keep any and all information relating to
the use of the Product confidential, including, but not limited to, the Product,
documentation, specifications, flow charts, and logic diagrams. Trial Licensee
further agrees that it will not copy, distribute, or disclose any information
relating to the use of the Product to anyone other than those persons who
require disclosure to carry out their responsibilities. Trial Licensee will hold
any and all information in trust and confidence, and will not use any such
information to the detriment of Licensor in any manner.
3. Licensor will not be liable for any direct, indirect, special, or
consequential damages relating to the use of the Product.
4. Upon termination of the evaluation period, Trial Licensee shall either: (a)
enter into a License Agreement for the Product; or (b) discontinue using the
Product, return the Product and any related materials to Licensor, and delete
all copies of the Product from its computer libraries.
- -------------------------------------------------------------------
To be completed by trial licensee:
<TABLE>
<CAPTION>
<S> <C>
Trial Licensee Address:
(Company): -------------------------- -----------------------------------------------
Authorization Date
Signature Phone
---------------------------------------- -----------------------------
Name Fax
----------------------------------------- -----------------------------
Title Email
----------------------------------------- -----------------------------
Senior Date
Management
Signature Phone
----------------------------------------- -----------------------------
Name Fax
----------------------------------------- -----------------------------
Title Email
----------------------------------------- -----------------------------
Technical Date
Contact
Signature Phone
----------------------------------------- -----------------------------
Name Fax
----------------------------------------- -----------------------------
Title Email
----------------------------------------- -----------------------------
Date and Time of Installation Yes No (Trial Can Not Start Until this is received by
Proginet)
- ------------------------------------------- ----------- -------------------------------------------------------
Pre Installation Check list attached?
- ------------------------------------------- ----------- -------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT E SOFTWARE AND LICENSE FEES
The current Price List is attached to this document.
<PAGE>
EXHIBIT F DISTRIBUTOR PROGRAM LEVELS
Proginet has two distributor program levels. They are defined in order to best
serve and support distributors as well as customers of Proginet Products. Each
Distributor level is to be agreed to upon signing of this agreement. All
distributor levels will be reviewed after six months.
The Program levels are as follows:
Distributor of Proginet will provide the following: 1) Lead generation, getting
potential customers that will use the software, 2) RFI/RFP Response 3) Trial
support, LEVEL ONE (1) SUPPORT, as defined in Section 8A during the trial
period, 4) Contract negotiations, getting the customer to sign the contract or
the sale. In return for these services, Distributor will receive the indicated
percentage of the purchase price of the software (excluding maintenance).
GOLD LEVEL Pure Sales Distributors participating in the Gold Program will
receive thirty five percent [35%] of the initial sales price. For this
DISTRIBUTOR will provide:
1) Lead generation, getting potential customers that will use the
software,
2) RFI/RFP Response
3) Trial support, LEVEL ONE (1) SUPPORT as defined in Section 8A during
the trial period
4) Contract negotiations, getting the customer to sign the contract for
the sale.
The on going billing, and support, will be handled directly by Proginet.
Additional interaction with the customer on the part of the distributor is
for the purposes of add-on sales, and as such come from the NLR percentage
only. There is no maintenance fee paid by Proginet to the Distributor.
PLATINUM LEVEL Front Line Support - Distributors participating in the Platinum
Program will receive fifty percent [50%] of the initial sales price. For this
DISTRIBUTOR will provide:
1) Lead generation, getting potential customers that will use the
software,
2) RFI/RFP Response
3) Trial support, LEVEL ONE (1) SUPPORTas defined in Section 8A during
the trial period
4) Contract negotiations, getting the customer to sign the contract for
the sale.
Distributors participating at this level will handle billing and Level
One-Customer Support Issues. The customer will call their Platinum
Distributor with all inquiries and issues. The Platinum Distributor will
pass all requests and/or problems onto Proginet and will keep the customer
appraised of the status of any and all issues.
The Platinum Distributor will receive fifty percent [50%] of all
maintenance received for their customers, in addition to the
predetermined
percentage of the initial sales price. Platinum level support requirements
are defined in the attached EXHIBIT H DISTRIBUTOR FUNCTION REQUIREMENTS,
steps 1 - 9.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
This Distributor Agreement is being signed for a _____________________ Level Distributor.
<S> <C>
- -------------------------------------------------------------------------------------------------------------
Distributor Proginet Corporation
- ------------------------------------------------------- -----------------------------------------------------
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT G DISTRIBUTOR'S SOFTWARE LICENSE AGREEMENT
To be attached if not using Proginet's Standard Software License Agreement.
<PAGE>
EXHIBIT H DISTRIBUTOR FUNCTION REQUIREMENTS
Step 1: An issue is reported to the DISTRIBUTOR, via any of the problem
reporting mechanisms (i.e. email, fax, phone, or web).
Step 2: A determination must be made whether this is a new call or an existing
call. If it is a new call skip to step 5, if not continue with step 3.
Step 3: If this is an existing call, the individual that was working on the
previous call should continue to work on the call, if that individual is
available. This will make it easier to pick up the call were it was last
left off. If the customer is reporting new information about the call, the
customer support engineer should search the OASIS knowledge base to see if
the new information has shed any light on the problem, and if there is
already a known problem and resolution. If not the DISTRIBUTOR should
review the customer's environment, settings and configuration to ensure
that there are no errors.
Step 4: Is issue solved. If so go to step 13. If no go to step 9.
Step 5: For issues reported via phone, the DISTRIBUTOR needs to collect the
contact information and enter it into the OASIS database in real time. If
the issue was reported via email or fax, or the web enter as much of the
information below as is known.
<PAGE>
If the company that the individual is calling from is not in the database,
then this may be an indication that the customer does not have a support
contract with Proginet. It is the DISTRIBUTOR's responsibility to confirm
that the company is currently paying for support, or is currently trialing
the product. If the company should be receiving support the DISTRIBUTOR
should work out with the Proginet accounts receivable department the exact
details of the support contract. If this company is a trial, then
Proginet's customer support department should be provided with the
appropriate documentation of the trial (TLA and pre-install checklist).
For this step the DISTRIBUTOR should collect the following information:
1. Company
2. Contact information of the caller
3. Product in question, including the versions of all components in
question (i.e. Net/Wrk 400 3.6 and Net/Wrk NT 2.7.0.6)
4. Any PTFs applied to our software
5. Platforms including version number of the operation system
6. Protocol being used (i.e. SNA or TCP/IP)
7. Brief Description
Step 6: After inputting the information in step 5 into the OASIS database the
DISTRIBUTOR will be returned with a problem record number. For issues
reported via phone inform the customer of the number before continuing. If
the call was reported via email or fax, the DISTRIBUTOR should contact the
customer and inform them that PROGINET has received their issue and
PROGINET is working on it. When DISTRIBUTOR first makes contact with the
customer be sure to inform them of the call number.
Step 7: The DISTRIBUTOR should search the knowledge base to see if the issue
being reported is already a known problem with a resolution. If not the
DISTRIBUTOR should review the customer's environment, settings and
configuration to ensure that there are no user errors.
Step 8: Is the issue solved? If so go to step 13. If not go to step 9.
Step 9: If at this point the DISTRIBUTOR is still not able to resolve the
customer's problem , the DISTRIBUTOR will need to collect the appropriate
diagnostic information. The type of information to collect will depend on
the product, platform, and nature of the problem. If the DISTRIBUTOR is
unsure of what diagnostics to collect, consult one of the members of
Proginet's customer support team. At this point the DISTRIBUTOR should also
collect any information that will be necessary to recreate the problem
(i.e. batch jobs or parameter values specified in the interface).
Step 10: When the diagnostics collected in step 9 are received, the DISTRIBUTOR
should review them to see if they indicate any configuration problems. The
DISTRIBUTOR should contact, one of the members of Proginet's customer
support team for the resolution if the DISTRIBUTOR is unfamiliar with the
diagnostics or does not see anything.
If the customer is able to recreate the problem, the DISTRIBUTOR should
document exactly what needs to be done to recreate it and update the OASIS
database with this information. If any batch jobs or configuration files
were used in recreating the problem, these should be provided to Proginet.
Step 11: Is issue solved. If so go to step 13. If no go to step 12.
Step 12: Queue the issue to Proginet customer support team. Before you do this
you should make sure that all of the information mentioned in Step 5 as
well as what you determined from your review of the diagnostics. is clearly
documented in the OASIS database. If the problem was recreated, clearly
document all of the steps that were performed to recreate the problem,
including batch jobs that were created.
At this point the DISTRIBUTOR and Proginet have to make sure that the
following take place:
1. When the issue is queued to Proginet, that the database is updated on
the progress of the issue.
2. If additional information is required by Proginet, the DISTRIBUTOR
must work with the customer to get this additional information.
Step 13: Issue is solved: Once the customer has agreed that the issue is
resolved then the DISTRIBUTOR should update OASIS and clearly identify
that the issue has been resolved and the Customer has agreed to the
resolution. The database must be updated to clearly indicate the issue
and the resolution.
EXHIBIT I TERMINATION PROCESS
The following section will be enacted upon Termination of this Agreement by
PROGINET or DISTRIBUTOR.
1. All rights granted to DISTRIBUTOR under or pursuant to this Agreement
shall immediately cease, except as otherwise specifically provided in
this Section and DISTRIBUTOR will cease holding itself out as a
DISTRIBUTOR of the PRODUCTS. Upon the termination of this Agreement,
the parties agree to continue their cooperation and to effect an
orderly termination of their relationship. This will include
DISTRIBUTOR being allowed to pursue and conclude all business, which
was duly forecasted
<PAGE>
before termination and is likely to be closed with in one hundred
eight (180) days of termination notification.
2. All existing software license agreements and maintenance agreements
shall be fully vested in PROGINET upon occasion of renewal, and
DISTRIBUTOR shall have no further rights therein. DISTRIBUTOR shall
provide a complete list of all customers using Proginet products,
including what products and platforms are in use. Upon PROGINET's
specific request, notify all existing CLIENT(S) and/or users of the
PRODUCTS in the TERRITORY that such CLIENT(S) and/or users agreements
run directly with PROGINET, and that all further payments and
communications should be directed to PROGINET. In addition, PROGINET
shall have the right to directly communicate such termination to all
CLIENT(S) and assume full contact with such CLIENT(S) AND PROGINET
shall have the right to contact CLIENT(S) and instruct that all
SOFTWARE LICENSE FEES and MAINTENANCE FEES should be paid directly to
PROGINET, DISTRIBUTOR shall immediately pay to PROGINET any amounts
then owing from DISTRIBUTOR to PROGINET, including any pro rata
maintenance monies that have not been earned by DISTRIBUTOR.
3. Unless otherwise agreed to in writing, or as specified above by
PROGINET, DISTRIBUTOR shall immediately, as customer servicing is
completed, return to PROGINET all of the following which, on the date
of expiration or termination, are in DISTRIBUTOR'S possession or under
its control: (i) all originals and copies of all PRODUCTS literature,
price lists, customer lists, customer license and maintenance
agreements, technical data PRODUCTS samples, drawings, designs and all
documents and electronic media containing CONFIDENTIAL INFORMATION
except those, if any, which DISTRIBUTOR is entitled to retain under
DISTRIBUTOR'S LICENSE AGREEMENT; and (ii) a complete list of the names
and addresses of all CLIENT(S) for whom DISTRIBUTOR is then supporting
any of the PRODUCTS, additionally, The maintenance payments made by
customers during the period of the distributor agreement, must be
properly apportioned for the time of support provided by each of the
parties. Under the Generally Accepted Accounting Principles (GAAP)
guidelines, maintenance is categorized as Unearned monies which are
earned for each month of covered support. Therefore the monies
recognized each month from the payment are one twelfth of the total
amount paid. By the end of the year for which maintenance is
purchased, all monies are thereby recognized.
All customer maintenance covered by the terminating agreement will be
broken out to show the amount of monies earned by each party. This
chart will then show what payments are required by the Partner to
Proginet, or by Proginet to the Partner.
Any maintenance that is not current and is late will be due and
payable to the other party upon the signing of the letter of
termination.
Payment will be made by the appropriate party within thirty days of
signing the Letter of Termination.
4. Together with the materials described above, DISTRIBUTOR shall deliver
to PROGINET a document duly executed on behalf of DISTRIBUTOR
certifying that no such materials are in DISTRIBUTOR'S possession or
under its control DISTRIBUTOR shall also deliver to PROGINET as soon
as possible any of the foregoing materials that come into
DISTRIBUTOR'S possession or under its control after the expiration or
termination of this Agreement.
5. DISTRIBUTOR shall immediately cease holding itself out as a
representative of PROGINET, shall destroy all advertising and
promotional literature, stationery and other materials within its
possession or control bearing any TRADEMARKS, and shall destroy any
and all signs or notices bearing TRADEMARKS or otherwise identifying
DISTRIBUTOR as a representative of PROGINET, the PRODUCTS or the
TELEPHONE SUPPORT.
6. Neither DISTRIBUTOR nor PROGINET is responsible for promises or lost
opportunities made to other parties that are not fulfilled as a result
of the termination of this agreement.
<PAGE>
CONTRACT SUMMARY FORM
Effective Date of Agreement:
-----------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Company: Address:
-------------------------- -----------------------------------------------
Product: Number of SecurPass
users (If applicable):
-------------------------- ---------------------------------
Number of Servers: CPUID's of all machines
running software:
(CyberFUSION only)
--------------------- ---------------------------------
Total Sale Amount (USD): Maintenance
Paid/Owed:
----------------------- -------------------------
Amount remitted by customer: Maintenance Period
Coverage:
----------------------- --------------------------
Amount remitted by customer in USD Proginet's Portion
(If different from above): of sale (USD):
----------------------- --------------------------
Senior Management: Phone
------------------------------
Name Fax
----------------------------------------- ------------------------------
Title Email
----------------------------------------- ------------------------------
Technical Contact: Phone
------------------------------
Name Fax
----------------------------------------- ------------------------------
Title Email
----------------------------------------- ------------------------------
Administrative Contact: Phone
------------------------------
Name Fax
----------------------------------------- ------------------------------
Title Email
----------------------------------------- ------------------------------
</TABLE>
EXHIBIT 10.6
[PROGINET LOGO]
OEM AGREEMENT
entered into between
PROGINET Corporation, a company established and incorporated under the laws of
the state of Delaware, U.S.A., having its principal place of business at 200
Garden City Plaza, Garden City, New York 11530, United States of America,
- hereinafter referred to as "PROGINET" -
and PARTNER, a company established and incorporated under the laws of
- -------------- with its principal place of business at
- -----------------------------------.
- - hereinafter referred to as "PARTNER" -
PRELIMINARY REMARKS
WHEREAS, PROGINET has developed or otherwise lawfully acquired certain
proprietary computer programs, support services and trade secrets
including, but not limited to, PROGINET SOFTWARE, which is licensed
worldwide by PROGINET, its Subsidiaries and Distributors as defined
herein after;
WHEREAS, PARTNER has developed or otherwise lawfully acquired certain
proprietary computer programs, support services and trade secrets
including, but not limited to, OEM PRODUCT which is licensed worldwide
by PARTNER, its Subsidiaries and Distributors as defined hereinafter;
WHEREAS, PARTNER is interested to integrate the PROGINET SOFTWARE
software, with and in order to enhance OEM PRODUCT;
WHEREAS, PROGINET agrees to license to PARTNER, on a non-exclusive
basis, its PROGINET SOFTWARE to be integrated with OEM PRODUCT and to
be distributed worldwide by PARTNER through its direct and indirect
channels;
WHEREAS, PROGINET wishes that Services to Customers with regard to the
Product shall be performed by PARTNER;
WHEREAS, PROGINET agrees to provide all necessary information and
support to PARTNER, as provided for in this agreement, in order to
provide Services to Customers with regard to the Product;
WHEREAS, PARTNER and/or its Distributors desire to distribute the
Product worldwide and to provide Services for the Product worldwide.
NOW THEREFORE, in consideration of the covenants and mutual promises,
terms and conditions set forth hereinafter, as well as other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
<PAGE>
1.
DEFINITIONS
In this OEM Agreement, the following terms shall have the following
respective meanings:
1. "PARTNER" shall mean PARTNER, its employees, contractors,
consultants and all its Subsidiaries worldwide.
2. "OEM PRODUCT" shall mean the PARTNER Products.
3. "CUSTOMER" shall mean any end-user of the Product distributed
by PARTNER or Distributors.
4. "Distributor" shall mean any third party who is granted a
sublicense by PARTNER and who may license copies of the
Product and/or who may provide Services to Customers.
5. "Documentation" shall mean end-user manuals, programmers
guides, educational materials, product descriptions and
specifications, technical manuals, supporting materials, and
all systems guides which are distributed in print, magnetic,
electronic, or video format, in connection with PROGINET
SOFTWARE and/or the Services.
6. "Revenue" shall mean all monies due and payments resulting
from licensing and/or maintenance of the Product, or from
Services.
7. "Product" shall mean the PROGINET SOFTWARE as integrated with
OEM PRODUCT distributed by PARTNER and/or its Distributors.
8. "PROGINET SOFTWARE" shall mean the one or all of the following
separate software products developed or otherwise lawfully
acquired by PROGINET:
SECURPASS a password management solution. Platforms
supported are: OS/390, Windows 95,98,NT, UNIX,
NetWare.
FUSION FTMS a data movement solution. Platforms
supported are: OS/390, Windows 95,98,NT, OS/2, Dec
VAX, UNIX, NetWare.
CYBERFUSION an Internet File Transfer solution.
Platforms supported are: OS/390, Windows 95,98,NT.
This OEM AGREEMENT pertains only to the --------------
solution developed or otherwise lawfully acquired by PROGINET,
regardless of whether it will be delivered under the name
"PROGINET SOFTWARE" or any other name.
9. "SERVICES" shall mean any services, including training,
development, support, and consulting, to be provided by
PARTNER and/or Distributors to Distributors and/or Customers
with regard to the Product.
10. "SOURCE CODE" shall mean the human-readable form of the
Product and the soft copy of all technical documentation of
any version, release or update of any computer program, that
must be converted into machine readable language by the use of
compilers, assemblers and/or interpreters and which includes
codes that have been compiled but require linking to binary
code in order to be machine readable. Source Code must include
sufficient information such that it can be used to provide the
software and Services to Customers.
<PAGE>
11. "SUBSIDIARY" shall mean any legal entity as to which PROGINET
has the actual control now or hereafter, whereby "control"
shall mean the ability to determine the policies of such
company, whether resulting from a stock or a share ownership
or by other means, generally, but not limited to, holding a
majority of the stock or shares of such Subsidiary.
12. "USER" A user is defined by accounts on platforms that have
the ability to have their passwords reset by means of the
product.
2. GRANT OF RIGHTS
1. PROGINET hereby grants to PARTNER the non-exclusive,
non-transferable, but worldwide right to
a) create ancillary, supplemental and derivative works
with regard to PROGINET SOFTWARE and its
Documentation, and to integrate and package PROGINET
SOFTWARE with OEM PRODUCT, and to integrate, package,
modify and make excerpts from the Documentation into
other support material and documentation, under the
sole responsibility of PARTNER. PARTNER shall be the
sole proprietor of all works prepared by PARTNER,
exclusive of any works and products that are now
owned or developed by PROGINET.
b) distribute, sell, promote, demonstrate, reproduce,
license, lease, rent, publicly display, publicly
perform and create ancillary, supplemental and
derivative works related to the Products as well as
the Products' documentation or portions thereof,
through itself and/or its Distributors to
Distributors and/or Customers to use, display,
perform and copy for safeguard purposes, in any
medium and on any platform now known or later
developed. All such use and distribution is subject
to the terms, as specified, in this OEM Agreement.
2. PARTNER shall be entitled to use PROGINET SOFTWARE for its
internal purposes, for development, maintenance, training, and
demonstration purposes free of charge. Proginet shall be
entitled to use OEM PRODUCT for its internal purposes, for
development, maintenance, training, and demonstration purposes
free of charge.
3. PARTNER shall not be entitled to distribute PROGINET SOFTWARE
in its non-integrated form.
4. PARTNER shall be entitled to modify the existing Documentation
and/or to prepare newly developed documentation with regard to
the Product and to incorporate such documentation into
PARTNER's formatted sales, marketing and documentation
materials.
5. PARTNER may, distribute the Product under its own trademarks
and/or trade names. PARTNER shall provide notices related to
PROGINET's ownership and trademarks during the initialization
of the Product, and in such other places, if any, to insure
reasonable protection of PROGINET marks. The parties are to
inform each other of any such changes of trademarks and/or
trade names.
6. PARTNER will provide adequate disclosure in its Sales License
Agreement with customers, of inclusion of Proginet's software
in the licensed product related to proprietary ownership by
Proginet.
<PAGE>
3. SUPPORT AND MAINTENANCE
1. PROGINET agrees to deliver to PARTNER one master copy of all
PROGINET SOFTWARE components and all future PROGINET SOFTWARE
releases, versions, updates, and upgrades developed hereafter
on electronic media and format as well as one master copy of
the Documentation on electronic media, during the life of this
OEM Agreement. PARTNER will provide all support to customers
for the licensed software.
2. Support Services will be provided for those licensees who have
fully paid all license and support fees due. PROGINET agrees
to provide maintenance and support services, over the phone,
24 hours/seven days a week, to PARTNER to the extent necessary
to provide promptly the Services to Distributors and/or
Customers as follows:
Error Severity Levels Of Service
PROGINET shall exercise commercially reasonable efforts to
correct any software defects reported by licensee in the
current or previously released and unmodified release of the
PROGINET SOFTWARE- in accordance with the priority level
reasonably assigned to such software defect. The service
levels are as follows:
SEVERITY "1" ISSUES, are assigned to a system which is not
operational and the licensee is prepared to turn requested
documentation over to the Support staff for resolution. For
severity 1 issues the PARTNER staff, and licensee staff must
be willing to work around the clock with PROGINET staff to
resolve the problem.
SEVERITY "2" ISSUES, are assigned when software is not in
complete failure, but is failing often and the failures are
having a high impact on the licensee's ability to do work.
SEVERITY "3" ISSUES, are assigned to problems which do not
affect the licensee's ability to essentially conduct normal
business activities. Delayed action by support resources is
appropriate, with a solution provided at a future time
convenient to the licensee and PROGINET.
Exclusions
PROGINET shall have no obligation to support:
a) altered, damaged or modified licensed software:
b) licensed software that is not the then current or
previous Sequential Release;
c) licensed software problems caused by licensee's
negligence, abuse or misapplication, or other causes
beyond the control of Proginet; or
d) Licensed Software installed on any Platform which is
not supported by PROGINET SOFTWARE. See Section 1.
DEFINITIONS for supported platforms by Product. These
platforms will be amended as platform support changes
occur.
<PAGE>
3. Any additional training of Services related to the Product not
covered by paragraph 2 herein before shall be provided for by
PROGINET to PARTNER and/or its Distributors, upon PARTNER's
request, at PROGINET's most competitive standard pricing.
4. First and Second Level Customer Support will be provided by
PARTNER for the licensee.
4. ROYALTIES AND PAYMENT
1. PARTNER agrees to pay to PROGINET a royalty fee based upon the
schedule included herein as Enclosure 1.
2. For this purpose, PARTNER agrees to submit to PROGINET a copy
of each license and/or maintenance agreement entered into by
PARTNER, within 5 (in words: five) days of receipt of such
signed agreement
3. PARTNER agrees to submit to PROGINET a copy of each license
and/or maintenance agreement entered into by PARTNER, within
10 (in words: ten) days of receipt of such signed agreement.
4. PARTNER agrees to furnish PROGINET with a statement of
PROGINET SOFTWARE royalties on a quarterly basis within 10 (in
words: ten) days following the end of each calendar quarter
setting forth the payments made and due to PROGINET during the
preceding calendar quarter.
5. PROGINET agrees to inspect the statement of royalties in due
course and agrees to report to PARTNER in writing any
objections within 10 (in words: ten) days.
6. All payments to be made by PARTNER to PROGINET should be due
and payable within 5 (in words: five) days after receipt of
payment. If PARTNER is in default with any undisputed payment
or any payment as to which a final and binding judgment has
been entered into, PARTNER agrees to the payment of an
interest rate of 1.5% (in words: one and one half percent) per
month as a contractual penalty. All disputed payments
eventually determined to be due and payable to PROGINET are
subject to the rate as defined above.
7. Payments that are not received by PARTNER from the contractual
partner that are more than 90 (in words: ninety) days late,
will be made by PARTNER to PROGINET within 5 (in words: five)
business days after the ninety day period expires.
<PAGE>
8. All payments to be made shall be in US Dollars. Such funds are
to be remitted via wire transfer as follows:
Wire Transfer Instructions:
--------------------------------------- ---------------------------
Company Name: PROGINET Corp.
Bank Name: Citibank N.A.
Bank Address: 204 Old Country Road
Mineola, New York, 11501
USA
Account Number: 234 14 118
Bank ABA Number: 021000089
{also known as
Routing Number}
Bank ABA Number: 021000089
(also known as
Routing Number)
--------------------------------------- ---------------------------
<PAGE>
5. MARKETING/SALES RESPONSIBILITIES
1. PARTNER will be responsible for all the effort and investment
for the marketing promotion and sales of the mainframe reset
module based on the licensed technology. PARTNER agrees to
provide Proginet copies of all prepared materials within two
weeks of such material(s) being prepared.
6. TRAINING, JOINT DEVELOPMENT AND SERVICES
1. PROGINET agrees to provide to PARTNER an initial training
package encompassing a 2 (in words: two) days training on
PROGINET SOFTWARE for PARTNER and/or its Distributors or
PARTNER's developers. This initial training pack will be
provided by PROGINET at no charge, except all out of pocket
expenses, actually incurred will be paid by PARTNER.
2. Any additional training shall be provided by PROGINET at a 33%
discounted rate off of PROGINET's standard rate (currently
$2,000 per day), per day, plus out of pocket expenses.
3. PROGINET and PARTNER agree to make specific functionality
enhancements to the product as mutually agreed. These
enhancements will have detailed specifications and be
completed in a timely manner as documented separately in
writing, from time to time. This specifications document must
be completed and approved by both parties.
4. PROGINET will provide consulting services and support to
assist customer deployment when requested; provided that such
services have been scheduled and approved in advance. Rates
will be as defined in the fee schedule attached to this
agreement.
7. WARRANTIES AND REPRESENTATIONS
1. PROGINET represents and warrants that PROGINET SOFTWARE as
well as any information submitted by PROGINET in this regard
is substantially free of defects and substantially has the
promised qualities and is performing in all material aspects
according to the Documentation.
2. PROGINET represents and warrants that PROGINET SOFTWARE is
free and clear of any liens or encumbrances.
3. PROGINET represents and warrants that PROGINET SOFTWARE is
Year 2000 Compliant and that the use of any date prior to,
during and after the year 2000 does not affect the performance
or functionality of PROGINET SOFTWARE whatsoever, pursuant to
PROGINET's "Definition of Year 2000 Compliance" attached as
follows:
The definition of year 2000 Compliance implies that neither
performance nor functionality is affected by dates prior to,
during and after the year 2000.
In particular:
RULE 1: No value for current date will cause any interruption
in operation.
RULE2: Date-based functionality must behave consistently for
dates prior to, during and after year 2000.
<PAGE>
RULE3: In all interfaces and data storage, the century in any
date must be specified either explicitly or by unambiguous
algorithms or inferencing rules.
RULE 4: Year 2000 must be recognized as a leap year.
4. Except as specifically provided otherwise in this OEM
agreement, PROGINET does not provide any other warranties or
representations.
5. PROGINET agrees to indemnify PARTNER to the full extent,
including reasonable attorneys fees, from any claims brought
against PARTNER, its employees, contractors, consultants, and
Distributors, of any third party in connection with any defect
of PROGINET SOFTWARE for a proven infringement of any patent
or copyright rights relating to PROGINET SOFTWARE.
6. PARTNER agrees to indemnify PROGINET to the full extent,
including reasonable attorneys fees, from any claims brought
against PROGINET, its employees, contractors, consultants, and
Distributors, of any third party in connection with any defect
of OEM PRODUCT for a proven infringement of any patent or
copyright rights relating to OEM PRODUCT.
7. The statute of limitations with regard to any claims of
PARTNER against PROGINET shall expire within 6 (in words: six)
months after PARTNER obtained actual knowledge of its claim.
8. The statute of limitations with regard to any claims of
PROGINET against PARTNER shall expire within 6 (in words: six)
months after PROGINET obtained actual knowledge of its claim.
8. INTELLECTUAL PROPERTY RIGHTS/INFRINGEMENT
1. Both parties recognize the intellectual property rights, such
as patents, trademarks, copyrights, trade secrets etc. of the
respective other party.
2. PARTNER agrees to include a notice regarding PROGINET's
copyrights and/or trademarks to protect PROGINET's proprietary
information consistent with applicable standards in the
respective market.
3. PARTNER shall be solely entitled to any intellectual property
rights resulting from the preparation of the Product developed
by PARTNER, its employees, contractors and consultants.
PROGINET shall be solely entitled to all intellectual property
rights resulting from the preparation of PROGINET SOFTWARE
developed by PROGINET, its employees, contractors, and
consultants.
4. PROGINET represents and warrants that PROGINET is the legal
proprietor of PROGINET SOFTWARE and that PROGINET has full
rights, title and interest, including the right to grant the
licenses herein, and that PROGINET SOFTWARE does not infringe
any patent, trademark, copyright, trade secret or other
proprietary right whatsoever worldwide.
5. Cure. As soon as Proginet or PARTNER has reason to believe a
Claim is likely to be made against PARTNER, its customers or
any of its subsidiaries, Proginet shall, promptly and at its
sole expense, use its best efforts to settle, avoid, or
otherwise cure the Claim by one of the following procedures:
<PAGE>
1) Obtain a license for PARTNER, its customers and its
subsidiaries to continue using PROGINET SOFTWARE in
accordance with this Agreement.
2) Modify PROGINET SOFTWARE to make it non-infringing, while
maintaining the equivalent or better functionality,
features, and performance.
3) Replace PROGINET SOFTWARE with a non-infringing product,
either from Proginet or another supplier, having the
equivalent or better functionality, features and
performance.
6. Cancellation of License. If, despite its best efforts to do
so, Proginet is unable to effect a cure under the paragraph
entitled "Cure" of this clause, and a permanent injunction
ordering PARTNER, its customers or its subsidiaries to cease
further use of the goods is issued by a court of competent
jurisdiction, either party may cancel the purchase contract
under which the goods were ordered, either in whole or in
part, whereupon PARTNER and its subsidiaries may return all or
any portion of the Goods to Proginet for a full refund; and
either party may terminate this Agreement. Any license granted
under this Agreement with respect to the returned software
will terminate as of the effective date of the cancellation.
9. CONFIDENTIALITY
1. Both parties agree to keep confidential any and all
information received directly or indirectly from the other
party, orally or in writing, including the terms and
provisions of this OEM Agreement, provided the party receiving
this information can reasonably presume that the information
is to be dealt as confidential and/or the information is
specifically stated as being confidential.
2. The duty of confidentiality shall not include any information,
which is now or hereafter in the public domain, which
information is already legally in the possession of the
receiving party, which information has been independently
developed by the receiving party and which information has
been disclosed by a third party without breach of any
obligation of confidentiality.
10. ESCROW
1. PROGINET agrees to deposit and maintain copies of the Source
Code of PROGINET SOFTWARE and all its components thereof,
including all future modifications, promptly with its escrow
agent, in which case fees are to be paid by PARTNER, and / or
licensee.
2. PARTNER agrees to deposit and maintain copies of the Source
Code of any products developed or integrated with of PROGINET
SOFTWARE and all its components thereof, including all future
modifications, promptly with its escrow agent.
3. The Escrow Agent will release a copy of the source code, only
after receiving written instruction from PROGINET, or
PROGINET's trustee in a bankruptcy or Chapter 11 proceeding.
PROGINET will grant the Escrow Agent the irrevocable right to
duplicate the software to provide a copy as authorized in the
Escrow Agreement.
<PAGE>
11. RELATIONSHIP BETWEEN THE PARTIES
Each party is acting as an independent contractor and not as an agent,
partner, or joint venture of the other party for any purpose. Except as
provided in this OEM agreement neither party shall have any right,
power or authority to act or to create any obligation, expressed or
implied, on behalf of the other party.
12. TERM AND TERMINATION
1. This OEM Agreement shall commence after being signed by both
parties and shall be concluded for a period of 2 (in words:
two) years from the date of signing. It shall then be extended
for further periods of 1 (in words: one) year each, provided
it is not terminated by either party with 3 (in words: three)
months notice prior to the termination date.
2. Each party shall have the right to terminate this agreement
for good cause, particularly if the other party does not
comply with substantial duties under this OEM agreement, as
well as, but not limited to, if any substantial obligation of
this OEM agreement has been breached, and bankruptcy
proceedings have been adjudicated or if a liquidator has been
appointed over the assets of one party.
4. The termination shall be made in writing in accordance with
Article 14.
5 All licenses granted with regard to the Product during the
term of this OEM agreement, as well as all obligations,
including royalty payments with respect thereto, shall survive
any termination of this OEM agreement, excepting that the
licenses granted to PARTNER in section 2.2 will terminate.
13. LIMITATION OF LIABILITY
Except for claims arising under the clauses entitled "Intellectual
Property Rights/Infringement" in no event shall either party have any
liability to the other party, whether based on contract, tort
(including but not limited to strict liability and negligence), or any
other legal or equitable grounds, for any loss of use, profit, or
revenue by the other party, or for any indirect, consequential,
special, or punitive damages incurred or suffered by the other party,
arising out of or related to this agreement, even if that party has
been advised of the possibility of such loss or damages. Claims by
either party for contribution from the other party for third-party
injury, damage, or loss are not waived, released, or disclaimed.
14. MISCELLANEOUS
1. This OEM agreement contains the complete and entire agreement
between the parties and supersedes any previous communication,
representation or agreement, whether verbal or written.
2. All notices shall be in writing and given by personal
delivery, certified mail, return receipt requested, or by
commercial overnight courier for next business day delivery,
to the recipient's address set forth above. Notice shall be
deemed given the date of personal delivery, the fifth business
day after mailing, or the next business day after delivery to
such courier (unless the return receipt or the courier's
records evidence a later delivery).
<PAGE>
3. If any part of this agreement is rendered void, unenforceable
or incomplete, this shall not affect the validity of the
remainder of this agreement. The parties agree in this case to
replace the void, unenforceable or incomplete provision by a
clause representing the economically intended purpose as
closely as possible and which they would have agreed upon if
they had actual knowledge that this specific provision was
void, unenforceable or incomplete.
4. This agreement shall be exclusively governed by the Laws of
the United States, in the State of New York.
5. Any dispute resulting out or in connection with this OEM
agreement shall be subject to the exclusive jurisdiction and
shall finally be settled by arbitration through the means of
the American Arbitration Association.
6. This agreement and the licenses granted herein, may not be
assigned, delegated, sublicensed or transferred by either
party, without the prior written consent of the other party.
Such consent shall not be unreasonably withheld. In the case
of a successor company carrying on substantially the same
business in connection with a merger, purchase of assets of
other reorganization, this agreement and licenses herein will
be transferred.
7. Neither party shall use the name of the other party in any
news release, public announcement, advertisement, or other
form of publicity without securing the prior written consent
of the other.
8. Either party's failure to exercise any of its rights under
this Agreement shall not constitute a waiver of any past,
present, or future right or remedy.
15. SIGNATURES
<TABLE>
<CAPTION>
- ------------------- ----------------------------------------------- ---------------------------------------------------
PARTNER Proginet Corporation
<S> <C> <C>
- ------------------- ----------------------------------------------- ---------------------------------------------------
Place
- ------------------- ----------------------------------------------- ---------------------------------------------------
Date:
- ------------------- ----------------------------------------------- ---------------------------------------------------
Signature
- ------------------- ----------------------------------------------- ---------------------------------------------------
Name:
- ------------------- ----------------------------------------------- ---------------------------------------------------
Title
- ------------------- ----------------------------------------------- ---------------------------------------------------
</TABLE>
<PAGE>
ENCLOSURE 1 PROGINET SOFTWARE PRICING
See Proginet's Price List, attached.
EXHIBIT 10.7
PROGINET CORPORATION
MANAGEMENT CONTINUITY AGREEMENT
AGREEMENT dated __________________, by and between _________________ (the
"Executive") and Proginet Corporation (the "Company"), a Delaware corporation
having its principal office at 200 Garden City Plaza, Garden City, NY 11530.
WHEREAS, the Executive is _________________________________________ of the
Company; and
WHEREAS, the Company recognizes that in order to induce the Executive to remain
in the employ of the Company, to reinforce his motivation to increase the value
of the Company for its shareholders, and to strengthen his objectivity during
any period when a Change of Control (as defined in paragraph 5(a) below) of the
Company is contemplated or could occur, it must provide the Executive with
security against the possibility that his employment could be terminated as a
result of a Change of Control;
NOW, THEREFORE, the parties hereby agree, for the mutual considerations stated
below, as follows:
1. The term of this Agreement (the "Term") shall begin on the date hereof
and shall end on the third anniversary of the date hereof; provided,
that (i) the Term shall be automatically extended by one year as of the
end of each year in the Term unless either party shall have given the
other at least thirty days' written notice of a desire not to extend,
(ii) if at any time before a Change of Control the Board of Directors
of the Company (the "Board") gives the Executive written notice (x)
that it has determined that he has willfully refused to perform his
duties as Executive of the Company, and (y) setting forth in detail the
conduct upon which such determination is based, and the Executive fails
to correct such willful refusal to the satisfaction of the Board within
60 days following his receipt of such notice, then the Board may
terminate this Agreement by written notice to the Executive, and (iii)
the Term shall in all events end upon the voluntary retirement of the
Executive.
2. If following a Change of Control (as defined in paragraph 5(a) below),
the Company terminates the Executive without Cause (as defined in
paragraph 5(b) below) or the Executive terminates his own employment
for Good Reason (as defined in paragraph 5(c) below), the Executive
shall be entitled to receive:
(i) A lump sum payment representing the then present value
(computed using the interest rate assumption set forth in
paragraph 5(d) below) of the sum of (a) the aggregate amount
of base compensation that he would have received for the
period of eighteen months following the termination (or, if
shorter, the period beginning on the day following the date of
the termination and ending on the date he reaches age 65),
assuming that his base compensation for that period was paid
at the highest annual rate in effect at any time during the
<PAGE>
period of three years immediately preceding the termination,
plus (b) the amount of annual bonuses that he would have
received with respect to each calendar year and partial
calendar year in the period of eighteen months following the
termination (or, if shorter, the period beginning on the day
following the date of the termination and ending on the date
he reaches age 65), assuming that the amount of such bonuses
for each complete calendar year in such period would have
equalled, and the amount of such bonuses for each partial
calendar year in such period would have equalled a pro rata
portion of, the highest aggregate amount of such bonuses that
he received for any one of the three calendar years preceding
the termination;
(ii) Continuation at Company expense for the period of eighteen
months following the termination (or, if shorter, the period
beginning on the day following the date of the termination and
ending on the date he reaches age 65), of his participation in
all retirement, medical, life insurance, disability, and other
benefit plans and programs of the Company in which he was
entitled to participate before the termination (or, in the
case of any such plan or program the terms of which do not
permit such continued participation, equivalent benefits
outside such plan or program); and
(iii) Executive job placement counseling at Company expense,
provided, however, that the job placement counseling firm
selected by the Executive shall be reasonably satisfactory to
the Company. Such benefits are limited to one year.
3. If following a Change of Control (as defined in paragraph 5(a) below),
the Company terminates the Executive with Cause (as defined in
paragraph 5(b) below) or the Executive terminates his own employment
without Good Reason (as defined in paragraph 5(c) below), the Executive
shall be entitled to received six month's compensation and all benefits
as set forth in paragraph 2(ii) above and Executive job placement
counselling as set forth in paragraph 2(iii) above.
4. The Company shall pay all costs incurred by the Executive in enforcing
the provisions of this Agreement, including reasonable legal fees and
expenses.
5. (a) A "Change of Control" shall be deemed to have occurred if (i) there
is a public offering or offerings of securities aggregating more than
75 percent of the total combined voting power of the Company's then
outstanding securities; (ii) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Act") other than Joseph T. Mohen, other than a trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or its subsidiaries, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 of the Act), directly or indirectly, of
securities of the Company representing more than 20 percent of the
total combined voting power of the Company's then outstanding
securities, (iii) there occurs a change of control of the Company of a
nature that would be required to be reported in response to Item 1(a)
of the Current Report on Form 8-K pursuant to Section 13 or 15(d) of
the Securities Exchange Act of
-2-
<PAGE>
1934 (the "Exchange Act") or in any other filing under the Exchange
Act; or, (iv) during any period of twelve consecutive months (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board or
who represent institutions that were represented on the Board at the
beginning of such period (the "Original Board"), and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in item
(ii) or (v) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least
two-thirds (b) of the directors then still in office who either were
members of the Original Board or whose election or nomination for
election was previously so approved, cease for any reason to constitute
a majority of the Board; or (vi) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least 80 percent of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all
the Company's assets.
(b) The Company shall have "Cause" to terminate the Executive's
employment if a majority of the entire Board determines, after a
hearing at which the Executive has the opportunity to be heard, that
the Executive has committed (i) an act of gross negligence or willful
misconduct which has caused material damage to the Company or its
business, (ii) a felony involving money or other property, (iii) a
crime of moral turpitude, or (iv) embezzlement or other criminal fraud.
(c) The Executive shall have "Good Reason" to terminate his employment
if (i) his duties or reporting responsibilities are materially changed,
(ii) his base compensation is reduced or his performance compensation
plan is altered in any material way, (iii) the terms of the Company's
annual and long-term incentive plans and programs are materially
changed, (iv) the office where he is primarily expected to perform his
duties is relocated outside the New York metropolitan area, or (v) he
otherwise suffers a material adverse change in the terms and conditions
of his employment.
(d) For purposes of this Agreement, present value shall be determined
using an interest rate equal to that as of the date of the termination
of employment.
6. Nothing contained herein shall be construed as conferring on the
Executive any right to continued employment by the Company before the
occurrence of a Change of Control.
7. This Agreement shall be governed by the laws of the State of New York,
without reference to the rules of conflicts of law.
-3-
<PAGE>
Agreed: Agreed:
------------------------------- --------------------------------
Executive For Board of Directors
EXHIBIT 10.8
PROGINET CORPORATION
INDEPENDENT DIRECTORS; STOCK OPTION PLAN
(amended and restated as of February 21, 1995)
WHEREAS, Proginet Corporation (the "Company") has previously adopted
the Proginet Corporation Independent Directors; Stock Option Plan (the
"Directors' Plan") by action of the Board of Directors of the Company dated
October 18, 1994; and
WHEREAS, the Company now wishes to amend and restate the Directors'
Plan.
NOW THEREFORE, the Directors' Plan is hereby amended and restated , as
of February 21, 1995, to read in its entirety as follows:
SECTION 1. PURPOSE
The purpose of the Directors' Plan is to promote the interests of the
Company and its stockholders by retaining the current independent directors of
the Company, giving such individuals an opportunity to acquire proprietary
interests in the Company, and creating an increased personal interest in the
continued success and progress of the Company. As used in this Directors' Plan,
the term "Independent Director" means a director of the Company who is not an
officer or employee of the company, or is not, directly or indirectly, together
with members of his or her "immediate family" (as that term is defined in Rule
16a-1(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act")), the beneficial owner of five percent (5%) or more of the Company's
Common Stock (the "Common Stock"), including "derivative securities", as that
term is defined in Rule 16a-1(c) promulgated under the Exchange Act, related to
the Company's Common Stock. The term "Independent Director" shall not include
any director of the Company who in writing excludes himself or herself from
participation in the Directors' Plan.
SECTION 2. NON-STATUTORY OPTIONS
It is intended that options to purchase shares of Common Stock granted
under the Directors' Plan shall be non-qualified or non-statutory options, and
not incentive stock options within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended. Non-statutory options granted under the
Directors' Plan are hereinafter referred to as "Options." Shares of Common Stock
issued upon the exercise of options granted hereunder may be authorized but
unissued shares, or shares held in the Company's treasury.
SECTION 3. ADMINISTRATION OF THE DIRECTORS' PLAN
The Directors' Plan shall be administered by the Compensation and Stock
Option Committee (the "Committee") of the Company's Board of Directors (the
"Board").
SECTION 4. GRANTING OF OPTIONS
4.1 Subject to the provisions of the Plan, Options to purchase
sixty-thousand (60,000) shares of the Company's Common Stock
shall be awarded to each Independent Director of the company
on the effective date of the Plan.
The number of shares for which Options granted under this Section 4 are
exercisable shall be subject to adjustment as provided in Section 10.
<PAGE>
The total number of shares of Common Stock for which Options may be
granted under the Directors' Plan is 120,000 subject to adjustment as provided
in Section 10. Options granted pursuant to the Plan shall reduce the number of
shares available for awards pursuant to the Company's Equity Incentive Plan by
the number of shares of Common Stock for which Options are granted hereunder. If
an option granted under the Directors' Plan shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject to
the Option shall (unless the Directors' Plan shall terminate) become available
for the grant of awards under the Company's Equity Incentive Plan.
SECTION 5. TERMS OF OPTIONS
Options granted under the Directors' Plan shall be fully vested
according to the following schedule: 30,000 shares upon the closing of the
initial public offering of the Company's Common Stock on the Vancouver Stock
Exchange and 10,000 shares per quarter commencing June 30, 1995 and ending
December 31, 1995. No Option may be exercised after ten (10) years from the date
the Option is granted, and Options shall be subject to earlier termination as
hereinafter provided.
The purchase price of a share of Common Stock covered by the Options
granted under Section 4 shall be equal to the initial public offering price of
the Company's Common Stock in the initial public offering of the Company's
Common Stock on the Vancouver Stock Exchange. Such price shall be subject to
adjustment as provided in Section 10 hereof. The purchase price of any shares as
to which an Option shall be exercised shall be paid in full at the time of the
exercise (i) in cash (ii) by bank or certified check or (iii) by delivery of
certificates for shares of Common Stock appropriately endorsed for transfer to
the Company, equal in fair market value on the date of exercise to the purchase
price of the Common Stock. Each Option granted hereunder shall be evidenced by
an option agreement, a form of which is attached hereto as Exhibit A.
SECTION 6. NON-TRANSFERABILITY
All Options granted under the Directors' Plan shall not, by their terms, be
transferable otherwise than by will or by the laws of descent and distribution,
and shall be exercisable, during the lifetime of the optionee, only by the
optionee.
SECTION 7. WITHHOLDING
The Company shall have the right, in connection with the exercise of
any Option, to deduct from the amount of any payment or other compensation
payable to the optionee, taxes required by law to be withheld from such payment
or other compensation payable to the optionee or to require the recipient to pay
the Company an amount sufficient to provide for any such taxes so required to be
withheld by law.
SECTION 8. TERMINATION OF SERVICE AS A DIRECTOR
In the event an optinee's services as a Director shall terminate for
any reason, any Option granted under the Directors' Plan may be exercised by the
optionee to the extent the optionee was entitled to do so at the date of
termination of service as a Director ("Termination Date"), within the
twenty-four (24) months after such Termination Date; provided, however, that in
no event may an Option be exercised after ten (10) years from the date the
Option is granted or after twenty-four (24) months from the Termination Date,
whichever date is sooner.
The foregoing notwithstanding, in the event that an optionee's
Termination Date is prior to the approval of the Directors; Plan by the
shareholders and the Directors' Plan is subsequently approved by
9
<PAGE>
the shareholders, the Option(s) that would have been exercisable on the
Termination Date had the Directors' Plan been approved shall be exercisable by
the optionee for the balance of the twenty-four (24) month period described
above.
Nothing in the Directors' Plan or in any agreement evidencing an Option
granted pursuant to the Directors' Plan shall confer upon any person any right
to continue in the service of the Company as a Director or interfere in any way
with the rights of the Company or its stockholders to terminate the service of a
director at any time in accordance with the Company's Certificate of
Incorporation and Bylaws.
SECTION 9. DEATH OF DIRECTOR
If an optionee shall die while serving as a Director or within the
period after termination of service as a Director during which the optionee is
permitted to exercise an Option granted under the Directors' Plan, then the
Option may be exercised by a legatee or legatees of the optionee under his or
her last will, or by his or her personal representatives or distributees, to the
extent the optionee was entitled to do so at his or her date of death, at any
time within one (1) year after the death of the optionee, at the end of which
period the Option shall terminate; provided, however, that in no event may an
Option be exercised after the expiration of ten (10) years from the date that
the Option is granted.
SECTION 10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation, reorganization or
liquidation, or any other change in the corporate structure or shares of the
Company, the number and kind of shares for which Options may be granted under
the Directors' Plan and, with respect to outstanding options granted under the
Directors' Plan, the number and kind of shares covered by outstanding Options
and the exercise price shall be equitably adjusted by the Committee to prevent
enlargement or diminution of the rights of optionees and, to the extent possible
consistent with the foregoing, in the same manner so provided in non-statutory
options outstanding under the Company's Equity Incentive Plan.
SECTION 11. LISTING AND REGISTRATION OF SHARES
If at any time the Board shall determine, in its discretion, that the
listing, registration or qualification of any of the shares subject to Options
granted under the Directors' Plan upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of or in connection with the
purchase or issue of shares upon the exercise of Options, then no outstanding
Options may be exercised in full or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board. The Board may require any person
exercising an Option granted under the Directors' Plan to make such
representations and furnish such information as the Board may consider
appropriate in connection with the issuance or delivery of any shares in order
to comply with applicable law and shall have the authority to cause the Company
at its expense to take any action related to the Directors' Plan which may be
required in connection with such listing, registration, qualification, consent,
or approval.
SECTION 12. EFFECTIVE DATE OF DIRECTORS' PLAN
The Directors' Plan, as amended and restated, shall become effective as
of February 21, 1995, subject to approval by the company's shareholders. No
options granted prior to approval by the Company's shareholders shall be
exercisable until such approval shall have been obtained.
EXHIBIT 10.9
PROGINET CORPORATION
EQUITY INCENTIVE PLAN
(amended and restated as of December 5, 1995)
WHEREAS, Proginet Corporation (the "Company") has previously adopted
the Proginet Corporation Equity Incentive Plan (the "Plan") by action of the
Board of Directors of the Company dated August 16, 1994; and
WHEREAS, the Company now wishes to amend and restate the Plan.
NOW THEREFORE, the Plan is hereby amended and restated, as of February
21, 1995, to read in its entirety as follows:
Section 1. Purpose
The purpose of the Plan is to attract and retain key employees and
consultants, to provide an incentive for them to assist the Company to achieve
long-range performance goals, and to enable them to participate in the long-term
growth of the Company.
Section 2. Definitions
"Affiliate" means any business entity in which the Company owns
directly or indirectly 100% or more of the total combined voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, each of whom is a "disinterested
person" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 or any successor provision. In the absence of appointment of another
Committee by the Board, the Compensation and Stock Option Committee of the Board
shall be the Committee.
"Common Stock" or "Stock" means the Common Stock, $.001 par value, of
the Company.
"Company" means Proginet Corporation.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, Designated Beneficiary
shall mean the Participant's estate.
<PAGE>
"Fair Market Value" means, as of any date with respect to Common Stock
or any other property:
a. if the Common Stock is listed on any established stock exchange
or national market system, including without limitation the
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, the closing
sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such exchange or system for the last
market day prior to the time of determination);
b. if the Common Stock is listed on the Vancouver Stock Exchange
(the "VSE"), the closing sales price for such stock (or the
closing bid, if no sales were reported on that date);
c. if the Common Stock is quoted on the NASDAQ System (but not on
the National Market System) or regularly quoted by a recognized
securities dealer but selling prices are not reported, the mean
between the high bid and low ask prices for the Common Stock; and
d. in the absence of an established market for the Common Stock,
the fair market value of such property as determined by the Committee in good
faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Independent Directors' Stock Option Plan" means the Proginet
Corporation Independent Directors' Stock Option Plan.
"Nonstatutory Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under Section 6 which is intended not to
be an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock
Option.
"Participant" means a person selected by the Committee to receive an
Award under the Plan.
"Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
Section 3. Administration
<PAGE>
The Plan shall be administered by the Committee. The Committee shall
have authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the plan. The Committee's
decisions shall be final and binding. To the extent permitted by applicable law,
the Committee may delegate to one or more executive officers of the Company the
power to make Awards to Participants who are not Reporting Persons and all
determinations under the Plan with respect thereto, provided that the Committee
shall fix the maximum amount such Awards for the Participants who are not
Reporting Persons and a maximum for any one Participant.
Section 4. Eligibility
Employees, officers, directors and other insiders of the Company or any
Affiliate as well as any other person or company engaged to provide ongoing
management or consulting services to the Company or any Affiliate, capable of
contributing significantly to the successful performance of the Company, other
than a person who has irrevocably elected not to be eligible, are eligible to be
Participants in the Plan. There is specifically excluded from the group of
persons eligible to be Participants in the Plan any and all members of the Board
who are not employees of the Company or any Affiliate. Incentive Stock Options
may be awarded only to persons eligible to receive such Options under the Code.
An Option may not be granted to any person if, as the result of such grant, such
person would at the time of such grant hold options, whether granted under the
Plan or otherwise, to acquire in aggregate more than 5% of the issued and
outstanding Common Stock of the Company.
Section 5. Stock Available for Awards
a. Awards may be made under the Plan for up to 1,200,000 shares of
Common Stock. Any options granted under the independent Directors' Stock Option
Plan to receive the Company's Common Stock shall reduce the number of shares
available to be awarded hereunder by the amount granted under the Independent
Directors' Stock option Plan. If any Award in respect of shares of Common Stock
expires or is terminated unexercised or is forfeited for any reason or settled
in a manner that results in fewer shares outstanding than were initially
awarded, including without limitation, the surrender of shares in payment for
the Award or such option, or any tax obligation thereon, the shares subject to
such Award or such option, or so surrendered, as the case may be, to the extent
of such expiration, termination, forfeiture or decrease, shall be available for
Awards under the Plan. Shares issued under the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
b. In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value, or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Committee, subject, in the case of Incentive
Stock Options, to any limitation required under the Code, shall equitably adjust
any or all of (I) the number and kind of shares in respect of which Awards may
<PAGE>
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Committee
may make provision for a cash payment with respect to an outstanding Award,
provided that the number of shares subject to any Award shall always be a whole
number and if the Common Stock is at the time of such adjustment listed solely
on the VSE no such adjustment shall be made without the approval of the VSE.
Section 6. Stock Options
a. Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to, and comply with,
Section 422 of the Code or any successor provision, and any regulations
thereunder.
b. The Committee shall establish the option price at the time each
Option is awarded, which price shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of award with respect to Incentive Stock
Options and not less than 50% of the Fair Market Value of the Common Stock on
the date of award with respect to Nonstatutory Stock Options, provided that so
long as the Common Stock is listed solely on the VSE, Nonstatutory Stock Options
having an exercise price that is less than Fair Market Value shall not be
granted.
c. Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter, provided that:
a. all Options shall be non-assignable and non-transferable, except
as contemplated by subsection (b) below;
b. the period within which the Participant's heirs, administrators
or executors may exercise any portion of an Option will not
exceed one year after the date of death of the Participant;
c. subject to subsection (b) above, options may be exercised only
while the Participant is eligible to receive Options pursuant to
the Plan and for a period of 30 days after ceasing to be so
eligible; and
d. Options will expire no later than 10 years from the date of
grant.
The Committee may impose such conditions with respect to the exercise of
Options, including conditions relating to applicable federal or state securities
laws, as it considers necessary or advisable.
d. No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent permitted
by the Committee at or after the award of the
<PAGE>
Option, by delivery of shares of Common Stock owned by the optionee, valued at
their Fair Market Value on the date of delivery.
e. The Committee may provide for the automatic award of an Option upon
the delivery of shares to the Company in payment of an Option for up to the
number of shares so delivered.
Section 7. General Provisions Applicable to Awards
a. Reporting Person Limitations. Any provision of the Plan to the
contrary notwithstanding, to the extent required to qualify for the exemption
provided by Rule 16b-3 under the Securities Exchange Act of 1934 and any
successor provision, (I) any "equity security" (as that term is used in said
Rule 16b-3) granted under the Plan to a Reporting Person must be held for at
least six months from the date of grant or, in the case of a "derivative
security, (as that term is defined in said Rule 16b-3), at least six months
elapse from the date of acquisition of the derivative security to the date of
disposition of its underlying equity security and (ii) any derivative security
issued under the Plan to a Reporting Person shall not be transferable other than
by will, by the laws of descent and distribution or pursuant to a "qualified
domestic relations order" (as the term is used in said Rule 16b-3).
b. Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or comply with applicable tax and regulatory
laws and accounting principles.
c. Committee Discretion. Each type of Award may be made alone, in
addition to, or in relation to any other type of Award. The terms of each type
of Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
d. Settlement. The Committee shall determine whether Awards are settled
in whole or in part in cash, Common Stock, other securities of the Company or
Awards.
e. Dividends and Cash Awards. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest, and (ii)
cash payments in lieu of or in addition to an Award.
f. Termination of Employment. Subject to subsection 6c the Committee
shall determine the effect on an Award of the disability, death, retirement or
other termination of employment of a Participant and the extent to which, and
the period during which, the Participant's legal representative, guardian or
Designated Beneficiary may receive payment of an Award or exercise rights
thereunder.
g. Change in Control. In order to preserve a Participant's rights under
an Award in the event of a change in control of the Company, the Committee in
its discretion may, at the time an
<PAGE>
Award is made or at any time thereafter, take one or more of the following
actions: (i) provide for the acceleration of any time period relating to the
exercise or realization of the Award, (ii) provide for the purchase of the Award
upon the Participant's request for an amount of cash or other property that
could have been received upon the exercise or realization of the Award had the
Award been currently exercisable or payable, (iii) adjust the terms of the Award
in a manner determined by the Committee to reflect the change in control, (iv)
cause the Award to be assumed, or new rights substituted therefor, by another
entity, or (v) make such other provision as the Committee may consider equitable
and in the best interests of the Company.
h. Withholding. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date of
the event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the Award creating the tax obligation, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant.
i. Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization, or converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that (i) the
Participant's consent to such action shall be required unless the Committee
determines that the action taking into account any related action, would not
materially and adversely affect the Participant and (ii) if regulatory or
shareholder approval is required of such amendment, modification or termination,
such approval shall have been obtained.
j. Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization, or converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that (i) the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant and (ii) if regulatory or
shareholder approval is required in respect of such amendment, modification or
termination, such approval shall have been obtained.
Section 12. Miscellaneous.
(a) No Right To Employment. No person shall have any claim or right to
be granted an Award, and the grant of an Award shall not be construed as giving
a Participant the right to employment or continued employment. The Company
expressly reserves the right at any time to dismiss a Participant free from any
liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Shareholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a shareholder with respect to any
<PAGE>
shares of Common Stock to be distributed under the Plan until he or she becomes
the holder thereof. A Participant to whom Common Stock is awarded shall be
considered the holder of the Stock at the time of the Award except as otherwise
provided in the applicable Award.
(c) Effective Date. Subject to the approval of the shareholders of the Company,
the Plan, as amended and restated, shall be effective as of February 21, 1995.
Prior to such approval, Awards may be made under the Plan expressly subject to
such approval.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any
portion thereof at any time, provided that no amendment shall be made without
shareholder approval if such approval is necessary to comply with any applicable
tax or regulatory requirement, including any requirement for exemptive relief
under Section 16(b) of the Securities Exchange Act of 1934 or any successor
provision; and further provided that any amendment to the Plan shall be subject
to filing with the Vancouver Stock Exchange.
(e) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of the state of Delaware.
EXHIBIT 10.10
1997 STOCK OPTION PLAN
OF
PROGINET CORPORATION
--------------------
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
designed to provide an incentive to key employees (including officers and
directors who are key employees), of Proginet Corporation, a ________
corporation (the "Company"), and its present and future subsidiary corporations,
as defined in Paragraph 19 ("Subsidiaries"), and to offer an additional
inducement in obtaining the services of such individuals. The Plan provides for
the grant of "incentive stock options" ("ISOs") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options ("NQSOs"), but the Company makes no warranty as to
the qualification of any option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph
12, the aggregate number of shares of Common Stock, $.0001 par value per share,
of the Company ("Common Stock") for which options may be granted under the Plan
shall not exceed ______. Such shares of Common Stock may, in the discretion of
the Board of Directors of the Company (the "Board of Directors"), consist either
in whole or in part of authorized but unissued shares of Common Stock or shares
of Common Stock held in the treasury of the Company. The Company shall at all
times during the term of the Plan reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of the
Plan. Subject to the provisions of Paragraph 13, any shares of Common Stock
subject to an option which for any reason expires, is cancelled or is terminated
unexercised or which ceases for any reason to be exercisable shall again become
available for the granting of options under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors which, to the extent it shall determine, may delegate its
powers with respect to the administration of the Plan to a committee of the
Board of Directors (the "Committee") consisting of not less than two directors
(or such greater number as required by law), each of whom shall be a
"non-employee director" (within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and an "outside director" (within the meaning of Section
162(m)
<PAGE>
of the Code), to the extent Rule 16b-3 and Section 162(m), respectively,
are applicable to the Company. References in the Plan to determinations or
actions by the Committee shall be deemed to include determinations and actions
by the Board of Directors. A majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, and any acts approved in writing by all
members without a meeting, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine: the key employees who
shall receive options; the times when they shall receive options; whether an
option shall be an ISO or a NQSO; the number of shares of Common Stock to be
subject to each option; the term of each option; the date each option shall
become exercisable; whether an option shall be exercisable in whole, in part or
in installments, and, if in installments, the number of shares of Common Stock
to be subject to each installment; whether the installments shall be cumulative;
the date each installment shall become exercisable and the term of each
installment; whether to accelerate the date of exercise of any installment;
whether shares of Common Stock may be issued on exercise of an option as partly
paid, and, if so, the dates when future installments of the exercise price shall
become due and the amounts of such installments; the exercise price of each
option; the form of payment of the exercise price; whether to restrict the sale
or other disposition of the shares of Common Stock acquired upon the exercise of
an option and to waive any such restriction; whether to subject the exercise of
all or any portion of an option to the fulfillment of contingencies as specified
in the Contract (as described in Paragraph 11), including without limitation,
contingencies relating to entering into a covenant not to compete with the
Company and its Parent and Subsidiaries, to financial objectives for the
Company, a Subsidiary, a division, a product line or other category, and/or the
period of continued employment of the optionee with the Company or its
Subsidiaries, to determine whether such contingencies have been met; to construe
the respective Contracts and the Plan; to determine the amount, if any,
necessary to satisfy the Company's obligation to withhold taxes; with the
consent of the optionee, to cancel or modify an option, provided such option as
modified would be permitted to be granted on such date under the terms of the
Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; and to make all other determinations necessary or advisable for
administering the Plan. The determinations of the Committee on the matters
referred to in this Paragraph 3 shall be conclusive. No member or former member
of the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any option granted hereunder.
4. ELIGIBILITY; GRANTS. The Committee may, consistent with the
purposes of the Plan, grant options from time to time, to key employees
(including officers and directors who are key employees) of the Company or any
of its Subsidiaries. Options granted shall cover such number of shares of Common
Stock as the Committee may determine; provided, however, that the maximum number
of shares subject to options that may be granted to any employee in any fiscal
year of the Company under the Plan (the "162(m) Maximum") may not exceed
________; and further, provided, that the aggregate market value (determined at
the time the option is granted) of the shares of Common Stock for which any
eligible employee may be
-2-
<PAGE>
granted ISOs under the Plan or any other plan of the Company, or of a Parent or
a Subsidiary of the Company, which are exercisable for the first time by such
optionee during any calendar year shall not exceed $100,000. The $100,000 ISO
limitation shall be applied by taking ISOs into account in the order in which
they were granted. Any option (or the portion thereof) granted in excess of such
amount shall be treated as a NQSO.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock
under each Option shall be determined by the Committee; provided, however, that
the exercise price shall not be less than 100% of the fair market value of the
Common Stock subject to such option on the date of grant; and, further provided,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the exercise price of such ISO shall not be less
than 110% of the fair market value of the Common Stock subject to such ISO on
the date of grant.
The fair market value of a share of Common Stock on any day shall be
(a) if the principal market for the Common Stock is a national securities
exchange (including, the Vancouver Stock Exchange), the average between the high
and low sales prices per share of the Common Stock on such day as reported by
such exchange or on a consolidated tape reflecting transactions on such
exchange, (b) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is quoted on the National Association
of Securities Dealers Automated Quotations System ("NASDAQ"), and (i) if actual
sales price information is available with respect to the Common Stock, the
average between the high and low sales prices per share of the Common Stock on
such day on NASDAQ, or (ii) if such information is not available, the average
between the highest bid and the lowest asked prices for the Common Stock on such
day on NASDAQ, or (c) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is not quoted on NASDAQ, the
average between the highest bid and lowest asked prices per share for the Common
Stock on such day as reported on the NASDAQ OTC Bulletin Board Service, National
Quotation Bureau, Incorporated or a comparable service; provided that if clauses
(a), (b) and (c) of this Paragraph are all inapplicable, or if no trades have
been made or no quotes are available for such day, the fair market value of a
share of Common Stock shall be determined by the Committee by any method
consistent with applicable regulations adopted by the Treasury Department
relating to stock options. The determination of the Committee shall be
conclusive in determining the fair market value of the stock.
6. TERM. The term of each option granted pursuant to the Plan shall
be such term as is established by the Committee, in its sole discretion, at or
before the time such option is granted; provided, however, that the term of each
ISO granted pursuant to the Plan shall be for a period not exceeding 10 years
from the date of grant thereof, and further, provided, that if, at the time an
ISO is granted, the optionee owns (or is deemed to own under Section 424(d) of
the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, of any of its Subsidiaries or of a Parent,
the term of the ISO shall be for a
-3-
<PAGE>
period not exceeding five years from the date of grant. Options shall be subject
to earlier termination as hereinafter provided.
7. EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office (at present
__________________________________________________, Attn.:___________), stating
which ISO or NQSO is being exercised, specifying the number of shares of Common
Stock as to which such option is being exercised and accompanied by payment in
full of the aggregate exercise price therefor (or the amount due on exercise if
the Contract permits installment payments) (a) in cash or by certified check or
(b) if the applicable Contract at the time of grant so permits, with the
authorization of the Committee, with previously acquired shares of Common Stock
having an aggregate fair market value, on the date of exercise, equal to the
aggregate exercise price of all options being exercised, or with any combination
of cash, certified check or shares of Common Stock.
The Committee may, in its discretion, permit payment of the exercise
price of an option by delivery by the optionee of a properly executed exercise
notice, together with a copy of his irrevocable instructions to a broker
acceptable to the Committee to deliver promptly to the Company the amount of
sale or loan proceeds sufficient to pay such exercise price. In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a shareholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
option holder using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a shareholder with
respect to such previously acquired shares.
8. TERMINATION OF RELATIONSHIP. Any holder of an Employee Option
whose employment with the Company (and its Parent and Subsidiaries) has
terminated for any reason other than his death or Disability (as defined in
Paragraph 19) may exercise such option, to the extent exercisable on the date of
such termination, at any time within three months after the date of termination,
but not thereafter and in no event after the date the option would otherwise
have expired; provided, however, that if his employment shall be terminated
either (a) for cause, or (b) without the consent of the Company, said option
shall terminate immediately. Options granted under the Plan shall not be
affected by any change in the status of the holder so long as he continues to be
a full-time employee of the Company, its Parent or any of the Subsidiaries
(regardless of having been transferred from one corporation to another).
For purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an
-4-
<PAGE>
individual on military, sick leave or other bona fide leave of absence shall
continue to be considered an employee for purposes of the Plan during such leave
if the period of the leave does not exceed 90 days, or, if longer, so long as
the individual's right to reemployment with the Company (or a related
corporation) is guaranteed either by statute or by contract. If the period of
leave exceeds 90 days and the individual's right to reemployment is not
guaranteed by statute or by contract, the employment relationship shall be
deemed to have terminated on the 91st day of such leave. In addition, for
purposes of the Plan, an optionee's employment with a Subsidiary or Parent of
the Company shall be deemed to have terminated on the date such corporation
ceases to be a Subsidiary or Parent of the Company.
Nothing in the Plan or in any option granted under the Plan shall
confer on any individual any right to continue in the employ of the Company, its
Parent or any of its Subsidiaries, or interfere in any way with the right of the
Company, its Parent or any of its Subsidiaries to terminate such relationship at
any time for any reason whatsoever without liability to the Company, its Parent
or any of its Subsidiaries.
9. DEATH OR DISABILITY OF AN OPTIONEE. If an optionee dies (a) while
he is employed by the Company, its Parent or any of its Subsidiaries, (b) within
three months after the termination of his employment (unless such termination
was for cause or without the consent of the Company) or (c) within one year
following the termination of his employment by reason of Disability, an option
may be exercised, to the extent exercisable on the date of his death, by his
executor, administrator or other person at the time entitled by law to his
rights under such option, at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.
Any optionee whose employment has terminated by reason of Disability
may exercise his option, to the extent exercisable upon the effective date of
such termination, at any time within one year after such date, but not
thereafter and in no event after the date the option would otherwise have
expired.
10. COMPLIANCE WITH SECURITIES LAW. It is a condition to the
exercise of any option that either (a) a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Common Stock to be issued upon such exercise shall be effective and
current at the time of exercise, or (b) there is an exemption from registration
under the Securities Act for the issuance of shares of Common Stock upon such
exercise. Nothing herein shall be construed as requiring the Company to register
shares subject to any option under the Securities Act.
The Committee may require the optionee to execute and deliver to the
Company his representations and warranties, in form and substance satisfactory
to the Committee, that (i) the shares of Common Stock to be issued upon the
exercise of the option are being acquired by the optionee for his own account,
for investment only and not with a view to
-5-
<PAGE>
the resale or distribution thereof, and (ii) any subsequent resale or
distribution of shares of Common Stock by such optionee will be made only
pursuant to (a) a Registration Statement under the Securities Act which is
effective and current with respect to the shares of Common Stock being sold, or
(b) a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption, the optionee shall prior to any offer of
sale or sale of such shares of Common Stock provide the Company with a favorable
written opinion of counsel, in form and substance satisfactory to the Company,
as to the applicability of such exemption to the proposed sale or distribution.
In addition, if at any time the Committee shall determine in its discretion that
the listing or qualification of the shares of Common Stock subject to such
option on any securities exchange or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of an option, or the issuance
of shares of Common Stock thereunder, such option may not be exercised in whole
or in part unless such listing, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms and conditions not inconsistent herewith
as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any
other provisions of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger or
consolidation in which the Company is the surviving corporation, split-up,
spin-off, combination or exchange of shares or the like, the aggregate number
and kind of shares subject to the Plan, the aggregate number and kind of shares
subject to each outstanding option and the exercise price thereof and the 162(m)
Maximum shall be appropriately adjusted by the Board of Directors, whose
determination shall be conclusive.
In the event of (a) the liquidation or dissolution of the Company,
(b) a merger or consolidation in which the Company is not the surviving
corporation, or (c) any other capital reorganization (other than a
recapitalization) in which more than 50% of the shares of Common Stock of the
Company entitled to vote are exchanged, any outstanding options shall terminate,
unless other provision is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by
the Board of Directors on _________, 1997. No option may be granted under the
Plan after _________, 2007. The Board of Directors, without further approval of
the Company's shareholders, may at any time suspend or terminate the Plan, in
whole or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISO granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the provisions of Rule 16b-3 promulgated under the
-6-
<PAGE>
Exchange Act, Section 162(m) of the Code and to conform to any change in
applicable law or to regulations or rulings of administrative agencies;
provided, however, that no amendment shall be effective without the requisite
prior or subsequent shareholder approval which would (a) except as contemplated
in Paragraph 12, increase the maximum number of shares of Common Stock for which
options may be granted under the Plan or the 162(m) Maximum, (b) materially
increase the benefits to participants under the Plan or (c) change the
eligibility requirements for individuals entitled to receive options hereunder.
No termination, suspension or amendment of the Plan or amendment to the Contract
shall, without the consent of the holder of an existing option affected thereby,
adversely affect his rights under such option. The power of the Committee to
construe and administer any options granted under the Plan prior to the
termination or suspension of the Plan nevertheless shall continue after such
termination or during such suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the holder
thereof, only by him or his legal representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
15. WITHHOLDING TAXES. The Company may withhold cash and/or, with
the authorization of the Committee, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value equal to the amount which
it determines is necessary to satisfy its obligation to withhold Federal, state
and local income taxes or other taxes incurred by reason of the grant or
exercise of an option, its disposition, or the disposition of the underlying
shares of Common Stock. Alternatively, the Company may require the holder to pay
to the Company such amount, in cash, promptly upon demand. The Company shall not
be required to issue any shares of Common Stock pursuant to any such option
until all required payments have been made. Fair market value of the shares of
Common Stock shall be determined in accordance with Paragraph 5.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the certificates for shares of Common Stock issued upon
exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its discretion, to be necessary or appropriate to (a) prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act, (b) implement the provisions of the Plan or any agreement between the
Company and the optionee with respect to such shares of Common Stock, or (c)
permit the Company to determine the occurrence of a "disqualifying disposition,"
as described in Section 421(b) of the Code, of the shares of Common Stock
transferred upon the exercise of an ISO granted under the Plan.
-7-
<PAGE>
The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of
Common Stock pursuant to the exercise of options under the Plan shall be added
to the general funds of the Company and used for its general corporate purposes
as the Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the shareholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS.
(a) Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.
(b) Parent. The term "Parent" shall have the same definition as
"parent corporation" in Section 424(e) of the Code.
(c) Constituent Corporation. The term "Constituent Corporation"
shall mean any corporation which engages with the Company, its Parent or any
Subsidiary in a transaction to which Section 424(a) of the Code applies (or
would apply if the option assumed or substituted were an ISO), or any Parent or
any Subsidiary of such corporation.
(d) Disability. The term "Disability" shall mean a permanent and
total disability within the meaning of Section 22(e)(3) of the Code.
20. GOVERNING LAW. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of [New York].
21. PARTIAL INVALIDITY. The invalidity or illegality of any
provision herein shall not affect the validity of any other provision.
22. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the votes cast at the next duly held meeting of the Company's
shareholders at which a majority of the outstanding voting shares are present,
in person or by proxy, and voting on the Plan. No options granted pursuant to
the Plan may be exercised prior to such approval, provided that the date of
grant of any options granted thereunder shall be determined as if the amendment
to the Plan had not been subject to such approval. Notwithstanding the
foregoing, if
-8-
<PAGE>
the Plan is not approved by a vote of the shareholders of the Company on or
before _________, 1997, the Plan and any options granted thereunder shall
terminate.
-9-
EXHIBIT 10.11
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
INCENTIVE STOCK OPTION AGREEMENT made this 16th day of November 1999
between PROGINET CORPORATION, a Delaware corporation (hereinafter called the
"Company") and______________, an employee of the Company(hereinafter called the
"Employee").
WHEREAS, the company desires, by affording the Employee opportunity to
purchase shares of its common stock, $.001 par value per share ("Stock"),
pursuant to the exercise of an Incentive Stock Option, as hereinafter provided,
to carry out the purpose of the Equity Incentive Plan of the Company ("Plan");
and
WHEREAS, the Employee desires to acquire the opportunity to purchase
shares of Stock, under the terms and conditions herein stated and in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration acknowledged by the
parties to be adequate, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to the Employee an option
("Option") to purchase all or any part of an aggregate of shares of Stock
("Option Shares"), such number being subject to adjustment as provided in
paragraph 7 hereof, on the terms and conditions herein set forth , and as
set forth in the Plan.
2. Purchase Price. The purchase price ("Purchase Price") of the Options Shares
shall be the price of the Company's Stock at closing on the Vancouver Stock
Exchange on the date of the grant, which was $ per share.
3. Terms and Condition of Option.
(a) The term of the Option shall be for a period of ten (10) years from the
date hereof, subject to earlier termination as provided in Section 6
and 7 hereof.
(b) The Option may not be exercised as to fewer than 100 Option shares at
any one time (or the number of shares then purchasable under the
Option, if less than 100 Shares are then purchasable under the Option).
(c) The purchase price of the Option Shares as to which the Option shall be
exercised shall be paid, at the time of exercise, in full (i) in cash
or (ii) by delivery of certificates for shares of Stock, appropriately
endorsed for transfer to the Company, equal in fair market value on the
date of exercise to the Purchase Price of the Option Shares.
(d) Subject to the provisions of Section 6 below, the Option may not be
exercised at any time unless the Employee shall have been and is in the
continuous employ of the Company from the date hereof to the date of
the exercise of the Option
1
<PAGE>
<TABLE>
<CAPTION>
(e) The Option shall only be exercisable as follows:
-----------------------------------------------------------------------------------------------------------
GRANT DATE SHARES PRICE $ DATE(S) TO BE VESTING CRITERIA
GRANTED VESTING VESTED
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
If company profitability of US $400,000
is achieved for Fiscal Year End 2000
-----------------------------------------------------------------------------------------------------------
None
-----------------------------------------------------------------------------------------------------------
If company profitability of US $600,000
is achieved for Fiscal Year End 2001
-----------------------------------------------------------------------------------------------------------
None
-----------------------------------------------------------------------------------------------------------
</TABLE>
provided, however, that the Option shall be fully exercisable upon (i)
(A) merger, reorganization or consolidation of the Company into or with
another corporation or entity unless the stockholders or the Company
immediately prior thereto shall have the right, immediately thereafter,
to cast at least a majority of the votes of voting securities of the
resulting or surviving corporation or entity on any matter on which any
such holders of voting securities shall be entitled to vote, or (B)
sale of all or substantially all of the Company's assets to another
corporation, or (ii) there shall be a voluntary or involuntary
dissolution, liquidation, or winding up of the Company. In any one or
more of said cases, the Company shall give written notice, by first
class mail, postage prepaid, addressed to the Employee at his or her
address appearing on the records of the Company, of the date on which
the action in question shall take place. Such notice shall also specify
the date as of which the holders of Stock of record shall be entitled
to exchange their stock for securities or other property deliverable
upon consummation of the action in question. Such written notice shall
be given at least twenty (20) days prior to date upon which the action
in question is to be effected, and not less than twenty (20) days prior
the record date or the date on which the Company's transfer books are
closed in respect thereto. Anything to the contrary herein contained
notwithstanding, the Option shall not be exercisable after such time as
provided in paragraph 3(a) hereof.
(f) The holder of the Option shall not have any of the rights of a
stockholder with respect to the Option Shares except to the extent that
one or more certificates for such shares shall be delivered to him upon
the due exercise of the Option.
(g) The Option may not be exercised unless at the date of exercise (i) a
registration statement on Form S-8 under the Securities Act of 1933
(the "Act"), as amended, relating to the Option Shares covered by the
Option shall be in effect, or (ii) in the opinion of counsel to the
holder of the Option, in form and substance satisfactory to counsel to
the Company, an exemption from the registration requirements of the Act
relating to the Option Shares covered by the Option is available.
(h) The Company may impose at any time such other restrictions on any
Option Shares sold hereunder as it may deem advisable, including
without limitation, (i) restrictions under the Act, as amended, in
addition to those set forth above; (ii) restrictions or requirements of
any stock exchange upon which such Option Shares or shares of the same
class are
2
<PAGE>
then listed; and (iii) restrictions under any "blue sky" or securities
laws applicable to such Option Shares.
4. Nontransferability. The Option is not transferable by the Employee other
than by will or the laws of descent and distribution, and may be exercised
only by him or otherwise in accordance with the provisions of Section 6
below.
5. Covenants of Holder and Restriction on Transfer.
(a) Unless at the time the Option is exercised there is an effective
registration statement covering the Option Shares issuable upon
exercise of the Option, the Employee, by acceptance hereof, agrees that
he will acquire all of the Option Shares issuable upon the exercise of
this Option for his own account for investment and not with a view to
the distribution of such shares. The Employee further agrees that, upon
each exercise of this Option, he will at such time or times make such
representation and warranties to the Company confirming such agreement
as the Company shall require.
(b) Unless at the time the Option is exercised there is an effective
registration statement covering the Option Shares issuable upon
exercise of the Option, any certificate or certificates representing
the Option Shares shall bear a legend substantially upon the following
terms:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act"), and
may not be offered, sold, transferred, pledged or hypothecated except
pursuant to an effective registration statement under the Act or in a
transaction which, in the opinion of counsel to the company, is exempt
from registration under the Act and any applicable state "blue sky"
laws; and such securities, furthermore, are subject to certain
restriction as set forth in an agreement between the Company and the
holder hereof, a copy of which shall be furnished to the holder without
charge upon written request to the Secretary of the Company."
6. Termination of Employment
(a) In the event that the employment of the Employee shall be terminated by
the Company other than for cause or by Employee, then the Employee
shall be entitled to exercise the vested portion of the Option
(determined at the date of such termination) within the 30-day period
following such termination.
(b) In the event that the Employee becomes "disabled" (as defined in
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the
"Code") and, as a result, his employment with the Company is
terminated, or if the Employee dies, then the Employee or his legal
representative, as applicable, shall be entitled to exercise the vested
portion of the Option (determined at the date of such termination or
death, as applicable) within 12 months following such termination or
death, as applicable.
3
<PAGE>
(c) In all other cases, including without limitation, termination of the
employment of the Employee by the Company for cause, the Option shall
terminate and no longer be exercisable upon termination of the
Employee's employment with the Company.
(d) So long as the Employee shall continue to be an employee of the
Company, the Option shall not be affected by any change of duties or
position of the Employee. Nothing in this Option Agreement shall confer
upon the Employee any right to continue in the employ of the Company or
interfere in any way with the right of the Company to terminate his
employment at any time.
7. Capital Changes Affecting the Stock.
(a) In the event that, after the date hereof and prior to the exercise of
the Option, the Company shall issue additional shares of Stock as a
result of a stock dividend being paid or becoming payable in respect of
the Stock or there shall occur a split or reverse-split in the number
of shares of Stock outstanding, then the number of shares for which the
Option may thereafter be exercised shall be proportionately adjusted,
so that the Option shall be deemed to cover such additional shares of
Stock to the extent that the same would have been issued to the
Employee had such Option been exercised in its entirety immediately
prior to the issuance of such additional shares of Stock. There shall
be a corresponding proportionate adjustment of the Purchase Price of
such Option so that in the aggregate the Purchase Price for all shares
of Stock then covered by the Option shall be the same as the aggregate
Purchase Price for the shares of Stock remaining subject to such Option
immediately prior the issuance of such additional shares of Stock.
(b) In the event of a reclassification or change of outstanding shares of
Stock or a consolidation or merger of the Company with or into another
corporation or a sale or conveyance, substantially as a whole, of the
property of the Company, the Company shall take appropriate actions to
enable the Employee, upon exercise of his or her Option, to be entitled
to receive shares of Stock or other securities equivalent in kind and
value to the shares of Stock he or she would have held if he or she
both had exercised the Option in full immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and
had continued to hold such shares of Stock (together with all other
shares and securities thereafter issued in respect thereof) until the
time of actual exercise of the Option.
(c) In the event that there is to occur a recapitalization involving an
increase in the par value of the Stock which would result in a par
value exceeding the exercise price under an Option, the Company shall
notify the Employee of such proposed recapitalization immediately upon
its being recommended by the Board of Directors to the Company's
shareholders, after which the Employee shall have the right to exercise
his or her Option prior to such recapitalization; if the Employee fails
to exercise the Option prior to recapitalization, the exercise price
under the Option shall be appropriately adjusted. In the event of a
dissolution or liquidation of the Company, except pursuant to a
transaction to which Section 424(a) of the Code applies, each Option
shall terminate, but the
4
<PAGE>
Employee shall have the right to exercise his or her Option prior to
such dissolution or liquidation.
(d) No fraction of a share shall be purchasable or deliverable under an
Option. In the event that an adjustment of the number of shares
purchasable under an Option shall cause such number to include a
fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares and the purchase price shall be
appropriately adjusted.
8. Successive Options. This Option may be exercised notwithstanding that there
is outstanding any Option of an earlier date granted to the Employee under
the Plan.
9. Method of Exercising Option. Subject to the terms and conditions of this
Option Agreement, the Option may be exercised by written notice to the
Company at its main office, 200 Garden City Plaza, Garden City, New York,
11530. Such notice shall state the election to exercise the Option and
number of Option Shares with respect to which it is being exercised, and
shall be signed by the person or persons so exercising this Option. Such
notice shall either (a) be accompanied by payment of the full Purchase
Price Option Shares, or (b) fix a date (not less than (5) nor more than ten
(10) business days from the date such notice shall be received by the
Company) for the payment of the full Purchase Price to the Company, against
delivery of a certificate or certificates representing such Option Shares.
The Company shall deliver or cause to be delivered to the Employee a
certificate or certificates for the Option Shares then being purchased by
the Employee. The certificate or certificates for the Option Shares as to
which the Option shall have been so exercised shall be registered in the
name of the person or persons so exercising the Option and shall be
delivered as provided above to or upon the written order of the person or
persons exercising the Option. All Option Shares that shall be purchased
upon the exercise of the Option as provided herein shall be fully paid and
nonaccessible.
10. Incentive Stock Option Status. It is intended that the Option represented
by this Option Agreement shall be construed as an "Incentive Stock Option"
as that term is defined in the Section 422 of the Code.
11. General. The Company shall at all times during the term of the Option
reserve and keep available such number of Option Shares as will be
sufficient to satisfy the requirements of this Option Agreement, shall pay
all original issue and transfer taxes with respect to the issue and
transfer of Option Shares pursuant hereto and all other necessary fees and
expenses incurred by the Company in connection therewith, and will from
time to time use its best efforts to comply with all laws and regulations
which, in the opinion of counsel for the Company, shall be applicable
thereto.
12. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Company, its successors and assigns, and the Employee and
his successors.
5
<PAGE>
13. Notices. Any notice or communication hereunder shall be considered to have
been given if mailed, certified mail, return receipt requested, if to the
Company, to its principle business address, or if to the Employee, to his
address as listed in the records of the Company.
14. Priority of Plan. The Plan shall control in any matters of inconsistency
between the Plan and this Option Agreement.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be duly
executed by its officer thereunto authorized and the Employee has hereunto
set his hand and seal, all on the day and year first above written.
EMPLOYEE: PROGINET CORPORATION:
___________________________ By:___________________________
President
6
EXHIBIT 10.12
MICROSOFT CORPORATION
AND
PROGINET CORPORATION
ASSET PURCHASE AGREEMENT
Dated as of December 17, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS 1
ARTICLE I DEFINITIONS 1
1.1 Assumed Obligations 1
1.2 Closing 1
1.3 Closing Date 1
1.4 Company Affiliate 2
1.5 Confidential Information 2
1.6 Follow-On Transition Period 2
1.7 Initial Transition Period 2
1.8 Intellectual Property Rights 2
1.9 MVS Platform 2
1.1O Object Code 3
1.11 Other Platforms 3
1.12 Product Revenues 3
1.13 Source Code 3
1.14 Transaction Period 3
1.15 Windows Components of the Acquired Assets 3
1.16 Windows Platforms 3
1.17 Other Defined Terms 3
ARTICLE II ACQUISITION AND DISPOSITION OF ACQUIRED ASSETS 3
2.1 Acquired Assets 3
2.1.1 Other Assets 4
2.1.2 Other Assets 4
2.1.3 Other Assets 4
2.2 Assumption of Obligations 4
ARTICLE III PURCHASE PRICE AND PAYMENT 4
3.1 Minimum Purchase Price 4
3.3 Additional Share Issuance 5
3.3 Additional Contingent Payments by Company 5
3.4 Restriction on Transfer 6
3.5 Fractional Shares 6
ARTICLE IV CLOSING 6
4.1 Closing and Delivery of Acquired Assets 6
4.2 Method of Acquisition 6
4.2.1 Conveyance of Acquired Assets 6
4.2.2 Assumption of Obligations 7
ARTICLE V REPRESENTATIONS AND WARRANTIES 7
5.1 Representations and Warranties of the Company 7
5.1.1 Authority 7
5.1.2 Adequate Shares 7
5.1.3 Due Authorization 7
5.1.4 Reliance 7
5.2 Representations and Warranties of Microsoft 7
<PAGE>
5.2.1 Authority 7
5.2.2 Ownership of Acquired Assets 7
5.2.3 Reliance 8
ARTICLE VI ADDITIONAL AGREEMENTS 8
6.1 Registration Rights 8
6.2 Board Representation 11
6.3 BackOffice License Rights 11
6.4 Expenses 12
6.5 Additional Agreements 12
6.7 Public Announcements 12
6.8 Taxes 12
6.9 Bulk Sales 12
ARTICLE VII CONDITIONS PRECEDENT 13
7.1 Conditions to Company's Obligations 13
7.1.1 Representations and Warranties 13
7.1.2 Delivery of Software Code 13
7.1.3 Conveyance of Acquired Assets 13
7.1.4 Investment Agreement 13
7.1.5 Opinion of Counsel 13
7.2 Conditions to Microsoft's Obligations 14
7.2.1 Representations and Warranties 14
7.2.2 Delivery of Consideration 14
7.2.3 Assumption of Obligations 14
7.2.4 Opinion of Counsel 14
7.3 Effectiveness 14
ARTICLE VIII CONDITIONS SUBSEQUENT 14
8.1 Product Support Plan 15
8.2 Payments Related to Product Support 15
8.3 Customer Relationships 15
8.4 Company Upgrades 15
8.5 Marketing Efforts 16
ARTICLE IX INDEMNIFICATION 16
9.1 Indemnification by Company 16
9.2 Indemnification by Microsoft 18
9.3 Limitations of Liability 18
ARTICLE X MISCELLANEOUS 19
10.1 Notices 19
10.2 Dispute_Resolution 19
10.3 Assignment 19
10.4 Construction 20
10.5 Entire Agreement 20
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of December
17, 1996 (the "Agreement Date") by and between MICROSOFT CORPORATION, a
Washington corporation located at One Microsoft Way, Redmond, WA 98052
("Microsoft") and PROGINET CORPORATION, A Delaware corporation located at 200
Garden City Plaza, Garden City, New York 11530 ("Company").
RECITALS
A. COMPANY DESIRES TO ACQUIRE CERTAIN ASSETS OF MICROSOFT (THE "Acquired ASSETS"
AS DEFINED IN SECTION 2.1) AND TO ASSUME CERTAIN CONTRACTUAL OBLIGATIONS (THE
"Assumed, Obligations" AS DEFINED IN SECTION 1.1), ALL ON THE TERMS AND SUBJECT
TO THE CONDITIONS HEREINAFTER SET FORTH.
7.2.2
A. MICROSOFT DESIRES TO SELL SUCH ASSETS TO COMPANY, AND TO TRANSFER SUCH
OBLIGATIONS TO COMPANY, ON THE TERMS AND SUBJECT TO THE CONDITIONS HEREINAFTER
SET FORTH.
7.2.3
A. THE BOARD OF DIRECTORS OF COMPANY HAS APPROVED THE TERMS OF THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREBY.
7.2.4
7.2.5 D. THE PARTIES FURTHER DESIRE TO COOPERATE IN CERTAIN MARKETING
ACTIVITIES CONCERNING THE ACQUIRED ASSETS, AS DESCRIBED IN EXHIBIT C TO THIS
AGREEMENT (THE "Joint Sales and Support Plan").
INTENDING TO BE LEGALLY BOUND, and in consideration of the promises and
the mutual representations, warranties, covenants and agreements contained
herein, Microsoft and Company hereby agrees as follows:
ARTICLE I
DEFINITIONS
7.2.6 1.1 "Assumed Obligations" MEANS ALL AGREEMENTS, OBLIGATIONS AND
LIABILITIES WHICH COMPANY AGREES TO ASSUME UNDER THE TERMS OF THIS AGREEMENT, AS
LISTED IN EXHIBIT B AND FURTHER SPECIFIED IN SECTION 2.2 BELOW.
1.2 "CLOSING" means the closing of the transaction contemplated by this
Agreement, as such closing is further described in Section 4.1 below.
1.3 "CLOSING DATE" means the date on which the Closing occurs, as such date is
further described in Section 4.1 below.
1.4 "COMPANY AFFILIATE" means any entity directly or indirectly controlling,
controlled by, or under common control with Company, where "controlling,
controlling, and under common control with" refers to the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of an entity, whether through the ownership of voting shares, by
contract, or otherwise. In the case of an entity that is a partnership, limited
liability company, corporation, or similar entity and that has partners,
members, or shareholders with equal ownership interests or equal control
interests, by contract or otherwise, each such partner, member, or shareholder
shall be deemed to possess, directly or indirectly, the power to direct or cause
the direction of the management and policies of that entity.
1.5 "CONFIDENTIAL INFORMATION" means any trade secrets relating to either
party's product plans, designs, costs, prices and names, finances, marketing
plans, business opportunities, personnel, research development or know-how,
including without limitation the Source Code of the Acquired Assets.
Confidential Information shall not include information that: (i) is or becomes
generally known or available by publication, commercial use or otherwise through
no fault of the receiving party; (ii) is known and has
<PAGE>
been reduced to tangible form by the receiving party at the time of disclosure
and is not subject to restriction; (iii) is independently developed or learned
by the receiving party; (iv) is lawfully obtained from a third party that has
the right to make such disclosure; (v) is made generally available by the
disclosing party without restriction on disclosure; (vi) is disclosed to the
extent required by judicial or administrative process when the party making such
disclosure believes in good faith and after consultation with the other party
that it is legally required to do so; or (vii) is contained in the documentation
components of the Acquired Assets.
1.6 "FOLLOW-ON TRANSITION PERIOD" means the fifteen (15) month period
immediately following the Initial Transition Period; i.e., beginning as of the
fourth (4th) month after the Closing Date and ending as of the eighteenth (I8th)
month after the Effective Date.
1.7 "INITIAL TRANSITION PERIOD" means the three (3) month period immediately
following the Closing Date.
1.8 "INTELLECTUAL PROPERTY RIGHTS" means all intellectual property rights
arising under statutory or common law, and whether or not perfected, including,
without limitation, all (a) patents and patent applications owned or licensable
by a party hereto, (b) rights associated with works of authorship, including
copyrights, copyright applications, mask work rights, mask work applications,
and mask work registrations, (c) rights relating to the protection of trade
secrets and confidential information, (d) any rights analogous to those set
forth in this Section 1.7 and any other proprietary rights relating to
intangible property, and (e) divisions, continuations, renewals, reissues and
extensions of the foregoing (as and to the extent applicable) now existing,
hereafter filed, issued or acquired.
1.9 "MVS PLATFORM" means the IBM mainframe operating system known as "WS" or
"OS/390," and any direct successors thereto.
1.10 "OBJECT CODE" means machine-executable computer software code in binary
form.
1.11 "OTHER PLATFORMS" means any and all computer operating systems
other than the MVS Platform or the Windows Platforms on which any of
the Acquired Assets operate as of the Closing Date.
7.2.7 1.12 "Product Revenues" MEANS GROSS REVENUES EARNED BY COMPANY IN
THE FORM OF LICENSE FEES, ROYALTIES, MAINTENANCE FEES, AND SUPPORT FEES
(INCLUDING BOTH PERIODIC MAINTENANCE AND/OR SUPPORT CHARGES AND CHARGES
FOR ERROR CORRECTION SERVICES CHARGED ON A PER-INCIDENT OR HOURLY
BASIS) WITH RESPECT TO THE ACQUIRED ASSETS. PRODUCT REVENUES ALSO
INCLUDE GROSS REVENUES EARNED BY ANY COMPANY AFFILIATE IN THE FORM OF
LICENSE FEES, ROYALTIES, MAINTENANCE FEES, AND SUPPORT FEES WITH
RESPECT TO THE ACQUIRED ASSETS, LESS ANY FEES PAID BY SUCH COMPANY
AFFILIATE TO COMPANY IN CONSIDERATION OF SUCH EXERCISES OF RIGHTS IN
ACQUIRED ASSETS. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN,
PRODUCT REVENUES SHALL NOT INCLUDE ANY REVENUES EARNED BY COMPANY OR A
COMPANY AFFILIATE IN CONSIDERATION OF THE SIX HUNDRED AND EIGHTY-FOUR
THOUSAND SIX HUNDRED AND FOUR DOLLARS (US$684,604.00) IN MICROSOFT
OBLIGATIONS ASSUMED BY COMPANY PURSUANT TO SECTION 2 OF THIS AGREEMENT
1.13 "SOURCE CODE" means computer software code in human-readable,
high-level language form which, when compiled or assembled, becomes the
executable Object Code of a software program. Source Code shall include
all developer comments concerning the relevant software code.
7.2.8 1.14 "Transition Period" MEANS THE EIGHTEEN (18) MONTH PERIOD
IMMEDIATELY FOLLOWING THE CLOSING DATE, AND CONSISTS OF BOTH THE
INITIAL TRANSITION PERIOD AND THE FOLLOW-ON TRANSITION PERIOD.
<PAGE>
1.15 "WINDOWS COMPONENTS OF THE ACQUIRED ASSETS" means those portions
of the Acquired Assets which operate on Windows Platforms.
7.2.9 1.16 "Windows Platforms" MEANS MICROSOFT'S WINDOWS 3.X, WINDOWS
95, WINDOWS NT WORKSTATION, AND WINDOWS NT SERVER OPERATING SYSTEMS,
AND ANY DIRECT SUCCESSORS THERETO.
1.17 OTHER DEFINED TERMS. All other initially capitalized terms shall
have the meanings assigned to them in this Agreement.
ARTICLE II
ACQUISITION AND DISPOSITION OF ACQUIRED ASSETS
7.2.10 2.1 Acquired Assets. SUBJECT TO THE TERMS AND CONDITIONS OF THIS
AGREEMENT, AT THE CLOSING (AS DEFINED BELOW), MICROSOFT SHALL SELL, CONVEY,
TRANSFER, ASSIGN AND DELIVER TO COMPANY, AND COMPANY SHALL PURCHASE, ACQUIRE AND
ACCEPT FROM MICROSOFT, THE FOLLOWING ASSETS:
2.1.1 Netwise Assets. ALL SOFTWARE, DOCUMENTATION, TEST CASES,
DEVELOPMENT HISTORY DATABASE, TRAINING MATERIALS AND RELATED
PROPRIETARY MATERIALS ACQUIRED BY MICROSOFT FROM NETWISE, INC. (THE
"NETWISE ASSETS") UNDER AN ASSET PURCHASE AGREEMENT DATED OCTOBER 27,
1995 (THE "NETWISE ASSET PURCHASE AGREEMENT").
7.2.11
2.1.2 Netwise Assets Further Developed or Modified by Microsoft. THE
ACQUIRED ASSETS ALSO INCLUDE ALL ERROR CORRECTIONS AND UPDATES
TO THE NETWISE ASSETS, DOCUMENTATION AND MATERIALS RELATED TO
THE NETWISE ASSETS DEVELOPED BY MICROSOFT BETWEEN OCTOBER 27,
1995 AND THE CLOSING DATE OF THIS AGREEMENT.
7.2.12
2.1.3 Other Assets. "Other Assets" WHICH SHALL MEAN ALL OF
MICROSOFT'S INTANGIBLE ASSETS ACQUIRED PURSUANT TO THE NETWISE
ASSET PURCHASE AGREEMENT, INCLUDING GOODWILL, GOING CONCERN
VALUE, CUSTOMER LISTS, CONTRACTS, AGREEMENTS, LICENSES OR
LICENSE AGREEMENTS, COMMITMENTS, WARRANTIES, CLAIMS AND OTHER
CHOATE AND INCHOATE RIGHTS, BUT EXCLUDING WITHOUT LIMITATION,
THE RETAINED OBLIGATIONS (AS DEFINED BELOW), CASH, MARKETABLE
SECURITIES, RECEIVABLES AND RIGHTS RELATING TO CONTRACTUAL
OBLIGATIONS (OTHER THAN THE
ASSUMED OBLIGATIONS (AS DEFINED BELOW)).
All of the above shall be referred to as the "ACQUIRED ASSETS";
provided, however, that notwithstanding anything to the contrary
hereinabove, the Acquired Assets do not include any leases, equipment
maintenance agreements or other contractual obligations to third
parties assumed by Microsoft under the Netwise Asset Purchase Agreement
(the "Retained Obligations").
7.2.13 2.2 Assumption of Obligations. AT THE CLOSING, COMPANY SHALL
ASSUME ONLY THOSE WRITTEN CONTRACTS, WRITTEN AGREEMENTS, WRITTEN LEASES
FOR PERSONAL PROPERTY AND WRITTEN COMMITMENTS OF MICROSOFT PERTAINING
TO THE ACQUIRED ASSETS AS OF THE CLOSING WHICH ARE SPECIFICALLY LISTED
ON EXHIBIT B (THE "Assumed Obligations"), WHICH SHALL THEREAFTER BE
PERFORMED BY COMPANY WHEN DUE IN ACCORDANCE WITH THE TERMS THEREOF
MICROSOFT SHALL USE ITS COMMERCIALLY REASONABLE BEST EFFORTS TO OBTAIN
CONSENT TO COMPANY'S ASSUMPTION OF ANY CONTRACTS REQUIRING THIRD PARTY
CONSENT. COMPANY SHALL BE SOLELY RESPONSIBLE FOR ALL COLLECTION MATTERS
AND ENTITLED TO RECEIVE ALL BILLINGS, PAYMENTS, AND RECEIPTS IN
CONNECTION WITH THE ASSUMED OBLIGATIONS, AND SHALL BE SOLELY
RESPONSIBLE FOR COMPLYING WITH MICROSOFT'S OBLIGATIONS AND ASSUMING
MICROSOFT'S LIABILITIES UNDER AND WITH RESPECT TO THE ASSUMED
OBLIGATIONS. COMPANY ASSUMES NO LIABILITIES WITH RESPECT TO THE
RETAINED OBLIGATIONS. AS OF THE TIME OF SUCH DELIVERY AND SUBJECT TO
SUCH EFFECTIVENESS, MICROSOFT'S SOLE OBLIGATIONS WITH RESPECT TO THE
ASSUMED OBLIGATIONS SHALL BE ITS OBLIGATIONS TO
COMPANY AS SET FORTH IN THIS AGREEMENT EACH PARTY WILL REMIT TO THE
OTHER, WITHIN @ (30) DAYS OF RECEIPT, ANY AMOUNTS RECEIVED BY SUCH
PARTY WHICH WERE EARNED BY THE OTHER PARTY IN CONNECTION WITH THE
ACQUIRED ASSETS AND SUPPORT THEREOF, AS DETERMINED AS OF THE CLOSING
DATE.
ARTICLE III
PURCHASE PRICE AND PAYMENT
3.1 Minimum Purchase Price. SUBJECT TO ARTICLE VII, COMPANY SHALL PAY
MICROSOFT A MINIMUM PURCHASE PRICE OF TWO MILLION SEVEN HUNDRED AND
EIGHTY-FOUR THOUSAND SIX HUNDRED AND FOUR DOLLARS (US$2,784,604.00), WHICH
SHALL INCLUDE BOTH AN ASSUMPTION OF OBLIGATIONS AND AN EQUITY COMPONENT AND
WHICH SHALL BE DUE AND NONREFUNDABLE AS OF THE CLOSING DATE, AS FOLLOWS:
7.2.14
3.1.1 COMPANY SHALL MAKE AN INITIAL PAYMENT TO MICROSOFT IN THE FORM OF
AN ASSUMPTION OF ASSUMED OBLIGATIONS EQUAL TO SIX HUNDRED AND
EIGHTY-FOUR THOUSAND SIX HUNDRED AND FOUR DOLLARS (US$684,604.00).
7.2.15
3.1.2 COMPANY SHALL MAKE FURTHER PAYMENTS IN THE FORM OF COMPANY'S
COMMON STOCK, PAR VALUE $.OOI PER SHARE OF COMPANY (THE "SHARES"),
WHICH SHARES SHALL BE EVIDENCED BY STOCK CERTIFICATES WITH LEGENDS AND
RESTRICTIONS AS REQUIRED BY LAW. THIS PAYMENT SHALL BE DELIVERED TO
MICROSOFT AS FOLLOWS: ON THE EIGHTEEN (18) MONTH ANNIVERSARY OF THE
CLOSING DATE (THE "18-MONTH ANNIVERSARY DATE"), COMPANY SHALL ISSUE
SHARES TO MICROSOFT HAVING A FAIR MARKET VALUE OF TWO MILLION ONE
HUNDRED THOUSAND DOLLARS (US$2,100,000.00). THE "FAIR MARKET VALUE" OF
THE SHARES TO BE ISSUED UNDER THIS SECTION 3.1.2 SHALL BE DETERMINED BY
DIVIDING TWO MILLION ONE HUNDRED THOUSAND DOLLARS (US$2,100,000.00) BY
THE AVERAGE CLOSING PRICE OF THE SHARES AS PUBLICLY REPORTED BY THE
EXCHANGE ON WHICH THE SHARES ARE LISTED, AS OF THE CLOSING TIME OF THE
LISTING EXCHANGE (IN SUCH EXCHANGE'S TIME ZONE) OVER THE TWENTY (20)
TRADING DAYS ENDING ONE TRADING DAY PRIOR TO THE 18-MONTH ANNIVERSARY
DATE. THE FOLLOWING EXAMPLE IS INSERTED FOR PURPOSES OF CLARIFICATION
OF THE PRECEDING SENTENCE: ASSUME THE 18-MONTH ANNIVERSARY DATE IS
WEDNESDAY, APRIL 1, 1998. THE SPECIFIED TWENTY (20) TRADING DAY PERIOD
WILL END ON AND INCLUDE TUESDAY, MARCH 31, 1998. ASSUME THE AVERAGE
PRICE DURING SUCH TWENTY (20) TRADING DAY PERIOD IS FOUR DOLLARS
(US$4.00) PER SHARE; MICROSOFT WOULD BE ENTITLED TO RECEIVE 525,000
SHARES ON THE 18-MONTH ANNIVERSARY DATE.
3.2 Additional Share Issuance. AS FURTHER CONSIDERATION FOR THE PROPERTY
PURCHASED UNDER THIS AGREEMENT, ON OR PRIOR TO THE CLOSING DATE, COMPANY
SHALL ISSUE AND DELIVER ONE HUNDRED THOUSAND (100,000) SHARES TO MICROSOFT,
WITH ANY LEGENDS AND RESTRICTIONS AS REQUIRED BY LAW, AND RECEIPT OF SUCH
SHARES BY MICROSOFT SHALL BE A CONDITION TO THE EFFECTIVENESS OF THIS
AGREEMENT.
7.2.16
3.3 Additional Contingent Payments by Company. COMPANY
SHALL MAKE ADDITIONAL PAYMENTS OF SHARES TO MICROSOFT BASED UPON THE
CUMULATIVE TOTAL OF PRODUCT REVENUES earned by Company during the
Transition Period TO the extent such cumulative total exceeds One Million
Dollars (US$1,000,000.00). Such additional payments shall be comprised of
the following:
3.3.1 ONE SHARE FOR EVERY FIFTY DOLLARS (US$50.00) OF COMPANY'S
CUMULATIVE PRODUCT REVENUES DURING THE TRANSITION PERIOD TO THE EXTENT
SUCH PRODUCT REVENUES EXCEED ONE MILLION DOLLARS (US$1,000,000.00) BUT
ARE LESS THAN FOUR MILLION DOLLARS (US$4,000.000-00); AND
7.2.17
3.3.2 ONE SHARE FOR EVERY TWENTY-FIVE DOLLARS (US$25.00) OF COMPANY'S
PRODUCT REVENUES DURING THE TRANSITION PERIOD FOR CUMULATIVE PRODUCT
REVENUES IN EXCESS OF FOUR MILLION DOLLARS (US$4,000,000-00) BUT LESS
THAN FOURTEEN MILLION DOLLARS (US$14,000.000.00).
<PAGE>
FOR PURPOSES OF DETERMINING PRODUCT REVENUES, WHENEVER COMPANY
RECEIVES AN INDIVISIBLE REVENUE STREAM FOR TWO OR MORE PRODUCTS OR
SERVICES, INCLUDING FEES WHICH ARE INCLUDED IN THE DEFINITION OF
PRODUCT REVENUES, THEN COMPANY WILL PROPOSE A REASONABLE AND GOOD
FAITH ALLOCATION OF SUCH REVENUES ACROSS THE APPLICABLE PRODUCTS OR
SERVICES IN CONSULTATION WITH MICROSOFT. COMPANY SHALL ISSUE AND
DELIVER ALL SHARES DUE TO MICROSOFT UNDER THIS SECTION 5.3 WITHIN
SIXTY (60) DAYS AFTER THE "I 8-MONTH ANNIVERSARY DATE," WITH ANY
LEGENDS AND RESTRICTIONS AS REQUIRED BY LAW.
7.2.18
3.4 Restriction on Transfer. ALL OF THE SHARES ISSUED TO MICROSOFT UNDER
THIS AGREEMENT SHALL BE SUBJECT TO A CERTAIN INVESTMENT AGREEMENT BETWEEN
THE PARTIES, A FORM OF WHICH IS ATTACHED AS EXHIBIT E TO THIS AGREEMENT.
7.2.19
7.2.20 3.5 Fractional Shares. IN CONNECTION WITH THE SHARES TO BE ISSUED
PURSUANT TO SECTIONS 3.1 AND 3.2, NO FRACTIONAL SHARES WILL BE ISSUED. IN
LIEU OF SUCH ISSUANCE, THE NUMBER OF SHARES ISSUED TO MICROSOFT PURSUANT TO
THE TERMS OF THIS AGREEMENT SHALL BE ROUNDED TO THE CLOSEST WHOLE SHARE.
ARTICLE IV
CLOSING
4.1 Closing and Delivery of Acquired Assets. THE CLOSING OF THE TRANSACTION
(THE "Closing") WILL TAKE PLACE AS SOON AS PRACTICABLE AFTER
SATISFACTION OR WAIVER OF THE LAST TO BE FULFILLED OF THE CONDITIONS
SET FORTH IN ARTICLE VII THAT BY THEIR TERMS ARE NOT TO OCCUR AT THE
AGREEMENT DATE (THE "Closing Date"), AT THE OFFICES OF PRESTON GATES &
ELLIS, SEATTLE, WASHINGTON, UNLESS ANOTHER DATE OR PLACE IS AGREED TO
BY THE PARTIES HERETO. MICROSOFT AND COMPANY AGREE THAT MICROSOFT SHALL
DELIVER THE ACQUIRED ASSETS TO COMPANY IN THE STATE OF NEW YORK.
7.2.21
7.2.22 4.2 Method of Acquisition.
4.2.1 CONVEYANCE OF ACQUIRED ASSETS. The sale, conveyance, transfer,
assignment and delivery to Company of the Acquired Assets, as herein
provided, shall be effected by such bills of sale, endorsements,
assignments and other instruments of transfer and conveyance as may be
necessary to vest in Company the right, title and interest of Microsoft
in and to the Acquired Assets, free and clear of all liens, claims,
charges and encumbrances, except as otherwise provided in this
Agreement. Such documents shall include, without limitation, an
Assignment and Bill of Sale in the form hereto as Exhibit F. Microsoft
shall, at the Closing or at any time or from time to time after the
Closing, upon request, perform or cause to be performed such acts, and
execute, acknowledge and deliver or cause to be executed, acknowledged
and delivered, such documents as may be reasonably required or
requested to effectuate the sale, conveyance, transfer, assignment and
delivery to Company of any of the Acquired Assets or for the
performance by Microsoft of any of its obligations hereunder.
4.2.2 Assumption of Obligations. COMPANY SHALL AT THE CLOSING
EXECUTE AN ASSUMPTION OF OBLIGATIONS IN THE FORM ATTACHED
HERETO AS EXHIBIT G, AND WILL, AT THE CLOSING OR AT ANY TIME
OR FROM TIME TO TIME AFTER THE CLOSING, UPON REQUEST, PERFORM
OR CAUSE TO BE PERFORMED SUCH ACTS, AND EXECUTE, ACKNOWLEDGE
AND DELIVER OR CAUSE TO BE EXECUTED, ACKNOWLEDGED AND
DELIVERED, SUCH OTHER DOCUMENTS AS MAY BE REASONABLY REQUIRED
OR REQUESTED FOR THE ASSUMPTION BY COMPANY OF THE ASSUMED
OBLIGATIONS OR FOR THE DISCHARGE OR THE PERFORMANCE BY
MICROSOFT OF ANY OF ITS OBLIGATIONS HEREUNDER.
7.2.23
7.2.24
7.2.25
7.2.26
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of COMPANY. COMPANY REPRESENTS AND
WARRANTS TO MICROSOFT ON EXECUTION OF THIS AGREEMENT AND, IF LATER, ON
THE CLOSING DATE AS FOLLOWS:
7.2.27
5.1.1 AUTHORITY. It has the full power to enter into and perform under
this Agreement and give the license grants set forth herein.
5.1.2 ADEQAUTE SHARES. Company has and will keep available an adequate
number of authorized but unissued Shares to permit the issuances of the
Shares required pursuant to this Agreement and the transactions
contemplated hereby.
5.1.3 DUE AUTHORIZATION. The Shares to be issued to Microsoft pursuant
to the terms of this Agreement and the Investment Agreement, when
issued in accordance with this Agreement and the Investment Agreement,
will be duly authorized, validly issued, fully paid and nonassessable.
5.1.4 RELIANCE. The foregoing representations and warranties are made
by Company with the knowledge and expectation that Microsoft is placing
reliance thereon.
7.2.28 5.2 Representations and Warranties of Microsoft. MICROSOFT
REPRESENTS AND WARRANTS TO COMPANY AS FOLLOWS:
5.2.1 AUTHORITY. It has the full power to enter into and perform
under this Agreement and give the license grants set forth
herein.
5.2.2 OWNERSHIP OF ACQUIRED ASSETS. It has not previously and will not
grant any rights to any third party that are inconsistent with the
rights granted to Company herein.
5.2.3 TITLE; NO LIENS. It has good title to all of the Acquired Assets,
free and clear of any liens, claims, charges, chattel mortgages,
security interests or other encumbrances of whatsoever nature.
5.2.4 CONFLICTS, BINDING OBLIGATION. The execution and delivery of this
Agreement does not, and the transactions contemplated hereby will not,
violate or be in conflict with any agreement or contract, including
without limitation the Netwise Asset Purchase Agreement. There are no
claims by Netwise against Microsoft in connection with the Acquired
Assets or the Netwise Asset Purchase Agreement. This Agreement has been
duly executed and delivered by Microsoft and constitutes a valid and
legally binding obligation of Microsoft, enforceable in accordance with
its terms.
5.2.5 CONSENTS. No consent, action, approval or authorization of, or
registration, declaration or filing with, any federal, state or local
governmental agency or any third party is required to be obtained by
Microsoft in order to authorize the execution and delivery by Microsoft
of this Agreement or the performance by Microsoft of the terms hereof.
5.2.6 RELIANCE. The foregoing representations and warranties are made
by Microsoft with the knowledge and expectation that Company is placing
reliance thereon.
The foregoing warranties are for the benefit of Company only and do not
extend to any potential or claimed third party beneficiaries. EXCEPT AS
EXPRESSLY PROVIDED IN THIS SECTION 5.2, AND SUBJECT TO SECTION 7.1.3,
MICROSOFT IS SELLING THE ACQUIRED ASSETS ON AN "AS IS" BASIS. MICROSOFT
EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES, INCLUDING
<PAGE>
WITHOUT LIMITATION THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
ARTICLE VI
ADDITIONAL AGREEMENTS
In addition to the foregoing, Microsoft and Company each agree to take the
following actions and to comply with the following terms after the
execution of this Agreement.
7.2.29 6.1. Registration Rights.
6.1.1 CANADIAN REGISTRATION RIGHTS. Within sixty (60) days after the 18
Month Anniversary Date, and upon the written request of Microsoft, the
Company shall prepare and file -with the British Columbia Securities
Commission (the "BC Commission") and the securities commission of any
other province of Canada in which the Company is then a reporting
issuer (collectively, with the BC Commission, the "Canadian
Commission") a preliminary prospectus qualifying the distribution of
the Shares so as to enable Microsoft to freely resell the Shares issued
under this Agreement without being subject to any hold period or other
resale restriction under applicable Canadian securities legislation
("Canadian Legislation"). As promptly as practicable after the filing
of the preliminary prospectus, the Company shall us6 its best efforts
to file a final prospectus relating to such distribution with, and to
obtain a receipt therefor from, the Canadian Commission under
applicable Canadian Legislation. The Company shall use its best efforts
to keep any resale prospectus current under the Canadian Legislation
for a period of one year, or such shorter period as may be required for
Microsoft to fully dispose of all the Shares thereunder. In connection
with the issuance of the shares, Microsoft agrees to provide any notice
or undertakings required by the Canadian Legislation, or by any stock
exchange located in Canada on which the Shares then trade.
6.1.2 6.1.2 U.S. Piggy-Back Rights. If Company is a reporting company
under Section 12(b) of 12(g) of the Securities Exchange Act of 1934, as
amended (a "Reporting Company"), then Microsoft subject to this Section
may have all or any portion of its Shares included in any registration
of Shares under the Securities Act of 1933, as amended (the "Act").
Whenever Company proposes to register under the Act the sale of any
class of its common stock or the common stock holdings of any of its
stockholders, then on any such occasion, Company will furnish Microsoft
with prompt written notice thereof. To the extent permitted by
applicable securities laws and this Agreement, Company will, subject to
Section 6.1.4, include in such registration such number of Microsoft's
Registrable Shares as Microsoft shall request to be included therein.
"Registrable Shares" shall mean all Shares issued pursuant to the
provisions of this Agreement. Microsoft shall exercise the "Piggy-back
rights" under this Section by giving written notice to Company to such
effect within seven (7) days after receipt of the Company's written
notice of any proposed registration by Company as aforesaid. The
provisions of this Section 6.1.2 shall not apply to a registration (1)
on Form S-8 or other comparable form relating solely to employee stock
benefit plans, (2) on Form S-4 or other comparable form relating solely
to business combination transactions, or (3) such other form which does
not include substantially the same information as would be included in
a registration statement covering the sale of common stock to the
public.
6.1.3 U.S. DEMAND REGISTRATION. In the event that the Company is a
Reporting Company, Microsoft may, (i) on an unlimited number of
occasions (but not more than twice in any twelve month period) require
the Company to effect the registration of Registrable Shares on Form
S-3 (or any successor form thereto, a "Short Form Registration); and
(ii) in the event a Short Form Registration is unavailable at the time
of such request on one occasion, require the Company to effect the
registration of Registrable Shares on Form S-1 (or any successor form
thereto, a "Long
<PAGE>
Form Registration"), in each case pursuant to the provisions of this
Section 6.1.3. If Microsoft shall give notice to the Company to the
effect that it desires to transfer Registrable Shares pursuant to a
public distribution (within the meaning of the Act), then the Company
shall, as promptly as practicable after receipt of such notice (but in
any event within 60 days after receipt of such notice), file a
registration statement on the appropriate form pursuant to the Act
and, as promptly as is practicable thereafter, use its best efforts to
cause Registrable Shares to be registered under the Act and qualified
under the securities or blue sky laws of any jurisdiction requested by
Micro'sof4 to the end that such Registrable Shares may be sold by
Microsoft under the Act and pursuant to the securities or blue sky
laws of the jurisdictions requested, as promptly as is practicable
thereafter and the Company will use its best efforts to cause any such
registration to become effective and to keep the prospectus included
therein current for a period of one year from the effective date
thereof or, if sooner, until the distribution shall have been
completed; provided that Microsoft shall furnish the Company with such
appropriate information in connection therewith as the Company may
reasonably request in writing. Notwithstanding the foregoing, the
Company (i) shall not be required to effect a Long Form Registration
hereunder unless the proposed minimum aggregate offering price set
forth on the cover of the initial filing exceeds $1.0 million
(excluding any shares which Microsoft may then sell into the public
market pursuant to Rule 144 under the Act), and (ii) may, on one
occasion, delay or withdraw Microsoft's Long Form Registration under
this Section 6.1.3 if the Company's board of directors determines in
good faith that the timing of the registration would be detrimental to
the best interests of the Company. Subject to the provisions of
Section 6.1.5, in the event Company elects to withdraw the
registration statement, Company will bear no liability of any kind to
Microsoft, except for attorneys' and advisors' fees incurred by
Microsoft. The managing underwriters, if any, for any offering made
pursuant to this Section 6.1.3 shall be selected by the Company.
Without the prior written consent of Microsoft, which consent will not
be unreasonably withheld, the Company will not include in a
registration pursuant to Section 6.1.3 any securities which are not
Registrable Shares if the inclusion of such other securities would, in
the reasonable opinion of Microsoft, adversely impact the
marketability or value of the Registrable Shares subject to such
registration.
6.1.4 GENERAL REGISTRATION PROVISIONS. In the event an offering
effected under this Section 6.1 is an underwritten offering, Microsoft
shall (together with Company and other persons, if any, distributing
their shares through such offering) enter into an underwriting
agreement in customary form with the under-writer or underwriters
selected for such underwriting. Notwithstanding any other provision of
this Section 6. 1, if the underwriter reasonably determines and
notifies Company and Microsoft in writing that marketing factors
require a limitation of the number of shares to be underwritten, the
underwriter may limit the number of shares included therein first, by
reducing the number of shares to be included by shareholders who do not
have contractual rights to include shares in such registration, then,
if and to the extent additional limitations are required, by reducing
the number of Registrable Shares to be included in the registration
pari passu with any shares held by other shareholders of Company which
have contractual rights to include shares in such registration (other
than those shareholders (including Microsoft) whose exercise of demand
registration rights resulted in the relevant underwritten offering).
The Company shall advise Microsoft of any such limitation made by the
underwriter and of the number of Registrable Shares, if any, that may
be included in the registration along with such materials utilized to
calculate such limitation on the number of Registrable Shares. In the
event the terms of such underwriting include provisions which are not
customary or commercially reasonable for such type of transaction and
if Microsoft disapproves of such terms, it may elect to withdraw
therefrom by written notice to Company or the underwriter and any such
offering shall not be counted as a demand registration under Section
6.1.3. All expenses in connection with preparing and filing any
registration statement under this Agreement (and any registration or
qualification under the securities or "Blue Sky" laws of states in
which the offering will be made under such registration statement)
shall be borne in full by Company, except for discounts or commissions
relating to the Registrable Shares or fees of counsel or other advisors
to Microsoft. The rights pro
<PAGE>
any permitted assignee or transferee pursuant to Section 10.3 hereof
Notwithstanding anything to the contrary in this Section 6. 1, the
provisions of this Section 6.1 shall be subject to and consistent with
the restrictions on resale of the Shares set forth in Investment
Agreement.
6.1.5 PUT RIGHT. Notwithstanding the foregoing provisions of Section 6.
1, if the Company is a Reporting Company Microsoft may, at it option,
require the Company to purchase, and the Company agrees to purchase
from Microsoft, all or such portion of the Registrable Shares as
Microsoft directs in the event the Company elects not to file a Long
Form Registration in accordance with the provisions of Section 6.1.3 or
in the event a Microsoft's right to demand a Long-Form Registration
under Section 6.1.3 is otherwise not available for the registration of
such Registrable Shares (the "Put Right"). Microsoft shall provide
Company with written notice of its intention to exercise its Put Right
(the "Put Notice") which shall include the number of shares to be sold
to Company and the purchase price therefor. The purchase price for each
share to be sold to Company under the Put Right shall be the Current
Market Price as of the date of the Put Notice. The term "Current Market
Price" for the each share as of a specified date shall mean the average
closing sale price over the preceding 10 trading days as reported on
the principal U.S. stock exchange or quotation system on which the
shares are listed or quoted The provisions of the Section 6.1.4 shall
terminate on the later to occur of (i) one year from the date the
Company becomes a Reporting Company and (ii) at such time as the
Company becomes eligible to use a Short Form Registration to register
Registrable Shares.
6.2 BOARD REPRESENTATION. At such time as Microsoft acquires at least two
percent (2%) of the outstanding voting securities of Company, Company shall
notify Microsoft thereof in writing. Within ninety (90) days of the receipt of
such notice, Microsoft, in its sole discretion, may, but is not obligated to,
notify Company of a person selected by Microsoft (the "Microsoft Designee") whom
Company will promptly appoint to its Board of Directors. Thereafter, for so long
as Microsoft holds at least two percent (2%) of the outstanding voting
securities of Company, at each meeting of Company's stockholders at which
directors are to be elected: (a) Company's management will recommend to its
stockholders the election of Microsoft's Designee to Company's Board of
Directors, and (b) Kevin M. Kelly, Joseph T. Mohen, and James F. Kelly will each
vote all of their Company voting securities in favor of the Microsoft Designee's
election to Company Board of Directors. Notwithstanding the foregoing, if
Microsoft fails to notify Company of a Microsoft Designee within the ninety (90)
day period following the date on which Microsoft has received notice written
notice from Company that Microsoft has acquired at least two percent (2%) of the
outstanding voting securities of Company, Microsoft shall forfeit its right to
have the Microsoft Designee appointed to the Board of Directors, or to require
Company management to recommend the election of the Microsoft Designee to the
Board of Directors.
6.3 BACKOFFICE LICENSE RIGHTS. Microsoft shall deliver to Company as soon as
commercially available one (1) copy of Microsoft BackOffice(TM) v. 2.5, and
shall be deemed to have granted to Company, as of the Closing Date, a
non-exclusive, royalty-free, revocable, personal and nontransferable license
authorizing Company to exercise the license rights set forth in Microsoft's
standard end user license agreements "EULAs") for such Microsoft BackOffice
software, subject to the following amended terms which are hereby deemed
incorporated in such EULAs and shall modify and supersede any contrary
provisions in such EULAS. The foregoing license grant from Microsoft to Company
shall authorize Company to use fifteen (15) Server Licenses and one hundred
(100) Client Access Licenses to the Microsoft BackOffice software products;
provided, however, that Company may exercise rights under such licenses solely
for purposes of testing and internal use by Company employees and solely during
the Transition Period, after which the foregoing grant of license rights shall
expire automatically and Company shall be obligated to acquire any additional
license rights to Microsoft Back Office products through standard Microsoft
distribution channels.
<PAGE>
6.4 EXPENSES. Whether or not the transactions contemplated under this Agreement
are closed, except as specifically provided in the Agreement, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense.
6.5 ADDITIONAL AGREEMENTS. In case at an time after the Closing Date any further
action is reasonably necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each corporation which is a
party to this Agreement shall take all such necessary action.
6.6 CONFIDENTIALITY OBLIGATIONS. Microsoft and Company shall each protect the
other's Confidential Information from unauthorized dissemination and use with
the same degree of care that such party uses to protect its own like
information. Neither party will use the other's Confidential Information for
purposes other than those necessary to directly further the purposes of this
Agreement. Neither party will disclose to third parties the other's Confidential
Information without the prior written consent of the other party. Except as
expressly provided in this Agreement, no ownership or license rights are granted
in any Confidential Information. Without limiting the generality of the
foregoing-, no information concerning this Agreement or the transactions
contemplated herein shall be disclosed by Microsoft or Company without the
consent of the other party except to such party's employees, agents, and
attorneys and financial advisors on a need to know basis, provided however that
nothing contained herein shall prevent either party at any time from furnishing
any such information to the extent required by judicial or administrative
process or from making any public disclosure when such party believes in good
faith and after consultation with the other party that it is legally required to
do so.
6.7 PUBLIC ANNOUNCEMENTS. Microsoft and Company agree to issue a joint press
release which shall be approved in advance in writing by both parties and which
shall announce their entry into this Agreement.
6.8 TAXES. Any sales or use or similar tax or levy arising from the transactions
contemplated by this Agreement shall be the sole responsibility of Company and
Company shall indemnify Microsoft from and against any liability arising in
connection therewith. Company acknowledges and agrees that Microsoft in its sole
and exclusive discretion shall control any defense against an assertion for any
such tax or levy at the expense of Company, and that if any such assertion is
made to Microsoft, Microsoft shall provide Company with prompt notice of such
assertion.
6.9 BULK SALES. Without implication that such laws apply to the transaction
contemplated hereby, Company and Microsoft shall not comply with the provisions
of the Uniform Commercial Code of any states relating to bulk sales.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO COMPANY'S OBLIGATIONS. The obligations of Company hereunder
are subject to the satisfaction, at or before the Closing Date, of the following
conditions (any of which may be waived, in whole or in part, by Company):
7.1.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Microsoft contained in this Agreement shall be true and
correct in all material respects at the Closing Date as if made again
on and as of the Closing Date. Microsoft shall have duty performed and
complied with all agreements and conditions required by this Agreement
to be performed or complied with by Microsoft on or before the Closing
Date. Microsoft shall furnish Company with a certificate of an
appropriate officer of Microsoft, dated the Closing Date, certifying
the fulfillment of the foregoing conditions.
7.1.2 DELIVERY OF SOFTWARE CODE. Microsoft shall have delivered to
Company a copy of Source Code that can be compiled into complete Object
Code for the software components of the Acquired Assets which are
designed to operate on the MVS Platform and the Windows Platforms;
provided, however, that Company shall perform any compilation processes
and acceptance tests
<PAGE>
on such Source Code which Company finds necessary or desirable within
five (5) days of Microsoft's delivery of such code, and such code
shall be deemed to satisfy the foregoing condition unless Company
notifies Microsoft within the foregoing five (5) day period of a
material error or omission within such Source Code as delivered by
Microsoft. Any such notice shall contain sufficient details to enable
Microsoft to diagnose and correct any alleged material omissions or
other errors, and Microsoft may at its option correct and resubmit the
applicable Source Code to Company at any time within thirty (30) days
of receiving a rejection notice from Company. In the event Microsoft
does not so re-deliver an acceptable version of the software code,
then upon Company's request Microsoft shall return to the Company any
Shares it has received following the end of such thirty (30) day
period and upon any such return neither party shall have any further
obligations or liabilities in connection with this Agreement,
including, without limitation, in connection with the Assumed
Obligations. Except as provided in this paragraph, the Company shall
be deemed to have accepted the Acquired Assets upon their delivery.
7.1.3 CONVEYANCE OF ACQUIRED ASSETS. Microsoft shall have executed and
delivered the Assignment and Bill of Sale conveying to Company the
Acquired Assets.
7.1.4 INVESTMENT AGREEMENT. Microsoft shall have executed and
delivered the Investment Agreement
7.1.5 OPINION OF COUNSEL. Company shall have received an opinion of
Preston Gates & Ellis, counsel to Microsoft, relating to the
authorization and enforceability of this Agreement.
7.2 CONDITIONS TO MICROSOFT'S OBLIGATIONS. The obligations of Microsoft
hereunder are subject to the satisfaction, at or before the Closing Date, of the
following conditions (any of which may be waived, in whole or in part, by
Microsoft):
7.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Company contained in this Agreement shall be true and
correct in all material respects at the Closing Date as if made again
on and as of the Closing Date. Company shall have duly performed and
complied with all agreements and conditions required by this Agreement
to be performed or complied with by Company on or before the Closing
Date. Company shall furnish Microsoft with a certificate of an
appropriate officer of Company, dated the Closing Date, certifying the
fulfillment of the foregoing conditions.
7.2.2 DELIVERY OF CONSIDERATION. Company delivers to Microsoft the
100,000 Shares described in Section 3.2.
7.2.3 ASSUMPTION OF OBLIGATIONS. Company shall have executed and
delivered to Microsoft an Assumption of Obligations assuming the
Assumed Obligations.
7.2.4 OPINION OF COUNSEL. Microsoft shall have received an opinion of
Parker Chapin Flattau and Kimpl, LLP, counsel to the Company, relating
to (i) the authorization and enforceability of this Agreement, (ii) the
authorization of the Shares to be issued pursuant to the terms of this
Agreement, and (iii) the compliance with any applicable securities laws
relating to the issuance of the Shares as contemplated by this
Agreement (other than the laws of British Columbia).
7.2.5 EFFECTIVENESS. THIS AGREEMENT SHALL BECOME EFFECTIVE UPON THE
EXECUTION OF THIS AGREEMENT BY COMPANY AND MICROSOFT AND UPON THE
SATISFACTION, ON OR BEFORE THE CLOSING DATE, OF THE CONDITIONS SET
FORTH IN SECTIONS 7.1 AND 7.2, UNLESS ANY OF SUCH CONDITIONS HAS BEEN
WAIVED, IN WHOLE OR IN PART, BY COMPANY OR MICROSOFT, RESPECTIVELY.
<PAGE>
ARTICLE VIII
CONDITIONS SUBSEQUENT
Microsoft and Company further agree to comply with their respective
obligations as set forth in this Article VIII, and Microsoft and Company
agree and acknowledge that in the event either of them materially breaches
its customer support obligations as set forth in this Article VIII, the
other party shall be entitled to exercise any and all remedies available at
law or in equity with respect to such breach. Each of Microsoft and Company
further agrees that in the event a party reasonably alleges such a breach,
the other party shall negotiate in good faith promptly upon the request of
such party with respect to any possible future arrangements between the
parties which may address the needs of customers of the software components
of the Acquired Assets, and to establish a fair and reasonable pro rata
allocation of support revenues associated with providing support to such
customers.
8.1 PRODUCT SUPPORT PLAN. During the Transition Period, Microsoft and Company
will each carryout their responsibilities for customer support for the software
components of the Acquired Assets as set forth in the Transition Plan set forth
in Exhibit A hereto. As described in such Transition Plan, during the Follow-On
Transition Period, (i) Company will be responsible for providing all customer
support for the software components of the Acquired Assets which operate on the
MVS Platform and Windows Platforms, and (ii) Microsoft will be responsible for
providing customer support to Company for the software components of the
Acquired Assets which operate on Other Platforms. Company will have sole
responsibility for providing customer support for any versions of the software
components of the Acquired Assets which operate on any new platform as a result
of Company's development efforts after the Closing. After the expiration of the
Transition Period, Microsoft shall have no further obligations to Company or its
customers with respect to any technical or other customer support for software
components of the Acquired Assets.
8.2 PAYMENTS RELATED TO PRODUCT SUPPORT. During the Initial Transition Period,
Microsoft will provide the resources and customer support assistance described
in the Transition Plan at no charge to Company. During, the Follow-On Transition
Period, (i) Microsoft will provide at no charge to Company secondary customer
support as described in the Transition Plan for the software components of the
Acquired Assets which operate on Other Platforms, and (ii) Microsoft will
provide secondary technical support to Company for the software components of
the Acquired Assets which operate on the MVS Platform and Windows Platforms,
provided that Company shall pay Microsoft a fee of Five Hundred Dollars
(US$500.00) per Unsupported Platform Event. As used herein, an "Unsupported
Platform Event' shall mean each instance in which Microsoft resolves a customer
problem concerning- the software components of the Acquired Assets that relates
to such software as used on the MVS Platform or Windows Platforms. Company shall
pay all amounts payable to Microsoft hereunder within thirty (30) days of
Microsoft's invoice date.
8.3 CUSTOMER RELATIONSHIPS. Company shall be responsible for maintaining
relationships and enforcing agreements with all end users, resellers,
distributors, and other licensees of the software components of the Acquired
Assets as of the Closing Date. Microsoft agrees to cooperate with Company in
undertaking the customer relations activities described in Exhibit D to this
Agreement during the Transition Period. Microsoft does not represent or
guarantee, however, that existing customers and other licensees of the software
components of the Acquired Assets will maintain or perform under their existing
agreements with respect to such software, and Company acknowledges and accepts
the risk that such current customers and licensees may terminate such
relationships following the Closing Date.
8.4 COMPANY UPGRADES. During the Initial Transition Period, Company shall
promptly deliver to Microsoft all error corrections, updates and upgrades it
develops or has developed to the software components of the Acquired Assets
(collectively, the "Company Upgrades") in Source Code and Object Code form, and
Company hereby grants to Microsoft a nonexclusive, nontransferable, worldwide
license to use, reproduce, and modify such Company Upgrades solely for purposes
of providing product support as required by this Agreement. During the Follow-On
Transition Period, Company shall promptly deliver to Microsoft all additional
error corrections, updates and upgrades it develops or has developed to the
software components of the Acquired Assets as used on the MVS Platform and the
Windows Platforms, all in Source Code and Object Code form, and all such
additional error corrections, updates and upgrades shall be included in the
"Company Upgrades" and shall be subject to the foregoing license grant. In the
event Company desires to obtain support for Other Platforms from Microsoft
during the Follow-On
<PAGE>
Transition Period, Company shall provide any error corrections, updates and
upgrades developed by Company which may be relevant to obtaining such support,
in Source Code and Object Code form, and shall additional code shall also be
included in the "Company Upgrades" and shall be subject to the foregoing license
grant. Microsoft shall not retain any rights to Company Upgrades following the
expiration of the Transition Period, and at Company's written request Microsoft
shall destroy or return all copies of such Company Upgrades at such time;
provided, however, that nothing herein shall be deemed to supersede the
provisions of Section 6.10 of this Agreement. As further described in the
Transition Plan, Company acknowledges that Microsoft will use commercially
reasonable efforts to provide customer support in the event Company makes
substantial modifications to the Acquired Assets during the Transition Period,
but that Microsoft may not be able successfully to resolve such customer support
requests notwithstanding Company's delivery of Source Code hereunder.
8.5 MARKETING EFFORTS. The parties agree to undertake the joint marketing
efforts described in Exhibit C of this Agreement with respect to the Acquired
Assets.
ARTICLE IX
INDEMNIFICATION
9.1. INDEMNIFICATION BY COMPANY.
9.1.1 Company shall, at its expense and Microsoft's request, defend any
claim or action brought against Microsoft that (a) if true, would
constitute a breach of a warranty by Company in Section 5.1, (b) any
Company-authored derivative works of the Acquired Assets delivered to
Microsoft pursuant to Section 8.1.4 violate any third party's
intellectual property or other proprietary rights, or (c) arises in
connection with Company's performance of its obligations under Article
VIII hereof, and Company will indemnify and hold Microsoft harmless
from and against any costs, damages and fees reasonably incurred by
Microsoft, including but not limited to fees of attorneys and other
professionals, that are attributable to any such claims. Microsoft
shall: (i) provide Company reasonably prompt notice in writing of any
such claim or action and permit Company, through counsel mutually
acceptable to Microsoft and Company, TO answer and defend such claim or
action; and (ii) provide Company information, assistance and authority,
at Company's expense, to help Company to defend such claim or action.
Company will not be responsible for any settlement made by Microsoft
without Company's written permission, which permission will not be
unreasonably withheld.
9.1.2 Microsoft shall have the right to employ separate counsel and
participate in the defense of any claim or action covered by this
Section 9. 1. Company shall reimburse Microsoft upon demand for any
payments made or loss suffered by it at any time after the date hereof,
based upon the judgment of any court of competent jurisdiction or
pursuant to a bona fide compromise or settlement of claims, demands, or
actions, in respect to any damages related to any claim or action under
this Section 9. 1.
9.1.3 Company may not settle any claim or action under this Section 9.1
on Microsoft's behalf without first obtaining Microsoft's written
permission, which permission will not be unreasonably withheld. In the
event Microsoft and Company agree to settle a claim or action, Company
agrees not to publicize the settlement without first obtaining
Microsoft's written permission, which permission will not be
unreasonably withheld.
9.2 INDEMNIFICATION BY MICROSOFT.
9.2.1 Microsoft shall, at its expense and Company's request, defend any
claim or action brought against Company that (a) if true, would
constitute a breach of a warranty by Microsoft in Section 5.2, (b) the
Acquired Assets as delivered by Microsoft to Company violate any third
party's intellectual property or other proprietary rights (regardless
of whether such claim arises before or after the Agreement Date), or
(c) arises in connection with Microsoft's performance of its
<PAGE>
obligations under Article VIII hereof, and Microsoft will indemnify and
hold Company harmless from and against any costs, damages and fees
reasonably incurred by Company, including but not limited to fees of
attorneys and other professionals, that are attributable to such claim.
Company shall: (i) provide Microsoft reasonably prompt notice in
writing of any such claim or action and permit Microsoft, through
counsel mutually acceptable le to Microsoft and Company, to answer and
defend such claim or action; and (ii) provide Company information,
assistance and authority, at Microsoft's expense, to help Microsoft to
defend such claim or action. Microsoft will not be responsible for any
settlement made by Company without Microsoft's written permission which
permission will not be unreasonably withheld.
9.2.2 Company shall have the night to employ separate counsel and
participate in the defense of any claim or action covered by this
Section 9.2. Microsoft shall reimburse Company upon demand for any
payments made or loss suffered by it at any time after the date hereof,
based upon the judgment of any court of competent jurisdiction or
pursuant to a bona fide compromise or settlement of claims, demands, or
actions, in respect to any damages related to any claim or action under
this Section 9.2.
9.2.3 Company may not settle any claim or action under this Section 9.2
on Microsoft's behalf without first obtaining Microsoft's written
permission, which permission will not be unreasonably withheld. In the
event Microsoft and Company agree to settle a claim or action, Company
agrees not to publicize the settlement without first obtaining
Microsoft's written permission, which permission will not be
unreasonably withheld.
9.3 LIMITATIONS OF LIABILITY.
9.3.1 NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES, EVEN IF SUCH PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
9.3.2 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, THE
PARTIES AGREE THAT EACH OF THEIR AGGREGATE LIABILITY UNDER THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION ARTICLES V AND VI, SHALL NOT
EXCEED TWO MILLION AND FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00).
EACH PARTY AGREES AND UNDERSTANDS THAT THE RESULT OF THE FOREGOING
LIMITATION ON LIABILITY AND INDEMNIFICATION MAY PREVENT SUCH PARTY FROM
RECOVERING LOSSES OR DAMAGES IN CONNECTION WITH OTHERWISE VALID CLAIMS.
ARTICLE X
MISCELLANEOUS
10.1 NOTICES. All notices and requests in connection with this Agreement shall
be deemed given as of the day they are received either by messenger, delivery
service, or in the United States of America mails, postage prepaid, certified or
registered, return receipt requested, and addressed as follows:
To Microsoft: To Company:
Microsoft Corporation Proginet Corporation
One Microsoft Way 200 Garden City Plaza
Redmond, WA 98052-6399 Garden City, NY 11 5 3 0
Attention: General Manager Attention: Kevin M. Kelly
SNA Server Development
<PAGE>
Phone: (206) 882-8080 Phone: (516) Phone: (516) 248-2000
248-2000
Fax: (206) 936-7329 Fax: (516) 248-3360
Copy to: Copy to:
Law & Corp. Affairs Parker Chapin LLP
Fax: (206) 869-1327 405 Lexington Avenue
New York, NY 10174
Attention: James Alterbaum, Esq.
Phone:(212) 704-6000
Fax: (212) 704-6288
or to such other address as a party may designate pursuant to this notice
provision
10.2 DISPUTE RESOLUTION. ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, OR ANY BREACH THEREOF, SHALL BE SETTLED
EXCLUSIVELY AND FINALLY BY ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION, AND JUDGMENT UPON
SUCH AN AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION THEREOF. A DECISION OF THE ARBITRATOR SHALL BE BINDING AND
CONCLUSIVE ON THE PARTIES HERETO AND SHALL NOT BE SUBJECT TO ANY APPEAL. ALL
LIMITATIONS OF LIABILITY SET FORTH IN THIS AGREEMENT, INCLUDING BUT NOT LIMITED
TO THE LIMITATIONS SET FORTH IN ARTICLE IX HEREOF, SHALL BE BINDING AND GIVEN
FULL FORCE AND EFFECT IN ANY SUCH ARBITRATION. THE FEES AND EXPENSES OF ANY
ARBITRATION HEREUNDER, INCLUDING OF THE ARBITRATOR, SHALL BE ADVANCED EQUALLY BY
THE PARTIES, AND EACH PARTY SHALL BE RESPONSIBLE FOR ITS OWN ATTORNEYS' FEES IN
CONNECTION ` WITH AN ARBITRATION. NOTWITHSTANDING THE FOREGOING, THE PARTIES'
FINAL RESPONSIBILITY FOR ALL ARBITRATION FEES AND RELATED ATTORNEYS' FEES AND
EXPENSES SHALL BE SUBJECT TO THE FINAL DECISION OF THE ARBITRATOR.
10.3 Assignment. THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT
OF EACH PARTY'S RESPECTIVE SUCCESSORS AND LAWFUL ASSIGNS; PROVIDED, HOWEVER,
THAT DURING THE TRANSITION PERIOD COMPANY MAY NOT ASSIGN THIS AGREEMENT OR ANY
OF ITS RIGHTS OR OBLIGATIONS
under this Agreement, in whole or in part, without the prior written approval of
Microsoft, which consent will not be unreasonably withheld or delayed. For
purposes of this Agreement, an `6assigmnent" by Company under this Section shall
be deemed to include, without limitation, the following: (a) a merger of Company
with another party, except where Company is the surviving entity; (b) any
transaction or series of transactions whereby a third party acquires direct or
indirect power to control the management and policies of Company, whether
through the acquisition of voting securities, by contract, or otherwise; (c) the
sale or other transfer of more than fifty percent (50%) of Company's assets
(whether in a single transaction or series of transactions), or (d) the transfer
of any rights or obligations under this agreement in the course of a liquidation
or other similar reorganization of Company.
7.2.6 10.4 Construction. IF FOR ANY REASON A COURT OF COMPETENT
JURISDICTION FINDS ANY PROVISION OF THIS AGREEMENT, OR PORTION THEREOF,
TO BE UNENFORCEABLE, THAT PROVISION OF THE AGREEMENT WILL BE ENFORCED
TO THE MAXIMUM EXTENT PERMISSIBLE SO AS TO EFFECT THE INTENT OF THE
PARTIES, AND THE REMAINDER OF THIS AGREEMENT WILL CONTINUE IN FULL
FORCE AND EFFECT. FAILURE BY EITHER PARTY TO ENFORCE ANY PROVISION OF
THIS AGREEMENT WILL NOT BE DEEMED A WAIVER OF FUTURE ENFORCEMENT OF
THAT OR ANY OTHER PROVISION. THIS AGREEMENT HAS BEEN NEGOTIATED BY THE
PARTIES AND THEIR RESPECTIVE COUNSEL AND WILL BE INTERPRETED FAIRLY IN
ACCORDANCE WITH ITS TERMS AND WITHOUT ANY STRICT CONSTRUCTION IN FAVOR
OF OR AGAINST EITHER PARTY.
7.2.7 10.5 Entire AGREEMENT. THIS AGREEMENT DOES NOT CONSTITUTE AN
OFFER BY MICROSOFT AND IT SHALL NOT BE EFFECTIVE UNTIL SIGNED BY BOTH
PARTIES. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE
PARTIES WITH RESPECT TO THE SUBJECT MATTE
<PAGE>
HEREOF AND MERGES ALL PRIOR AND CONTEMPORANEOUS COMMUNICATIONS. IT
SHALL NOT BE MODIFIED EXCEPT BY A WRITTEN AGREEMENT DATED ON OR
SUBSEQUENT TO THE AGREEMENT DATE AND SIGNED ON BEHALF OF COMPANY AND
MICROSOFT BY THEIR RESPECTIVE DULY AUTHORIZED REPRESENTATIVES.
[remainder of page intentionally left blank]
20
IN WITNESS VMEREOF, the parties have entered into this Agreement as of the
Agreement Date written above.
MICROSOFT CORPORATION PROGINET CORPORATION
- ------------------------------------- ------------------------------------
By (Sign) By (Sign)
- ------------------------------------- ------------------------------------
Name (Print) Name (Print)
- ------------------------------------- ------------------------------------
Title Title
- ------------------------------------- ------------------------------------
Date Date
Solely for purposes of Section 6.2 of this Agreement, the parties whose names
are set forth below hereby agree to be bound by the undertakings set forth in
Section 6.2 of this Agreement.
- -------------------------------- ----------------------------------------
Kevin M. Kelly Joseph T. Mohen
- --------------------------------
James F. Kelly
EXHIBIT A
TRANSITION PLAN
During the Initial Transition Period, Microsoft will continue to resolve all
customer problems concerning the software components of the Acquired Assets
(referred to herein as the "Acquired Software") that have
<PAGE>
been previously opened prior to the Closing Date. Also during the Initial
Transition Period, Microsoft will continue to accept new problems directly from
customers until all customers have been provided with instructions for obtaining
support from Company. Microsoft will provide assistance and training to Company
as reasonably necessary for Company to learn the Acquired Software and to create
the necessary infrastructure to support customers. Such activities during
Initial Transition Period will involve one visit by Microsoft staff to Company
and by Company staff to Microsoft, as necessary. Company will pay all out of
pocket cost incurred by Microsoft for any business trips, materials etc. during
the Transition Period.
During the Follow-On Transition Period, Company will assume responsibility for
customer support for the Acquired Software as used on the MVS Platform and
Windows Platforms. Microsoft agrees to provide support for the Acquired Software
as used on all other platforms on which the Acquired Software is intended to
operate as of the Closing Date at no charge to Company, provided that the
initial customer support incident is logged through Company. The parties agree
to the payment arrangements set forth in Article VIII of the Agreement with
respect to customer support during the Follow-On Transition Period.
The following activities will occur during the Initial Transition Period:
1. Microsoft will send technical staff to Company site in Long Island to:
A. ASSIST IN THE INSTALLATION OF THE ACQUIRED SOFTWARE ON COMPANY'S
MAINFRAME, INCLUDING ALL OF THE OPTIONAL COMPONENTS. MICROSOFT WILL
CONDUCT TRAINING SESSIONS AT COMPANY ON THE MVS, LJNIX, WINDOWS,
NETWARE, AND OTHER VERSIONS OF THE ACQUIRED SOFTWARE, WITH THE EMPHASIS
BEING ON THE MVS AND WINDOWS PLATFORM VERSIONS.
B. WORK WITH COMPANY TO PREPARE COMPANY MAINFRAME LABORATORY FOR THE
SUPPORT OF THE ACQUIRED SOFTWARE, INCLUDING THE CONFIGURATION OF DB2,
IMS-TM, CICS, AND THE COBOL AND PL/I COMPILER PROCEDURES. THE
OBJECTIVE TO BE ACCOMPLISHED IS TO ELIMINATE THE NEED TO USE THE
SUNGUARD SERVICE BUREAU AND INSTEAD USE COMPANY MAINFRAME IN ITS
PLACE. ALL THE MAINFRAME SUPPORT FOR THE ACQUIRED SOFTWARE IS TO BE
REMOVED FROM SUNGUARD TO COMPANY WITHIN NINETY (90)DAYS AFTER THE
CONTRACT IS EXECUTED.
C. MICROSOFT WILL PROVIDE TRAINING CLASSES IN THE ACQUIRED SOFTWARE.
2. Microsoft will provide machine readable copies of its problem database for
the Acquired Software to Company during the Transition Period.
3. Microsoft agrees to provide the Acquired Software test cases and automated
testing to Company pursuant to Article 11 of the Agreement.
4. Microsoft will provide the development history database for the Acquired
Software, as available, to Company which would include all current and
former versions of the Acquired Software.
5. Company will provide free access to its mainframe for Microsoft to
support Company with the Acquired Software.
The following activities will occur during the Follow-On Transition Period:
1. Company will receive all customer support calls on all platforms and will
be responsible for making initial diagnoses. Company will be responsible
for supporting the MVS Platform and Windows Platforms. Microsoft will have
the responsibilities defined in paragraph 3 below and Company will forward
information from customer calls on such issues as per paragraph 3 below
that Company desires Microsoft to support.
2. All problem tracking will be done through Company's new Internet based call
tracking system. During this period, Company, Microsoft and customer staff
can enter problems into the system, using their own Internet browsers.
3. Microsoft will be responsible for support for Acquired Software for Other
Platforms as provided herein after Company staff or support system has
received the problem report from the customer and diagnosed it as involving
such versions of Acquired Software. Company acknowledges and agrees that
Microsoft will not be responsible for providing any customer support for
versions of the Acquired Software which operate on any new platform as a
result of Company's development efforts after the Closing Date, and also
that Microsoft will not be able to provide customer support in the event
Company makes substantial modifications to the Acquired Software during the
Transition Period,
<PAGE>
notwithstanding Company's delivery of Source Code to such versions pursuant
to Section 8.1.4 of the Agreement.
4. Microsoft and Company will work in good faith to jointly develop, agree on
and implement additional procedures related to support resolution, customer
communication etc.
EXHIBIT B
ASSUMED OBLIGATIONS
1) Customer agreements (listed in Attachment I to this Exhibit B)
2) Distribution agreements (listed in Attachment 2 to this Exhibit B)
3) XVT Software License Agreement with XVT Software, Inc., dated August 22,
1996.
B-1
<TABLE>
<CAPTION>
Attachment 1 to Exhibit B
Customer Agreements
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Customer Name Billing City Billing State Billing Country
- ------------------------------------------------------------------------------------------------------------
American Management Systems Fairfax VA
- ------------------------------------------------------------------------------------------------------------
AMP Society North Sydney AUSTRALIA
- ------------------------------------------------------------------------------------------------------------
Anderson Consulting St. Louis MO
- ------------------------------------------------------------------------------------------------------------
Anderson Consulting/St of CT Chicago IL
- ------------------------------------------------------------------------------------------------------------
AT&T-MVS Maitland FL
- ------------------------------------------------------------------------------------------------------------
AT&T-non MVS Maitland FL
- ------------------------------------------------------------------------------------------------------------
AT&T - ITS Maitland FL
- ------------------------------------------------------------------------------------------------------------
AvNet Chandler AZ
- ------------------------------------------------------------------------------------------------------------
Blue Cross BS Tenn Chatanooga TN
- ------------------------------------------------------------------------------------------------------------
BMW of North America Woodcliff Lake NJ
- ------------------------------------------------------------------------------------------------------------
California PERS Sacramento CA
- ------------------------------------------------------------------------------------------------------------
Carlson Companies Inc Plymouth MN
- ------------------------------------------------------------------------------------------------------------
Case Consult International Gent Drougen BELGIUM
- ------------------------------------------------------------------------------------------------------------
Case Consult/Sony B-1410 Waterloo Belgium
- ------------------------------------------------------------------------------------------------------------
Case Consult/Winterthur B- 1 41 0 Waterloo BELGIUM
- ------------------------------------------------------------------------------------------------------------
CDR Surrey UK
- ------------------------------------------------------------------------------------------------------------
CDR/British Aerospace Surrey UK
- ------------------------------------------------------------------------------------------------------------
CDR/British Library Surrey UK
- ------------------------------------------------------------------------------------------------------------
CDR/British Telecom Surrey UK
- ------------------------------------------------------------------------------------------------------------
CDR/Integrated Medical Solutions MKI4601 UK
- ------------------------------------------------------------------------------------------------------------
CDR/ITSA Surrey UK
- ------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------
CDR/M&G Surrey UK
- ------------------------------------------------------------------------------------------------------------
CDR/Mercury Surrey UK
- ------------------------------------------------------------------------------------------------------------
CDR/Prudential Surrey UK
- ------------------------------------------------------------------------------------------------------------
Chubb Branchburg NJ
- ------------------------------------------------------------------------------------------------------------
Cimage Enterprise Sys Ltd Ann Arbor ml
- ------------------------------------------------------------------------------------------------------------
Citibank New York NY
- ------------------------------------------------------------------------------------------------------------
Citibank Student Loan Corp. Pittsford NY
- ------------------------------------------------------------------------------------------------------------
CPI/Alltel Jacksonville FL
- ------------------------------------------------------------------------------------------------------------
CSC Australia Ply Ltd North Sydney AUSTRALIA
- ------------------------------------------------------------------------------------------------------------
Cummins Engine Co Columbus IN
- ------------------------------------------------------------------------------------------------------------
Deloitte & Touche/St of Delaware New Castle DE
- ------------------------------------------------------------------------------------------------------------
Detroit Edison Detroit MI
- ------------------------------------------------------------------------------------------------------------
Distributed Solutions Inc San Francisco CA
- ------------------------------------------------------------------------------------------------------------
Documentum Pleasanton CA
- ------------------------------------------------------------------------------------------------------------
Dr. Holtman/BV Hamburg GERMANY
- ------------------------------------------------------------------------------------------------------------
DSI / Levi Strauss & Co. San Francisco CA
- ------------------------------------------------------------------------------------------------------------
EDS Plano TX
- ------------------------------------------------------------------------------------------------------------
EDS/Nad Car Rental Plano TX
- ------------------------------------------------------------------------------------------------------------
Fujitsu AustIASS Chatswood NSW AUSTRALIA
- ------------------------------------------------------------------------------------------------------------
Household Wood Date IL
- ------------------------------------------------------------------------------------------------------------
HWACOM(Rose Data Systems) San Jose CA
- ------------------------------------------------------------------------------------------------------------
IBP Dakota City NE
- ------------------------------------------------------------------------------------------------------------
Imperial 00 Toronto Ontario CANADA
- ------------------------------------------------------------------------------------------------------------
Intel Corporation Folsom CA
- ------------------------------------------------------------------------------------------------------------
Isis Marlborough MA
- ------------------------------------------------------------------------------------------------------------
ITT Hartford Hartford CT
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
B-Al. I
Attachment 1 to Exhibit B
CUSTOMER AGREEMENTS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JVL Paris FRANCE
- ------------------------------------------------------------------------------------------------------------
JVL / BMW France Paris FRANCE
Paris
FRANCE
- ------------------------------------------------------------------------------------------------------------
JVL / Crica Paris FRANCE
Paris
FRANCE
- ------------------------------------------------------------------------------------------------------------
Kaiser Aluminum Spokane WA Spokane WA
- ------------------------------------------------------------------------------------------------------------
Lexis-Nexis Miamisburg OH Miamisburg OH
-----------------------------------------------------------------------------------------------------------
Milestone / TK Hamburg Germany
Insurance Hamburg
GERMANY
- ------------------------------------------------------------------------------------------------------------
Navistar International Oak Brook Terrace IL Oak Brook Terrace IL
-----------------------------------------------------------------------------------------------------------
Open Environment Corp Dallas TX Dallas TX
(OEC)
- ------------------------------------------------------------------------------------------------------------
Oracle/Macroview/EDI North Point HONG KONG
North Point
HONG KONG
- ------------------------------------------------------------------------------------------------------------
Oracle/Macroview/HK North Point HONG KONG
lmm. North Point
HONG KONG
- ------------------------------------------------------------------------------------------------------------
Peregrine San Diego CA San Diego CA
- ------------------------------------------------------------------------------------------------------------
Praxis Alexandria VA Alexandria VA
- ------------------------------------------------------------------------------------------------------------
Praxis/BDM Federal, Kettering OH Kettering OH
Inc
- ------------------------------------------------------------------------------------------------------------
Praxis/Computer Alexandria VA Alexandria VA
Sciences
- ------------------------------------------------------------------------------------------------------------
Praxis/DISA -Westhem Alexandria VA Alexandria VA
- ------------------------------------------------------------------------------------------------------------
PSE&G Newark NJ Newark NJ
- ------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------
Selesta Gestione Torino ITALY
Centri Torino
ITALY
- ------------------------------------------------------------------------------------------------------------
Selesta/Finsiel Torino ITALY
Torino
ITALY
- ------------------------------------------------------------------------------------------------------------
SHL System House Ottawa Ontario
Ottawa Ontario
- ------------------------------------------------------------------------------------------------------------
SHL/MCI Cerritos CA
Cerritos CA
- ------------------------------------------------------------------------------------------------------------
Simba/PageAhead Seattle WA
Seattle WA
- ------------------------------------------------------------------------------------------------------------
SNET/OEC New Haven CT
New Haven CT
- ------------------------------------------------------------------------------------------------------------
SNS (IAS Dist)
- ------------------------------------------------------------------------------------------------------------
SW Bell Mobile Dallas TX
Dallas TX
- ------------------------------------------------------------------------------------------------------------
Tadiran Givat Shmuel ISRAEL
Givat Shmuel
ISRAEL
- ------------------------------------------------------------------------------------------------------------
TCI/Vartec Denver CO
Denver co
- ------------------------------------------------------------------------------------------------------------
Teranet Whitby Ontario Canada
Whitby Ontario
Canada
- ------------------------------------------------------------------------------------------------------------
Transaction Santa Monica CA
Technology Inc. Santa Monica CA
- ------------------------------------------------------------------------------------------------------------
Transquest Into Sol Atlanta GA
Atlanta GA
- ------------------------------------------------------------------------------------------------------------
TRW Oakland CA
Oakland CA
- ------------------------------------------------------------------------------------------------------------
UCC Seodaemoon-Ku Seol KOREA
Seodaemoon-Ku Seoul
KOREA
- ------------------------------------------------------------------------------------------------------------
Unify Sacramento CA
Sacramento CA
- ------------------------------------------------------------------------------------------------------------
Uniplex Limited Hertfordshire UK
Hertfordshire
UK
- ------------------------------------------------------------------------------------------------------------
United Healthcare Hartford CT
Services Hartford CT
- ------------------------------------------------------------------------------------------------------------
United Insurance Chicago IL
Chicago
IL
- ------------------------------------------------------------------------------------------------------------
United Technologies / Bloomfield CT
Otis Elev Bloomfield CT
- ------------------------------------------------------------------------------------------------------------
Unitel Comm Toronto Ontario CANADA
Toronto Ontario
ICANADA
- ------------------------------------------------------------------------------------------------------------
Wang Labs Lowell MA
Lowell MA
I
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
B-Al.2
Attachment 2 to Exhibit B
DISTRIBUTION AGREEMENTS
- ------------------------------------------------------------------------------------------------------------
<S> <C>
CUSTOMER NAME TYPE OF AGREEMENT
- ------------------------------------------------------------------------------------------------------------
Case Consult International Distributor, International
- ------------------------------------------------------------------------------------------------------------
CDR Distributor, International
- ------------------------------------------------------------------------------------------------------------
Cimage Enterprise Sys Ltd ISV
- ------------------------------------------------------------------------------------------------------------
Documentum ISV
- ------------------------------------------------------------------------------------------------------------
Dr. Holtman & Partners GMBH Consulting and tech support to the customers of Milestone
- ------------------------------------------------------------------------------------------------------------
JVL Distributor, International
- ------------------------------------------------------------------------------------------------------------
Milestone/TK Insurance ISV
- ------------------------------------------------------------------------------------------------------------
Open Environment Corp (OEC) Reseller
- ------------------------------------------------------------------------------------------------------------
Oracle/Macroview Distributor, International
- ------------------------------------------------------------------------------------------------------------
Peregrine SW LIC/ISV
- ------------------------------------------------------------------------------------------------------------
Praxis Distributor, Federal
- ------------------------------------------------------------------------------------------------------------
Selesta Gestione Centri Distributor, International
- ------------------------------------------------------------------------------------------------------------
SHL System House Reseller
- ------------------------------------------------------------------------------------------------------------
SNS ([AS Dist) Distributor, International
- ------------------------------------------------------------------------------------------------------------
Tadiran Distributor, International
- ------------------------------------------------------------------------------------------------------------
TCI/Vartec LSV
- ------------------------------------------------------------------------------------------------------------
TRW ISV
- ------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------
UCCc Distributor, International
- ------------------------------------------------------------------------------------------------------------
Unify SW Lic/ISV
- ------------------------------------------------------------------------------------------------------------
Wang Labs SW Lic/ISV
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
B-A2
<PAGE>
EXHIBIT C
JOINT SALES AND SUPPORT PLAN
Microsoft and Company have the common goal of making available the best
solutions for integrating
BackOffice with IBM mainframes. Accordingly, Microsoft and Company agree to the
following:
1. Company executive management and VP of Microsoft's DB and TP division agree
to meet, and develop ways to work together to leverage the core
competencies and strengths of both organizations to support the enterprise
customers.
2. Microsoft and the Company will jointly inform TransAccess customers and
distributors (as identified in Exhibit B), for both United States and
international, along guidelines determined by appropriate Microsoft and
Company management.
3. Microsoft and Company agree to jointly collaborate consistent with the
terms of this agreement, as follows:
a. Microsoft will provide introduction to the large systems integrators
that have been involved with the TransAccess business, as Microsoft
deems appropriate.
b. Microsoft will provide Company with
introductions, as appropriate, to contacts within Microsoft field
organization that deal with integration of BackOffice with IBM
mainframes.
c. According to normal and customary Microsoft practice, Microsoft may
provide Company with references of solution providers and/or
customers, as appropriate, who express an interest in integrating
BackOffice with IBM mainframes, and Microsoft may also provide
solution providers and/or customers with references to the Company.
d. Company will be invited to attend, as appropriate, at Microsoft
Consulting Services and SE force training events, in order to ensure
that MCS and SE staff are aware of Company solutions that integrate
BackOffice with IBM mainframes.
e. Microsoft and Company agree to have quarterly meetings during the
18-month transition period to review marketing/sales activities and
determine future activities.
<PAGE>
EXHIBIT D
CUSTOMER RELATIONS PROGRAM
To effectively manage customer relationships and prospects and to reasonably
assure a high level of comfort and satisfaction for customers, the parties agree
to engage in the following Customer Relations Program.
I. Joint Letter to Customers - A joint letter will be sent to all existing
customers, as well as those designated to be in the pipeline. The letter will
contain the following points:
A. Nature of the transaction.
B. Microsoft's and Company's strong ongoing relationship.
C. Invitation to the upcoming joint event with Microsoft and
Company.
D. Detailing that Microsoft and Company are developing integration
solutions.
II. Joint Event for Microsoft and Company - Perhaps an addition to an existing
planned Microsoft function (PDC, Viper/Cedar Technology Preview, or sales
meeting), to inform customers face to face about the transition and the strong
relationship between Microsoft and Company. Alternative approach by Microsoft
would be acceptable.
III. Selected Joint Visits - A specific group of customers to be jointly agreed
upon by the parties will be jointly visited by Company Management and Microsoft
personnel, to address any concerns about the transition. The Microsoft personnel
should include the current Microsoft Sales Team, as well as the Major Account
Manager of the specific area.
IV. Microsoft Manager - Microsoft will designate a manager at Microsoft to be
responsible to work with Company to assure quality and timely service during,
the transition period.
<PAGE>
EXHIBIT E
FORM OF
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT ("Investment Agreement") entered into as of the 17th
day of December between Microsoft Corporation, a Washington corporation
located at One Microsoft Way, Redmond, WA 98052 ("Microsoft") and Proginet
Corporation, a Delaware corporation located at 200 Garden City Plaza,
Garden City, New York 11530 ("Company").
RECITALS
A. Microsoft and Company have entered into an Asset Purchase Agreement
of even date herewith (the "ASSET PURCHASE AGREEMENT"). B. The Asset
Purchase Agreement provides that Microsoft will sell certain assets to
Company. In exchange for the assets, Company will assume certain of
Microsoft's liabilities and issue shares of Company's common stock, par
value $.00I (the "SHARES") as specified in the Asset Purchase
Agreement. C. All capitalized terms shall have the same meaning as
defined in the Asset Purchase Agreement unless otherwise indicated
herein.
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and
the mutual representations, warranties, covenants and agreements
contained herein, Microsoft and Company hereby agree as follows:
AGREEMENT
1. Microsoft Representations and Agreements. Microsoft hereby
represents, warrants and agrees that:
1.1 Investor Status. Microsoft: (i) is (a) a "sophisticated purchaser"
as that term is defined in Appendix A to Form 20A of the
Securities Act (British Columbia) 1985 (the "BC Act"), and (b) an
"accredited investor" as that term is defined in Rule 501(a)(5) of
Regulation D of the Securities Act of 1933 (the "1933 Act"), (ii)
is acquiring the Shares for its own account, (iii) has the
knowledge and experience in financial and business matters and is
capable of evaluating the merits and risks of the prospective
investment; and (iv) does not intend to make a distribution of the
Shares or otherwise act as an "underwriter" within the meaning of
Section 2(11) of the 1933 Act.
1.2 Company Disclosure Documents. Microsoft has received copies of all
of Company's disclosure documents that have been filed with
the British Columbia Securities Commission ("BCSC") since November 1,
1995, and a description of the Shares to be issued pursuant to the terms
of the Asset Purchase Agreement.
1.3 Transfer Restrictions. Microsoft agrees that any and all transfers
of Shares received pursuant to the Asset Purchase Agreement, shall
be limited as follows:
(a) No Shares may be sold or otherwise transferred by Microsoft
prior to the 18-Month Anniversary Date.
(b) During the six-month period after the 18-Month Anniversary
Date, Microsoft shall be permitted, but not obligated, to
sell: (i) the 100,000 Shares initially issued pursuant
to Section 3.2 of the Asset Purchase Agreement.
(c) During the six month period beginning 24 months after the Closing
Date, Microsoft shall be permitted, but not obligated, to sell: (a) any
of the Shares described in Section 1.3(b) above,
<PAGE>
and (ii) one-third (1/3) of the Shares issuable to Microsoft pursuant
to Sections 3.1.2 and 3.2 of the Asset Purchase Agreement.
(d) During the six month period beginning 30 months after the Closing
Date, Microsoft shall be permitted, but not obligated, to sell: (a)
any of the Shares described in Section 1.3 (b) above, and (ii) an
additional one-third (1/3) of the Shares issuable to Microsoft
pursuant to Sections 3.1.2 and 3.2 of the Asset Purchase Agreement
(i.e., a cumulative total of 2/3 of such latter categories of Shares).
(e) On the 36-month anniversary date of the Closing Date, all of the
Shares issued to Microsoft pursuant to the terms of the Asset Purchase
Agreement shall be freely saleable, subject only to the restrictions
of Section 1.4 below, by Microsoft
1.4 Restrictions. Subject to the restrictions contained in Section
1.3, Microsoft will not offer to sell, exchange, transfer, pledge or otherwise
dispose of any of the Shares unless at such time at least one of the following
is satisfied:
(a) a registration statement under the BC Act or the 1933 Act, whichever is
applicable, covering the Shares proposed to be sold, transferred or otherwise
disposed of, describing the manner and terms of the proposed sale, transfer or
other disposition, and containing a current prospectus, shall have been filed
with the BCSC or the SEC, whichever is applicable, and made effective under
either the BC Act (through the issuance of a receipt by the BCSC) or the 1933
Act;
(b) such transaction shall be permitted pursuant to the provisions of Rule
144 under the 1933 Act ("RULE 144");
(c) counsel to Microsoft reasonably acceptable to Company shall have
advised Microsoft that no registration under the BC Act or 1933 Act would
be required in connection with the proposed sale, transfer or other
disposition; or
(d) an authorized representative of the BCSC or the SEC shall have
rendered written advice to Microsoft (sought by Microsoft or counsel to
Microsoft after prior notice to Company) to the effect that the BCSC or the
SEC would take no action, or that the staff of the BCSC or the SEC would
not recommend that the BCSC or SEC take action, with respect to the
proposed sale, transfer or other disposition if consummated.
1.5 Restrictive Legend(s). All certificates representing the Shares
deliverable to Microsoft pursuant to the Asset Purchase Agreement and any
certificates subsequently issued with respect thereto or in substitution
therefor, unless a sale, transfer or other disposition is executed pursuant
to one or more of the alternative conditions set forth in Section 1.4 shall
have occurred, or unless the conditions of paragraph (k) of Rule 144 shall
have been satisfied, and shall bear a legend substantially as follows:
"The shares represented by this certificate may not be offered, sold,
pledged, transferred or otherwise disposed of except in accordance with the
requirements of the Securities Act (British Columbia) 1985, as amended, and
the other conditions specified in that certain Investment Agreement, a copy
of which may be inspected by the holder of this certificate at the offices
of Proginet Corporation, 200 Garden City Plaza, Suite 220, Garden City, New
York 11530, or Proginet Corporation will furnish, without charge, a copy
thereof to the holder of this certificate upon written request therefor."
Should the Shares be registered with the Securities and Exchange Commission
during the 30 months after the Closing Date, Microsoft shall return to
Company its Shares containing the above legend.
E-2
Company shall promptly replace these Shares with the same number of Shares
bearing the following
legend:
<PAGE>
"The shares represented by this certificate may not be offered,
sold, pledged, transferred or otherwise disposed of except in
accordance with the requirements of the Securities Act (British
Columbia) 1985, as amended, and the other conditions specified in
that certain Investment Agreement, a copy of which may be
inspected by the holder of this certificate at the offices of
Proginet Corporation, 200 Garden City Plaza, Suite 220, Garden
City, New York 11530, or Proginet Corporation will furnish,
without charge, a copy thereof to the holder of this certificate
upon written request therefor."
Company, at its discretion, may cause a stop transfer order to be placed
with its transfer agent(s) with respect to the certificates for the Shares
but not as to the certificates for any part of the Shares as to which said
legend is no longer appropriate when one or more of the alternatives set
forth in Section 1.4 shall have been satisfied and the contractual
agreement not to engage in Sales as set forth in Section 1.3 has been
satisfied or waived by Company. Company covenants that upon the request of
Microsoft, it will remove said legend when a sale, transfer or other
disposition is executed in compliance with Sections 1.3 and one of the
alternatives in Section 1.4.
1.6 Observation of BC and 1933 Acts. Microsoft will observe and comply
with the BC Act and 1933 Act, whichever is applicable, and the General
Rules and Regulations thereunder, as now in effect and as from to time
amended and including those hereafter enacted or promulgated, in connection
with any offer, sale, pledge, transfer or other disposition of the
Microsoft Common Shares or any part thereof including the prospectus
delivery requirements of the BC and 1933 Acts.
2. REGISTRATION. Company shall have the obligation, at Company's sole
expense, to register the Shares issued to Microsoft in connection with
the Asset Purchase Agreement as set forth in, and subject to, Section
6.1 of the Asset Purchase Agreement. Sales pursuant to such a
registration shall be in a manner consistent with the provisions of
Section 1.3 and 1.4.
3. REPORTS. If the Shares are registered with the
SEC, from and after the 18-Month Anniversary Date, and for so long as
necessary in order to permit Microsoft to sell the Shares pursuant to
Rule 144, Company will use its best efforts to file on a timely basis
all reports required to be filed by it pursuant to Section 13 of the
Securities Exchange Act of 1934, referred to in paragraph (c)(1) of
Rule 144 (or, if applicable, Company will use its best efforts to make
publicly available the information regarding itself referred to in
paragraph (c)(2) of Rule 144), in order to permit Microsoft to sell,
pursuant to the terms and conditions of Rule 144, the Shares.
4. STOCK, SPLIT, RECLASSIFICATION OF SHARES. Should Company effect any
stock split or reclassification of its shares of common stock, such
stock split or reclassification shall apply to the terms of this
Agreement, and the number of Shares which have been issued to
Microsoft and which Microsoft may sell pursuant Section 1.3 to this
Agreement shall be adjusted accordingly.
5. WAIVER. No waiver by any party hereto of any condition or of any
breach of any provision of this Investment Agreement shall be
effective unless in writing.
6. NOTICES. All notices, requests, demands or other communications
which are required or may be given pursuant to the terms of this
Investment Agreement shall be in writing and shall be deemed to have
been duly given on the date of delivery if delivered by hand or upon
receipt if mailed by registered or certified mail, postage prepaid,
return requested, or sent by express courier, or by facsimile upon
written confirmation of receipt by the recipient of such notice to the
party at the address set forth below, or such other address as may be
hereafter be designated in writing by the party:
E-3
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
To Microsoft: To Company:
<S> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Microsoft Corporation Proginet Corporation
- ------------------------------------------------------------------------------------------------------------
One Microsoft Way 200 Garden.City Plaza
- ------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------
Redmond, WA 98052-6399 Garden City, NY 11530
- ------------------------------------------------------------------------------------------------------------
Attention: General Manager, Attention: Kevin M. Kelly
- ------------------------------------------------------------------------------------------------------------
SNA Server Development
- ------------------------------------------------------------------------------------------------------------
Phone: (206) 882-8080 Phone: (516) 248-2000
- ------------------------------------------------------------------------------------------------------------
Fax: (206) 936-7329 Fax: (516) 248-3360
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Copy to: Copy to:
- ------------------------------------------------------------------------------------------------------------
Law & Corporate Affairs, US Legal Parker Chapin Flattau and Kimpl, LLP
- ------------------------------------------------------------------------------------------------------------
Fax: (206) 869-1327 405 Lexington Avenue
- ------------------------------------------------------------------------------------------------------------
New York, NY 10174
- ------------------------------------------------------------------------------------------------------------
Attention: James Alterbaum, Esq.
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Phone: (212) 704-6000
- ------------------------------------------------------------------------------------------------------------
Fax: (212) 704-6288
</TABLE>
6. COUNTERPARTS. This Agreement may be executed in two or more
partially or fully executed counterparts each of which shall be deemed
an original and shall bind the signatory, but all of which together
shall constitute but one and the same instrument. `Me execution and
delivery of a Signature Page - Investment Agreement in the form annexed
to this Agreement by any party hereto who shall has been furnished the
final form of this Agreement shall constitute the execution and
delivery of this Agreement by such party.
7. SUCCESSORS AND ASSIGNS. This Investment Agreement shall be
enforceable by and shall inure to the benefit of and be binding upon,
the parties hereto and their respective successors and assigns. As
used herein, the terms "successors and assigns" shall mean, where the
context so permits, heirs, executors, administrators, trustees and
successor trustees, and personal and other representatives.
8. DISPUTE RESOLUTION. Any dispute, controversy or claim arising, out
of or in connection with this Agreement, or any breach thereof, shall
be addressed in accordance with Section 10.2 of the Asset Purchase
Agreement.
9. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, such provision and all other related
provisions shall be modified rather than voided, if possible, in order
to achieve the intent of the parties to this Agreement to the extent
possible. In any event all other unrelated provisions of this
Agreement shall be deemed valid and enforceable to the full extent.
10. EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the construction or
interpretation of this Investment Agreement.
11. DEFINITIONS. All capitalized terms used herein shall have the
meaning defined in the Asset Purchase Agreement, unless otherwise
defined herein.
12. THIRD PARTY RELIANCE. Counsel to the parties shall be entitled to
rely upon this Investment Agreement as needed in the rendering of
opinions as provided for in the Asset Purchase Agreement. 13.
CONFIDENTIALITY. Microsoft and Company agree to keep confidential all
information in accordance with Section 6.6 of the Asset Purchase
Agreement specifically including without limitation the amount of cash
and the number of Shares to be issued.
E-4
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date
first written above.
MICROSOFT CORPORATION PROGINET CORPORATION
- ---------------------------------------- ---------------------------------------
<PAGE>
By (Sign) By (Sign)
Name (Print) Name (Print)
Title Title
E-5
EXHIBIT F
FORM OF
ASSIGNMENT AND BILL OF SALE
THIS ASSIGNMENT AND BILL OF SALE (this "Assignment and Bill of Sale") is
delivered pursuant to that certain Asset Purchase Agreement, dated as of
December 6, 1996, ("APA") between Microsoft Corporation, a Washington
corporation located at One Microsoft Way, Redmond, WA 98052 ("Microsoft")
and Proginet Corporation, a Delaware corporation located at 200 Garden City
Plaza, Garden City, New York 11530 ("Company"). The terms and provisions of
the APA shall apply to this Assignment and Bill of Sale. All capitalized
terms used but not otherwise defined herein shall have the meanings set
forth in the APA.
RECITALS
7.2.8 A. UNDER THE APA, MICROSOFT AGREED TO SELL TO COMPANY AND COMPANY
AGREED TO PURCHASE FROM MICROSOFT CERTAIN ASSETS AND RIGHTS OF
MICROSOFT PERTAINING TO THE ACQUIRED ASSETS. 7.2.9 B. IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THE APA, MICROSOFT AGREED TO
ASSIGN CERTAIN ASSETS AND RIGHTS PERTAINING TO THE ACQUIRED ASSETS TO
COMPANY.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, Microsoft hereby agrees as follows:
7.2.10 1. SALE AND ASSIGNMENT
Microsoft hereby sells, conveys, transfers, assigns and delivers to
Company all right, title and interest in and to the Acquired Assets,
free and clear of all liens, claims, charges and encumbrances,
including without limitation the following:
<PAGE>
(a) Netwise Assets. All software, documentation, test cases,
development history database, training materials and related
proprietary materials acquired by Microsoft from Newts, Inc. (the
"Netwise Assets") under an Asset Purchase Agreement dated October
27, 1995 (the "Netwise Asset Purchase Agreement").
(b) Netwise Assets Further Developed or Modified by Microsoft. All
error corrections and updates to the Netwise Assets, documentation
and materials related to the Netwise Assets developed by Microsoft
between October 27, 1995 and the Closing Date of this Agreement.
(c) Other Assets. All of Microsoft's intangible assets acquired
pursuant to the Netwise Asset Purchase Agreement, including
goodwill, going concern value, customer lists, contracts,
agreements, licenses or license agreements, commitments,
warranties, claims and other choate and inchoate rights, but
excluding without limitation, the Retained Assets, cash,
F-I
marketable securities, receivables and rights relating to contractual
obligations (other than the Assumed Obligations).
7.2.11 2. MICROSOFT'S COVENANTS
Microsoft hereby covenants and agrees that it will, at the reasonable
request of Company, execute and deliver, and will cause to be executed
and delivered, such further instruments of sale, transfer, conveyance
and assignment and take such other action as may reasonably be required
to more effectively sell, transfer, convey, assign and deliver to, and
vest in, Company, title to and possession of the assets hereby sold,
transferred, conveyed, assigned and delivered, and to put Company in
actual possession and operating control thereof.
7.2.12 3. ATTORNEY-IN-FACT
Microsoft hereby irrevocably constitutes and appoints Company, and its
successors and assigns, as its attorney-in-fact, with full power of
substitution, in its name or otherwise, on behalf of Microsoft for
Company's use, to claim, demand, collect and receive at any time and
from time to time any and all assets, properties, claims, accounts and
other rights, tangible or intangible, real, personal or mixed sold,
transferred, conveyed, assigned and delivered under this Assignment and
Bill of Sale.
7.2.13 4. APA
Microsoft, by its execution of this Assignment and Bill of Sale, and
Company, by its acceptance and consent to the form of this Assignment
and Bill of Sale, each hereby acknowledge and agree that:
(a) The terms and provisions of the APA shall apply to this Assignment
and Bill of Sale, and the terms and conditions of this Assignment
and Bill of Sale shall be construed
consistently therewith; and
7.2.14 (B) NEITHER THE REPRESENTATIONS AND WARRANTIES NOR THE RIGHTS
(INCLUDING INDEMNIFICATION) AND REMEDIES OF ANY PARTY UNDER THE APA
SHALL BE DEEMED TO HAVE BEEN ENLARGED OR ALTERED IN ANY WAY BY THE
EXECUTION, ACCEPTANCE AND APPROVAL OF THIS ASSIGNMENT AND BILL OF SALE.
5. Effective Date of Assignment and Bill of Sale
This Assignment and Bill of Sale shall be deemed effective for all
purposes as of the Closing Date of the APA.
<PAGE>
F-2
IN WITNESS WHEREOF, Microsoft has executed this Assignment and Bill of Sale
effective as of the ___ day of __________ 1996.
MICROSOFT CORPORATION
By
ITS V:P, 6,s-c-s + -T@ S 0-@ IDIAS
ACCEPTED:
PROGINET CORPORATION
By
Its
F-3
EXHIBIT G
FORM OF
ASSUMPTION OF OBLIGATIONS
THIS ASSLWTTON OF OBLIGATIONS ("Assumption") is made by and between
Proginet Corporation, a Delaware corporation ("Company"), and Microsoft
Corporation, A Washington corporation ("Microsoft"). This Assumption is
delivered pursuant to that certain Asset Purchase Agreement, dated as of
December 6, 1996, ("APA"). Capitalized terms used but not otherwise defined
herein shall have the meanings set forth in the APA.
RECITALS
7.2.15 A. UNDER THE APA, MICROSOFT AGREED TO SELL AND COMPANY AGREED TO
PURCHASE FROM MICROSOFT CERTAIN ASSETS OF MICROSOFT ACQUIRED BY
MICROSOFT FROM NETWISE, INC. (THE
<PAGE>
"NETWISE ASSETS") UNDER AN ASSET PURCHASE AGREEMENT DATED OCTOBER 27,
1995 BETWEEN MICROSOFT AND NETWISE, INC. 7.2.16 B. IN CONNECTION WITH
THE TRANSACTIONS CONTEMPLATED BY THE APA, COMPANY AGREED TO ASSUME
CERTAIN CONTRACTUAL OBLIGATIONS OF MICROSOFT WITH RESPECT TO THE
ACQUIRED ASSETS
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree
as follows:
1. ASSIGNMENT AND ASSUMPTION
Microsoft hereby assigns to Company, and Company hereby assumes and agrees,
subject to the exclusions and limitations contained in the APA, to perform,
pay or discharge the Assumed Obligations as they are defined in the APA.
Except for the Assumed Obligations or as otherwise provided in the APA,
Company assumes no debt, liability or obligation of Microsoft by this
Assumption, and it is expressly understood and agreed that all debts,
liabilities and obligations other than the Assumed Obligations shall remain
the sole obligation of Microsoft, its successors and assigns, and no person
other than Microsoft shall have any rights under this Assumption.
2. APA
Company, by its execution of this Assumption, and Microsoft, by its
acceptance and consent to the form of this Assumption, each hereby
acknowledge and agree that:
7.2.17 (A) THE TERMS AND PROVISIONS OF THE APA SHALL APPLY TO THIS
ASSUMPTION, AND THE TERMS AND CONDITIONS OF THIS ASSUMPTION SHALL BE
CONSTRUED CONSISTENTLY THEREWITH; AND
G- I
7.2.18 (B) NEITHER THE REPRESENTATIONS AND WARRANTIES NOR THE RIGHTS
(INCLUDING INDEMNIFICATION) AND REMEDIES OF ANY PARTY UNDER THE APA
SHALL BE DEEMED TO HAVE BEEN ENLARGED OR ALTERED IN ANY WAY BY THE
EXECUTION, ACCEPTANCE AND APPROVAL OF THIS ASSUMPTION, AND THIS
ASSUMPTION SHALL NOT ENLARGE ANY RIGHTS OF THIRD PARTIES UNDER ANY OF
THE ASSUMED OBLIGATIONS.
3. EFFECTIVE DATE OF ASSUMPTION
This Assumption shall be deemed effective for all purposes as of the
Closing Date of the APA.
IN WITNESS WHEREOF, Microsoft and Company have executed this Assumption
effective as of the ___ day of ____________ of 1996.
PROGRNET CORPORATION
By
Its
ACCEPTED:
MICROSOFT CORPORTION
<PAGE>
By-I
Its
G-2
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT ("INVESTMENT AGREEMENT") entered into as of the ___
day of December between MICROSOFT CORPORATION, A Washington corporation
located at One Microsoft Way, Redmond, WA 98052 ("MICROSOFT") and PROGINET
CORPORATION, a Delaware corporation LOCATED at 200 Garden City Plaza,
Garden City, New York 11530 ("COMPANY").
RECITALS
7.2.19 A. MICROSOFT AND COMPANY HAVE ENTERED INTO AN ASSET PURCHASE
AGREEMENT OF EVEN DATE HEREWITH (THE "Asset Purchase Agreement").
7.2.20 B. THE Asset PURCHASE AGREEMENT PROVIDES THAT MICROSOFT WILL
sell CERTAIN ASSETS TO COMPANY. IN exchange for the ASSETS, COMPANY
WILL ASSUME CERTAIN OF MICROSOFT'S LIABILITIES AND ISSUE SHARES OF
COMPANY'S COMMON STOCK, PAR VALUE S.001 (THE "Shares") AS specified IN
THE Asset PURCHASE AGREEMENT. 7.2.21 C. ALL CAPITALIZED TERMS SHALL
HAVE THE SAME MEANING as DEFINED IN THE Asset PURCHASE AGREEMENT UNLESS
OTHERWISE INDICATED HEREIN.
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and
THE mutual representations, warranties, covenants and agreements
contained herein, Microsoft and Company hereby agree as follows:
AGREEMENT
7.2.22 1. Microsoft Representations and Agreements. MICROSOFT
HEREBY REPRESENTS, WARRANTS AND AGREES THAT:
1.1 Investor Status. Microsoft: (i) is (a) a "SOPHISTICATED PURCHASER"
AS that term is DEFINED in Appendix A to Form 20A of the
Securities Act (British Columbia) 1985 (the "BC ACT"), and (b) an
"ACCREDITED INVESTOR" as that term is defined in Rule 50 1 (a)(5)
of Regulation D of THE Securities Act of 1933 (the "1933 ACT");
(ii) is acquiring the Shares for its own account, (iii) has the
knowledge and experience in financial and business matters and is
capable of evaluating the merits and risks of the prospective
investment; and (iv) does not intend to make a distribution of the
Shares or otherwise act as an "UNDERWRITER" within the meaning of
Section 2(11) of the 1933 Act.
1.2 Company Disclosure Documents. Microsoft has received copies of ALL
of Company's disclosure documents that have been filed with the
British Columbia Securities Commission ("BCSC") since November 1,
1995, and a description of the Shares to be issued pursuant to the
terms of the Asset Purchase Agreement.
<PAGE>
1.3 Transfer Restrictions. Microsoft agrees that any and all transfers
of Shares received pursuant to the Asset Purchase Agreement, shall
be limited as follows:
(A) No Shares may be sold or otherwise transferred by Microsoft
prior to the 18-Month Anniversary Date.
(b) During the six month period after the 18-Month Anniversary
Date, Microsoft shall be permitted, but not obligated, to sell:
(i) the 100,000 Shares initially issued pursuant to
Section 3.2 of the Asset Purchase Agreement.
7.2.23 (C) DURING THE SIX MONTH PERIOD BEGINNING 24 MONTHS AFTER THE
CLOSING, DATE, MICROSOFT SHALL BE PERMITTED, BUT NOT OBLIGATED, TO
SELL: (A) ANY OF THE SHARES DESCRIBED IN SECTION 1.3(B) ABOVE, AND (II)
ONE-THIRD (1/3) OF THE SHARES ISSUABLE TO MICROSOFT PURSUANT TO
SECTIONS 3.1.2 AND 3.2 OF THE ASSET PURCHASE AGREEMENT.
7.2.24 (D) DURING THE SIX MONTH PERIOD BEGINNING 30 MONTHS AFTER THE
CLOSING DATE, MICROSOFT SHALL BE PERMITTED, BUT NOT OBLIGATED, TO SELL
(A) ANY OF THE SHARES DESCRIBED IN SECTION 1.3
(b) above, and (ii) an additional one-third (1/3) of the Shares issuable to
Microsoft pursuant to Sections
3.1.2 and 3.2 of the Asset Purchase Agreement (i.e., a cumulative total of
2/3 of such latter categories of Shares).
7.2.25 (E) ON THE 36-MONTH ANNIVERSARY DATE OF THE CLOSING DATE, ALL OF
THE SHARES ISSUED TO MICROSOFT PURSUANT TO THE TERMS OF THE ASSET
PURCHASE AGREEMENT SHALL BE FREELY SALEABLE, SUBJECT ONLY TO THE
RESTRICTIONS OF SECTION 1.4 BELOW, BY MICROSOFT.
1.4 Restrictions. Subject to the restrictions contained in Section
1.3, Microsoft will not offer to sell, exchange, transfer, pledge
or otherwise dispose of any of the Shares unless at such time at
least one of the following is satisfied:
(a) a registration statement under the BC Act or the 1933 Act,
whichever is applicable, covering the Shares proposed to be
sold, transferred or otherwise disposed of, describing the
manner and terms of the proposed sale, transfer or other
disposition, and containing a current prospectus, shall have
been filed with the BCSC or the SEC, whichever is applicable,
and made effective under either the BC Act (through the
issuance of a receipt by the BCSC) or the 1933 Act;
(b) such transaction shall be permitted pursuant to the provisions
of Rule 144 under the 1933 Act ("Rule 144");
(c) counsel to Microsoft reasonably acceptable to Company shall
have advised Microsoft that no registration under the BC Act
or 1933 Act would be required in connection with the proposed
sale, transfer or other disposition; or
7.2.26 (D) AN AUTHORIZED REPRESENTATIVE OF THE BCSC OR THE SEC SHALL
HAVE rendered written advice to Microsoft (sought by Microsoft or counsel to
Microsoft after prior notice to Company) to the effect that the BCSC or the SEC
would take no action, or that the staff of the BCSC or the SEC would not
recommend that the BCSC or SEC take action, with respect to the proposed sale,
transfer or other disposition if consummated.
7.2.27 1.5 RESTRICTIVE LEGEND(S). ALL CERTIFICATES REPRESENTING THE
SHARES DELIVERABLE TO MICROSOFT PURSUANT TO THE ASSET PURCHASE
AGREEMENT AND ANY CERTIFICATES SUBSEQUENTLY ISSUED WITH RESPECT THERETO
OR IN SUBSTITUTION THEREFOR, UNLESS A SALE, TRANSFER OR OTHER
DISPOSITION IS EXECUTED PURSUANT TO ONE OR MORE OF THE ALTERNATIVE
CONDITIONS SET FORTH IN SECTION 1.4 SHALL HAVE OCCURRED, OR UNLESS THE
CONDITIONS OF PARAGRAPH (K) OF RULE 144 SHALL HAVE BEEN SATISFIED, AND
SHALL BEAR A LEGEND SUBSTANTIALLY AS FOLLOWS:
<PAGE>
y
"The shares represented by this certificate may not be offered, sold,
pledged, transferred or otherwise disposed of except in accordance with the
requirements of the Securities Act (British Columbia) 1985, as amended, and
the other conditions specified in that certain Investment Agreement, a copy
of which may be inspected by the holder of this certificate at the offices
of Proginet Corporation, 200 Garden City Plaza, Suite 220, Garden City, New
York 11530, or Proginet Corporation will furnish, without charge, a copy
thereof to the holder of this certificate upon written request therefor."
Should the Shares be registered with the Securities and Exchange Commission
during, the 30 months after the Closing Date, Microsoft shall return to
Company its Shares containing the
above legend. Company shall promptly replace these Shares with the same number
of Shares bearing the following, legend:
0
"The shares represented by this certificate may not be offered, sold,
pledged, transferred or otherwise disposed of except in accordance with the
requirements of the Securities Act (British Columbia) 1985, as amended, and
the other conditions specified in that certain Investment Agreement, a copy
of which may be inspected by the holder of this certificate at the offices
of Proginet Corporation, 200 Garden City Plaza, Suite 220, Garden City, New
York 11530, or Proginet Corporation will furnish, without charge, a copy
thereof to the holder of this certificate upon written request therefor.'
Company, at its discretion, may cause a stop transfer order to be placed
with its transfer agent(s) with respect to the certificates for the Shares
but not as to the certificates for any part of the Shares as to which said
legend is no longer appropriate when one or more of the alternatives set
forth in Section 1.4 shall have been satisfied and the contractual
agreement not to engage in Sales as set forth in Section 1.3 has been
satisfied or waived by Company. Company covenants that upon the request of
Microsoft, it will remove said legend when a sale, transfer or other
disposition is executed in compliance with Sections 1.3 and one of the
alternatives in Section 1.4.
7.2.28 1.6 OBSERVATION OF BC AND 1933 ACTS. MICROSOFT WILL OBSERVE AND
COMPLY WITH THE BC Act and 1933 Act, whichever is applicable, and the General
Rules and Regulations thereunder, as now in effect and as from to time amended
and including those hereafter enacted or promulgated, in connection with any
offer, sale, pledge, transfer or other disposition of the Microsoft Common
Shares or any part thereof including the prospectus delivery requirements of the
BC and 1933 Acts.
7.2.29 2. REGISTRATION. COMPANY SHALL HAVE THE OBLIGATION, AT COMPANY'S
SOLE EXPENSE, TO REGISTER THE SHARES ISSUED TO MICROSOFT IN CONNECTION
WITH THE ASSET PURCHASE AGREEMENT AS SET FORTH IN, AND SUBJECT TO,
SECTION 6.1 OF THE ASSET PURCHASE AGREEMENT. SALES PURSUANT TO SUCH A
REGISTRATION SHALL BE IN A MANNER CONSISTENT WITH THE PROVISIONS OF
SECTION 1.3 AND 1.4.
7.2.30 3. REPORTS. IF THE SHARES ARE REGISTERED WITH THE SEC, FROM AND
AFTER THE 18-MONTH ANNIVERSARY DATE, AND FOR SO LONG AS NECESSARY IN
ORDER TO PERMIT MICROSOFT TO SELL THE SHARES PURSUANT TO RULE 144,
COMPANY WILL USE ITS BEST EFFORTS TO FILE ON A TIMELY BASIS ALL
REPORTS REQUIRED TO BE FILED BY IT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934, REFERRED TO IN PARAGRAPH (C)(1) OF
RULE 144 (OR, IF APPLICABLE, COMPANy WILL USE ITS BEST EFFORTS TO MAKE
PUBLICLY AVAILABLE THE INFORMATION REGARDING ITSELF REFERRED TO IN
PARAGRAPH (C)(2) OF RULE 144), IN ORDER TO PERMIT MICROSOFT TO SELL,
PURSUANT TO THE TERMS AND CONDITIONS OF RULE 144, THe SHARES.
7.2.31 4. STOCK SPLIT, RECLASSIFICATION OF SHARES. SHOULD COMPANY
EFFECT ANY STOCK SPLIT OR RECLASSIFICATION O I@ SHARES OF COMMON
STOCK, SUCH STOCK SPLIT OR RECLASSIFICATION SHALL APPLY TO THE TERMS
OF THIS AGREEMENT, AND THE NUMBER OF SHARES WHICH HAVE BEEN ISSUED TO
MICROSOFT AND WHICH MICROSOFT MAY SELL PURSUANT SECTION 1.3 TO THIS
AGREEMENT SHALL BE ADJUSTED ACCORDINGLY.
7.2.32 5. WAIVER. NO WAIVER BY ANY PARTY HERETO OF ANY CONDITION OR OF
ANY BREACH OF ANY PROVISION OF THIS INVESTMENT AGREEMENT SHALL BE
EFFECTIVE UNLESS IN WRITING
<PAGE>
7.2.33 6. NOTICES. ALL NOTICES, REQUESTS, DEMANDS OR OTHER
COMMUNICATIONS WHICH ARE REQUIRED OR MAY BE GIVEN PURSUANT TO THE
TERMS OF THIS INVESTMENT AGREEMENT SHALL BE IN WRITING AND SHALL BE
DEEMED TO HAVE BEEN DULY GIVEN ON THE DATE OF DELIVERY IF DELIVERED BY
HAND OR UPON RECEIPT IF MAILED BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, RETURN REQUESTED, OR SENT BY EXPRESS COURIER, OR BY
FACSIMILE UPON WRITTEN CONFIRMATION OF RECEIPT BY THE RECIPIENT OF
SUCH NOTICE TO THE PARTY AT THE ADDRESS SET FORTH BELOW, OR SUCH
other ADDRESS AS MAY be hereafter be designated in writing by the party:
C,
To Microsoft: To Company:
Microsoft Corporation Proginet Corporation
One Microsoft Way 200 Garden City Plaza
Redmond, WA 98052-6399 Garden City, NY 11530
Attention: General Manager, Attention: Kevin M. Kelly
7.2.34 SNA SERVER DEVELOPMENT
Phone: (206) 882-8080 Phone: (516) 248-2000
Fax: (206) 936-7329 Fax: (516) 248-3360
Copy to: Copy to:
Law & Corporate Affairs, US Legal Parker Chapin Flattau and Kimpl, LLP
Fax: (206) 869-1327 1211 Avenue Of Americas
New York, NY 10036
Attention: James Alterbaum, Esq.
Phone: (212) 704-6000
Fax: (212) 704-6288
7.2.35 6. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE
PARTIALLY OR FULLY EXECUTED COUNTERPARTS EACH OF WHICH SHALL BE DEEMED
AN ORIGINAL AND SHALL BIND THE SIGNATORY, BUT ALL OF WHICH TOGETHER
SHALL CONSTITUTE BUT ONE AND THE SAME INSTRUMENT. THE EXECUTION AND
DELIVERY OF A SIGNATURE PAGE - INVESTMENT AGREEMENT IN THE FORM ANNEXED
TO THIS AGREEMENT BY ANY PARTY HERETO WHO SHALL HAS BEEN FURNISHED THE
FINAL FORM OF THIS AGREEMENT SHALL CONSTITUTE THE EXECUTION AND
DELIVERY OF THIS AGREEMENT BY SUCH PARTY.
7.2.36 7. SUCCESSORS AND ASSIGNS. THIS INVESTMENT AGREEMENT SHALL BE
ENFORCEABLE BY AND SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON,
THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. AS
USED HEREIN, THE TERMS "SUCCESSORS AND ASSIGNS" SHALL MEAN, WHERE THE
CONTEXT SO PERMITS, HEIRS, EXECUTORS, ADMINISTRATORS, TRUSTEES AND
SUCCESSOR TRUSTEES, AND PERSONAL AND OTHER REPRESENTATIVES.
7.2.37 8. DISPUTE RESOLUTION. ANY DISPUTE, CONTROVERSY OR CLAIM
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, OR ANY BREACH
THEREOF, SHALL BE ADDRESSED IN ACCORDANCE WITH SECTION 10.2 OF THE
ASSET PURCHASE AGREEMENT.
7.2.38 9. SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT IS HELD TO
BE UNENFORCEABLE FOR ANY REASON, SUCH PROVISION AND ALL OTHER RELATED
PROVISIONS SHALL BE MODIFIED RATHER THAN VOIDED, IF POSSIBLE, IN ORDER
TO ACHIEVE THE INTENT OF THE PARTIES TO THIS AGREEMENT TO THE EXTENT
POSSIBLE. IN ANY EVENT, ALL OTHER UNRELATED PROVISIONS OF THIS
AGREEMENT SHALL BE DEEMED VALID AND ENFORCEABLE TO THE FULL EXTENT.
7.2.39 10. EFFECT OF HEADINGS. THE SECTION HEADINGS HEREIN ARE FOR
CONVENIENCE ONLY AND SHALL NOT AFFECT THE CONSTRUCTION OR
INTERPRETATION OF THIS INVESTMENT AGREEMENT.
<PAGE>
11. Definitions. All capitalized terms used herein shall have the meaning
defined in the Asset Purchase Agreement, unless otherwise defined herein.
7.2.40 12. THIRD PARTY RELIANCE. COUNSEL TO THE PARTIES SHALL BE
ENTITLED TO RELY UPON THIS INVESTMENT AGREEMENT AS NEEDED IN THE
RENDERING OF OPINIONS AS PROVIDED FOR IN THE ASSET PURCHASE AGREEMENT.
7.2.41 13. CONFIDENTIALITY. MICROSOFT AND COMPANY AGREE TO KEEP
CONFIDENTIAL ALL INFORMATION IN ACCORDANCE WITH SECTION 6.6 OF THE
ASSET PURCHASE AGREEMENT SPECIFICALLY INCLUDING WITHOUT LIMITATION THE
AMOUNT OF CASH AND THE NUMBER OF SHARES TO BE ISSUED.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date FIRST written above.
MICROSOFT CORPORATION PROGINET CORPORATION
By ZSip) BI (Sign)
NAME (Print) NAME (Print)
Title TITLE
p@ A,
Date Date
I\chdM[02-00.45Nn@tdoc
ASSIGNMENT AND BILL OF SALE
THIS ASSIGNMENT AND BILL OF SALE (this "Assignment and Bill of Sale") is
delivered pursuant to that certain Asset Purchase Agreement, dated as of
December 6, 1996, ("APA") between Microsoft Corporation, a Washington
corporation located at One Microsoft Way, Redmond, WA 98052 (`Microsoft')
and Proginet Corporation, a Delaware corporation located at 200 Garden City
Plaza, Garden City, New York 11530 ("Company"). `Me terms and provisions of
the APA shall apply to this Assignment and Bill of Sale. All capitalized
terms used but not otherwise defined herein shall have the meanings set
forth in the APA.
RECITALS
7.2.42 A. UNDER THE APA, MICROSOFT AGREED TO SELL TO COMPANY AND
COMPANY AGREED TO PURCHASE FROM MICROSOFT CERTAIN ASSETS AND RIGHTS OF
MICROSOFT PERTAINING TO THE ACQUIRED ASSETS. 7.2.43 B. IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THE APA, MICROSOFT AGREED TO
ASSIGN CERTAIN ASSETS AND RIGHTS PERTAINING TO THE ACQUIRED ASSETS TO
COMPANY.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, Microsoft hereby agrees as follows:
7.2.44 1. SALE AND ASSIGNMENT
Microsoft hereby sells, conveys, transfers, assigns and delivers to
Company all right, title and interest in and to the Acquired Assets,
free and clear of all liens, claims, charges and encumbrances,
including without limitation the following:
C,
<PAGE>
(a) Netwise Assets. All software, documentation, test cases,
development history database, training materials and related
proprietary materials acquired by Microsoft from Netwise, Inc.
(the "Netwise Assets") under an Asset Purchase Agreement dated
October 27, 1995 (the "Netwise Asset Purchase Agreement").
(b) Netwise Assets Further Developed or Modified by Microsoft. All
error corrections and updates to the Netwise Assets, documentation
and materials related to the Netwise Assets developed by Microsoft
between October 27, 1995 and the Closing Date of this Agreement.
(c) Other Assets. All of Microsoft's intangible assets acquired
pursuant to the
Netwise Asset Purchase Agreement, including goodwill, going concern value,
customer lists, contracts, agreements, licenses or license agreements,
commitments, warranties, claims and other choate and inchoate rights, but
excluding without limitation, the Retained Assets, cash, marketable securities,
receivables and rights relating to contractual obligations (other than the
Assumed Obligations).
7.2.45 2. MICROSOFT'S COVENANTS
Microsoft hereby covenants and agrees that it will, at the reasonable
request of Company, execute and deliver, and will cause to be executed
and delivered, such further instruments of sale, transfer, conveyance
and assignment and take such other action as may reasonably be required
to more effectively sell, transfer, convey, assign and deliver to, and
vest in, Company, title to and possession of the assets hereby sold,
transferred, conveyed, assigned and delivered, and to put Company in
actual possession and operating control thereof.
7.2.46 3. ATTORNEY-IN-FACT
----------------------------------
Microsoft hereby irrevocably constitutes and appoints Company, and its
successors and assigns, as its attorney-in-fact, with full power of
substitution, in its name or otherwise, on behalf of Microsoft for
Company's use, to claim, demand, collect and receive at any time and
from time to time any and all assets, properties, claims, accounts and
other rights, tangible or intangible, real, personal or mixed sold,
transferred, conveyed, assigned and delivered under this Assignment and
Bill of Sale.
7.2.47 4. APA
---------------------
Microsoft, by its execution of this Assignment and Bill of Sale, and
Company, by its acceptance and consent to the form of this Assignment
and Bill of Sale, each hereby acknowledge and agree that:
(a) `Me terms and provisions of the APA shall apply to this Assignment
and Bill of Sale, and the terms and conditions of this Assignment
and Bill of Sale shall be construed consistently therewith; and
(b) Neither the representations and warranties nor the rights
(including indemnification) and remedies of any party under the
APA shall be deemed to have been enlarged or altered in any way by
the execution, acceptance and approval of this Assignment and Bill
of Sale.
7.2.48 5. EFFECTIVE DATE OF ASSIGNMENT AND BILL OF SALE
---------------------------------------------------------------
This Assignment and Bill of Sale shall be deemed effective for all
purposes as of the Closing Date of the APA.
IN WITNESS @REOF, Microsoft has executed this Assignment and Bill of
Sale effective as of the /-7/4 day of 1996.
MICROSOFT CORPORATION
By
<PAGE>
`700
- ----
its
ACCEPTED:
PROGINET CORPORATION
By_
its
ASSUMPTION OF OBLIGATIONS
THIS ASSUMPTION OF OBLIGATIONS ("Assumption") is made by and between
Proginet Corporation, a Delaware corporation ("Company"), and Microsoft
Corporation, a Washington corporation ("Microsoft"). This Assumption is
delivered pursuant to that certain Asset Purchase Agreement, dated as of
December 6, 1996, ("A.PA"). Capitalized terms used but not otherwise
defined herein shall -have the meanings set forth in the APA.
RECITALS
7.2.49 A. UNDER THE APA, MICROSOFT AGREED TO SELL AND COMPANY AGREED TO
PURCHASE FROM MICROSOFT CERTAIN ASSETS OF MICROSOFT ACQUIRED BY
MICROSOFT FROM NETWISE, INC. (THE "NETWISE ASSETS") UNDER AN ASSET
PURCHASE AGREEMENT DATED OCTOBER 27, 1995 BETWEEN MICROSOFT AND
NETWISE, INC.
7.2.50 B. IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THE APA, COMPANY AGREED TO ASSUME CERTAIN CONTRACTUAL OBLIGATIONS OF
MICROSOFT WITH RESPECT TO THE ACQUIRED ASSETS.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree
as follows:
7.2.51 1. ASSIGNMENT AND ASSUMPTION
-------------------------------------------
Microsoft hereby assigns to Company, and Company hereby assumes and
agrees, subject to the exclusions and limitations contained in the APA,
to perform, pay or discharge the Assumed Obligations as they are
defined in the APA.
Except for the Assumed Obligations or as otherwise provided in the APA,
Company assumes no debt, liability or obligation of Microsoft by this
Assumption, and it is expressly understood and agreed that all debts,
liabilities and obligations other than the Assumed Obligations shall
remain the sole obligation of Microsoft, its successors and assigns,
and no person other than Microsoft shall have any rights under this
Assumption.
7.2.52 2. APA
---------------------
Company, by its execution of this Assumption, and Microsoft, by its
acceptance and consent to the form of this Assumption, each hereby
acknowledge and agree that:
ZP
(a) `Me terms and provisions of the APA shall apply to this
Assumption, and the terms and conditions of this Assumption shall
be construed consistently therewith; and
(b) Neither the representations and warranties nor the rights
(including indemnification) and remedies of any party under the
APA shall be deemed to have been enlarged or altered in any way by
the execution, acceptance and approval of this Assumption, and
this Assumption shall not enlarge any rights of third parties
under any of the Assumed Obligations.
7.2.53 3. EFFECTIVE DATE OF ASSUMPTION THIS ASSUMPTION SHALL BE DEEMED
EFFECTIVE FOR ALL PURPOSES AS OF THE CLOSING DATE OF THE APA. TN
WITNESS WHEREOF, Microsoft and Company have executed this Assumption
effective as of ther7.6d-ay of 1996.
<PAGE>
PROGINET CORPORATION
By
its
ACCEPTED:
NHC ON
By
its
COVENANT
This Covenant (the "Covenant") is entered into and effective
contemporaneously with the Asset Purchase Agreement entered into between
these same parties dated the I'-7-6day of December, 1996 (the "Agreement)
by Proginet Corporation, a Delaware corporation located at 200 Garden City
Plaza, Garden City, NY II530 ("Covenant"), in favor of Microsoft
Corporation, a Washington corporation located at One Microsoft Way,
Redmond, WA 98052, ("Microsoft") and Microsoft's employees, agents,
officers, directors, distributors, resellers, licensees, and its and their
successors and assigns (collectively, "Covenantees").
1. Definitions.
7.2.54 1.1 IBIS COVENANT INCORPORATES BY REFERENCE AS THOUGH FULLY SET
FORTH HEREIN THE DEFINITIONS OF THE FOLLOWING TERMS FOUND IN SECTION I
OF THE AGREEMENT: ACQUIRED ASSETS, SOURCE CODE, AND Confidential
Information.
7.2.55 1.2 "RESIDUALS" MEANS INFORMATION IN NON-TANGIBLE FORM, WHICH
MAY BE RETAINED BY PERSONS who have had access to Confidential
Information, including Source Code for Acquired Assets or portions
thereof, and the ideas, concepts, know-how or techniques contained in
that Confidential Information.
2. Covenant In consideration of the promises made and obligations undertaken
by Microsoft under the Agreement, and for additional good and valuable
consideration, the receipt and sufficiency of which Covenantor hereby
acknowledges, Covenantor hereby covenants and agrees, on behalf of itself
and its directors, officers, employees, agents, and its and their
successors and assigns, that notwithstanding any provision of the
Agreement, it will never institute, prosecute, aid in the prosecution of,
or join in any administrative proceeding, legal action, or administrative
or judicial appeal relating to, arising out of, or in any manner connected
with a claim that Covenantees, or any of them, have improperly or without
proper authority used or disclosed Residuals in any manner, including
without limitation in connection with the acquisition, licensing,
development, manufacture, distribution or marketing, for it or themselves,
of similar technology performing the same or similar functions as the
technology which is the subject of the Agreement. This paragraph shall not
be deemed to supersede, modify or limit Microsoft's obligations to Company
under Section 9.2.1 of the Agreement, notwithstanding anything to the
contrary herein.
3. Choice of law/availability of injunctive relief. Covenantor acknowledges
and agrees that any breach of this Covenant will result in irreparable harm
to Covenantees, and each of them, and that any breach shall entitle
Covenantees and each of them to injunctive relief, among other remedies.
In WITNESS @EREOF, the parties have entered into this Covenant as of the date
first written
7.2.56 ABOVE.
MICROSOFT CO[ PR T CORPORATION
By (sign) B@(sign)
o C)LLO , ti Uric, K@ v't
Name (print) Nam?(print) @
<PAGE>
@@@ese@4
Title Title
Date Date
LICENSE AGREEMENT
License Agreement (the "License") is entered into and effective
contemporaneously with the Asset Purchase Agreement entered into between
these same parties dated the ____ day of December, 1996 (the "Agreement")
by and between Proginet Corporation, a Delaware corporation located at 200
Garden City Plaza, Garden City, NY 11530 ("Licensor'), and Microsoft
Corporation, a Washington corporation located at One Microsoft Way,
Redmond, WA 98052 ("Microsoft").
1. Definitions. This License incorporates by reference as though fully set
forth herein the definitions of the following terms found in Section I of
the Agreement: Acquired Assets, Source Code, Object Code, and Closing Date.
2. License Grant and Payment. In consideration of a payment of Ten Thousand
Dollars ($ 1 0,000.00) in cash to be made in full by Microsoft to Licensor
on or before the Closing Date, Licensor shall be deemed to have granted to
Microsoft, as of the Closing Date, a non-exclusive, fully paid, royalty
free, irrevocable, perpetual license to (i) make, use, copy, edit, format,
port, translate, modify, adapt and create derivative works based upon the
"Exec Hub" software components (including all subsystems thereof) of the
Acquired Assets in both Source Code and Object Code form; and (ii) to
reproduce, license, rent, lease or otherwise distribute, and have
reproduced, licensed, rented, leased or otherwise distributed, to and by
third parties, such derivative works as part of any and all Microsoft
products in Source Code and Object Code form. For purposes of this License,
the "Exec Hub" software, including all of its subsystems, refers to the
Exec Hub software and subsystems as described in the document "TransAccess
EXEC for MVS, internals Guide," dated September, 1995.
In WITNESS WHEREOF, the parties have entered into this License as of the
date first written above.
0 p ET CORPORATION
Mr@A
`w b t
By (sign) B5r(sign)
v a si@ V'.
Name (print) Name (print)
v
Title Title
iqq@
Date Date
MICROSOFT CORPORATTON
CERTIFICATE OF ASSISTANT SECRETARY
This certificate is being furnished to you pursuant to Section 7. 1. I of
the Asset Purchase Agreement (the "Agreement") dated as of December 17,
1996 by and among Microsoft Corporation, a Washington corporation (the
"Company"), Proginet Corporation, a Delaware corporation, and certain
shareholders of Proginet Corporation. , The undersigned, Robert A.
Eshelman, does hereby certify that he is the duly elected and acting
Assistant Secretary of the Company, and does hereby further certify as
follows:
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7.2.57 (A) THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY IN THE
AGREEMENT WERE TRUE AND CORRECT IN ALL MATERIAL RESPECTS AS OF DECEMBER
!L 1996 AND AS OF THE CLOSING DATE (AS DEFINED IN THE AGREEMENT) AS
THOUGH MADE ON AND AS OF THE CLOSING DATE, AND 7.2.58 (B) THE COMPANY
HAS PERFORMED IN ALL RESPECTS ALL AGREEMENTS AND COVENANTS REQUIRED TO
BE PERFORMED BY THE COMPANY UNDER THE AGREEMENT PRIOR TO THE CLOSING
DATE.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of the
17th day of December 1996.
Robert A. Eshelman, Assistant Secretary
EXHIBIT 10.13
AMENDMENT AGREEMENT
This Amendment Agreement (this "Agreement") is made this 28th day of
October by and between by PROGINET CORPORATION, a Delaware corporation located
at 200 Garden City Plaza, Garden City, NY 11530 ("Proginet"), and MICROSOFT
CORPORATION, a Washington corporation located at One Microsoft Way, Redmond, WA
98052, ("Microsoft"), and relates to the Asset Purchase Agreement entered into
between these same parties dated the 17th day of December, 1996 (the "Asset
Purchase Agreement"). Capitalized terms used but not defined herein have the
meanings assigned to them in the Asset Purchase Agreement.
WHEREAS, the Transition Period specified in the Asset Purchase
Agreement has expired and the parties wish to provide for a final resolution of
certain obligations the parties owe each other under the Asset Purchase
Agreement; and
WHEREAS, for the purposes of greater certainty, the parties wish to
clarify the covenants and obligations that will continue to survive under the
Asset Purchase Agreement and the related agreements contemplated by the Asset
Purchase Agreement (the "Related Agreements"), including, without limitation,
the Investment Agreement, the BackOffice license contemplated by Section 6.3 of
the Asset Purchase Agreement, the Assignment and Bill of Sale, the Assumption of
Obligations and the Covenant (the "Covenant") each entered into in connection
with the Asset Purchase Agreement.
NOW, THEFORE, based on the foregoing, and the mutual covenants and
agreements set forth herein, the parties agree as follows:
1 ASSET PURCHASE AGREEMENT AND RELATED AGREEMENTS
1.1 DELIVERY OF SHARES. In full and complete satisfaction of Proginet's
obligations under Sections 3.1 and 3.3 of the Asset Purchase Agreement,
simultaneous with the execution of this Agreement Proginet is issuing and
delivering to Microsoft 1,260,000 shares of Proginet Common Stock (the
"Settlement Shares"). The Settlement Shares and the 100,000 shares of Proginet
Common Stock heretofore delivered to Microsoft pursuant to the Asset Purchase
Agreement (the "Original Shares") are collectively referred to as the "Shares."
Upon issuance, the Shares shall be freely tradable on the Vancouver Stock
Exchange (the "VSE") in reliance upon the letter of McCarthy Tetrault, counsel
to Microsoft, to the effect that no prospectus is required under the Securities
Act (British Columbia) (the "BC Act") in connection with the proposed sale,
transfer or other disposition of such Shares in British Columbia. A copy of such
letter is attached hereto as Annex 1. Upon issuance, the Settlement Shares shall
be free from all restrictive legends and, upon surrender of the Original Shares
to Proginet, Proginet shall reissue to Microsoft a certificate representing such
shares free from all restrictive legends. At or prior to the time of delivery of
the Settlement Shares, Proginet shall remove any stop transfer instructions with
respect to the Shares previously provided to the transfer agent for the Proginet
Common Stock.
1.1.1 RESTRICTIONS ON SALE OF SHARES IN THE UNITED STATES.
Microsoft will not offer to sell, exchange, transfer, pledge or otherwise
dispose of any of the Shares in the United States unless at such time at least
one of the following is satisfied:
(a) a registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the Shares proposed to be sold,
transferred or otherwise disposed of, describing the manner and terms of the
proposed sale, transfer or other disposition, and containing a current
prospectus, shall have been filed with the SEC and made effective under the 1933
Act;
(b) such transaction shall be permitted pursuant to the
provisions of Rule 144 under the 1933 Act ("Rule 144");
(c) counsel to Microsoft reasonably acceptable to Proginet
shall have advised Microsoft that no registration under the 1933 Act would be
required in connection with the proposed sale, transfer or other disposition; or
(d) an authorized representative of the SEC shall have
rendered written advice to Microsoft (sought by Microsoft or counsel to
Microsoft after prior notice to Proginet) to the effect that the SEC would take
no
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action, or that the staff of the SEC would not recommend that the SEC take
action, with respect to the proposed sale, transfer or other disposition if
consummated.
1.1.2 OBSERVATION OF BC AND 1933 ACTS. Microsoft will observe
and comply with the BC Act and 1933 Act, whichever is applicable, and the
General Rules and Regulations thereunder, as now in effect and as from to time
amended and including those hereafter enacted or promulgated, in connection with
any offer, sale, pledge, transfer or other disposition of the Shares or any part
thereof.
1.2 PROXY. Simultaneous with the execution of this Agreement, Microsoft
is executing and delivering to the President of Proginet Corporation a proxy to
vote the Shares at the next annual meeting of the shareholders of Proginet in
favor of the slate of nominees for Proginet's Board of Directors as recommended
by the existing Board of Directors.
1.3. TERMINATION OF COVENANTS AND AGREEMENTS. Except as specifically
provided in the next sentence, all covenants and agreements of the parties not
already satisfied and set forth in the Asset Purchase Agreement and the Related
Agreements are hereby terminated and of no further force or effect.
Notwithstanding the foregoing, the provisions of Sections 6.3. (BackOffice
License Rights which is extended until December 17th, 2003), 6.6
(Confidentiality Obligations) and 6.8 (Taxes) of the Asset Purchase Agreement
and the Covenant shall continue to survive (collectively, the "Surviving
Obligations"). Except for the Surviving Obligations, each party shall have no
further obligation to the other under the Asset Purchase Agreement or the
Related Agreements. For purposes of clarification, the extension of the
BackOffice License Rights set forth in this Agreement shall apply only to
Microsoft BackOffice v. 2.5 and shall not entitle Proginet to any upgrades or
subsequent versions thereof.
2. RELEASES.
2.1 PROGINET RELEASE OF MICROSOFT. Proginet hereby fully and finally
releases, acquits and forever discharges Microsoft from any and all actions,
debts, claims, counterclaims, demands, liabilities, damages, causes of action,
costs, expenses, and compensation of every kind and nature whatsoever, past,
present or future, in law or in equity, whether known or unknown (collectively,
"Claims"), which Proginet had, has, may have had at any time in the past or may
have in the future against Microsoft arising from, related to or in connection
with any representation, warranty, covenant or agreement of Microsoft
(collectively, the "Microsoft Obligations") set forth in or contemplated by the
Asset Purchase Agreement or the Related Agreements, including, without
limitation, any Claims relating to any Microsoft Obligation set forth in any
exhibit or annex to any such agreement. For purposes of this Section 2,
references to Proginet shall be deemed to include any subsidiary of Proginet and
any other entity controlled by Proginet or under common control with Proginet.
2.2 MICROSOFT RELEASE OF PROGINET. Microsoft hereby fully and finally
releases, acquits and forever discharges Microsoft from any and all actions,
debts, claims, counterclaims, demands, liabilities, damages, causes of action,
costs, expenses, and compensation of every kind and nature whatsoever, past,
present or future, in law or in equity, whether known or unknown (collectively,
"Claims"), which Microsoft had, has, may have had at any time in the past or may
have in the future against Proginet arising from, related to or in connection
with any representation, warranty, covenant or agreement of Proginet
(collectively, the "Proginet Obligations") set forth in or contemplated by the
Asset Purchase Agreement or the Related Agreements, including, without
limitation, any Claims relating to any Proginet Obligation set forth in any
exhibit or annex to any such agreement. For purposes of this Section 2,
references to Microsoft shall be deemed to include any subsidiary of Microsoft
and any other entity controlled by Microsoft or under common control with
Microsoft. Nothing contained in this Section 2.2 shall in any way release or
reduce Proginet's obligations to Microsoft arising under this Agreement.
3. PROGINET REPRESENTATIONS AND WARRANTIES. Proginet represents and warrants to
Microsoft on execution of this Agreement as follows:
3.1. ORGANIZATION; GOOD STANDING. Proginet is a corporation duly
organized, validly existing and subsisting under the laws of the State of
Delaware and is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of its business or the
ownership of its property makes such qualification necessary, except where the
failure to be so qualified will not have a material adverse effect on Proginet,
and has the corporate power and authority to own and lease its properties, to
carry on its business as presently conducted, and to execute, deliver and
perform its obligations under this Agreement.
3.2. DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate action by
Proginet and will not violate or result in a breach of any provision of any law,
statute, rule or regulation, any order of any court or other agency, the
Certificate of Incorporation (the
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"Charter") or Bylaws of Proginet (the "Bylaws"), or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon the
properties or assets of Proginet.
3.3. BINDING OBLIGATION; NO CONSENTS. This Agreement has been duly
executed and delivered by Proginet and constitutes a valid and legally binding
obligation of Proginet, enforceable in accordance with its terms, except as the
enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by general equitable principles. No registration or filing with, or consent
or approval of, or other action by, any U.S. or Canadian federal, state,
provincial or other governmental department, commission, board, bureau, agency
or instrumentality or any third party is necessary for the execution, delivery
and performance of this Agreement or for the issuance of the Shares contemplated
hereby other than those required under applicable U.S. or Canadian federal,
state or provincial securities laws (the "Securities Consents and Filings").
Proginet covenants and agrees to make and obtain all required Securities
Consents and Filings within the applicable statutory periods prescribed for such
consents and filings.
3.4. CAPITALIZATION. The authorized capital stock of Proginet consists
of 40,000,000 shares of Common Stock, of which 12,375,180 shares are issued and
outstanding, and 10,000,000 shares of Preferred Stock, of which no shares are
issued and outstanding. All of the issued and outstanding shares of capital
stock have been duly authorized and validly issued and are fully-paid and
non-assessable, and there are no preemptive rights with respect thereto. On the
date hereof, 2,000,000 shares of Common Stock were reserved for future issuance
under Proginet's Employee Stock Option Plan (the "Plan"). On the date hereof
there were no outstanding options, warrants, or other securities convertible
into or exchangeable for shares of Proginet's equity securities other than
options to purchase approximately 1,045,000 shares of Common Stock outstanding
under the Plan.
3.5. PUBLIC INFORMATION. Proginet has delivered to Microsoft copies of
all prospectuses and other public offering documents as filed with the Canadian
Commission, and all periodic and other reports filed by Proginet with the
Canadian Commission or the VSE since November 1, 1995 and copies of all proxy
statements, annual information forms and other materials distributed to
Proginet's shareholders during such period (collectively, the "Public
Information"). The Public Information is true, correct and complete in all
material respects as of the respective dates of the information set forth
therein, and the Public Information, as of its respective dates, does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which such statements were made.
3.6 REPORTING ISSUER; LISTING. Proginet is a reporting issuer (as such
term is defined in applicable Canadian Legislation) only in British Columbia and
is a reporting issuer in good standing under the BC Act. No outstanding
securities of Proginet, including the common stock of Proginet, are listed on
any stock exchange other than the VSE.
4. MICROSOFT REPRESENTATIONS AND WARRANTIES. Proginet represents and warrants to
Microsoft on execution of this Agreement as follows:
4.1. ORGANIZATION; GOOD STANDING. Microsoft is a corporation duly
organized, validly existing and subsisting under the laws of the State of
Washington and is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of its business or the
ownership of its property makes such qualification necessary, except where the
failure to be so qualified will not have a material adverse effect on Microsoft,
and has the corporate power and authority to own and lease its properties, to
carry on its business as presently conducted, and to execute, deliver and
perform its obligations under this Agreement.
4.2. DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate action by
Microsoft and will not violate or result in a breach of any provision of any
law, statute, rule or regulation, any order of any court or other agency, the
Articles of Incorporation (the "Charter") or Bylaws of Microsoft (the "Bylaws"),
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon the properties or assets of Microsoft.
4.3. BINDING OBLIGATION; NO CONSENTS. This Agreement has been duly
executed and delivered by Microsoft and constitutes a valid and legally binding
obligation of Microsoft, enforceable in accordance with its terms, except as the
enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by general equitable principles. No registration or filing with, or consent
or approval of, or other action by, any U.S. or Canadian federal, state,
provincial or other governmental department, commission, board, bureau, agency
or instrumentality or any third party is necessary for the execution, delivery
and performance of this Agreement.
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4.4 INVESTOR STATUS. Microsoft: (i) is an "accredited investor" as that
term is defined in Rule 501(a)(5) of Regulation D of the Securities Act of 1933
(the "1933 Act"); (ii) is acquiring the Shares for its own account; (iii) has
the knowledge and experience in financial and business matters and is capable of
evaluating the merits and risks of the prospective investment; and (iv) does not
intend to make a distribution of the Shares or otherwise act as an "underwriter"
within the meaning of Section 2(11) of the 1933 Act.
5.1 NOTICES. All notices, requests, demands or other communications which are
required or may be given pursuant to the terms of this Investment Agreement
shall be in writing and shall be deemed to have been duly given on the date of
delivery if delivered by hand or upon receipt if mailed by registered or
certified mail, postage prepaid, return requested, or sent by express courier,
or by facsimile upon written confirmation of receipt by the recipient of such
notice to the party at the address set forth below, or such other address as may
be hereafter be designated in writing by the party:
To Microsoft: To Proginet:
Microsoft Corporation Proginet Corporation
One Microsoft Way 200 Garden City Plaza
Redmond, WA 98052-6399 Garden City, NY 11530
Attention: General Counsel, Attention: Kevin M. Kelly
Finance and Administration Phone: (516) 248-2000
Phone: (425) 882-8080 Fax: (516) 248-3360
Fax: (425) 869-1327
Copy to: Copy to:
Preston Gates & Ellis LLP Parker Chapin Flattau and Klimpl, LLP
5000 Columbia Center 1211 Avenue of the Americas
701 Fifth Avenue New York, NY 10036
Seattle, WA 98104-7078 Attention: James Alterbaum, Esq.
Attention: Gary J. Kocher, Esq. Phone: (212) 704-6000
Phone: (206) 623-7580 Fax: (212) 704-6288
Fax: (206) 623-7022
6. COUNTERPARTS. This Agreement may be executed in two or more partially or
fully executed counterparts each of which shall be deemed an original and shall
bind the signatory, but all of which together shall constitute but one and the
same instrument.
7. SUCCESSORS AND ASSIGNS. This Agreement shall be enforceable by and shall
inure to the benefit of and be binding upon, the parties hereto and their
respective successors and assigns. As used herein, the terms "successors and
assigns" shall mean, where the context so permits, heirs, executors,
administrators, trustees and successor trustees, and personal and other
representatives.
8. SEVERABILITY. If any provision of this Agreement is held to be unenforceable
for any reason, such provision and all other related provisions shall be
modified rather than voided, if possible, in order to achieve the intent of the
parties to this Agreement to the extent possible. In any event, all other
unrelated provisions of this Agreement shall be deemed valid and enforceable to
the full extent.
9. CHOICE OF LAW/AVAILABILITY OF INJUNCTIVE RELIEF. This Agreement shall be
governed by the laws of the State of Washington. The parties acknowledge and
agree that any breach of this Agreement will result in irreparable harm to the
non-breaching party and its Related Parties, and each of them, and that any
breach shall entitle the non-breaching party and its Related Parties, and each
of them, to injunctive relief, among other remedies.
10. EFFECT OF HEADINGS. The section headings herein are for convenience only and
shall not affect the construction or interpretation of this Agreement.
11. PUBLIC DISCLOSURE. Proginet agrees that it will issue a press release (which
shall be solely a release of Proginet) which shall announce the terms of this
Agreement (the "Announcement"). Proginet shall give Microsoft the opportunity to
review and approve the Announcement prior to the release thereof, which approval
shall not be
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unreasonably withheld. Microsoft and Proginet each agree that, other than as set
forth in the Announcement, they will make no other public disclosure of the
terms of this Agreement, the Asset Purchase Agreement or the relationship
between the parties without the express prior written consent of the other
party.
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first written above.
MICROSOFT CORPORATION PROGINET CORPORATION
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By (sign) By (sign)
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Name (print) Name (print)
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Title Title
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Date Date
EXHIBIT 10.14
STOCK REDEMPTION AGREEMENT
STOCK REDEMPTION AGREEMENT dated as of October 20, 1998 by and
between PROGINET CORPORATION, a Delaware corporation with offices at 200 Garden
City Plaza, Garden City, New York 11530 (the "Company"), and Joseph T. Mohen, an
individual residing at 14 Cedar Place, Garden City, New York 11530 (the
"Seller").
W I T N E S S E T H:
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WHEREAS, the Seller is the owner of and holder of 2,777,336
shares of common stock, par value $.001 per share (the "Common Stock"), of the
Company;
WHEREAS, the Company desires to redeem, and the Seller desires
to sell, 750,000 shares of Common Stock owned by the Seller (the "Shares"); and
WHEREAS, the Seller desires to grant to the Company a right of
first refusal with respect to the remaining 2,027,336 shares of Common Stock
owned by the Seller (the "First Refusal Shares") on the terms set forth herein.
NOW THEREFORE, in consideration of the promises and mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
1. Sale and Purchase of Shares. Subject to the terms and
conditions of this Agreement, the Seller hereby sells, assigns, transfers and
delivers to the Company, and the Company hereby purchases, redeems and accepts
from the Seller, for and in consideration of the Purchase Price (as hereinafter
defined), the Shares.
2. Purchase Price and Payment.
2.1. Subject to the terms and conditions of this Agreement,
the purchase price to be paid by the Company to the Seller for and in
consideration of the sale to the Company of the Shares is an amount equal to
$232,500 (the "Purchase Price").
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2.2. The Purchase Price shall be paid by the Company to the
Seller as follows: (i) forgiveness by the Company of a loan obligation of the
Seller to the Company in the aggregate amount of $14,870, (ii) $50,000 by
certified or bank check at the Closing (as hereinafter defined) and (iii) the
balance in thirty-six (36) equal installments of $4,656.38 with the first,
second, third and fourth payments due on the two, four, six and eight-month
anniversaries of the date hereof, respectively, and the remaining thirty-two
(32) equal payments payable monthly, commencing on the ten-month anniversary of
the date hereof and continuing for each successive month thereafter, each such
payment due on the 20th day of the month (or the next business day thereafter in
the event that the 20th day of any such month falls on a Saturday or Sunday),
with no interest whatsoever accruing or payable thereon, provided that, payment
by the Company to the Seller of any installment pursuant to this Section
2.2(iii) within five (5) days of the due date thereof shall not constitute a
breach of this Agreement. The Company agrees to deliver the original note
reflecting the aforementioned indebtedness marked "paid in full" to the Seller
at the Closing.
3. Right of First Refusal.
3.1. In the event that the Seller receives, and is willing to
accept, any offer from a third party to purchase, in a single transaction or in
a series of transactions, whether publicly in ordinary brokerage transactions or
otherwise through a securities exchange, bulletin board, over-the-counter market
or otherwise (a "Public Sale") or other than as a Public Sale, including without
limitation, a private sale to an individual or entity or otherwise (a "Private
Sale"), a minimum of 75,000 First Refusal Shares (the "Offer"), then the Seller,
prior to, and as a condition of, accepting the Offer, shall deliver written
notice to the Company (the "Offer Notice") setting forth (i) the number of
shares of Common Stock to which the Offer applies (the "Offer Shares"), (ii) the
price per share and aggregate consideration offered, (iii) all other material
terms and conditions of the Offer and (iv) if in writing, a copy of the Offer.
For the avoidance of doubt, if the Seller sells fewer than 75,000 First Refusal
Shares in a Public Sale where he does not know the identity of the beneficial
purchaser, the Right of First Refusal shall not apply.
3.2. The Company shall have the right, exercisable by
delivering written notice to the Seller within three (3) days in the case of a
Public Sale or ten (10) days in the case of a Private Sale, after the Company's
receipt of the Offer Notice (the "Company Notice"), to purchase all (but not
less than all) of the Offer Shares at the same price and upon the same terms and
conditions as are set forth in the Offer Notice. The Company Notice shall
specify a closing date no later than twenty (20) days following the Company's
receipt of the Offer Notice together with a time and place of closing.
3.3. If the Company does not deliver the Company Notice to the
Seller within the specified time period, the Seller shall have the right to sell
the Offer Shares to the third party. If the Seller does not sell the Offer
Shares to the third party within ninety (90) days after the
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date of the Offer Notice and on the terms and conditions set forth therein, such
Offer Shares shall continue to be bound by the terms and provisions contained
herein.
3.4. The right of first refusal set forth in this Section 3
shall not apply with respect to any Offers for which an Offer Notice thereof is
delivered to the Company after the fourth anniversary of the date of this
Agreement.
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4. Closings.
4.1. The sale and purchase of the Shares shall take place at
the offices of the Company on the date hereof or on such other date or at such
other location as the parties hereto shall mutually agree upon (hereinafter
referred to as the "Closing" or the "Closing Date"), provided that, the sale and
purchase of the Shares shall not be effective prior to October 26, 1998.
4.2. The Seller shall (i) at the Closing sell, transfer,
assign and deliver to the Company the Shares together with stock powers relating
thereto and (ii) at any closing in connection with any purchase and sale of
First Refusal Shares, sell, transfer, assign and deliver to the Company the
First Refusal Shares, in each instance free and clear of any and all liens,
claims or encumbrances whatsoever and evidenced by duly issued and registered
certificate(s) representing the Shares or First Refusal Shares, as the case may
be, accompanied by stock transfer power(s) duly executed in blank, with all
necessary stock transfer stamps affixed.
5. Legending of Certificates/Voting of Shares.
5.1. The Company undertakes to direct the transfer agent for
the Common Stock to remove any restrictive legends contained on any certificates
representing shares of Common Stock owned by the Seller and deliver a letter at
Closing to such effect in the form annexed hereto as Exhibit A.
5.2. Through and including December 31, 2000, the Seller
hereby irrevocably and unconditionally agrees that, with respect to that number
of shares of Common Stock owned by the Seller (of record and beneficially) that
exceeds five (5%) percent of the then issued and outstanding Common Stock, the
Seller will vote all such excess shares in connection with any meeting (whether
annual or special) or written consent of shareholders in lieu of a meeting on
each matter submitted to the meeting or as to which consent in lieu of a meeting
is sought in the same proportion that all other shareholder votes are cast at
such meeting or written consent of shareholders on such matter.
5.3. In furtherance of the Seller's obligation pursuant to
Section 5.2, the Seller hereby agrees that, no later than ten (10) days prior to
any meeting (whether annual or special) or written consent in lieu of a meeting
of the shareholders of the Company, the Seller shall execute and deliver a
proxy, which proxy shall be coupled with an interest, to the transfer agent for
the shares of Common Stock of the Company in the case of a meeting, or to the
Company in the case of a written consent in lieu of a meeting, with respect to
that number of shares of Common Stock owned by the Seller (of record and
beneficially) that exceeds five (5%) percent of the then issued and outstanding
Common Stock on the record date for such meeting or consent (or, if no record
date has been set, on the date as of which transfer books have been closed for
such meeting or consent) (the "Proxy Shares"), which proxy shall direct the
proxy or proxies named therein to vote all Proxy Shares on each matter submitted
to the meeting or as to which consent is sought in
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the same proportion that all other shareholder votes are cast at such meeting or
written consent of shareholders on such matter. In the event that the Seller
fails to deliver any such proxy within the ten (10) day period set forth above,
the Seller shall, automatically and with no further action required by any
party, be deemed to have granted an irrevocable proxy to Parker Chapin Flattau &
Klimpl, LLP, which proxy shall be coupled with an interest, to effectuate the
vote of the Proxy Shares as contemplated in this Section for such meeting or
consent in lieu of a meeting.
6. Representations and Warranties of the Seller. The Seller
represents and warrants to the Company as of the date hereof, which such
representations and warranties shall be confirmed in writing by the Seller to
the Company upon the Company's request as of any date in which the Company
delivers to the Seller a Company Notice, as follows:
6.1. The Seller is the lawful owner of record and beneficially
owns, and has good and marketable title to, the Shares and the First Refusal
Shares, as applicable. The sale, transfer, assignment and delivery of the Shares
and the First Refusal Shares, as applicable, by the Seller pursuant to this
Agreement is and will transfer to the Company good and marketable record and
beneficial title thereto, free and clear of all pledges, liens, security
interests, encumbrances, equities, claims and other charges of any kind
whatsoever.
6.2. The Seller has the capacity to execute and deliver this
Agreement and perform all of his obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement and the agreements and
documents contemplated hereby are valid and legally binding obligations of the
Seller, enforceable against him in accordance with their respective terms. Each
document and instrument of transfer contemplated by this Agreement is valid and
legally binding upon the Seller in accordance with its terms.
6.3. The execution and delivery of this Agreement and the
agreements and documents contemplated hereby by the Seller and the consummation
of the transactions contemplated hereby do not and will not (a) with or without
the giving of notice or the passage of time or both, violate, conflict with,
result in the breach or termination of, constitute a default under, or result in
the right to accelerate or loss of rights under or the creation of any lien,
encumbrance or charge upon any assets or property of the Seller, pursuant to the
terms or provisions of any contract, agreement, commitment, indenture, mortgage,
deed of trust, pledge, security agreement, note, lease, license, divorce or
separation agreement, covenant, understanding or other instrument or obligation
to which the Seller is a party or by which any of the Seller's properties or
assets may be bound or affected, or (b) violate any order, writ, injunction,
judgment or decree of any court, administrative agency or governmental body
binding upon the Seller.
6.4. The Seller represents that he caused "Form 23" to be
filed with the British Columbia Securities Commission and the Vancouver Stock
Exchange on October 19, 1998 via facsimile in the form annexed hereto. To the
best of the Seller's knowledge, no other consent, approval or authorization of
or declaration or filing with any governmental authority or other
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<PAGE>
persons or entities on the part of the Seller is required in connection with
execution or delivery of this Agreement or the consummation of the transactions
contemplated hereby.
6.5. Any obligation or liability for taxes (state or federal)
incurred by the Seller in connection with this Agreement or the transactions
contemplated hereby shall be the responsibility of and be paid for by the
Seller.
6.6. There is no fact known to the Seller that the Seller has
not disclosed to the Company and that materially affects or may materially
affect the business, operations, prospects, properties, assets or conditions
(financial or otherwise) of the Company. The Seller acknowledges that he has
been represented by independent legal counsel with respect to this Agreement and
the transactions contemplated hereby.
6.7. The Seller acknowledges that he is a sophisticated
investor, has such knowledge and experience in financial and business matters in
general and has full familiarity with the current business and future business
prospects of the Company and the financial and other affairs of the Company and
acknowledges that he has had access to and has received sufficient written and
oral information about the Company, including any and all such information
requested by the Seller and including copies of all of the publicly available
information prepared by the Company in order to make an informed decision as to
the disposition of the Shares by the Seller, including without limitation, the
Annual Report of the Company for the year ended July 31, 1998. In addition, the
Seller acknowledges that he has had access to the officers, directors and
employees of the Company to discuss the business, affairs and prospects of the
Company and has had the opportunity to obtain additional information necessary
to evaluate the merits and the risks of engaging in the transactions
contemplated by this Agreement. The Seller has reached an independent decision
with respect to the advisability of the sale of the Shares and, in arriving at
his decision, has considered both the value of the Shares as well as the present
condition and future prospects of the Company.
6.8. The Seller acknowledges that he understands that he will
not be able to benefit from any difference between the Purchase Price and any
amount that he could otherwise receive from an unaffiliated third party willing
and able to purchase the Shares or from any future appreciation in the value of
the Shares, whether caused by merger, consolidation, sale of stock or assets or
otherwise.
7. Representations and Warranties of the Company. The Company
represents and warrants to the Seller as follows:
7.1. The Company is a corporation duly organized and validly
existing and in good standing under the laws of the State of Delaware, has all
requisite corporate power and authority to own its properties and conduct its
business as being conducted, and has full legal right, power and authority to
enter into this Agreement and to carry out the transactions contemplated hereby.
-6-
<PAGE>
7.2. The execution of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Company,
and such authorization is in full force and effect as of the date hereof.
7.3. Neither the execution and the delivery of this Agreement,
the consummation of the transactions contemplated hereby, nor compliance with
the terms and provisions hereof, will conflict with or result in a breach of the
provisions of the Certificate of Incorporation or the By-Laws of the Company, or
of any material judgment, agreement or instrument to which the Company is a
party or by which the Company is bound.
7.4. The Company has made available to the Seller all of the
publicly available filings relating to the Company that have been filed to date.
8. Survival of Representations, Warranties, Covenants and
Agreements. Each party hereto covenants and agrees that his or its
representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution and delivery of this Agreement.
9. Indemnification.
9.1. The Seller covenants and agrees to indemnify and hold the
Company, its officers, directors and agents harmless from and against, and to
reimburse the Company, its officers, directors and agents for any claim for any
losses, damages, liabilities, deficiencies and expenses (including reasonable
counsel fees) (hereinafter a "Claim") incurred by the Company, its officers,
directors and agents or any of them after the date hereof by reason of, or
arising from, (a) any material misrepresentation or material breach of any
representation or warranty contained in this Agreement by the Seller or (b) any
failure by the Seller to perform any obligation or covenant required to be
performed by him under any provision of this Agreement or any agreements
contemplated hereby.
9.2. The Company covenants and agrees to indemnify and hold
the Seller and his agents harmless from and against, and to reimburse the Seller
and his agents for any Claim incurred by the Seller and his agents after the
date hereof by reason of, or arising from, (a) any material misrepresentation or
material breach of any representation or warranty contained in this Agreement by
the Company or (b) any failure by the Company to perform any obligation or
covenant required to be performed by it under any provision of this Agreement.
10. Notices. All notices and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered in person or sent by registered or
certified mail, return receipt requested, postage prepaid, or delivered via
facsimile to the parties hereto at the following addresses or at any other
addresses specified in accordance with this Section:
-7-
<PAGE>
if to the Seller, at his address hereinabove first mentioned
with a copy to:
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
Attention: Michael J. McNamara, Esq.
Facsimile No.: (212) 480-8421
if to the Company, at:
Proginet Corporation
200 Garden City Plaza
Garden City, New York 11530
Attention: Kevin M. Kelly, President
Facsimile No.: (516) 248-3360
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: James Alterbaum, Esq.
Facsimile No.: (212) 704-6288
or to such other address as any party hereto shall have specified by notice in
writing to the other party hereto. All such notices and communications shall be
deemed to have been received on the date of delivery thereof or the fifth
business day after the mailing thereof.
11. Brokerage Fees. The parties represent and warrant to each
other that there are no obligations or liabilities for brokerage of finders'
fees or agents' commissions in connection with this Agreement, or the
transactions contemplated hereby.
12. Expenses. Each of the parties hereto shall pay the fees
and expenses of his or its counsel, accountants and other experts and all other
expenses incurred by such party incident to the negotiation, preparation and
execution of this Agreement.
13. Miscellaneous.
13.1. Partial Invalidity. If it is found in a final judgment
of a court of competent jurisdiction (not subject to a further appeal) that any
term or provision of this Agreement is
-8-
<PAGE>
invalid or unenforceable, (a) the remaining terms and provisions of this
Agreement shall be unimpaired and shall remain in full force and effect and (b)
the invalid or unenforceable provision or term of this Agreement shall be
replaced by a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.
13.2. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument. This Agreement may
be executed via facsimile.
13.3. Successors and Assigns. The benefits of this Agreement
shall inure to the parties hereto, their respective successors and assigns and
to the indemnified parties hereunder and their successors and representatives,
and the obligations and liabilities assumed in this Agreement by the parties
hereto shall be binding upon their respective successors and assigns.
13.4. Governing Law. This Agreement and the legal relations
between the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without giving effect to
principles of conflicts or choice of law thereof.
13.5. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association in the State of
New York, County of New York under its Commercial Arbitration Rules before a
single arbitrator and judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
13.6. Headings. Headings of the Sections in this Agreement are
for reference purposes only and shall not be deemed to have any substantive
effect.
13.7. Cancellation of Shareholder Voting Agreements. Effective
as of the date hereof, the Seller hereby agrees not to exercise any rights of
the Seller pursuant to those certain Shareholder Voting Agreements dated October
14, 1994 by and among the Seller, the Company and (i) Kevin Bohen, (ii) Kevin M.
Kelly, (iii) Thomas C. Bauer, (iv) Russel Drew, (v) Elizabeth R. Freites, (vi)
Baldwin Venture Partnership, (vii) Pacific Hill Ventures, Inc., (viii) Richard
B. Kelly, (ix) James F. Kelly, (x) John C. Daily, (xi) Gregory P. Buckman and
(xii) Thomas P. Mohen (collectively, the "Shareholder Voting Agreements"). The
Seller shall execute and deliver a letter in the form annexed hereto as Exhibit
B on the date hereof. At the Closing, the Seller shall execute and deliver to
the Company any and all agreements or instruments necessary to terminate and
cancel each of the Shareholder Voting Agreements. The Company hereby undertakes
to deliver the individual letters to the named persons.
13.8. Entire Agreement; Amendments. Except as provided for in
that certain (i) Employment Agreement of even date herewith by and between the
Company and the Seller, (ii) Escrow Agreement by and among the Company, the
Seller and Parker Chapin Flattau & Klimpl,
-9-
<PAGE>
LLP, (iii) Confidential Information and Non-Competition Agreement dated August
30, 1994 by and between the Seller and the Company and (iv) Management
Continuity Agreement dated as of August 26, 1994 by and between the Seller and
the Company, this Agreement and any documents contemplated herein or therein
contain, and are intended as, a complete statement of all the terms of the
arrangements between the parties with respect to the matters provided for, and
supersede any and all prior agreements, arrangements and understandings between
the parties with respect to the matters provided for herein. No alteration,
waiver, amendment, change or supplement hereto shall be binding or effective
unless the same is set forth in writing, signed by the parties hereto or a duly
authorized representative thereof.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement
on the day and year first above written.
PROGINET CORPORATION
By: ________________________________
Name: Kevin M. Kelly
Title: President
------------------------------------
Joseph T. Mohen
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<PAGE>
EXHIBIT A
October 20, 1998
CIBC Mellon Trust Company
Mall Level
1177 West Hastings Street
Vancouver, British Columbia V6E 2K3
Canada
Re: Proginet Corporation
--------------------
Gentlemen:
Reference is made to 2,777,336 shares of common stock, par value $.001
per share (the "Shares"), of Proginet Corporation (the "Company"), owned of
record by Joseph T. Mohen (the "Shareholder"), and evidenced by Certificate Nos.
00966, 00967, 00970 and 01434 (the "Old Certificates"). You are hereby
irrevocably directed to cancel each of the Old Certificates and issue and
deliver (i) in accordance with the Stock Power of the Shareholder annexed
hereto, to and in the name of the Company, a certificate for 750,000 Shares and
(ii) to Parker Chapin Flattau & Klimpl, LLP, as Escrow Agent, 1211 Avenue of the
Americas, New York, New York 10036, Attention: Michael J. Shef, Esq. and in the
name of the Shareholder, a certificate or certificates representing 2,027,336
Shares, in each instance (i) free of any restrictive legends thereof or stop
transfer instructions thereon and (ii) dated October 26, 1998. You are requested
to deliver the aforementioned certificates as so directed via federal express
for delivery as soon as practicable.
Very truly yours,
PROGINET CORPORATION
By:__________________________________
Name: Kevin M. Kelly
Title: President
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto Proginet Corporation, a Delaware corporation (the "Company"),
750,000 shares of the Common Stock, par value $.001 per share, of the Company,
standing in the undersigned's name on the books of the Company represented by
Certificate No. 00966 herewith, and does hereby irrevocably constitute and
appoint CIBC Mellon Trust Company, attorney to transfer the said stock on the
books of the Company with full power of substitution in the premises.
DATED AS OF: October 20, 1998
--------------------------
Joseph T. Mohen
In presence of
- --------------------------
<PAGE>
EXHIBIT B
October 20, 1998
[Name of Shareholder]
[Address]
Re: Proginet Corporation/Shareholder Voting Agreements
---------------------------------------------------
Dear [Shareholder]:
Reference is made to that certain Shareholder Voting Agreement dated
October 14, 1994 by and among you, the undersigned and Proginet Corporation (the
"Shareholder Voting Agreement"). The purpose of this letter is to inform you
that you are hereby released and discharged, effective as of the date hereof,
from any and all obligations pursuant to the Shareholder Voting Agreement,
including without limitation, the obligation contained therein with respect to
the voting of shares of Proginet Corporation.
Very truly yours,
Joseph T. Mohen
AGREED AND ACKNOWLEDGED:
PROGINET CORPORATION
By:_____________________________________
Name: Kevin M. Kelly
Title: President
EXHIBIT 10.15
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of July 12, 1999, by and between
Joseph T. Mohen, an individual residing at 14 Cedar Place, Garden City, New York
11530 (the "Seller"), and Bathurst Ltd, with its offices at Britannic House,
Provideniales Turks and Caicos Isle, British West Indies (the "Buyer").
WHEREAS, the Seller has heretofore acquired 1,827,336 shares of the
common stock, par value $0.01 per share (the "Common Stock") (the "Shares"), of
Proginet Corporation, a Delaware corporation (the "Company"); and
WHEREAS, the Seller desires to sell the 1,827,336 Shares to the Buyer,
and the Buyer desires by buy such 1,827,336 Shares, subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for such other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND RELATED MATTERS
-----------------------------------------------
1.1. Sale of Shares. Upon the terms and subject to the conditions of
this Agreement, the Seller shall transfer, assign, set over and deliver to the
Buyer, and the Buyer shall purchase from the Seller, all of the Seller's right,
title and interest in and to 1,827,336 Shares.
1.2. Purchase Price. The purchase price for such Shares shall be in an
amount equal to U.S.$0.50 for each Share (the "Per Share Price") totaling nine
Hundred and Thirteen Thousand Six Hundred and Sixty Three United States Dollars
(U.S.$913,663.00) (the "Purchase Price").
1.3. Non-Refundable Deposit. Buyer agrees that on or prior to July 16,
1999, the Buyer shall irrevocably pay to the Seller a non-refundable deposit of
One Hundred Thousand United States Dollars (U.S. $100,000) (the "Deposit"),
which shall be applied as a credit against the Purchase Price at the Closing (as
hereinafter defined). The Deposit shall be paid to the Seller by wire transfer
of immediately available U.S. funds in accordance with the wire instructions set
forth on Schedule A. If the Seller shall not have received the Deposit on or
prior to 5:00 p.m., New York City time, on July 16, 1999, then the Seller shall
have no further obligation of any kind whatsoever (including, without
limitation, any obligation to sell or otherwise transfer the 1,827,336 Shares,
or any portion thereof) to the Buyer under this Agreement or otherwise. If the
Seller shall not have received payment of the balance of the Purchase Price at
or prior to the Closing, then this Agreement shall be deemed terminated as of
the Closing Date (as hereinafter defined) and the Seller shall have no further
obligation of any
2
<PAGE>
kind whatsoever (including, without limitation, any obligation to sell the
1,827,336 Shares, or any portion thereof) to the Buyer under this Agreement or
otherwise.
1.4. Closing Payments and Delivery of Shares. The closing of the sale
and purchase of the Shares provided for herein (the "Closing") shall take place
at the offices of Seward & Kissel , One Battery Park Plaza, New York, New York,
at 10:00 a.m., New York City time, on September 14, 1999 (the "Closing Date") or
such other date, time and place as Buyer and Seller may mutually agree in
writing. Payment of the Purchase Price to the Seller (net of the credit for the
Deposit provided under Section 1.3) shall be made at the Closing by delivery to
the Seller of an official bank check, drawn on a New York money center bank,
payable to the order of the Seller in the amount of Eight Hundred and Thirteen
Thousand Six Hundred and Sixty Three United States Dollars (U.S. $813,663.00).
Upon delivery of such check, the Escrow Agent (as hereinafter defined) shall
deliver to the Buyer at the Closing all certificates representing the 1,827,336
Shares, duly endorsed in blank, or accompanied by stock transfer powers duly
endorsed in blank, in accordance with the Escrow Agreement.
1.5. Buyer's Voting Agreement. The Buyer hereby agrees to enter into a
Shareholder Voting Agreement with the Company agreeing to vote the Shares that
it shall purchase hereunder with the Board of Directors of the Company through
December 31, 2000.
1.6. Seller's Lock-up Agreement. Subject to his receipt of the Deposit
in accordance with Section 1.3, Seller agrees that he shall not sell or transfer
to anyone other than the Buyer any shares owned by him until September 15, 1999
or the earlier termination of this Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE SELLER
--------------------------------------------------------
The Seller hereby represents and warrants to, and agrees with, the
Buyer, as of the date hereof and as Closing Date, as follows:
2.1. Capacity; Authority; Validity. The Seller has all necessary
capacity, power and authority to enter into this Agreement and to perform all
the obligations to be performed by the Seller hereunder; this Agreement and the
consummation by the Seller of the transactions contemplated hereby has been duly
and validly authorized by all necessary action of the Seller; this Agreement has
been duly executed and delivered by the Seller; and assuming the due execution
and delivery of this Agreement by the Buyer, this Agreement constitutes the
legal, valid and binding obligation of the Seller enforceable against the Seller
in accordance with its terms.
2.2. Title to Shares. The Seller is the sole owner of, and has good,
valid and marketable title to, 1,827,336 Shares, free and clear of any lien,
pledge, claim, security interest, encumbrance or charge of any kind (together,
"Lien"), other than pursuant to (i) that certain Stock Redemption Agreement
dated as of October 20, 1998 by and between the Company and the Seller, and (ii)
that certain Escrow Agreement dated as of October 20, 1998 and as amended
2
<PAGE>
by the amendment thereto of even date herewith (the "Escrow Agreement") by and
among the Company, the Seller, and Parker Chapin Flattau & Klimpl, LLP (the
"Escrow Agent"). Other than as contemplated by this Agreement, the Seller shall
not sell, assign, or otherwise transfer all or any portion of his right, title
and interest in and to the Shares, or create, incur, assume or permit to exist
any Lien on the Shares.
2.3. No Violation of Law or Agreement. Neither the execution and
delivery of this Agreement by the Seller, nor the consummation of the
transactions contemplated hereby by the Seller, will violate any judgment,
order, writ, decree, law, rule or regulation or agreement applicable to the
Seller or create any Lien over the Shares.
2.4. No Consents. Other than as set forth in the Escrow Agreement, to
the best of the Seller's knowledge, no consent, approval or authorization of or
declaration or filing with any governmental authority or other persons or
entities on the part of the Seller is required in connection with the execution
or delivery of this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE BUYER
-------------------------------------------------------
The Buyer hereby represents and warrants to, and agrees with, the
Seller, as of the date hereof and as Closing Date, as follows:
3.1. Organization. The Buyer is a company duly organized and validly
existing and in good standing under the laws of the Turks and Caicos Islands.
3.2. Capacity; Authority; Validity. The Buyer has all necessary
capacity, power and authority to enter into this Agreement and to perform all
the obligations to be performed by the Buyer hereunder; this Agreement and the
consummation by the Buyer of the transactions contemplated hereby has been duly
and validly authorized by all necessary action of the Buyer; this Agreement has
been duly executed and delivered by the Buyer; and assuming the due execution
and delivery of this Agreement by the Seller, this Agreement constitutes the
legal, valid and binding obligation of the Buyer enforceable against the Buyer
in accordance with its terms.
3.3. Brokerage. The Buyer has not incurred and will not incur any
liability for investment banker's brokerage or finder's fees in connection with
this Agreement and the transactions contemplated hereby. To the extent such
broker may have been retained by the Buyer, the Buyer will indemnify and hold
the Seller harmless from an against any liability for investment banker's,
brokerage or finder's fees in connection with the Agreement and the Buyer's
purchase of the Shares.
3
<PAGE>
3.4. Investment. The Shares will be acquired by the Buyer for its own
account, for investment purposes and not with a view to, or for resale in
connection with, the distribution thereof in violation of any applicable
securities laws, rules or regulations. Neither the Buyer nor any affiliate
thereof is a party to any other agreement or contract or understanding providing
for the purchase of Common Stock from any other person or entity at a price per
share that exceeds the Per Share Price.
3.5. No Consents. Other than as set forth in the Escrow Agreement, to
the best of the Seller's knowledge, no consent, approval or authorization of or
declaration or filing with any governmental authority or other persons or
entities on the part of the Seller is required in connection with the execution
or delivery of this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE IV
MISCELLANEOUS
-------------
4.1. Notices. All notices and other communications by the Buyer or
Seller hereunder shall be in writing to the other party and shall be deemed to
have been duly given when delivered in person or by an overnight courier
service, or sent via telecopy transmission and verification received, or when
posted by the United States postal service, registered or certified mail, return
receipt requested with postage prepaid, at the address set forth on the
signature page hereto or to such other addresses as a party may from time to
time designate to the other party by written notice thereof, effective only upon
actual receipt.
4.2. Assignment. This Agreement shall not be assigned by the Buyer
without the Seller's prior written consent.
4.3. Entire Agreement. This Agreement constitutes the entire agreement
by the parties hereto and supersedes any other agreement, whether written or
oral, that may have been made or entered into between them relating to the
matters contemplated hereby.
4.4. Amendments and Waivers. This Agreement may be amended, modified,
superseded, or canceled, and any of the terms, representations, warranties or
covenants hereof may be waived, only by written instrument executed by both of
the parties hereto or, in the case of a waiver, by the party waiving compliance.
4.5. Captions; Counterparts, Execution. The captions in this Agreement
are for convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in one or more counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
4.6. Survival of Representations and Warranties.. The representations
and warranties contained herein shall survive the execution and delivery of this
agreement.
4
<PAGE>
4.7. Expenses. Each party hereto shall bear his or its own fees, taxes
and expenses in connection with the negotiation, preparation, execution and
delivery of this Agreement, including, without limitation, fees and expenses of
counsel.
4.8. New York Jurisdiction. Each of Seller and Buyer hereby irrevocably
submits to the non-exclusive jurisdiction of the United States District Court
for the Southern District of New York and/or any state court of the State of New
York located in New York County or in Nassau County (the "Jurisdictional
Courts") in any action, suit or proceeding brought against Seller or Buyer and
related to, or in connection with, this Agreement or any instrument, agreement
or document referred to herein, or any transaction contemplated hereby and to
the extent permitted by applicable law, Seller and Buyer each hereby waives and
agrees not to assert as a defense by way of answer, motion or otherwise, in any
such suit, action, or proceeding, any claim that Seller or Buyer is not
personally subject to the jurisdiction of the Jurisdictional Courts, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or inconvenient, or that this
Agreement or any instrument, agreement or document referred to herein or the
subject matter hereof or any matter relating hereto may not be enforced in or by
such Jurisdictional Courts. Seller and Buyer hereby irrevocably agree that
service of process may be made upon each of them by certified or registered mail
to their respective addresses listed on the signature pages of this Agreement or
by any method authorized by the laws of the State of New York or the Federal
Rules of Civil Procedure, as the case may be. Buyer hereby irrevocably appoints
Mr. Don Mintmire c/o Mintmire & Associates, 265 Sunrise Avenue, Suite 204, Palm
Beach, FL 33480. Telephone# 561-832-5696, Fax # 561-659-5371 as its agent for
service of process in the United States for the purposes of any action, suit or
proceeding brought against Buyer and related to, or in connection with this
Agreement or any instrument, agreement or document referred to herein, or any
transactions contemplated hereby.
4.9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to conflicts
of laws principles.
[The next page is the signature page.]
5
<PAGE>
IN WITNESS WHEREOF, The Buyer and the Seller have caused this Agreement
to be duly executed as of the date first above written.
_________________________
Joseph T. Mohen
Address:
14 Cedar Place
Garden City, New York 11530
With a copy to:
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
Attention: Michael J. McNamara, Esq.
Telecopy No.: (212) 480-8421
Bathurst Ltd.
By:______________________
Name:_________________
Title:________________
Address: P.O. Box 25 Britannic House
Provideniales Turks and Caicos Isle.
British West Indies
Attention: Mr. Jeremy Nortcote
The undersigned does hereby acknowledge, agree and consent to, as of the date
hereof, the terms and provisions of this Agreement and does hereby and forever
waive any and all rights relating to the Shares contained in the Stock
Redemption Agreement including, without limitation, the rights of first refusal
contained in Section 3 thereof, or in the Escrow Agreement, provided that the
Closing shall occur.
PROGINET CORPORATION
By:____________________________
Name: Kevin M. Kelly
Title: President, CEO
6
<PAGE>
SCHEDULE A
Seller's Wire Instructions
ABA 043000261 Owner Mellon Bank
Further Credit 101-1730 Merrill Lynch
Further Credit 840 19F96 Joseph Mohen
September 22, 1999
Mr. Kevin M. Kelly
President , CEO
Proginet Corporation
200 Garden City Plaza
Garden City, NY 11530
Dear Mr. Kelly:
This letter will confirm the terms and conditions under which Mallory Factor Inc
("Advisor") will serve as Corporate Advisor to Proginet Corporation ("Client").
DUTIES:
As Corporate Advisor, the Advisor will:
A) Advise Client management on the Financial Relations aspects of the
Client's policies, opportunities and problems;
B) Develop, for approval and implementation, programs designed to achieve
the agreed upon objectives set forth in the "Strategic Corporate and
Communications Counseling Program" prepared for the Client dated
August 20, 1999;
C) Conduct itself in accordance with the appropriate professional
standards of its industry.
D) Assist the Client in its plan to become a listed company in the NASDAQ
small cap market.
OVERHEAD FEE:
The Client will pay an overhead charge of $3,500.00 per month for the term of
this agreement.
<PAGE>
TRANSACTION FEE:
The Client further agrees to pay Mallory Factor one or more transaction fee or
fees (the "Transaction Fee") in the event that at any time before eighteen (18)
months following the termination of this agreement or any renewal thereof, the
Client is involved in one or more of any of the following transactions: any sale
or other disposition of all or substantially all of the Client's assets or
engaging in any other financing transaction or any sale of securities or any
borrowing of money or engaging in any other financing transaction (any such of
the foregoing referred to as a "Transaction") with any third party directly or
indirectly introduced to the Client by the Advisor or any affiliate of such
third party whereby material is exchanged and/or meetings are arranged to
facilitate such transactions. A Transaction Fee shall be due with respect to
each Transaction entered into at any time before eighteen (18) months following
the termination of this agreement or any renewal thereof. Each Transaction Fee
shall be equal to Two and one-half percent (2 - 1/2%) of the total value of the
Transaction including all cash and all other considerations paid or loaned to
the Client or to a third party at the direction of the Client and, if the
transaction is a sale of the Client's assets only and not a stock sale, any of
Client's debt assumed by such third party or its affiliate and shall be in
addition to any other fees or expenses payable under this Agreement. Each
Transaction Fee shall be due and payable at closing of each Transaction, except
for that portion of the fee where cash is received subsequent to closing or the
amount is not quantitatively ascertainable at the closing (e.g., an earnout)
which shall be paid when the fee is received or the amount is ascertainable.
Client's obligations set forth in this paragraph shall survive any termination
of this agreement.
WARRANTS:
In consideration of this Agreement, the Client has this day issued to Mallory
Factor a warrant in the attached form (a "Warrant") permitting Mallory Factor
(i) to purchase, without restriction, 500,000 shares of the Client's common
stock (the "Stock") consistent with the terms of such warrant agreement and (ii)
to purchase, in the event the agreement is renewed beyond its expiration one (1)
year after the date hereof, 200,000 shares of Stock, in each case at an exercise
price of $0.54 per share.
2
<PAGE>
OUT-OF-POCKET EXPENSES:
The Client will reimburse the Advisor for all reasonable out-of-pocket
disbursements made in the performance of its duties under this agreement. The
Advisor will maintain accurate records of all out-of-pocket expenditures
incurred on the Client's behalf. Disbursements to suppliers, such as
photographers, clipping services, messengers, etc., will be rebilled to the
Client with a standard commission added. The standard commission is 15% of the
gross rebilled amount. Other items, such as postage, luncheons with editors,
etc., will be rebilled at net cost with no markup. Advisor will obtain Client's
oral or written consent prior to incurring any out-of-pocket chargeable expense
in excess of $250.00.
TERMS OF PAYMENT:
Billing will be done monthly for the previous month's expenses and the following
month's overhead.
Payment is due within thirty (30) days upon receipt of invoice. The Client
agrees that it will pay on any overdue balance(s) a finance charge of 1.5% per
month or any part thereof in addition to the stated agreement payments. In the
event that the Client questions the validity of a charge by the Advisor, payment
for only that portion under question may be delayed without penalty provided the
Client expresses its objection in writing within ten (10) days upon receipt of
invoice.
LIABILITY:
The Client agrees to indemnify and hold the Advisor harmless from and against
any and all losses, claims, damages, expenses or liabilities which the Advisor
may incur based upon information, representations, reports or data furnished by
the Client to the extent that such material is furnished, prepared or approved
by the Client for use by the Advisor. Client shall be responsible for the
accuracy of the contents thereof, provided that Advisor will be responsible to
the extent it modifies same in writing or orally without the Client's
furnishing, preparing or approving such modifications.
NON-PROSELYTIZATION:
Recognizing that the Advisor's most highly valued resource is its professional
staff, the Client agrees that it shall not employ, hire or retain, or recommend
to others the employment, hiring or retention of, directly or indirectly, any
person employed by the Advisor without prior written consent of the Advisor's
chairman.
3
<PAGE>
"Indirectly" includes the Client hiring a competitor of the Advisor which
employs a former Advisor employee. This limitation expires one (1) year after
the employee has left the Advisor's employ.
TERMS OF AGREEMENT:
This agreement shall extend for one (1) year commencing September 22, 1999. This
agreement will be renewed for successive one (1) year periods unless either
party notifies the other in writing, at least thirty (30) days prior to the
expiration date, of its desire not to renew.
Any controversy or claim arising out of or relating to this agreement, or the
breach thereof, shall be settled by arbitration in New York, New York in
accordance with the rules of the American Arbitration Association, and judgement
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction.
Please reconfirm the Client's agreement to the above by endorsing all three (3)
copies and returning all three (3) copies to the Advisor for execution.
Sincerely,
MALLORY FACTOR INC
By:_________________________________
ACCEPTED:
PROGINET CORPORATION
By:_________________________________________
Title:___ Date:______________________
4
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 605,456
<SECURITIES> 1,085,707
<RECEIVABLES> 520,343
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,311,256
<PP&E> 504,096
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,621,372
<CURRENT-LIABILITIES> 1,050,722
<BONDS> 0
0
0
<COMMON> 14,140,000
<OTHER-SE> 6,339,821
<TOTAL-LIABILITY-AND-EQUITY> 7,621,372
<SALES> 2,063,436
<TOTAL-REVENUES> 4,174,163
<CGS> 1,314,368
<TOTAL-COSTS> 1,314,368
<OTHER-EXPENSES> 2,898,014
<LOSS-PROVISION> 38,219
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,533
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,533
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
