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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-26170
EAGLE POINT SOFTWARE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 43-1204819
(State or other jurisdiction of incorporation (I.R.S. employer identification
or organization) number)
4131 WESTMARK DRIVE, DUBUQUE, IOWA 52002-2627, (319) 556-8392
(Address of principal executive offices, including zip code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X].
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 19, 1996 was $11,810,280. This calculation does not
reflect a determination that persons are affiliates for any other purposes.
Number of shares of common stock outstanding as of September 19, 1996:
4,941,730.
Documents Incorporated by Reference:
Part III - Portions of the registrant's definitive proxy statement to be issued
in conjunction with registrant's annual stockholders' meeting to be held on
December 5, 1996 (the "Proxy Statement").
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PART I
ITEM 1. BUSINESS
Eagle Point Software Corporation (the "Company" or "Eagle Point") is a
leading developer and marketer of application software for use by professionals
in the architecture, engineering, construction and geographic information
systems ("AEC/GIS") industries. The Company's product line includes 90 modules
that can be used by civil engineers, surveyors, architects, building service
engineers, structural engineers, landscape architects, hydrologists and mapping
professionals to automate various design, analysis, drafting, mapping and
engineering functions. Most of the Company's products are designed for use in
conjunction with either AutoCAD or MicroStation, general purpose computer-aided
design ("CAD") drafting software tools developed by Autodesk, Inc. ("Autodesk")
and Bentley Systems, Inc. ("Bentley Systems"), respectively. Accordingly, the
Company's business and financial results are linked to the continued market
acceptance of AutoCAD and MicroStation, however, the Company is actively trying
to reduce its reliance on AutoCAD. There can be no assurance that the Company
will be successful in achieving such reduction of its reliance on AutoCAD. See
"Risk Factors -- Dependence on AutoDesk and Bentley Systems." The Company
focuses on developing and marketing technologically advanced software
application products that are designed to provide AEC/GIS professionals with the
functionality associated with high-end proprietary CAD systems at a price
suitable for more economical desktop systems.
The Company, originally incorporated in Iowa in 1983, reincorporated
in Delaware in May, 1995. In June, 1995 the Company completed an initial public
offering of its Common Stock, $.01 par value ("Common Stock"). In January, 1995
the Company acquired substantially all of the assets and business and assumed
certain of the liabilities of LANDCADD, Inc. ("LANCADD"), a Colorado-based
developer of software applications for landscape architecture, irrigation design
and environmental planning (the "LANCADD Acquisition"). In March, 1995 the
Company acquired certain assets of Facility Mapping Systems, Inc. ("FMS"), a
California-based developer of computer-aided GIS software applications for
managing parcels of land, streets, sewer systems, water systems, lighting,
buildings, electrical systems, natural gas systems, land use planning, telephone
systems, census information or analysts (the "FMS Acquisition"). In November,
1995 the Company merged with ECOM Associates, Inc.("ECOM"), a Wisconsin-based
developer of software applications for the structural engineers (the "ECOM
Merger"). Unless otherwise indicated, all references herein to the "Company"
refer to Eagle Point Software Corporation and its predecessors.
THE AEC/GIS SOFTWARE MARKET
The Company's software products are principally designed for use by
professionals in the AEC/GIS industries. These professionals use AEC/GIS-
related software in a variety of applications, including: automated mapping;
facilities management; plant and power management; civil engineering/surveying
and architecture; hydrology/hydraulics; landscape; structural engineering; and
construction.
Historically, design and drafting tasks were accomplished manually.
In order to reduce the costs and time necessary to complete projects, however,
such tasks have become increasingly automated. This automation was initially
provided by several large companies that marketed expensive integrated
proprietary hardware and software solutions directly to large users. In recent
years, however, the widespread availability of increasingly powerful and
inexpensive desktop personal computers and workstations, together with the
continued development of open-architecture general purpose CAD software, has
resulted in rapid acceptance of desktop based systems. The demand for these
products has come both from large users, who have generally found such systems
to be more cost effective than proprietary systems, as well as from many smaller
and mid-sized firms and governmental agencies that previously had been unable to
justify the cost of a proprietary system. This trend among users to seek lower
cost alternatives to proprietary systems has particularly benefited suppliers of
open-architecture CAD-based graphic engines, such as AutoCAD and MicroStation.
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The market for desktop AEC/GIS application software is highly
fragmented, with over 100 companies estimated to be offering some form of
AEC/GIS software application product. These companies range from a few large
firms offering a wide selection of products and having substantial financial and
marketing resources, to numerous small entities offering only a few specialized
products and having limited financial and marketing capabilities.
MARKET FOR THE COMPANY'S PRODUCTS; CUSTOMERS
The Company has traditionally targeted the segment of the AEC/GIS
market consisting of medium-sized consulting, engineering and architectural
firms of 20 to 50 employees, as well as governmental agencies in cities and
counties with fewer than 100,000 people. The typical selling cycle to this
segment of the market is approximately 90 days. During fiscal 1996, no single
customer accounted for more than 0.5% of the Company's revenues.
The Company has recently begun to focus limited resources on serving
the segments of the AEC/GIS market consisting of large organizations, (such as
FORTUNE 1000 companies, large engineering and consulting firms and larger
city/state/federal government agencies). These large organizations have tended
to rely on expensive proprietary software systems and have only recently begun
to migrate to desktop CAD systems. In addition, the selling cycle to large-
sized organizations is typically longer, ranging from 6 months to 3 years. As
large organizations increasingly focus on lower cost software solutions, the
Company intends to focus more resources and personnel to market products to this
market segment.
Small organizations in the AEC/GIS market, which generally consist of
consulting, engineering and architectural firms with fewer than 20 employees,
colleges and universities, contractors and specific in-house departments of
larger organizations, typically require a limited set of application software
products. Since the majority of the Company's products currently require the
use of AutoCAD or MicroStation, the Company has not devoted significant
marketing efforts to date on serving this category of users. However, the
Company is currently planning the development of additional modules for use in a
stand-alone environment which the Company believes will enhance its ability to
penetrate this market segment.
International. The Company distributes its products internationally
primarily through a network of over 50 resellers located in more than 40
countries. Currently, most of the Company's products distributed internationally
are in English. The Company does have a limited number of products with the
software and/or the documentation translated into various foreign languages. The
Company believes that the international distribution of its products will be
enhanced by the translation of its products into local languages, the
incorporation of local engineering regulations and requirements and the
establishment of a local marketing and support presence. The Company believes
that the design of the Company's products facilitates their translation into
foreign languages and additional products are currently being translated. The
Company anticipates that an increasing number of its products will be translated
into foreign languages in the future to enhance their appeal to international
customers. At this time the Company does not have any international offices,
however the Company may in the future explore opportunities for opening
international offices. The Company's international revenues (excluding Canada)
were $564,000 in fiscal 1996 or approximately 2.9% of the Company's revenues.
The Company believes that the increased use of general purpose drafting software
worldwide creates opportunities for the Company to increase the portion of its
revenues derived from international markets. The international portion of the
Company's business is subject to a number of inherent risks, including
difficulties in opening and managing foreign offices, establishing channels of
distribution, establishing the credit worthiness of foreign customers, the
collection of outstanding accounts, localizing software to meet engineering
regulations and requirements or translating products into foreign languages; the
lack of control over fluctuations in the value of foreign currencies;
import/export duties and quotas; and unexpected regulatory, economic or
political changes in foreign markets. See "Risk Factors -- Foreign Operations."
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PRODUCTS
The Company's products are organized into the following product
families: Civil Engineering/Surveying; Geographic Information Systems; Building
Design and Construction; Hydrology/Hydraulics; Landscape
Architecture/Environmental Planning; and Structural Engineering. Many of the
Company's products are integrated for use with one another across different
platforms. This integration enables users to easily add new modules to their
existing Eagle Point system. In addition, most of the Company's products include
a similar graphical user interface, which makes it easier for users to learn to
use additional Eagle Point products. Suggested list prices for the Company's
products range from approximately $195 to $2,495 per module, although many of
the Company's products are sold, by the Company, at prices less than their
suggested list prices. To facilitate additional sales of its software
application products, the Company also resells AutoCAD and other CAD-software
products manufactured by third parties.
Civil Engineering/Surveying. The Civil Engineering/Surveying product
series consists of 25 modules. Through the integration of the surveying modules
with the civil engineering design modules, users are able to gather surveying
data in the field electronically, download the data to the office, complete the
design and/or analysis, develop detailed construction documents and upload the
final design information to electronic surveying equipment for construction
staking purposes. Typical projects for which the Civil Engineering/Surveying
product series are used include the design/analysis of road, railroads,
airports, sites, subdivisions and landfills.
Geographic Information Systems. The Geographic Information Systems
product series consists of 12 modules which can be used by a wide variety of
customers including city, county and state engineering departments, planning
departments, utility companies, pipeline companies, city and county assessors
and recorders and other organizations which have an interest in managing and
tracking parcels of land, streets, sewer systems, water systems, lighting,
buildings, electrical systems, natural gas systems, land use planning, telephone
systems, census information and addresses. By graphically selecting any type of
feature such as a sewer, road, sign, pipeline, electric line or any other
feature of interest, the user is provided with any or all information stored in
an electronic database that has been associated with such feature. This type of
information will be useful throughout the entire Eagle Point product line to aid
in design/planning decisions. The Geographic Information Systems product line
was acquired by the Company on March 31, 1995 in connection with the FMS
Acquisition.
Building Design and Construction. The Building Design and
Construction product series consists of 10 modules which can be used by
architects and building services professionals to design and manage buildings.
Walls, windows, doors, floors and roofs, along with internal utilities and
fixtures, can be modeled to allow the user to develop several design variations.
Through the use of real time simulation features, the building owner can then
"walk through" the building to help in selecting the favored design. Once
selected, the designer can then complete final construction documents and
automatically estimate the building materials necessary in order to prepare for
the bidding and construction phase of the project.
Hydrology/Hydraulics. The Hydrology/Hydraulics product series
consists of 11 modules which aid users in designing and/or analyzing sewer
systems, stream flow and surface water run-off. Three dimensional ground
terrain models developed through the Civil Engineering/Surveying product series
are used in conjunction with Hydrology/Hydraulics products to develop an
integrated model of the entire hydrology or hydraulic project. This integrated
model is then used to design new storm or sanitary sewer networks including pipe
sizes, flow line elevations and hydraulic grade lines. Additionally, stream
flows can be analyzed to determine the flooding impact upstream from newly-
constructed bridges or culverts.
Landscape Architecture/Environmental Planning. The Landscape
Architecture/Environmental Planning product series consists of 7 modules which
are used by landscape architects and government planners to develop plans for
plantings, park layouts, green zones and irrigation systems, as well as analysis
for site visibility, solar potential, slope stability and other factors to
determine development suitability and environmental constraints. These modules
provide the user with a database of
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over 900 plants from every climactic zone around the world complete with
statistics which allow for complete growth simulation. Once the landscape plan
is modeled, the planner or owner can then "walk around" the newly and/or post-
growth plantings to view the overall esthetics of the site. The Landscape
Architecture/Environmental Planning product line was acquired by the Company on
January 1, 1995 in connection with the LANDCADD Acquisition.
Structural Engineering. The Structural Engineering products series
consists of 25 modules which can be used by structural engineers, architects and
other building professionals. Modules are designed to work independently or in
concert with one another and are classified under standard structural design
disciplines. Both structural analysis and design calculations may be performed
for a variety of materials including structural steel, reinforced concrete,
aluminum, and a variety of timber based products. A comprehensive 3-D finite
element analysis module is also integrated within the system, along with a
series of foundation design and bridge analysis programs. The user inputs the
geometry, material and connectivity data into the system for it to perform the
structural analysis and design calculations. The Structural Engineering product
line was acquired by the Company on November 9, 1995 in conjunction with the
ECOM Merger.
SALES AND MARKETING
The Company markets and sells its products in the United States and
Canada primarily through the use of direct response marketing, sales seminars,
trade shows and advertising designed to generate sales leads that can be pursued
by the Company's in-house telesales force. The Company's telesales force has
increased from 19 professionals at June 30, 1992 to 108 professionals at June
30, 1996.
The Company believes that the use of telesales professionals provides
competitive advantages over those competitors which principally rely upon
resellers. The Company believes that its use of a telesales force allows it to
develop a stronger ongoing relationship with the customer than could be achieved
through the use of resellers and provides the Company a cost-effective channel
of distribution for its products. In addition, the Company's sales
professionals have the ability to offer certain customers trade-in or volume
discounts, extended free trials and other flexible pricing arrangements designed
to introduce the customer to Eagle Point products in the hope of increasing
sales to that customer in the future. The Company believes that it generally
has greater incentive than a reseller to invest in a longer selling cycle by
providing flexible initial pricing. As the Company expands its product
offerings through the addition or acquisition of new modules, the Company's
direct knowledge of its customers' existing software systems and applications
needs provide the Company with valuable information to identify cross-selling
opportunities. The Company believes that such information is not generally
available to software companies which rely on resellers to market their
products. In addition, the Company believes that a significant number of its
product enhancements released in recent years were initially developed as a
result of communications with customers regarding their specific software
requirements.
Initial sales leads are primarily developed through direct mail
marketing, and trade publication advertising, public relations and promotional
campaigns undertaken by the Company, as well as through participation by the
Company in various trade shows and sales and training seminars. In fiscal 1996,
the Company is scheduled to hold over 250 customer sales and training seminars
in the United States and various international markets. The Company has also
been successful in placing its products in various colleges, universities and
secondary schools at reduced cost as a means of increasing familiarity with its
products among young professionals in the AEC/GIS market. The Company, while
maintaining a general database with over 250,000 names, also maintains a
registered user data base which facilitates the Company's ability to communicate
periodically with current customers and to pursue repeat sales and cross-selling
opportunities. In fiscal 1996, the Company made direct mailings to over 175,000
existing and potential customers on a quarterly basis.
Once sales leads are developed, the Company's telesales professionals
track such leads through an automated lead tracking system. A typical sales
cycle for the Company's products involves numerous communications between the
Company's telesales professionals and the potential customer. Frequently, the
potential customer is furnished a demonstration copy of the Company's product
and certain
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product literature, and invited to contact current customers to discuss the
product or observe its use. Potential customers may also be invited to attend
product demonstration seminars.
TRAINING AND SUPPORT
The Company believes that providing its customers with direct and
value-added training and support services helps ensure that customers obtain the
maximum benefits offered by its products. The Company believes that its
training and support programs also enhance the Company's relationships with
customers and help to differentiate the Company from AutoCAD-based application
developers that do not offer direct training and support. Moreover, the Company
believes that the demand by users for various training and support services
provides the Company with incremental revenue opportunities.
All purchasers of the Company's software are provided 60 days of
product support without charge. For support after the 60-day period, customers
can elect to obtain ongoing support on either a one-year contract basis or an
as-used fee basis. In addition, all customers have telephone access to the
Company's electronic bulletin board service. Customers also receive a technical
newsletter which is distributed quarterly by the Company and which is designed
primarily to apprise customers of technological enhancements and new products
offered by the Company. The Company also conducts training seminars to educate
customers on the functionality of the Company's products. For a fee, customers
may discuss products with and receive technical assistance directly from the
Company's in-house professionals who participated in the development of such
products. The Company believes that such programs help to foster customer
loyalty and allow the Company to develop product enhancements that can be
marketed to other users.
Approximately 23.9% of the Company's revenues for fiscal 1996 were
attributable to customer training and support services.
PRODUCT DEVELOPMENT
The Company offers a broad range of products which are designed to
keep pace with technological developments in the marketplace and address the
increasingly sophisticated needs of its customers. The number of modules
offered by the Company has increased from 12 at June 30, 1991 to 90 at June 30,
1996. Of the 90 modules offered by the Company at June 30, 1996, 43 of such
modules were developed internally by the Company and the remainder were added to
the Company's product line as a result of acquisitions by the Company of
products, businesses or technologies. All of the Company's products acquired
through acquisitions are integrated into the Company's product line and further
enhanced by the Company's development staff.
The Company releases enhanced versions of its software modules on an
on-going basis, and also typically introduces several new product modules each
year. The Company's software modules share the same technological foundation,
all being written in the computer programming language C or C++. The Company
works closely with its existing and prospective customers to determine their
requirements and to design enhancements and new products to meet their needs.
Each product development project begins with a review of the existing customer
requests, which are derived from a database generated by the Company's various
customer support programs, interviews with certain key customers and competitive
analyses. Product specifications for the development project are then
generated, a development team is assembled, and a detailed development and
release schedule is produced.
COMPETITION
Competition in the AEC/GIS market is intense and increasing. The
Company currently faces competition from two basic types of competitors. The
first category includes companies principally offering integrated proprietary
hardware and software solutions. The primary competitors within this group are
Intergraph Corporation, which owns a 50% equity interest in Bentley Systems,
Environmental Systems Research, Inc. ("ESRI") and a number of mid-sized
companies serving various foreign markets. The Company typically competes with
these companies for larger users. Most of the Company's
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competitors within this group have significantly greater financial and marketing
resources than the Company.
The second category of competitors includes companies which offer
AEC/GIS application software products, many of which are AutoCAD or
MicroStation-based, similar to products offered by the Company. The primary
competitor in this category is Softdesk, which offers a broad line of software
applications for the AEC/GIS market. Intergraph Corporation and ESRI, as well as
a number of smaller companies, also serve certain target markets within the
AEC/GIS market. Although the Company believes that it enjoys a greater market
share and greater resources than many competitors in this category, certain of
these competitors may offer specific solutions which are not available from the
Company.
A potential source of additional competition for the Company is
Autodesk, the developer of AutoCAD, and/or Bentley Systems, the developer of
MicroStation. Approximately 58.3% of the Company's net revenues for fiscal 1996
were related to AutoCAD, including 44.5% from the sale of the Company's software
products designed for use with AutoCAD and 13.8% derived from the resale by the
Company of AutoCAD. In addition, 5.3% of the Company's net revenues during such
period were derived from the sale of the Company's software products designed
for use with MicroStation. Autodesk currently sells application software in
certain segments of the CAD and related software markets not currently served by
the Company. In addition, Autodesk sells certain AEC/GIS software applications
outside the United States. To date, Autodesk has encouraged third party
developers of application software to expand distribution in international
markets. Accordingly, the Company does not anticipate that expansion by the
Company in international markets will have an adverse effect on its current
relationship with Autodesk. Although Autodesk and Bentley Systems currently do
not offer AEC/GIS software application products in the United States, either
company may in the future decide to internally develop and market such
application products, or to acquire one or more independent companies which
currently offer AutoCAD-based or MicroStation-based AEC/GIS software application
products.
The Company believes that the principal bases for competition in the
AEC/GIS market are product functionality, product reliability, price/performance
characteristics, ease of product use, availability of products on popular
computer platforms, the ability to integrate the product with other
applications, user support, documentation and training, distribution networks,
and corporate reputation. No assurance can be given that the Company will be
able to compete successfully against current and future sources of competition
or that the competitive pressures faced by the Company will not adversely affect
its business, operating results or financial condition. See "Risk Factors --
Competition."
PROPRIETARY RIGHTS
The Company relies primarily on a combination of contract, copyright,
trademark and trade secret laws, license and confidentiality agreements and
software security measures to protect its proprietary technology. The Company
distributes its products under "shrink-wrap" software license agreements which
grant users licenses to (rather than ownership of) the Company's products and
which contain various provisions intended to protect the Company's ownership and
confidentiality of the underlying technology. Outside the United States and
Canada, the Company's software is distributed with a third party "hardware lock"
which requires an authorization code generated by the Company's internal systems
to enable the software to function. The Company also requires all of its
employees and other parties with access to its confidential information to
execute agreements prohibiting the unauthorized use or disclosure of the
Company's technology. In addition, the Company periodically reviews its
proprietary technology for patentability, although the Company does not have any
current patents. Despite these precautions, the Company believes that existing
laws provide limited protection for the Company's technology and that it may be
possible for a third party to misappropriate the Company's technology or to
independently develop similar technology. In addition, effective copyright and
trade secret protection may not be available in every jurisdiction where the
Company distributes products, particularly in foreign countries where the laws
generally offer no protection or less protection than those of the United
States. Moreover, "shrink-wrap" licenses, which are not signed by the end-user,
may be unenforceable in certain jurisdictions. See "Risk Factors -- Limited
Protection of Intellectual Property; Risk of Infringement."
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Certain technology used in the Company's products is licensed from third
parties. Royalties are calculated and paid monthly on a per copy fee or
percentage of revenues basis. Eleven of the Company's currently offered 90
modules depend on licensed technology. For fiscal 1996, sales of such eleven
modules accounted for approximately 9% of the Company's net revenues for such
period. None of the Company's other 79 modules rely upon such eleven modules.
The Company believes that, due to the rapid pace of technological
innovation and change within the CAD industry, legal protections afforded the
Company's technology are less significant in affecting the Company's business
and results of operations than factors such as the reputation of the Company,
the knowledge, ability and experience of Company personnel, the frequency of
product enhancements and the timeliness and quality of the Company's customer
service and support.
The Company is not engaged in any material disputes with other parties with
respect to the ownership or use of the Company's proprietary technology.
However, there can be no assurance that other parties will not assert technology
infringement claims against the Company in the future. The litigation of such a
claim may involve significant expense and management time. In addition, if any
such claim were successful, the Company could be required to pay monetary
damages and may also be required to either refrain from distributing the
infringing product or obtain a license from the party asserting the claim (which
license may not be available on commercially reasonable terms). As the number of
software products in the industry increases and the functionality of these
products further overlap, the Company believes that software developers may
become increasingly subject to infringement claims.
EMPLOYEES
As of June 30, 1996, the Company had 257 employees, including 125 in sales
and marketing, 87 in product development and 45 in general and administrative
functions. None of the Company's employees are represented by a labor union, and
the Company believes that its employee relations are good.
RECENT DEVELOPMENTS
On July 29, 1996, the Company purchased substantially all of the assets of
Computer Integrated Building Corporation ("CIBC"), a California-based developer
of software applications for the home building market. The purchase price was
$550,000 cash. Additionally, the Company is obligated to make a contingent cash
payment equal to (1) 75% of the revenues between $550,000 and $743,400 received
by the Company in connection with the sale of Computer Integrated Building
Corporation's products during the 12 month period ending July 29, 1997, plus (2)
50% of such revenues exceeding $743,400 during the 12 month period ending July
29, 1997. As part of the acquisition, a three year non-compete agreement was
entered into between the Company and the former owners of CIBC.
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Annual Report on Form 10-K.
Dependence on Autodesk and Bentley Systems. In fiscal 1996, approximately
58.3% of the Company's net revenues were related to AutoCAD, including 44.5%
from the sale of Eagle Point software products designed for use with AutoCAD and
13.7% derived from the resale by the Company of AutoCAD. In addition, 5.3% of
the Company's net revenues in this period were derived from the sale of Eagle
Point software products designed for use with MicroStation. Accordingly, the
Company's business and financial results are linked to the continued market
acceptance of AutoCAD and MicroStation. In the Company's 3rd and 4th Quarter of
fiscal year 1996, the financial results of the Company were adversely impacted
by a soft market for AutoCAD and AutoCAD related products. The timing of major
AutoCAD or MicroStation releases may affect the timing of purchases of the
Company's products. The Company's product development efforts, insofar as they
relate to the compatibility of its products with those of Autodesk, the
developer of AutoCAD, or Bentley Systems, the developer of MicroStation, have
thus far been facilitated by cooperation from Autodesk's and Bentley Systems'
development personnel. However,
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there exists no material contractual or other formal relationship obligating
Autodesk or Bentley Systems to provide such cooperation. The Company is
currently authorized by Autodesk to resell AutoCAD. Any adverse change in the
business results of, or the Company's relationship with, Autodesk, or Bentley
Systems, including any limitation by Autodesk on the Company's ability to resell
AutoCAD, could have a material adverse effect on the Company's business,
operating results or financial condition.
Management of Growth. The Company's business has grown significantly over
the past several years. The Company is currently expanding its principal
facility and if growth continues the Company may need to expand further its
facilities and enhance its management information and telecommunications systems
and other operations. In addition, the Company's management team has limited
experience in operating and managing a public company. There can be no assurance
that the Company will continue to grow or be effective in managing its future
growth, expanding its facilities and operations or attracting and retaining
additional qualified personnel. Any failure to effectively manage growth, expand
its operations or attract and retain personnel could have a material adverse
effect on the Company's business operating results or financial condition.
Acquisitions. A principal business strategy of the Company is to pursue
acquisitions of businesses, products and technologies that are complementary to
those of the Company. To date, the Company's management has had limited
experience in making acquisitions. The Company recently completed the
acquisitions of ECOM and CIBC and the Company will likely make additional
acquisitions in the future. Integrating acquired products and businesses
requires a significant amount of management time and skill and may place
significant demands on the Company's operations and financial resources. There
can be no assurance that the Company will be effective in making acquisitions.
Any failure to effectively integrate its recent acquisitions or any future
acquisitions could have a material adverse effect on the Company's business,
operating results or financial condition. Acquisitions may also give rise to
contingent payment obligations by the Company. In connection with the CIBC
Acquisition, the Company has agreed to make a contingent payment to CIBC equal
to (1) 75% of the revenues between $550,000 and $743,000 received by the Company
in connection with the sale of CIBC's products during the 12 month period ending
July 29, 1997, plus (2) 50% of such revenues exceeding $743,400 during the 12
month period ending July 29, 1997. Such contingent payments, if any, would be
made directly to the acquired company, would be accounted for as goodwill by the
Company and would be amortized over a period not to exceed five years. The
Company believes that such contingent payments, if any, would not have a
material adverse effect on the Company's results of operations.
Competition. Competition in the AEC/GIS software industry is intense and
increasing. The Company faces competition from companies offering stand-alone
CAD systems as well as from companies offering AutoCAD-based or MicroStation-
based software applications. Autodesk markets application software for certain
segments of the United States CAD industry not currently served by the Company
and markets certain architectural software, which competes directly with
products offered by the Company, in international markets. In the future, the
Company may face additional competition from Autodesk or Bentley Systems if such
entities decide either to internally develop and market or to acquire software
applications in the AEC/GIS markets served by the Company. Intergraph
Corporation, one of the Company's primary competitors, owns a 50% equity
interest in Bentley Systems. Many of the Company's competitors have and
potential competitors may have significantly greater financial, technological
and marketing resources than the Company. Barriers to entry in the AEC/GIS
software industry are relatively low and the risk of new competitors entering
the market is high. In addition, the AEC/GIS software industry is experiencing
consolidation which could result in existing competitors increasing their market
position or breadth of product offerings through acquisitions. Competitive
pressures could force the Company to reduce its prices, resulting in reduced
margins. There can be no assurance that the Company will be able to compete
successfully against current and future sources of competition or that
competition will not have a material adverse effect on the Company's business,
operating results or financial condition. See "Business--Competition."
Variability of Quarterly Operating Results and Seasonality. The Company
has experienced in the past, and may experience in the future, significant
quarter-to-quarter fluctuations in its operating results. Factors such as the
timing of new product introductions and upgrades by the Company; the Company's
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competitors or AutoDesk (See "Dependence on AutoDesk and Bentley Systems"),
customer acceptance of software applications, product development expenses,
announcements or changes in pricing policies by competitors, the timing of
significant orders, the mix of products sold, the mix of domestic versus
international revenues, the existence of product errors or bugs, and the hiring
and training of additional staff could contribute to this variability of
quarterly results. In addition, the Company's operating results may be adversely
impacted by the markets acceptance of new, or changes in existing hardware or
software technology, including without limitation, Windows95/NT, the Internet,
CD ROM Technology, etc. Economic and other factors affecting the building,
construction, architecture, mapping and engineering industries could also affect
demand for the Company's products in one or more particular quarters. The
Company historically has operated with little or no backlog. A significant
portion of the Company's net revenues in a quarter are derived from orders
received late in that quarter, which makes the Company's financial performance
more susceptible to an unexpected downturn in business and quarterly results
difficult to forecast. In addition, the Company's expense levels are based in
part on expectations of future revenue levels, and a shortfall in revenues could
result in a disproportionate decrease in the Company's net income. As the
markets in which the Company competes mature and new and existing companies
compete for customers, price competition is likely to intensify and such
competition could affect quarterly operating results. In addition, operating
results historically have been seasonally lower during the first and fourth
quarters than during the other quarters of the fiscal year.
Technological Demands of the Marketplace. The software industry is
characterized by rapid technological changes and advances which can result in
relatively short product lifecycles. The Company's future success will depend
upon its ability to enhance its current products and introduce new products that
keep pace with technological developments in the marketplace and address the
increasingly sophisticated needs of its customers. To meet this goal the Company
periodically upgrades certain of its products. There can be no assurance that
the Company will be successful in introducing and marketing product enhancements
or new products, or that such products will be accepted by the market. The
Company's software products, like software products generally, may contain
undetected errors or bugs when introduced, or as new versions are released.
While the Company's current products have not experienced significant post-
release software error bugs to date, there can be no assurance that such
problems will not occur in the future, particularly as the Company expands its
product offerings and its products become more complex and sophisticated. Any
such defective software may result in a loss of or delay in market acceptance of
the Company's products or an increased warranty expenses or product recalls. See
"Business--Products" and "--Product Development."
Limited Protection of Intellectual Property; Risk of Infringement. The
Company's success is heavily dependent upon its proprietary technology. The
Company does not have any patents on its technology and relies upon copyright,
trademark and trade secret laws, license and confidentiality agreements and
software security measures to establish and protect its proprietary technology.
The Company enters into confidentiality and/or license agreements with its
resellers and potential customers and limits access to and distribution of its
software, documentation and other proprietary information. The Company's
products are, however, generally distributed under "shrink-wrap" licenses that
are not signed by the customer and therefore may be unenforceable in certain
jurisdictions. In addition, effective copyright and trade secret protection may
not be available to the Company, particularly in foreign countries where the
laws generally provide either no protection or less protection than the laws of
the United States. There can be no assurance that the steps taken by the Company
to protect its proprietary technology will be adequate to prevent
misappropriation. The Company has a policy of requiring all of its employees to
sign an agreement which prohibits disclosure of confidential information and a
covenant not to compete with the Company or be employed by competitors of the
Company. There can be no assurance, however, that such restrictive provisions
contained in such agreements would be enforceable by the Company. In addition,
as the number of software applications in the industry increase and
functionality of these applications further overlap, the Company believes that
software developers may become increasingly subject to infringement claims. The
Company is not engaged in any material disputes with other parties with respect
to the ownership or use of the Company's proprietary technology. However, there
can be no assurance that other parties will not assert technology infringement
claims against the Company in the future. Any such claims so asserted, with or
without merit, may be time consuming and expensive to defend. See "Business--
Proprietary Rights".
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Dependence on Management. The continued success of the Company's
operations will depend largely upon the continued services of its executive
officers, in particular Rodney L. Blum, its Chairman, President and Chief
Executive Officer, John F. Biver, its Vice President, Civil Division, and Dennis
J. George, its Chief Financial Officer. The loss of service of one or more of
these executive officers could adversely affect the Company's business. The
company's future success will also be dependent, in part, upon the Company's
ability to attract and retain additional qualified managers and other personnel.
Competition for qualified personnel in the AEC/GIS software industry is intense
and there can be no assurance that the Company will be successful in attracting
and retaining such personnel.
Foreign Operations. Approximately 2.9% of the Company's revenues in fiscal
1996 were derived from sales to customers located outside of the United States
and Canada. The international portion of the Company's business is subject to a
number of inherent risks, including difficulties in opening and managing foreign
offices, establishing channels of distribution, establishing the credit
worthiness of foreign customers, the collection of outstanding accounts,
localizing software to meet engineering regulations and requirements, or in
translating products into foreign languages; the lack of control over
fluctuations in the value of foreign currencies; import/export duties and
quotas; and unexpected regulatory, economic or political changes in foreign
markets. There can be no assurance that these factors will not adversely affect
the Company's international revenues or its overall financial performance.
Reliance on Headquarters. Substantially all of the Company's
administrative, sales, marketing, training, customer service, product
development and product ordering and shipping activities are conducted from a
single facility located in Dubuque, Iowa (the "Dubuque Facility"). A loss with
respect to all or part of this facility or a disruption in the Company's
telecommunications and management information systems would have a material
adverse effect on the Company's results of operations.
Potential Volatility of Stock Price. The stock market has historically
experienced volatility which has particularly affected the market prices of
securities of many technology-based companies and which sometimes has been
unrelated to the operating performances of such companies. Factors such as
announcements of technological developments or new products by the Company or
its competitors, variations in the Company's quarterly operating results or
general economic or stock market conditions may significantly impact the market
price of the Common Stock. Furthermore, any adverse changes in the market price
of the common stock of other related software companies may adversely affect the
market prices of the Company's Common Stock, irrespective of whether there has
been any deterioration of the Company's business or financial results.
Control by Management and Principal Stockholders. The Company's officers
and directors and their affiliates own approximately 52% of the Company's
outstanding Common Stock. As a result, these stockholders, acting together, will
be able to control the outcome of actions requiring stockholder approval, such
as the election of directors, amendments to the Company's charter and mergers.
Anti-Takeover Provisions: Possible Issuance of Preferred Stock. The
Company's Certificate of Incorporation and By-Laws contain various provisions,
including, without limitation, certain notice provisions and provisions
authorizing the Company to issue Preferred Stock, that may make it more
difficult for a third party to acquire, or may discourage acquisition bids for,
the Company and could limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock. The ownership by the
Company's officers, directors and their affiliates of substantial shares of
Common Stock could also discourage such bids. In addition, the rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of any holders of Preferred Stock that may be issued in the future
and that may be senior to the rights of the holders of Common Stock.
ITEM 2. PROPERTIES
The following table sets forth a brief description of the properties of the
Company:
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<TABLE>
<CAPTION>
Location General Description
- -------- ------------------------------------
<S> <C>
Eagle Point Software Corporation: Corporate headquarters and principal
Dubuque, Iowa operating facility of 32,000 square
feet (the "Dubuque Facility") (1)
Former LANDCADD operations: Development facility consisting of
Denver, Colorado 6,000 square feet (leased)
Former FMS operations: Development facility consisting of
Mill Valley, California 220 square feet (leased)
Former ECOM operations: Development facility consisting of
Milwaukee, Wisconsin 500 square feet (leased)
Former CIBC operations: Development facility consisting of
Sebastopol, California 1,300 square feet (leased)
</TABLE>
(1) A 45,000 square foot expansion to the Dubuque facility is currently under
construction. The expansion project, which is estimated at between $3.0
million and $4.0 million was funded by a portion of the proceeds from the
Company's initial public offering, The Company expects this expansion
project to be completed by the end of calendar year 1996.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since June 16, 1995, the Common Stock has been traded on The Nasdaq
National Market ("Nasdaq") under the symbol EGPT. The approximate number of
stockholders of record of common stock at September 19, 1996 was 164, some of
which are street name holders and depository trusts representing beneficial
shareholders. The Company has more than 1,200 beneficial holders of common
stock.
The Company has never paid cash dividends on the Common Stock. The Company
currently intends to retain any earnings for future growth and therefore does
not anticipate paying any cash dividends on the Common Stock in the foreseeable
future.
On September 19, 1996 the closing sales price of the Company's Common Stock
was $5.00. The following table sets forth for the periods indicated the high and
low sales prices per share of the Common Stock as reported by Nasdaq.
<TABLE>
<CAPTION>
Quarter Ended HIGH LOW
- ------------- ------ ------
<S> <C> <C>
June 30, 1995 (from June 16, 1995) ...................... $18.25 $13.00
September 30, 1995 ...................................... $24.25 $16.25
December 31, 1995 ....................................... $22.25 $15.25
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
March 31, 1996 .......................................... $21.00 $ 8.00
June 30, 1996 ........................................... $10.75 $ 6.50
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The statement of income data presented below for each of the fiscal years
ended June 30, 1996, 1995, 1994, 1993 and 1992 and the balance sheet data at
June 30, 1996, 1995, 1994 and 1993 have been derived from the Company's
financial statements, which have been audited by Deloitte & Touche LLP,
independent auditors, whose report thereon is included elsewhere in this Report
on Form 10-K. The statement of income data for the fiscal year ended June 30,
1991 and the balance sheet data at June 30, 1992 and 1991 are unaudited but have
been derived from the Company's combined financial statements, which in the
opinion of management of the Company, have been prepared on the same basis as
the audited financial statements. The selected combined financial data presented
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and with the financial
statements and the notes thereto appearing elsewhere in this Report on Form
10-K.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
--------------------------------------------------
1996(1) 1995(2) 1994 1993 1992
------- ------- ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA(3)(4):
Net revenues:
Product sales $14,580 $13,344 $7,695 $6,051 $2,687
Training and support 4,582 2,487 1,232 801 253
------- ------- ------ ------ ------
Total net revenues 19,162 15,831 8,927 6,852 2,940
------- ------- ------ ------ ------
Cost of revenues 5,073 4,834 3,151 2,374 593
------- ------- ------ ------ ------
Gross profit 14,089 10,997 5,776 4,478 2,347
------- ------- ------ ------ ------
Operating expenses:
Selling and marketing 6,421 4,324 2,377 1,814 1,107
Research and product development 3,511 2,129 1,698 1,158 484
General and administrative 1,680 1,493 820 588 292
Charge for purchased research and development -- 1,039(5) -- -- --
Acquisition related charges 43 -- -- -- --
------- ------- ------ ------ ------
Total operating expenses 11,655 8,985 4,895 3,560 1,883
------- ------- ------ ------ ------
Operating income from continuing operations 2,434 2,012 881 918 464
------- ------- ------ ------ ------
Interest income (expense), net 711 (166) (156) (77) (18)
Other income (expense), net 31 30 (9) (7) 14
------- ------- ------ ------ ------
Income from continuing operations before income taxes 3,176 1,876 716 834 460
Income taxes 1,100 559 177 239 143
------- ------- ------ ------ ------
Income from continuing operations 2,076 1,317 539 595 317
Income (Loss) from discontinued operations -- -- (125) (9) 96
------- ------- ------ ------ ------
Net income $ 2,076 $ 1,317 $ 414 $ 586 $ 413
======= ======= ====== ====== ======
Per Share:
Income from continuing operations $ .42 $ .34(5) $ .11 $ .12 $ .06
Net income $ .42 $ .34 $ .08 $ .12 $ .08
Weighted average number of common shares outstanding(6) 4,958 3,873 5,010 5,010 5,010
BALANCE SHEET DATA(3)(AT PERIOD END):
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
Working capital $12,215 $15,282 $ 76 $ 577 $ 539
Total assets 24,596 23,579 5,605 5,014 2,729
Total debt 901 857 2,197 1,955 1,045
Stockholders' equity 20,929 18,985 1,836 1,422 837
</TABLE>
(1) On November 9, 1995, the Company merged with ECOM Associates, Inc. The
Company has accounted for the merger as a pooling of interests. The pooling
did not have a material effect on the financial statements previously
presented and therefore such statements have not been restated.
Accordingly, the statement of income data for the fiscal year ended June
30, 1996 includes the results of operations of ECOM from the merger date.
(2) On January 1, 1995, the Company acquired substantially all of the assets
and business and assumed certain of the liabilities of LANDCADD. On March
31, 1995, the Company acquired certain assets of FMS. The Company has
accounted for each acquisition using the purchase method and, accordingly,
the statement of income data for the fiscal year ended June 30, 1995
includes the results of operations of LANDCADD and FMS from each respective
acquisition date.
(3) The data presented has been derived from the Company's financial
statements, which include the accounts of the Company and VisionOne
Partners (the "Partnership"), an entity under common ownership and common
management with the Company. The Partnership was formed solely to build and
own the Dubuque facility for lease to the Company. On June 30, 1995 the
Company purchased the Dubuque facility from the Partnership. See Note 1 and
Note 16 of Notes to Financial Statements.
(4) The Company's computer hardware manufacturing business was discontinued in
October 1993. Data relating to income from continuing operations does not
include the results from such discontinued operations. Net income data does
include the results from such discontinued operations. See Note 15 of Notes
to Financial Statements.
(5) In connection with the LANDCADD and FMS acquisitions, the portion of the
aggregate purchase prices related to research and development that had not
yet reached technological feasibility and had no alternative use as of the
date of acquisition was recorded as a charge for purchased research and
development. See Note 3 of Notes to Financial Statements. Exclusive of this
charge for purchased research and development, operating income from
continuing operations, income from continuing operations and income from
continuing operations per share would have been $3,051,000, $1,992,000 and
$.51, respectively, for the fiscal year ended June 30, 1995.
(6) On August 5, 1994, the Company repurchased, and subsequently retired,
1,625,000 shares of Common Stock. See Note 10 of Notes to Financial
Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company was founded in 1983 and during the remainder of the 1980s
focused on developing and marketing a software application product for use by
roadway design professionals. In 1990, the Company, under new management, began
to expand significantly its product line to include complementary software
application products for use by a variety of AEC/GIS professionals. Of the 90
modules comprising the Company's current product line, 43 modules were
internally developed and 47 modules were added through acquisitions.
On January 1, 1995, the Company added 6 modules of landscape architecture/
environmental planning application software as a result of the LANDCADD
Acquisition. On March 31, 1995, the Company added 12 modules of geographic
information systems software to its product line as a result of the FMS
Acquisition. On November 9, 1995, the Company added 25 modules of structural
engineering
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software as a result of the ECOM Merger. The LANDCADD Acquisition and the FMS
Acquisition were each accounted for under the purchase method, and accordingly,
the results of operations of such businesses are included in the Company's
results from their respective dates of acquisition. For each acquisition, the
aggregate cost over the fair value of acquired net assets has been assigned
principally to purchased research and development and software development costs
based on their estimated fair market values. The portion of the aggregate
purchase prices allocated to research and development that had not yet reached
technological feasibility and had no alternative future use was charged to
expense on the date of purchase. Accordingly, the Company's results of
operations for fiscal 1995 reflect a nonrecurring charge for purchased research
and development of approximately $1.0 million dollars. The ECOM Merger was
accounted for as a pooling of interest, however, it did not have a material
effect on financial statement and therefore such statements have not been
restated.
Prior to October 1993, the Company operated a computer hardware
manufacturing division that acted as a value added reseller, or dealer, selling
hardware products to the CAD marketplace. From fiscal 1990 to fiscal 1994, this
division operated at a loss, with the exception of fiscal 1992. In the second
quarter of fiscal 1994, the Company discontinued this division. The results of
operations of this division prior to this discontinuance are reflected in the
Company's financial statements as income (loss) from discontinued operations.
Because this division ceased operations with insignificant amount of assets of
such division being reassigned to other divisions, there was no gain or loss
resulting from the decision to cease such operations.
The Company resells AutoCAD in order to facilitate the additional sale of
the Company's software application products. Resales of AutoCAD represented
approximately 13.8% of net revenues in fiscal 1996. The resales of AutoCAD carry
a substantially lower gross-margin than sales of Eagle Point software products
and represented approximately 3.7% of gross profit in the same period.
The Company has experienced in the past, and may experience in the future,
significant quarter-to-quarter fluctuations in its operating results. Factors
such as the timing of new product introductions and upgrades by the Company; the
Company's competitors or Autodesk, customer acceptance of software applications,
product development expenses, announcements or changes in pricing policies by
competitors, the timing of significant orders, the mix of products sold, the mix
of domestic versus international revenues, the existence of product errors or
bugs, and the hiring and training of additional staff could contribute to this
variability of quarterly results. Economic and other factors affecting the
building, construction, architecture, mapping and engineering industries could
also affect demand for the Company's products in one or more particular
quarters. The Company historically has operated with little or no backlog. A
significant portion of the Company's net revenues in a quarter are derived from
orders received later in that quarter, which makes the Company's financial
performance more susceptible to an unexpected downturn in business and quarterly
results difficult to forecast. In addition, the Company's expense levels are
based in part on expectations of future revenue levels, and a shortfall in
revenues could result in a disproportionate decrease in the Company's net
income. As the markets in which the Company competes mature and new and existing
companies compete for customers, price competition is likely to intensify and
such competition could affect quarterly operating results. See "Risk Factors--
Variability of Quarterly Operating Results."
FORWARD LOOKING INFORMATION.
This Annual Report on Form 10-K contains forward looking statements,
including, without limitation, statements concerning the Company's future
product research and development and expenditures relating to sales and
marketing. These forward looking statements involve risks and uncertainties,
which could cause actual results to differ from those projected. These risks and
uncertainties include technological risks involved in the development and
testing of new products, the impact of competitive products and pricing, and the
uncertainties of which operating systems and hardware platforms will be of
preferred use, and which emerging technologies could impact the demand for the
Company's products.
FISCAL 1996 COMPARED TO FISCAL 1995.
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Net revenues increased by $3.3 million, or 21.0% to $19.2 million for the
fiscal year ended June 30, 1996 from $15.8 million for the fiscal year ended
June 30, 1995. The Company experienced growth in both product sales and training
and support revenues. The increase in products sales was attributable primarily
to increased sales volume and marketing efforts and to an expansion of the
number of modules included in the product line. Training and support revenues
during fiscal 1996 were favorably affected by the Company's larger installed
base of customers and an increased emphasis by the Company on customer training.
Gross profit increased $3.1 million, or 28.1% to $14.1 million for fiscal
1996 from $11.0 million for fiscal 1995 as a result of the increase in net
revenues. Gross profit as a percentage of net revenues increased to 73.5% in
fiscal 1996 from 69.5% in fiscal 1995. Gross profit as a percentage of
corresponding net revenues relating to product sales increased to 70.0% in
fiscal 1996 from 67.1% in fiscal 1995 primarily due to an increased percentage
of sales of Eagle Point's software products and a reduced percentage of resales
of AutoCAD in the sales mix. Gross profit as a percentage of corresponding net
revenues relating to training and support increased to 84.7% in fiscal 1996 from
82.0% in fiscal 1995.
Selling and marketing expense increased $2.1 million, or 48.5%, to $6.4
million in fiscal 1996 from $4.3 million in fiscal 1995. As a percentage of net
revenues, selling and marketing expenses increased to 33.5% in fiscal 1996 from
27.3% in fiscal 1995. The increase was primarily attributable to expanded direct
marketing, advertising and other promotional activities and higher personnel
costs associated with the growth in sales volume.
Research and development expense increased $1.4 million or 64.9% to $3.5
million in fiscal 1996, from $2.1 million in fiscal 1995. As a percentage of net
revenues, research and development expenses increased to 18.3% in fiscal 1996
from 13.4% in fiscal 1995. The increased research and development expenses
related primarily to the increased personnel costs associated with expanding the
company's development staff.
General and administrative expense increased $187,000, or 12.5%, to $1.7
million in fiscal 1996 from $1.5 million in fiscal 1995. As a percentage of net
revenues general and administrative expense decreased to 8.8% in fiscal 1996
from 9.4% in fiscal 1995. The increase was attributable primarily to higher
overhead expenses related to the growth in revenues and employment. The decrease
in expenses as a percentage of revenues was primarily due to the Company's
ability to leverage these expenditures over a larger revenue base.
Operating income from continuing operations increased $422,000, or 21.0%,
to $2.4 million in fiscal 1996 from $2.0 million in fiscal 1995 and, as a
percentage of net revenues, maintained at 12.7% in fiscal 1996 from 12.7% in
fiscal 1995. Excluding the $1.0 million charge for purchased research and
development incurred in fiscal 1995 in connection with the LANDCADD Acquisition
and FMS Acquisition and the $43,000 charge for acquisition related expenses
incurred in fiscal 1996 in connection with the ECOM Merger, operating income
from continuing operations decreased $574,000 to $2.5 million in fiscal 1996
from $3.1 million in fiscal 1995, and as a percentage of revenues decreased to
12.9% in fiscal 1996 from 19.3% in fiscal 1995, as a result of the factors
described above.
Interest expense decreased $174,000 to $24,000 in fiscal 1996 from $198,000
in fiscal 1995. The decrease in interest expense was due to a reduction of debt
from the proceeds generated from the Company's initial public offering. Interest
income increased $703,000 to $735,000 in fiscal 1996 from $32,000 in fiscal
1995. The increase in interest income was due to interest earned primarily from
the proceeds generated from the Company's initial public offering.
The Company's effective tax rate on income from continuing operations was
34.6% for fiscal 1996 compared to 29.8% in fiscal 1995. The primary reason for
the increase was the discontinuance of the research and development tax credit
previously allowed by the federal government for the period July 1, 1995 to June
30, 1996. Effective July 1, 1996 through June 30, 1997 the federal government
has
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<PAGE>
reinstated the research and development tax credit. No assurance can be given
that this tax credit will continue beyond June 30, 1997.
FISCAL 1995 COMPARED TO FISCAL 1994.
Net revenues increased by $6.9 million, or 77.3%, to $15.8 million for the
fiscal year ended June 30, 1995, from $8.9 million for the fiscal year ended
June 30, 1994. The Company experienced growth in both product sales and training
and support revenues. The increase in product sales was attributable primarily
to increased sales and marketing efforts and to an expansion of the number of
modules included in the product line. Training and support revenues during
fiscal 1995 Period were favorably affected by the Company's larger installed
base of customers and an increased emphasis by the Company on customer training.
Gross profit increased $5.2 million, or 90.4%, to $11.0 million for fiscal
1995 from $5.8 million for fiscal 1994 as a result of the increase in net
revenues. Gross profit as a percentage of net revenues increased to 69.5% in
fiscal 1995 from 64.7% in fiscal 1994. Gross profit as a percentage of
corresponding net revenues relating to product sales increased to 67.1% in
fiscal 1995 from 63.0% in fiscal 1994 primarily due to an increased percentage
of sales of Eagle Point's software products and a reduced percentage of resales
of AutoCAD in the sales mix. Gross profit as a percentage of corresponding net
revenues relating to training and support increased to 82.0% in fiscal 1995 from
75.3% in fiscal 1994.
Selling and marketing expense increased $1.9 million, or 81.9%, to $4.3
million in fiscal 1995 from $2.4 million in fiscal 1994. As a percentage of net
revenues, selling and marketing expenses increased to 27.3% in fiscal 1995 from
26.6% in fiscal 1994. The increase was primarily attributable to expanded direct
marketing, advertising and other promotional activities and higher personnel
costs associated with the growth in sales volume.
Research and development expense increased $431,000, or 25.4%, to $2.1
million in fiscal 1995, from $1.7 million in fiscal 1994. As a percentage of net
revenues, research and development expenses decreased to 13.4% in fiscal 1995
from 19.0% in fiscal 1994. In the 1994, research and development expense as a
percentage of net revenues exceeded the level required to support the Company's
ongoing development efforts. In fiscal 1995, the Company was able to leverage
these expenditures over a larger revenue base. In addition, the Company was able
to expand its product line significantly through acquisitions.
General and administrative expense increased $673,000, or 82.1%, to $1.5
million in fiscal 1995 from $820,000 in fiscal 1994. As a percentage of net
revenues general and administrative expense increased slightly to 9.4% in fiscal
1995 from 9.2% in fiscal 1994. These increases were attributable primarily to
higher overhead expenses related to the growth in revenues and employment. The
Company's allowance for accounts receivable as a percent of accounts receivables
increased to 7.3% at June 30, 1995 from 3.0% at June 30, 1994. This increase was
primarily the result of the increase in international sales to 10.8% of total
sales for fiscal 1995 from 5.6% for fiscal 1994 and the Company's unfamiliarity
with the LANDCADD and FMS customer base to which the Company began cross selling
its products during the last six months of fiscal 1995.
Operating income from continuing operations increased $1.1 million, or
128.3%, to $2.0 million in fiscal 1995 from $881,000 in fiscal 1994 and, as a
percentage of net revenues, increased to 12.7% in fiscal 1995 from 9.9% in
fiscal 1994. Excluding the $1.0 million charge for purchased research and
development incurred in connection with the LANDCADD Acquisition and FMS
Acquisition, operating income from continuing operations increased $2.2 million
to $3.1 million in fiscal 1995 from $881,000 in fiscal 1994, and as a percentage
of revenues increased to 19.3% in fiscal 1995 from 9.9% in fiscal 1994, as a
result of the factors described above.
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Interest expense increased $42,000, or 26.9%, to $198,000 in fiscal 1995
from $156,000 in fiscal 1994. The increase in interest expense was due to
borrowings related to the expansion of the Dubuque facility being included in
all of fiscal 1995 as compared to being included in only a portion of fiscal
1994.
The Company's effective tax rate on income from continuing operations was
29.8% for fiscal 1995 compared to 24.8% in fiscal 1994. The Company's effective
income tax rates for the periods were below the federal statutory rate,
primarily due to research and development tax credits. Exclusive of the charge
for purchased research and development, the effective tax rate on income from
continuing operations would have been 31.6% for fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date primarily through cash
generated from operations, borrowings and equity capital financings. At June 30,
1996, the Company had cash, cash equivalents and short-term investments of $10.6
million and working capital of $12.2 million as compared with cash, cash
equivalents and short-term investments of $15.7 million and working capital of
$15.3 million as of June 30, 1995. This decrease is primarily attributable to
investments in long-term marketable securities of $2.5 million and payments made
for the expansion of the Company's facilities. The Company also has a $2.0
million unsecured line of credit with a commercial bank, which borrowings would
be at an interest rate of prime. At June 30, 1996, the Company had no borrowings
outstanding under this line of credit.
The Company's principal capital expenditures in recent years have consisted
of investments in electronic data systems, furniture and equipment needs and the
construction and expansion of the Dubuque facility. Investments in electronic
data systems, furniture and equipment have been funded principally from cash
generated from operations and an aggregate $625,000 principal amount of economic
development loans. At June 30, 1996, these loans carried a weighted average
interest rate of approximately 2.5% per annum. These loans mature at various
dates through the year 2002. The Company anticipates that its capital
expenditures in fiscal 1997 will relate primarily to the expansion of the
Dubuque Facility, including related data systems, furniture and equipment.
Since November, 1995, the Company has been in the process of expanding the
Dubuque Facility. The Company estimates the cost of the expansion project
including related data systems, furniture and equipment to be between $3.0
million and $4.0 million. As of June 30, 1996, the Company had expended $1.7
million toward this expansion project.
A principal business strategy of the Company is to pursue acquisitions of
businesses, products and technologies that are complementary to those of the
Company. On January 1, 1995 the Company completed the LANDCADD Acquisition. The
purchase price consisted of $350,000 paid in cash at the closing, the issuance
of a $200,000 non-interest bearing promissory note, payable quarterly over three
years and the issuance of an aggregate of 37,000 shares of Common Stock (valued
by the Company's Board of Directors at $8 per share). The Company was obligated
to make a contingent payment to LANDCADD equal to 25% of any revenues in excess
of $1.1 million derived by the Company from the sale of LANDCADD products during
the twelve months ending December 31, 1995. Accordingly, as of December 31,
1995, the Company recorded a payable of $186,175 with interest payable of
$19,333 to be paid quarterly through December 31, 1997. In conjunction with the
acquisition, the Company entered into a non-competition agreement with four
former employees of LANDCADD.
On March 31, 1995, the Company completed the FMS acquisition. The purchase
price for the FMS assets consisted of $410,000 paid in cash at the closing, plus
a contingent payment equal to (i) 100% of the revenues derived by the Company
from the sale of FMS products during the twelve months ending March 31, 1996 for
revenues between $410,000 and $670,000 and (ii) 50% of any such revenues
exceeding $670,000. At FMS's election, the contingent payment was to be made in
(a) cash payable in equal quarterly installments over three years period or (b)
shares of Common Stock based on the market price per share on March 31, 1996. As
of March 31, 1996, the revenues derived by the Company from the sale of FMS
-18-
<PAGE>
products for the twelve months ended March 31, 1996, were less than $410,000 and
as such no contingent payment was due.
On November 9, 1995, the Company completed the ECOM Merger exchanging all
the capital stock of ECOM for 29,730 shares of the Company's Common Stock. There
were no cash payments in connection with such merger.
On July 29, 1996, the Company completed the CIBC Acquisition. The purchase
price was $550,000 cash. Additionally, the Company is obligated to make a
contingent cash payment equal to (1) 75% of the revenues between $550,000 and
$743,400 received by the Company in connection with the sale of CIBC's products
during the 12 month period ending July 29, 1997, plus (2) 50% of such revenues
exceeding $743,400 during the 12 month period ending July 29, 1997.
The Company believes that it's current cash position, together with funds
generated from operations and borrowings available under its line of credit,
will be sufficient to fund its operations through fiscal 1997.
INFLATION AND FOREIGN CURRENCY EXCHANGE
Inflation has not had a significant impact on the Company's operating
results to date, nor does the Company expect it to have a significant impact in
fiscal year 1997. The Company has experienced insignificant gains or losses on
foreign currency transactions since substantially all of its international sales
to date have been billed in U.S. dollars. As the Company continues to expand its
international operations it may begin billing in foreign currencies which would
increase the Company's exposure to gains and losses on foreign currency
transactions. The Company may choose to limit such exposure by the purchase of
forward foreign exchange contracts if deemed appropriate at that time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this Report on
Form 10-K. See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Registrant
- ---------------------------
The information contained under the headings "Nominees for Directors,"
"Members of Board of Directors Continuing in Office" and "Compliance With
Section 16 of the Exchange Act" in the Proxy Statement (which Proxy Statement
will be filed with the Securities and Exchange Commission on or before October
28, 1996) is incorporated herein by reference.
Executive Officers of the Registrant
- ------------------------------------
Information with respect to executive officers of the Company.
-19-
<PAGE>
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Rodney L. Blum 41 Chairman of the Board, President and Chief Executive Officer
Dennis J. George 33 Vice President, Chief Financial Officer, Treasurer and
Secretary; Director
John F. Biver 41 Vice President - Civil Division; Director
Edward T. Graham 33 Vice President - Architectural/Structural Division
Brent A. Straka 28 Vice President - Marketing and Business Development Division
William P. LeMay 42 Chief Technology Officer
</TABLE>
Rodney L. Blum has served as Chairman of the Board, President and Chief
Executive Officer of the Company since January 1990. From May 1988 until he
joined the Company in 1990, Mr. Blum was Director of Sales and Marketing of
D.D.S., a provider of turn-key computer systems to the auto, large truck and
implement dealer markets. From 1980 until May 1988 he served in various
marketing and management positions at CyCare Systems, Incorporated, a provider
of computerized information processing systems to the healthcare industry.
Dennis J. George has served as Vice President, Chief Financial Officer,
Treasurer, Secretary and a director of the Company since April 1989. During 1988
he was the Financial Budget Analyst for the Ertl Company, a manufacturer of
agricultural model toys. During 1987 he served as Finance Manager for D.D.S.
John F. Biver co-founded the Company in 1983 and has served as Vice
President - Civil Division since January 1990. Mr. Biver has served as a
director of the Company since its inception. Prior to founding the Company, Mr.
Biver was a registered Professional Engineer with the civil engineering firm of
Wright, Kilby, Sejkoara and Associates.
Edward T. Graham has been employed by the Company in various sales
capacities since January 1990. Mr. Graham currently serves as Vice President -
Architectural/Structural Division. From May 1989 until he joined the Company,
Mr. Graham was a principal of Prism Marketing, a provider of marketing systems
and services.
Brent A. Straka has been employed by the Company since November 1990 in
various sales, marketing-related, and management positions. Since July, 1996
Mr. Straka has served as Vice President - Marketing and Business Development.
From June 1989 until he joined the Company, Mr. Straka held various marketing
positions with Land's End, Inc., a mail-order provider of apparel and specialty
products.
William P. LeMay has been employed by the Company since October 1992 in
various research and development and management positions. Since December, 1995
Mr. LeMay has served as Chief Technology Officer. From March, 1984 until he
joined the Company, Mr. LeMay was a product manager Accugraph Corporation, a
developer of software applications for the civil engineering market.
ITEM 11. EXECUTIVE COMPENSATION
Except for information referred to in Item 402(a)(8) of Regulation S-K, the
information contained under the headings "Executive Officer Compensation" and
"Directors Meetings and Committees" in the Proxy Statement (which Proxy
Statement will be filed with the Securities and Exchange Commission on or before
October 28, 1996) is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the heading "Security Ownership of Directors,
Officers and Principal Stockholders" in the Proxy Statement (which Proxy
Statement will be filed with the Securities and
-20-
<PAGE>
Exchange Commission on or before October 28, 1996) is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except for the information relating to Item 11 hereof and except for information
referred to in Item 402(a)(8) of Regulation S-K, the information contained under
the headings "Executive Officer Compensation", "Directors Meetings and
Committees" and "Certain Relationships and Related Transactions" in the Proxy
Statement (which Proxy Statement will be filed with the Securities and Exchange
Commission on or before October 28, 1996) is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
--------------------
The following financial statements are filed as part of this report:
. Report of Independent Auditors on Financial Statements.
. Financial Statements:
Balance Sheets - June 30, 1996 and June 30, 1995.
Statements of Income - years ended June 30, 1996, June 30, 1995
and June 30, 1994.
Statements of Stockholders' Equity - years ended June 30, 1996,
June 30, 1995 and June 30, 1994.
Statements of Cash Flows - years ended June 30, 1996, June 30,
1995 and June 30, 1994.
Notes to financial statements - June 30, 1996.
(a)(2) Financial Statement Schedules
-----------------------------
Any schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
(a)(3) Exhibits
--------
The following exhibits are filed herewith or are incorporated by reference
to exhibits previously filed with the Securities and Exchange Commission.
Exhibit No. Description
- ----------- -----------
3.1* -- Certificate of Incorporation of the Company.
3.2* -- By-laws of the Company.
10.1* -- Loan Agreement between the Company and the City of
Dubuque, dated January 20, 1992
-21-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.2* -- Loan Agreement between the Company and the City of Dubuque,
dated July 6, 1993.
10.3* -- Loan Agreement between the Company and the City of Dubuque,
dated May 16, 1994.
10.4* -- Community Economic Betterment Account Agreement between the
Company and the Iowa Department of Economic Development,
dated July 18, 1991.
10.5* -- Community Economic Betterment Account Agreement between the
Company and the Iowa Department of Economic Development,
dated July 15, 1993.
10.6* -- Asset Purchase Agreement between the Company and Facility
Mapping Systems, Inc., dated March 31, 1995.
10.7* -- Asset Purchase Agreement between the Company and LANDCADD,
Inc., dated January 1, 1995.
10.8* -- Redemption Agreement between the Company, and Scott J.
Taylor, dated August 5, 1994.
.10.9**** -- Employment Agreement with Rodney L. Blum.
.10.10**** -- Employment Agreement with Dennis J. George.
.10.11**** -- Employment Agreement with John F. Biver.
.10.12** -- Eagle Point Software Corporation Stock Option Plan.
.10.13*** -- Eagle Point Software Corporation, 1995 Employee Stock
Purchase Plan.
10.14* -- Purchase Agreement between VisionOne Partnership and the
Company, dated as of May 1, 1995.
10.15* -- Indemnification Agreement among the Company, Rodney L. Blum,
John F. Biver and Dennis J. George.
10.16***** -- Merger Agreement between the Company and ECOM Associates,
Inc., dated November 9, 1995.
10.17***** -- Asset Purchase Agreement between the Company and Computer
Integrated Building Corporation, dated July 29, 1996.
11.1***** -- Statement re: computation of per share earnings.
21.1***** -- Subsidiaries
23.1***** -- Consent of Deloitte & Touche LLP.
27***** -- Financial Data Schedule
</TABLE>
- ---------------------
* Incorporated by reference from the Company's Registration Statement on Form
S-1 (File No. 33-91950)
-22-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
** Incorporated by reference from the Company's Registration Statement on
Form S-8 (File No. 33-96914)
*** Incorporated by reference from the Company's Registration Statement on
Form S-8 (File No. 33-96918)
**** Incorporated by reference from the Company's 1995 Annual Report on Form
10-K
***** Filed herewith.
. Indicates management contract or compensatory plan or arrangement.
</TABLE>
- -----------------------
(b) Reports on Form 8-K
-------------------
None.
-23-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Eagle Point Software Corporation and Subsidiary
We have audited the accompanying consolidated balance sheets of Eagle Point
Software Corporation and subsidiary as of June 30, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the companies at June 30, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended June 30, 1996, in conformity with generally
accepted accounting principles.
Des Moines, Iowa
July 29, 1996
-24-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 3,106,704 $ 15,742,926
Short-term investments 7,508,561
Accounts receivable (net of allowances of $251,344 and $192,878, respectively) 3,857,170 2,465,222
Interest receivable 255,290
Inventories 369,172 607,622
Prepaid expenses 150,081 319,729
Other assets 22,933 30,381
------------ ------------
Total current assets 15,269,911 19,165,880
INVESTMENTS 2,466,032
PROPERTY & EQUIPMENT, NET 5,945,320 3,655,730
SOFTWARE DEVELOPMENT COSTS (net of accumulated amortization
of $242,753 and $363,818, 213,417 282,921
NON-COMPETE AGREEMENTS (net of accumulated
amortization of $52,600 and $5,170, respectively) 203,174 64,430
DEFERRED INCOME TAXES 497,945 410,509
------------ ------------
TOTAL ASSETS $ 24,595,799 $ 23,579,470
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 288,523 $ 146,295
Accounts payable 252,768 645,496
Accrued expenses 966,754 1,103,948
Income taxes payable 3,051 635,211
Deferred revenues 1,540,998 1,291,889
Deferred income taxes 2,590 60,979
------------ ------------
Total current liabilities 3,054,684 3,883,818
LONG-TERM DEBT 502,187 600,326
CEBA FORGIVABLE LOAN 110,000 110,000
------------ ------------
Total liabilities 3,666,871 4,594,144
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 3, 13, 16)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares authorized; none issued
at June 30, 1996 and June 30, 1995
Common stock, $.01 par value; 20,000,000 shares authorized; 4,941,730 and 4,912,000
shares issued and outstanding at June 30, 1996 and 1995, respectively 49,417 49,120
Additional paid-in capital 17,535,942 17,477,138
Retained earnings 3,343,569 1,459,068
------------ ------------
Total stockholders' equity 20,928,928 18,985,326
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,595,799 $ 23,579,470
============ ============
</TABLE>
See notes to consolidated financial statements.
-25-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Net revenues:
Product sales $14,579,749 $13,344,033 $7,695,538
Training and support 4,582,375 2,487,385 1,231,782
----------- ----------- ----------
Total net revenues 19,162,124 15,831,418 8,927,320
----------- ----------- ----------
Cost of revenues:
Product sales 4,370,127 4,385,884 2,847,155
Training and support 703,136 448,387 304,181
----------- ----------- ----------
Total cost of revenues 5,073,263 4,834,271 3,151,336
----------- ----------- ----------
Gross profit 14,088,861 10,997,147 5,775,984
----------- ----------- ----------
Operating expenses:
Selling and marketing 6,421,005 4,323,806 2,377,091
Research and development 3,510,830 2,129,310 1,697,922
General and administrative 1,679,702 1,493,006 819,691
Charge for purchased research and development 1,038,764
Acquisition related charges 43,075
----------- ----------- ----------
Total operating expenses 11,654,612 8,984,886 4,894,704
----------- ----------- ----------
Operating income from continuing operations 2,434,249 2,012,261 881,280
Other income (expense):
Interest income 734,710 31,595
Interest expense (23,791) (197,598) (155,735)
Other income (expense), net 30,863 29,685 (9,118)
----------- ----------- ----------
Income from continuing operations before income taxes 3,176,031 1,875,943 716,427
Income tax expense 1,099,632 558,906 177,467
----------- ----------- ----------
Income from continuing operations 2,076,399 1,317,037 538,960
Loss from discontinued operations, net of tax (125,330)
----------- ----------- ----------
Net income $ 2,076,399 $ 1,317,037 $ 413,630
=========== =========== ==========
Weighted average common and common equivalent shares outstanding 4,957,988 3,873,126 5,010,091
=========== =========== ==========
Earnings per common and common equivalent share:
Income from continuing operations $ 0.42 $ 0.34 $ 0.11
Loss from discontinued operations (0.03)
----------- ----------- ----------
Net income $ 0.42 $ 0.34 $ 0.08
=========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
-26-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C>
Balances at July 1, 1993 $ 100 $ 81,009 $1,341,079 $ 1,422,188
Net income 0 0 413,630 413,630
------- ----------- ---------- -----------
Balances at June 30, 1994 100 81,009 1,754,709 1,835,818
Purchase and retirement of 1,625,000 shares of common stock (33) (81,009) (910,222) (991,264)
Five-for-one stock split 270 (270)
Issuance of 37,000 shares of common stock relating to an acquisition 4 295,996 296,000
Contingent payment relating to purchase and retirement of 1,625,000
shares of common stock (133,390) (133,390)
Change in par value of common stock from $.0001 to $.01 33,779 (33,779)
Issuance of 1,500,000 shares of common stock in connection with the
Company's public offering, net of $2,270,079 of offering expenses 15,000 17,214,921 17,229,921
Excess of purchase price over net book value of facilities acquired
from VisionOne Partners (568,796) (568,796)
Net income 1,317,037 1,317,037
------- ----------- ---------- -----------
Balances at June 30, 1995 49,120 17,477,138 1,459,068 18,985,326
Issuance of 29,730 shares common stock relating to acquisition 297 58,804 (191,898) (132,797)
Net income 2,076,399 2,076,399
------- ----------- ---------- -----------
BALANCE AT JUNE 30, 1996 $49,417 $17,535,942 $3,343,569 $20,928,928
======= =========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
-27-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 2,076,399 $ 1,317,037 $ 413,630
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 731,082 480,308 356,036
Amortization of software development costs 273,747 336,162 184,594
Charge for purchased research and development 1,038,764
Deferred income taxes (145,825) (347,359) (63,014)
Changes in assets and liabilities, net of
assets and liabilities acquired in connection
with the acquisitions of ECOM during 1996 and
LANDCADD and FMS during 1995:
Accounts receivable (1,383,093) (1,184,683) 609,467
Inventories 238,450 (417,745) (3,269)
Prepaid expenses 170,498 (282,500) 51,658
Accrued interest receivable (255,290)
Accounts payable (403,987) 305,803 (37,982)
Income taxes payable (632,160) 506,016 129,195
Deferred revenues 194,344 747,158 195,945
Accrued expenses (171,556) 782,056 62,895
Other 55,818 (32,976) 66,364
------------ ----------- -----------
Net cash provided by operating activities 748,427 3,248,041 1,965,519
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (3,017,681) (956,971) (818,847)
Software development costs:
Capitalized costs (74,744) (92,705) (314,535)
Purchases of software (129,500) (9,000) (100,000)
Purchase of investments (9,974,593)
Payments to acquire companies, net of
cash acquired (728,473)
------------ ----------- -----------
Net cash used in investing activities (13,196,518) (1,787,149) (1,233,382)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (188,131) (238,613) (33,784)
Change in notes payable (160,000)
Proceeds from long-term debt 425,250 436,013
Change in cash overdraft (351,961)
Purchase and retirement of common stock (1,124,654)
Proceeds from issuance of common stock 17,229,921
Payment to VisionOne Partners to
acquire facility (2,632,275)
------------ ----------- -----------
Net cash provided by (used in)
financing activities (188,131) 13,659,629 (109,732)
------------ ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (12,636,222) 15,120,521 622,405
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 15,742,926 622,405 --
------------ ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 3,106,704 $15,742,926 $ 622,405
============ =========== ===========
</TABLE>
(Continued)
-28-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW
INFORMATION:
Cash paid (received) for:
Interest $ 28,534 $ 186,596 $ 155,226
=========== =========== =========
Income taxes $ 1,887,737 $ 395,165 $ (8,185)
=========== =========== =========
Non-cash investing and financing
activities:
Long-term debt and other
non-current liabilities
assumed in business acquisitions $ 97,887
Long-term debt issued in business
acquisitions $ 186,175 173,580
Common stock issued in business
acquisitions (132,797) 296,000
Payments to acquire companies, net of
cash acquired:
Fair value of assets acquired $ 1,363,635
Liabilities assumed (165,582)
Long-term debt issued (173,580)
Common stock issued (296,000)
-----------
$ 728,473
===========
(Concluded)
</TABLE>
See notes to consolidated financial statements.
-29-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations - Eagle Point Software Corporation and its
subsidiary (the "Company") is engaged in the development, production and
sale of software for the engineering, construction, structural,
architectural and geographic information systems markets.
Financial Statements - Prior to June 30, 1995, the Company leased its
facilities from VisionOne Partners (the "Partnership"), an entity under
common ownership and common management. The Partnership was formed solely
to construct facilities for lease to the Corporation. Since the Partnership
was formed with a nominal investment by the individual partners and the
Corporation guaranteed its debt, the Partnership was considered to be a
special-purpose entity which required the entities to be combined in
accordance with rules promulgated by the Financial Accounting Standards
Board.
On June 30, 1995, the Company purchased its facilities from the Partnership
(see Note 16). Due to the purchase, the Partnership is no longer considered
a special-purpose entity and combined financial statements are no longer
required. However, as these transactions were all between entities under
common control, they have been accounted for in a manner similar to a
pooling-of-interests. The June 30, 1995 and 1994 statements of income
represent the historical combined operations of the Company and the
Partnership. All significant intercompany accounts and transactions between
these entities have been eliminated for financial statement purposes.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with maturities of three months or less when purchased to be
cash equivalents.
Investments - The Company adopted an investment policy during the current
year to address ongoing management of the Company's short-term investments
with maturity terms not exceeding two years. In conjunction with the
investment policy, the Company implemented Statement of Financial
Accounting ("SFAS") No. 115, entitled "Accounting for Certain Investments
in Debt and Equity Securities" in 1996. This statement addresses the
accounting and reporting for investments in debt and equity securities that
have readily determinable fair values. All the Company's investments are
accounted for as held-to-maturity and reported at amortized cost.
Inventories - Inventories are stated at the lower of cost (first in, first
out) or market and consist of the following as of June 30:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Manuals and diskettes $150,031 $260,450
Finished software products 209,516 282,794
Other supplies 9,625 64,378
-------- --------
$369,172 $607,622
======== ========
</TABLE>
-30-
<PAGE>
Property and Equipment - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the following
estimated useful lives:
ESTIMATED
USEFUL LIFE
Buildings and land improvements 20-40 Years
Computer equipment and purchased software 3-5 Years
Furniture and fixtures 7-10 Years
Office equipment 5-7 Years
Vehicles 5 Years
Non-Compete Agreements - Non-compete agreements are being amortized using
the straight-line method over the five year term of the agreements.
Income Taxes - The Company provides for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes." Under the liability method specified by SFAS No. 109, a
deferred tax asset or liability is determined based on the difference
between the financial statement and tax basis of assets and liabilities,
measured using enacted tax rates.
Concentrations - As of June 30, 1996, the Company held $9.97 million in
various Treasury Notes. The Company's temporary cash investments, $2.6 and
$15.4 million as of June 30, 1996 and 1995, were placed in a money market
account with William Blair Mutual Funds, Inc. These are primarily funds
that were received on June 16, 1995 from the Company's public stock
offering (see Note 2).
Revenues - The Company derives substantially all of its product revenues
from the license of its software products. Revenue is recognized upon
shipment of the product, provided that no significant vendor and post-
contract support obligations remain outstanding and collection of the
resulting receivable is deemed probable. The Company has no significant
vendor and post-contract support obligations associated with its product
sales. The Company recognizes its service revenues from maintenance and
support contracts ratably over the period of the arrangements. These
contracts generally have terms of one year or less. The Company recognizes
its service revenues from training arrangements in the period in which the
training occurs. The Company's product returns historically have been
insignificant.
Cost of Revenues - Cost of revenues consists primarily of purchases of
third party products, costs of manuals and other materials, software
development cost amortization, royalties, costs related to the Company's
system production department and personnel and other costs associated with
training and support.
Software Development Costs - Software development costs are stated at the
lower of unamortized cost or net realizable value. The Company capitalizes
software development costs subsequent to the establishment of technological
feasibility and until the product is available for general release. Costs
incurred prior to the establishment of technological feasibility are
charged to research and development expenses. Costs associated with product
enhancements that extend the original product's life are also capitalized
upon technological feasibility. Amortization of product development costs
begins the month of general release and extends on a straight-line basis
over 18 months, which results in amortization expense no less than that
which would result from using the ratio of current gross revenues to total
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<PAGE>
expected gross revenues. Purchased software development costs are
capitalized and amortized over 18 to 36 months.
Earnings Per Share - Earnings per common and common equivalent share for
all years presented were determined by dividing applicable income amounts
by the weighted average number of common shares and dilutive common share
equivalents outstanding during the period. Shares issued within a one year
period prior to the Company's initial public offering, at prices below the
offering price, have been included in the calculation of weighted average
number of common shares for the years ended June 30, 1995 and 1994, in
accordance with rules promulgated by the Securities and Exchange
Commission.
Statement of Financial Accounting Standards - During 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." The new
standard defines a fair value method of accounting for stock options and
other equity instruments, such as stock purchase plans. Under this method,
compensation cost is measured based on the fair value of the stock award
when granted and is recognized as an expense over the service period, which
is usually the vesting period. This standard will be effective for the
Company beginning in 1996, and requires measurement of awards made
beginning in 1995.
The new standard permits companies to continue to account for equity
transactions with employees under existing accounting rules, but requires
disclosure in a note to the financial statements of the pro forma net
income and earnings per share as if the company had applied the new method
of accounting. The Company intends to follow these disclosure requirements
for its employee stock plans. As a result, adoption of the new standard
will not impact the Company's results of operations.
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, 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. Significant estimates include the allowance
for doubtful accounts and allowance for sales returns as well as
realization of intangible assets. Actual results could differ from those
estimates.
Fair Value Disclosure - The carrying value of the long-term debt
approximates fair value as interest rates approximate the rate management
believes the Company could refinance the obligations, given the current
market conditions. The carrying value of other financial assets, other than
investments which are discussed in Note 4, and liabilities approximate
their fair values because of the short maturity of those instruments.
2. INITIAL PUBLIC OFFERING
In June 1995, the Company completed a public offering of 2,300,000 shares
of common stock, consisting of 1,500,000 new shares and 800,000 previously
issued shares (including 300,000 shares relating to the exercise of an
over-allotment option by the underwriters), at $13 per share. Prior to the
offering, there was no public market for the Company's common stock. The
Company's stock trades on the NASDAQ National Market System under the
symbol "EGPT".
The net proceeds of the offering, after deducting underwriting discounts
and applicable expenses, were $17,229,921. During June 1995, the Company
used $2,750,000 of the proceeds to acquire its facilities from the
Partnership (See Note 16). The remaining proceeds are intended to be used
for general corporate purposes including capital expenditures and possible
future acquisitions.
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<PAGE>
3. ACQUISITIONS
ECOM Associates, Inc.
In November, 1995 the Company merged with ECOM Associates, Inc. ("ECOM"), a
Wisconsin corporation, exchanging all the capital stock of ECOM for 29,730
shares of the Company's common stock. The transaction was accounted for as
a pooling of interests. The pooling did not have a material effect on the
financial statements previously presented and therefore such statements
have not been restated. ECOM, located in Milwaukee, Wisconsin, is a
software developer for the structural engineering market place.
Facility Mapping Systems, Inc.
On March 31, 1995, the Company acquired certain assets of Facility Mapping
Systems, Inc. ("FMS"), a developer and marketer of software for the
geographical information systems market.
The purchase price was $410,000 cash. Additionally, the Company is
obligated to make a contingent payment equal to (1) 100% of the revenues
between $410,000 and $670,000 received by the Company in connection with
the sale of FMS products, during the 12 month period ended March 31, 1996,
plus (2) 50% of such revenues exceeding $670,000. At the discretion of FMS,
the contingent payment is required to be made either in cash or in Company
common stock based on the market value per share at the time of the
contingent payment, as defined. For the 12 months ended March 31, 1996
sales of FMS products did not exceed the $410,000 minimum requirement.
Therefore, no contingent payment has been recorded as of June 30, 1996. Due
to the uncertainty regarding the amount and form of the contingent payment,
no contingent payment was recorded as of June 30, 1995. As part of the
acquisition, a five year non-compete agreement was entered into between the
Company and two former employees of FMS.
LANDCADD, Inc.
On January 1, 1995, the Company acquired substantially all of the assets
and business and assumed certain liabilities of LANDCADD, Inc.
("LANDCADD"), a developer and marketer of software for landscape
architecture, irrigation design and environmental planning.
The purchase price was $819,580 consisting of $350,000 cash, a non-interest
bearing note payable for $200,000 (imputed discount of $26,420 at January
1, 1995) and 37,000 shares of Company common stock (valued by the Company's
Board of Directors at $8 per share). The note is payable over three years
in quarterly installment of $16,667 beginning March 1, 1995. Additionally,
the Company is obligated to make a contingent cash payment equal to 25% of
the revenues received by the Company in connection with the sale of
LANDCADD products exceeding $1,100,000 for the calendar year ending
December 31, 1995. As of December 31, 1995, the Company recorded a payable
of $186,175 with interest payable of $19,333 to be paid quarterly through
December 31, 1997. Due to the uncertainty regarding the amount of the
contingent payment, no contingent payment was recorded as of June 30, 1995.
As part of the acquisition, a five year non-compete agreement was entered
into between the Company and the former owners of LANDCADD.
LANDCADD and FMS acquisitions have been accounted for under the purchase
method, and accordingly, the results of operations of such businesses are
included in the Company's results from their respective dates of
acquisition. For each acquisition, the aggregate cost over fair value of
acquired net assets has been assigned principally to purchased research and
development in process and software development costs based on their
estimated fair market values. The portion of the purchase prices allocated
to research and development that had not yet reached technological
feasibility and had no
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<PAGE>
alternative future use was charged to expense on the date of purchase.
Amounts allocated to software development costs and other intangibles will
be amortized on a straight-line basis over their estimate useful lives not
to exceed five years.
Purchase price allocations were as follows:
<TABLE>
<CAPTION>
LANDCADD FMS TOTAL
<S> <C> <C> <C>
Current assets $ 122,603 $ 122,603
Property and equipment 67,987 $ 31,125 99,112
Software development costs and
other intangibles 75,043 59,640 134,683
Purchased research and development
in process 719,529 319,235 1,038,764
Current liabilities (128,044) (128,044)
Non-current liabilities (37,538) (37,538)
----------- -------- ----------
$ 819,580 $410,000 $1,229,580
========= ======== ==========
</TABLE>
The following table presents selected unaudited pro forma financial
information for the year ended June 30, 1995, assuming the companies had
combined as of the beginning of the period. For purposes of this pro forma
financial information, the $1,038,764 charge for purchased research and
development has been eliminated to more appropriately reflect operations on
a recurring basis.
<TABLE>
<CAPTION>
1995
<S> <C>
Net revenues $17,064,004
Income from continuing operations 2,045,441
Net income 2,045,441
Income from continuing operations per
common and common equivalent share $ 0.53
Net income per common and common
equivalent share 0.53
Weighted average common and common
equivalent shares outstanding 3,884,721
</TABLE>
The pro forma results are not necessarily indicative of either actual
results of operations that would have occurred had the acquisitions
occurred as of the beginning of each respective period, or future results.
4. INVESTMENTS
Investments represents U.S. Treasury Notes. Notes due in one year or less
have interest rates ranging from 5.625-7.00% with maturity dates ranging
from September 30, 1996 to June 30, 1997. Market value at June 30, 1996 for
these investments was approximately $7,513,281. The Company holds one note
due
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<PAGE>
after one year with an interest rate of 5.25% and a maturity date of
December 31, 1997. Market value at June 30, 1996 for this investment was
approximately $2,473,438.
5. PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following as of June 30:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Land $ 637,400 $ 137,400
Buildings and land improvements 1,723,845 1,723,845
Building construction in progress 1,198,748
Computer equipment and purchased 3,143,659 2,007,095
software
Furniture and fixtures 844,877 755,995
Office equipment 508,944 313,309
Vehicles 66,399 51,487
----------- -----------
8,123,872 4,989,131
Accumulated depreciation (2,178,552) (1,333,401)
----------- -----------
$ 5,945,320 $ 3,655,730
=========== ===========
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses consist of the following as of June 30:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Salaries and commissions $281,874 $ 280,013
Public offering expenses 515,345
Other 684,880 308,590
-------- ----------
$966,754 $1,103,948
======== ==========
</TABLE>
7. NOTES PAYABLE
At June 30, 1996, the Company had a $2,000,000 unsecured operating line of
credit agreement with the bank which expires December 1, 1996. Borrowings
under the line of credit accrue interest at the prime rate (8.25% at June
30, 1996). At June 30, 1996 there was no borrowings outstanding under the
line.
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<PAGE>
8. LONG-TERM DEBT
Long-term debt consists of the following as of June 30:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Community Development Block Grant
Loan from the City of Dubuque,
interest at 3%, principal and
interest payments of $3,973 are
due quarterly with final payment
during October 2000,
collateralized by certain
equipment purchased with the
loan proceeds. $ 66,662 $ 80,297
Community Development Block
Grant Loan from the City of
Dubuque, interest at 5%,
interest-only payments were
due annually through January
1995, principal and interest
payments of $28,872 are due
annually beginning January
1996 with final payment
during January 2000,
collateralized by certain
equipment purchased with the
loan proceeds. 102,378 125,000
Community Development Block
Grant Loan from the City of
Dubuque, interest at 3%,
principal and interest
payments of $7,946 are due
quarterly with final payment
during February 2002,
collateralized by certain
inventory, accounts
receivable, equipment and
fixtures of the Company and
guaranteed by certain
stockholders of the Company. 167,284 193,554
Note payable acquired in
acquisition of ECOM,
interest at 5.25%, interest
and principal payments of
$1,235 quarterly with final
payment in September, 1998. 11,446
Non-interest bearing note
payable to the former owners
of LANDCADD for contingent
revenue payment, due in
quarterly installments of
$25,689 with final payment
during December 1997, net of
unamortized discount of
$15,145 based on an imputed
interest rate of 9%. 164,675
Community Economic Betterment
Account Loan from the Iowa
Department of Economic
Development, non-interest
bearing note requiring
annual payments of $28,571
beginning November 1995 with
final payment in November
2001, collateralized by
certain equipment purchased
with the loan proceeds and
guaranteed by certain
stockholders of the Company.
Borrowings become due upon
demand should the Company
not meet certain employment
obligations as of August 31,
1995, and for a thirteen
week period thereafter. 171,429 200,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Non-interest bearing note payable to the former
owners of LANDCADD, due in quarterly installments
of $16,667 with final payment during December 1997,
net of unamortized discount of $9,829 based on an
imputed interest rate of 9%. 106,836 147,770
-------- --------
790,710 746,621
Less current portion 288,523 146,295
-------- --------
$502,187 $600,326
======== ========
</TABLE>
At June 30, 1996, future principal payments on long-term debt for each of
the five years in the period ended June 30, 2001 are $182,531, $99,627,
$101,040, $66,933, and $52,056, respectively.
9. COMMUNITY ECONOMIC BETTERMENT ACCOUNT ("CEBA") FORGIVABLE LOAN
The CEBA Agreement is an agreement between the Iowa Department of Economic
Development ("Department"), the City of Dubuque, Iowa, and the Company with
the funds designated to purchase machinery, equipment, and furnitures and
fixtures. It is collateralized by a purchase money security interest
covering machinery and equipment purchased with the loan proceeds and a
personal guarantee from certain stockholders of the Company.
As the Company has met certain employment obligations outlined in the
agreement, repayment of principal and interest under the loan has been
temporarily waived until September 30, 1996. Provided these obligations
continue to be satisfied as of September 30, 1996, repayment of principal
and interest will be permanently waived. Upon the Department granting
permanent forgiveness, the Company will recognize the $110,000 principal and
any accrued interest (none at June 30, 1996 or 1995) as income. Should the
obligations not be met, interest will accrue at 9%.
10. STOCKHOLDERS' EQUITY
On August 5, 1994, the Company repurchased, and subsequently retired,
1,625,000 shares of its common stock from a former shareholder for $991,264.
Additionally, the provisions of the repurchase agreement required an
additional payment upon the completion of a public stock offering prior to
June 30, 2001. On May 12, 1995, the Company made an additional $133,390
payment to satisfy the terms of the agreement.
On May 3, 1995, the Company, formerly an Iowa corporation, reincorporated in
the state of Delaware. In conjunction with this reincorporation, the number
of authorized shares of common stock was increased to 20,000,000 and the
related par value per share was increased from $.0001 to $.01. Additionally,
the Board of Directors was authorized to issue an aggregate of 1,000,000
shares of preferred stock with a $.01 par value per share. The specific
terms of the preferred stock, including number of shares, dividend rate,
voting rights, and conversion and redemption provisions, are to be
determined by the Board of Directors upon issuance.
Certain of the Company's loan agreements prohibit the payment of dividends
on the Company's capital stock without prior written consent.
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<PAGE>
11. INCOME TAXES
Income tax expense consists of the following for the years ended June 30:
<TABLE>
<CAPTION>
1996 1995 1994
Current:
<S> <C> <C> <C>
Federal $1,213,729 $ 929,522 $203,690
State 31,728 (23,257) 9,579
---------- --------- --------
Total current 1,245,457 906,265 213,269
---------- --------- --------
Deferred:
Federal (141,234) (333,590) (35,867)
State (4,591) (13,769) 65
---------- --------- --------
Total deferred (145,825) (347,359) (35,802)
---------- --------- --------
Income tax expense $1,099,632 $ 558,906 $177,467
========== ========= ========
</TABLE>
See Note 14 regarding income tax expense related to discontinued operations.
The approximate tax effects of temporary differences that give rise to
deferred tax assets (liabilities) were as follows as of June 30:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Product development costs $ (19,632) $ (88,865) $(139,321)
Depreciation (141,338) (37,322) (64,560)
Accrual to cash basis amortization (115,410) (230,819) (346,229)
Purchased research and development 329,073 353,310
Research and development
tax credits 134,561
Deferred revenues 27,440 54,880 82,320
Prepaid expenses (52,528) (116,011) (16,098)
Allowance for bad debts 44,235 42,008 2,355
Land acquired from Partnership 79,625 79,625
Building acquired from Partnership 258,143 226,650
Other 85,747 66,074 42,868
Iowa new jobs credits 178,000 154,000
Valuation allowance (178,000) (154,000)
--------- --------- ---------
$ 495,355 $ 349,530 $(304,104)
========= ========= =========
</TABLE>
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<PAGE>
The State of Iowa offers an income tax credit to corporations who have
entered into certain training agreements under Iowa Law. During the years
ended June 30, 1996 and 1995, the Company's management determined that
approximately $190,000 and $170,000 of tax credits, respectively, are
available to the Company since their agreement was entered into (see Note
17). However, as the Company incurs minimal Iowa taxes due to a small
percentage of the Company's gross revenues being generated in Iowa, only
$16,000 in credits were used to reduce 1995 Iowa state taxes.
Approximately $12,000 in credits will be used to reduce 1996 Iowa state
taxes. The credits of $142,000 remaining as of June 30, 1995 can be
carried forward to reduce Iowa taxes through 2005. The additional credits
of $36,000 earned but not utilized as of June 30, 1996 can be carried
forward to reduce Iowa taxes through 2006. Management has fully reserved
the deferred tax asset related to the credit carryforward as they believe
it is more likely than not that the benefit of the carryforward will not
be fully realized prior to its expiration.
Reconciliations of income tax expense with income tax expense computed
using statutory federal rates are as follows for the years ended June 30:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Computed statutory expense $1,111,611 $656,580 $250,749
State income taxes, net of
federal tax benefit 17,910 (24,437) 6,269
Research and development
tax credits (84,134) (75,550)
Other (29,889) 10,897 (4,001)
---------- -------- --------
Income tax expense $1,099,632 $558,906 $177,467
========== ======== ========
</TABLE>
12. EXPORT SALES
Net revenues consisted of the following for the years ended June 30:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Domestic $17,958,882 $14,115,389 $8,426,887
Export - Canada 639,210 333,299 193,780
Export - Other 564,032 1,382,730 306,653
----------- ----------- ----------
$19,162,124 $15,831,418 $8,927,320
=========== =========== ==========
</TABLE>
13. EMPLOYEE BENEFITS
Profit Sharing - Effective January 1, 1993, the Company established a
profit sharing plan under Section 401(k) of the Internal Revenue Code.
The plan allows eligible employees to make contributions up to 15% of
their compensation. Under the plan, the Company may contribute to the
plan an amount of matching contributions which is determined at its
discretion. For the years ended June 30, 1996, 1995 and 1994, the
Company's matching contributions were $12,700, $10,313 and $5,505,
respectively.
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<PAGE>
Stock Options - Concurrent with the Company's public offering, the Board
of Directors of the Company adopted and the stockholders approved the
Eagle Point Software Corporation Stock Option Plan (the "Plan") which
allows for the issuance of incentive stock options or nonqualified stock
options. Under the Plan, up to an aggregate of 750,000 shares of common
stock may be issued upon the exercise of stock options granted. The Plan
also provides that option prices may not be less than 100% of the fair
market value of the shares on the date of grant. No stock options may be
issued under the Plan after May 1, 2005. Concurrent with the offering, the
Company granted 153,550 options under the Plan at $13 per share. During
the year ending June 30, 1996 an additional 81,300 options were granted by
the Company under the plan at prices from $9.94 to $20.875 per share. Due
to terminations throughout the year, there were 203,530 options
outstanding at June 30, 1996. As of June 30, 1996 and 1995, no options had
yet been exercised.
Employee Stock Purchase Plans - Concurrent with the Company's public
offering, the Board of Directors of the Company adopted and the
stockholders approved the Eagle Point Software Corporation Employee Stock
Purchase Plan (the "Purchase Plan"). The Purchase Plan, became effective
on July 1, 1995, permitting eligible employees of the Company to purchase
shares of common stock at below-market prices through payroll deductions.
Shares will be purchased at the lesser of 85% of the fair market value of
the common stock on the first trading day in an annual participation
period and 85% of the fair market value of the common stock on the last
trading day in such period. Under the Purchase Plan, up to 100,000 shares
may be sold. These shares may be newly issued shares or shares acquired by
the Company on the open market. Unless terminated earlier by the Board of
Directors, the Purchase Plan will terminate when 100,000 shares have been
sold.
14. LEASES
The Company leases certain office space and vehicles under operating
leases. Rent expense for the years ended June 30, 1996, 1995 and 1994,
was $185,425, $73,307 and $34,492, respectively. During 1994, the Company
began subleasing a portion of the leased office space to another company.
Sublease income for the years ended June 30, 1996, 1995 and 1994 was
$18,600, $25,351, and $5,000, respectively.
At June 30, 1996, future minimum rental payments due under operating
leases, net of sublease income, for each of the five years in the period
ended June 30, 2001 are $78,464, $56,787, $1,778, $1,778 and $1,778,
respectively.
15. DISCONTINUED HARDWARE OPERATIONS
In October 1993, the Company discontinued its computer hardware
manufacturing division.
The results of operations of the computer hardware manufacturing division
consisted of the following for the year ended June 30, 1994:
<TABLE>
<CAPTION>
<S> <C>
Revenue $ 795,693
Expenses 988,129
---------
Loss from operations before income tax benefit (192,436)
---------
Income tax benefit:
Current 39,894
Deferred 27,212
---------
67,106
---------
</TABLE>
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<PAGE>
Loss from discontinued operations $(125,330)
=========
16. RELATED PARTY TRANSACTIONS
Prior to June 30, 1995, the Company leased its facility from the
Partnership. On June 30, 1995, the Company purchased the facility from
the Partnership. The purchase price was $2,750,000, an amount determined
by the Company's Board of Directors to be the current fair market value of
the property based on a recent independent appraisal, consisting of
$2,632,275 cash and forgiveness of a note payable to the Company of
$117,725. However, the property is reflected on the Company's books at
the Partnership's historical net book value ($1,874,929 at June 30, 1995).
The $875,071 difference between the net book value and purchase price has
been recorded as a reduction of retained earnings, net of deferred taxes
of $306,275.
As discussed in Note 1, the June 30, 1995 and 1994 Statements of Income
represent the historical combined operations of the Company and the
Partnership. Condensed Partnership financial information, prior to
eliminations, is presented below.
<TABLE>
<CAPTION>
1995 1994
Statements of Income:
<S> <C> <C>
Rent income - Company $221,457 $199,432
Depreciation expense 71,375 64,198
Interest and other expenses 165,771 132,586
</TABLE>
17. INDUSTRIAL NEW JOBS TRAINING AGREEMENT
On September 14, 1992, the Company entered into a ten-year Industrial New
Jobs Training Agreement (the "Training Agreement") with Northeast Iowa
Community College, Calmar, Iowa, to educate and train certain employees.
The Training Agreement will provide the company with approximately
$146,000 in the form of reimbursement for training expenses incurred by
the Company during the term of the agreement. As of June 30, 1995, the
full $146,000 had been received by the Company.
On December 13, 1993 an addendum to the Training Agreement was entered
into. This addendum increased the amount of reimbursement for training
expenses incurred by the Company during the terms of the agreement by
approximately $216,000. As of June 30, 1996 and 1995, $118,500 and $97,500
had been received by the Company, respectively.
In May 1996, a second addendum to the Training Agreement was entered into.
This addendum increased the amount of reimbursement for training expenses
incurred by the Company during the terms of the agreement by approximately
$288,000. As of June 30, 1996 the Company had not received reimbursement
under this addendum.
18. SUBSEQUENT EVENT
On July 29, 1996, the Company purchased substantially all assets of
Computer Integrated Building Corporation, a developer and marketer of
computer software.
The purchase price was $550,000 cash. Additionally, the Company is
obligated to make a contingent cash payment equal to (1) 75% of the
revenues between $550,000 and $743,400 received by the
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<PAGE>
Company in connection with the sale of Computer Integrated Building
Corporation's products, during the 12 month period ending July 29, 1997,
plus (2) 50% of such revenues exceeding $743,400, during the 12 month
period ending July 29, 1997. As part of the acquisition, a three year non-
compete agreement was entered into between the Company and former owners.
* * * * * *
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, this Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 27, 1996 EAGLE POINT SOFTWARE CORPORATION
/s/ Rodney L. Blum
------------------------------
Rodney L. Blum
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 27th day of September, 1996.
Name Capacity
---- --------
/s/ Rodney L. Blum Chairman of the Board,
- ----------------------- President, Chief Executive Officer and
Rodney L. Blum Director (principal executive officer)
/s/ Dennis J. George Vice President, Chief
- ----------------------- Financial Officer, Secretary, Treasurer
Dennis J. George and Director (principal financial and
accounting officer)
/s/ John F. Biver Vice President and Director
- -----------------------
John F. Biver
/s/ James Hickey Director
- -----------------------
James Hickey
/s/ Thomas Miller Director
- -----------------------
Thomas Miller
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<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.1* -- Certificate of Incorporation of the Company.
3.2* -- By-laws of the Company.
10.1* -- Loan Agreement between the Company and
the City of Dubuque, dated January 20, 1992.
10.2* -- Loan Agreement between the Company and
the City of Dubuque, dated July 6, 1993.
10.3* -- Loan Agreement between the Company and
the City of Dubuque, dated May 16, 1994.
10.4* -- Community Economic Betterment Account
Agreement between the Company and the
Iowa Department of Economic Development,
dated July 18, 1991.
10.5* -- Community Economic Betterment Account
Agreement between the Company and the
Iowa Department of Economic Development,
dated July 15, 1993.
10.6* -- Asset Purchase Agreement between the
Company and Facility Mapping Systems,
Inc., dated March 31, 1995.
10.7* -- Asset Purchase Agreement between the
Company and LANDCADD, Inc., dated
January 1, 1995.
10.8* -- Redemption Agreement between the
Company, and Scott J. Taylor, dated
August 5, 1994.
.10.9**** -- Employment Agreement with Rodney L. Blum.
.10.10**** -- Employment Agreement with Dennis J. George.
.10.11**** -- Employment Agreement with John F. Biver.
.10.12** -- Eagle Point Software Corporation Stock
Option Plan.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit No. Description Page Number
- ----------- ----------- -----------
<S> <C> <C>
.10.13*** -- Eagle Point Software Corporation Stock
Purchase Plan.
10.14* -- Purchase Agreement between VisionOne
Partnership and the Company, dated as
of May 1, 1995.
10.15* -- Indemnification Agreement among the
Company, Rodney L. Blum, John F. Biver
and Dennis J. George.
10.16***** Merger Agreement between the
Company and ECOM Associates, Inc.,
dated November 9, 1995.
10.17***** Asset Purchase Agreement between the
Company and Computer Integrated
Building Corporation, dated July 29,
1996.
11.1***** -- Statement re: computation of per share
earnings.
21.1***** Subsidiaries
23.1***** -- Consent of Deloitte & Touche LLP.
27***** Financial Data Schedule
</TABLE>
- -------------------
* Incorporated by reference from the Company's Registration Statement on
Form S-1 (File No. 33-91950)
** Incorporated by reference from the Company's Registration Statement on
Form S-8 (File No. 33-96914)
*** Incorporated by reference from the Company's Registration Statement on
Form S-8 (File No. 33-96918)
**** Incorporated by reference from the Company's 1995 Annual Report on Form
10-K
***** Filed herewith.
. Indicates management contract or compensatory plan or arrangement.
-45-
<PAGE>
EXHIBIT 10.16
AGREEMENT AND PLAN OF MERGER
----------------------------
This Agreement and Plan of Merger ("Merger Agreement") is made as of
November 7, 1995 by and among Eagle Point Software Corporation, a Delaware
corporation ("Eagle Point"), Eagle Point Acquisition Corp., a Wisconsin
corporation and wholly-owned subsidiary of Eagle Point ("Purchaser"), and ECOM
Associates, Inc., a Wisconsin corporation (the "Company") (Purchaser and the
Company are hereinafter collectively referred to as the "Constituent
Corporations").
W I T N E S S E T H :
WHEREAS, the Company was incorporated by the filing of Articles of
Incorporation with the Secretary of State of the State of Wisconsin on November
29, 1973;
WHEREAS, Purchaser was incorporated by the filing of Articles of
Incorporation with the Secretary of State of the State of Wisconsin on November
2, 1995;
WHEREAS, the Company is a Wisconsin corporation having authorized
capital consisting of 2,500 shares of Common Stock, no par value per share (the
"Company Common Stock"), and 240 shares of Preferred Stock, $.01 par value per
share, and immediately prior to the Effective Time (as hereinafter defined) the
only outstanding capital stock of the Company shall be 455 shares of Company
Common Stock;
WHEREAS, the number of shares of Company Common Stock outstanding and
entitled to vote on this Merger Agreement is 455 shares of Company Common Stock;
WHEREAS, the vote required to approve this Merger Agreement is a
majority of the outstanding shares of Company Common Stock;
WHEREAS, Purchaser is a Wisconsin corporation having an authorized
capital of 100 shares of common stock, par value $.01 per share ("Purchaser
Common Stock"), all of which is issued and outstanding and owned by Eagle Point;
WHEREAS, the Board of Directors of each Constituent Corporation and of
Eagle Point has approved this Merger
<PAGE>
Agreement;
WHEREAS, the Board of Directors of the Company has recommended the
Merger (as hereinafter defined) to the stockholders of the Company and has
directed that this Merger Agreement be submitted to the stockholders of the
Company for approval;
WHEREAS, all of the stockholders of the Company are concurrently
herewith entering into a Supplemental Agreement (as described below) pursuant to
which, among other things, the stockholders have agreed to consent to and
approve the Merger and this Merger Agreement;
WHEREAS, the approval of the Merger Agreement by the stockholders of
Eagle Point is not required;
WHEREAS, Eagle Point, as the sole stockholder of Purchaser, has
approved this Merger Agreement on behalf of Purchaser; and
WHEREAS, the Constituent Corporations, Eagle Point and the
stockholders of the Company (the "Stockholders") are concurrently entering into
a Supplemental Agreement (the "Supplemental Agreement") that, among other
things, sets forth certain covenants, agreements, representations and warranties
with respect to the Merger and the transactions contemplated by this Merger
Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
----------
1.1 THE MERGER. Upon the terms and subject to the conditions hereof
and of the Supplemental Agreement, and in accordance with the Wisconsin Business
Corporation Law ("WBCL"), Purchaser shall be merged with and into the Company at
the Effective Time (as hereinafter defined). Such merger is herein called the
"Merger." Following the Merger, the separate corporate existence of Purchaser
shall cease, and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Purchaser in accordance with the WBCL.
1.2 EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VI of the Supplemental Agreement, the parties hereto shall cause the Merger to
be consummated by filing Articles of Merger with respect thereto with the
Secretary of
<PAGE>
State of the State of Wisconsin pursuant to Section 180.1105 of the WBCL (the
"Articles of Merger"). When used in this Merger Agreement, the term "Effective
Time" shall mean the date and time of receipt of the Articles of Merger for
filing by the Secretary of State of the State of Wisconsin, as indicated by the
endorsement thereon, which Articles of Merger are filed by the Secretary of
State of the State of Wisconsin.
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 180.1106 of the WBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all of the property, rights, privileges, powers and franchises
of Purchaser and the Company shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Purchaser and the Company shall become the
debts, liabilities and duties of the Surviving Corporation. From and after the
Effective Time, the Surviving Corporation shall be a wholly-owned subsidiary of
Eagle Point.
1.4 ARTICLES OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION; OFFICERS AND DIRECTORS. The Articles of Incorporation of the
Company, as such Articles of Incorporation are amended and restated to read as
set forth on Exhibit 1 hereto, shall be the Articles of Incorporation of
Surviving Corporation until thereafter changed or amended; the By-laws of
Purchaser shall be the By-laws of Surviving Corporation until thereafter changed
or amended. From and after the Effective Time, until their successors are duly
elected or appointed and qualified, the directors and officers of Surviving
Corporation shall be as follows:
DIRECTORS
Rodney L. Blum
John F. Biver
Dennis J. George
OFFICERS
Name Office
---- ------
Rodney L. Blum President
John F. Biver Vice President
Dennis J. George Secretary
1.5 EFFECT ON COMPANY COMMON STOCK. As of the Effective Time, by
virtue of the Merger and without any action on
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<PAGE>
the part of any stockholder of either of the Constituent Corporations:
(a) Each issued and outstanding share of Purchaser Common Stock shall
be converted into one share of common stock, par value $.01 per share, of
Surviving Corporation. Each certificate of Purchaser evidencing ownership of
any such shares of Purchaser Common Stock shall continue to evidence ownership
of the same number of shares of common stock of Surviving Corporation.
(b) All shares of Company Common Stock that are held in the treasury
of the Company shall be canceled and no consideration shall be delivered in
exchange therefor.
(c) All shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time, except shares canceled in accordance
with Section 1.5(b), shall be converted, in the aggregate, into 29,730 shares of
validly issued, fully paid and nonassessable shares of common stock, par value
$.01 per share (the "Eagle Point Common Stock"), of Eagle Point provided,
however, that, notwithstanding anything contained in this Merger Agreement to
the contrary, only 26,757 of the aggregate 29,730 shares of Eagle Point Common
Stock to be issued by Eagle Point in accordance with the foregoing conversion
provisions shall be distributable immediately following the Merger in accordance
with this Merger Agreement to the holders of the issued and outstanding shares
of Company Common Stock as of the Effective Time (the "Stockholders"), with the
remaining 2,973 shares of Eagle Point Common Stock to be issued to be deposited
as of the Effective Time in the escrow account established pursuant to the
Indemnity Escrow Agreement (as defined in the Supplemental Agreement) and held
and distributed as provided in the Indemnity Escrow Agreement and the provisions
of subsection (d) below (such 26,757 shares of Eagle Point Common Stock
described above as being distributable immediately following the Merger being
herein referred to as the "Closing Merger Consideration"); and provided,
further, that, with respect to the Closing Merger Consideration, each
Stockholder shall be entitled hereunder to receive in respect of such
Stockholder's shares of Company Common Stock held immediately prior to the
Effective Time only such Stockholder's pro-rata portion of such Closing Merger
Consideration as is attributable to such Stockholder's shares of Company Common
Stock so held (such pro-rata portion to be based on the percentage which the
aggregate number of shares of Company Common Stock held by such Stockholder
immediately prior to the Effective Time represents of the aggregate number of
shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time).
(d) In addition to the Closing Merger Consideration described in the
immediately preceding subsection (c), each Stockholder shall have a conditional
right to receive, in respect
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<PAGE>
of the shares of Company Common Stock issued and outstanding and held by such
Stockholder immediately prior to the Effective Time, such Stockholder's pro-rata
portion (determined in the manner described in subsection (c) above) of any
Distributable Indemnity Escrowed Shares (as defined in the Supplemental
Agreement) that may become available for distribution to Stockholders pursuant
to the provisions of Section 1.5 of the Supplemental Agreement and Section 1.8
of this Merger Agreement (any Distributable Indemnity Escrowed Shares that
become so available for distribution to Stockholders being herein called the
"Conditional Shares");
(e) All shares of Company Common Stock (other than shares of Company
Common Stock to be canceled in accordance with Section 1.5(b)), when so
converted as provided in Section 1.5(c), shall no longer be outstanding and
shall automatically be canceled and retired and each holder of a certificate
theretofore representing any such shares shall cease to have any rights with
respect thereto, except the right to receive, upon the surrender of such
certificate in accordance with Section 1.6, the portion of the Closing Merger
Consideration and the Conditional Shares, if any, attributable to such shares.
(f) Notwithstanding anything in this Merger Agreement to the contrary,
the Stockholders, each of whom is a party to the Supplemental Agreement, by
virtue of their execution of the Supplemental Agreement, have approved this
Merger Agreement and the Merger and have waived any and all rights that they
might otherwise have to demand appraisal for their shares of Company Common
Stock in accordance with Section 13 of the WBCL.
1.6 EAGLE POINT TO MAKE CERTIFICATES AVAILABLE; DIVIDENDS.
(a) Eagle Point shall make available to Purchaser, on the date of the
Effective Time, the certificates representing the 29,730 shares of Eagle Point
Common Stock described in Section 1.5(c). The Purchaser shall make available to
each holder of certificates representing shares of Company Common Stock
("Certificates") a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon actual delivery of the Certificates to the Surviving Corporation) for
use in effecting the surrender of the Certificates. Upon surrender by a holder
to the Surviving Corporation of the Certificates held by such holder and
delivery to the Surviving Corporation of a properly completed and executed
letter of transmittal, the Surviving Corporation shall promptly deliver to such
holder certificates for the shares of Eagle Point Common Stock that such holder
shall be entitled under Section 1.5(c).
(b) If the Closing Merger Consideration or any Conditional Shares (or
any portion thereof) are to be delivered to a person other than the person in
whose name the Certificates
-5-
<PAGE>
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Closing Merger Consideration or such Conditional Shares that the
Certificates so surrendered shall be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the person requesting such transfer pay to
the Surviving Corporation any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Surviving Corporation that
such taxes have been paid or are not required to be paid. For purposes of this
Merger Agreement, the term "person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, the Surviving Corporation will
deliver or cause to be delivered in exchange for such lost, stolen or destroyed
Certificate, with respect to each share of the Company Common Stock represented
thereby, certificates for any portion of the Closing Merger Consideration and
Conditional Shares, if any, deliverable in respect thereof as determined in
accordance with this Article I. No bond shall be required in connection
therewith.
(d) No dividends or other distributions, if any, that are declared on
or after the Effective Time on Eagle Point Common Stock or are payable to the
holders of record thereof on or after the Effective Time will be paid to persons
entitled by reason of the Merger to receive certificates representing shares of
Eagle Point Common Stock, nor shall such persons be entitled to vote such shares
of Eagle Point Common Stock, until such persons surrender their Certificates, as
provided in this Article I. Subject to the effect of applicable law, there
shall be paid to the record holder of the certificates representing such shares
of Eagle Point Common Stock (a) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to whole shares of Eagle Point Common Stock and
having a record date on or after the Effective Time and a payment date prior to
such surrender and (b) at the appropriate payment date, the amount of dividends
or other distributions, if any, payable with respect to whole shares of Eagle
Point Common Stock and having a record date on or after the Effective Time but
prior to surrender and a payment date subsequent to surrender. In no event
shall the person entitled to receive any such dividends on or other
distributions be entitled to receive interest on such dividends or other
distributions.
1.7 NO FRACTIONAL SECURITIES. No certificates representing fractional
shares of Eagle Point Common Stock shall
-6-
<PAGE>
be issued upon the surrender for exchange of Certificates pursuant to this
Article I, and no Eagle Point dividend or other distribution, stock split or
interest shall relate to any fractional security, and such fractional interests
shall not entitle the owner thereof to vote or to any rights of a security
holder of Eagle Point. In lieu of any fractional share, each holder of Eagle
Point Common Stock who would otherwise have been entitled to a fraction of a
share of Eagle Point Common Stock upon surrender of Certificates for exchange
pursuant to this Article I will be paid an amount in cash (without interest and
rounded to the nearest whole cent) determined by multiplying $18.50 by the
fractional share interest to which such holder would otherwise be entitled. As
soon as practicable after the determination of the amount of cash to be paid to
former stockholders of Company in lieu of any fractional interests, Eagle Point
shall make such cash available to the Surviving Corporation, which in turn shall
make available in accordance with this Merger Agreement such amounts to such
former stockholders.
1.8 RETURN OF THE CLOSING MERGER CONSIDERATION OR CONDITIONAL SHARES.
Any portion of the Closing Merger Consideration or any Conditional Shares which
remains undistributed to the Stockholders for six months after the termination
of the Indemnity Escrow Agreement shall, to the extent permitted by applicable
law, be delivered to Eagle Point, upon demand by Eagle Point, and any
Stockholder who has not theretofore complied with this Article I shall
thereafter look only to Eagle Point for payment of, and Eagle Point shall pay
any such Stockholder's valid claim for, any portion of the Closing Merger
Consideration or Conditional Shares, if any, to which such Stockholder is
otherwise entitled to receive. Notwithstanding the foregoing, neither Eagle
Point nor any other party shall be liable to any Stockholder for any cash
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
1.9 CONDITIONAL SHARES. In the event that, upon the termination of
the Indemnity Escrow Agreement, any Distributable Indemnity Escrowed Shares
remain available for distribution to Stockholders, such remaining Distributable
Indemnity Escrowed Shares shall be disbursed by the Escrow Agent to the
Surviving Corporation in accordance with the terms of the Indemnity Escrow
Agreement and Section 1.5 of the Supplemental Agreement. Upon receipt of such
Distributable Indemnity Escrowed Shares, the Surviving Corporation shall
promptly deliver to each Stockholder certificates representing such
Distributable Indemnity Escrowed Shares to which each Stockholder is entitled
pursuant to Section 1.5(d) hereof which shall be mailed to such address as
designated for such purpose in such Stockholder's executed letter of transmittal
delivered to the Surviving Corporation pursuant to Section 1.6(a).
-7-
<PAGE>
1.10 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
Closing Merger Consideration and Conditional Shares, if any, paid or payable
upon the surrender for exchange of Certificates in accordance with the terms
hereof shall be deemed to have been paid or be payable in full satisfaction of
all rights of ownership, including voting rights, pertaining to the shares of
Company Common Stock.
1.11 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made. If, after the Effective Time,
Certificates are presented to Surviving Corporation, they shall be canceled and
exchanged as provided in this Article I.
1.12 FURTHER ASSURANCES. If, at any time after the Effective Time,
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
Surviving Corporation, its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of either of the
Constituent Corporations, or (b) otherwise to carry out the purposes of this
Merger Agreement, Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of each of the
Constituent Corporations, all such other acts and things necessary, desirable or
proper to vest, perfect or confirm its right, title or interest in, to or under
any of the rights, privileges, powers, franchises, properties or assets of such
Constituent Corporation and otherwise to carry out the purposes of this Merger
Agreement.
ARTICLE II
CONDITIONS AND TERMINATION
--------------------------
2.1 CONDITIONS. The obligations of each Constituent Corporation
under this Merger Agreement are subject to the conditions that, prior to the
Effective Time, each of the conditions to its obligations contained in Article
VI of the Supplemental Agreement shall have been satisfied or waived.
2.2 WAIVER. The Board of Directors or a duly authorized officer of a
Constituent Corporation may, on behalf of such corporation, waive or extend the
time for performance of any condition to its obligations under the Supplemental
Agreement.
-8-
<PAGE>
2.3 TERMINATION. Notwithstanding the approval of this Merger
Agreement by the Board of Directors, and its adoption by the stockholders of
each Constituent Company, this Merger Agreement may be terminated and the Merger
abandoned prior to the Effective Time by:
(a) The mutual consent of (or such later date as shall be mutually
agreed to in writing by either Constituent Corporation) of the Constituent
Corporations;
(b) Either Constituent Corporation if the Merger has not become
effective by December 31, 1995 (or such later date as shall be mutually agreed
to in writing by either Constituent Corporation); provided that the party
seeking termination is not in default or breach of the Supplemental Agreement;
or
(c) By the Company in the event of a breach by Eagle Point of any of
its representations, warranties or covenants contained in the Supplemental
Agreement, which breach is not cured by Eagle Point within 10 days after written
notice of such breach;
(d) By the Purchaser in the event of a breach by the Company or the
Stockholders of any of their respective representations, warranties and
covenants contained in the Supplemental Agreement, which breach is not cured by
the Company or the Stockholders with 10 days after written notice of such
breach; or
(e) By Eagle Point in the event that it is advised by Deloitte &
Touche L.L.P. that it is reasonably likely that the Merger will not be treated
by the Securities and Exchange Commission as a pooling of interests for
accounting purposes.
(f) If the Supplemental Agreement is terminated in accordance with its
terms.
ARTICLE III
GENERAL
-------
3.1 PARTIAL INVALIDITY. Wherever possible each provision of this
Merger Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Merger Agreement shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Merger Agreement.
3.2 SUCCESSORS AND ASSIGNS. This Merger Agreement
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<PAGE>
shall not be assignable prior to the Effective Time by either Constituent
Corporation without the written consent of the other, but, if assigned with such
consent, shall inure to the benefit of and be binding upon the successor or
assign of the assigning Constituent Corporation before the Effective Time and
thereafter upon the Surviving Corporation.
3.3 INTERPRETATION. This Merger Agreement shall be governed by the
laws of the State of Wisconsin and may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. The headings of the several articles
and sections herein are for convenience of reference only and shall not be a
part of or affect the meaning or interpretation of this Merger Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Merger Agreement
to be executed by their respective officers thereunto duly authorized, and their
respective seals to be affixed and attested, all as of the date first above
written.
ECOM ASSOCIATES, INC.
By: ______________________________
Name: Daniel G. Horn
Title: President
EAGLE POINT SOFTWARE CORPORATION
By: ______________________________
Name: Rodney L. Blum
Title: Chairman, Chief Executive
Officer and President
EAGLE POINT ACQUISITION CORP.
By: ______________________________
Name: Rodney L. Blum
Title: President
-10-
<PAGE>
- --------------------------------------------------------------------------------
SUPPLEMENTAL AGREEMENT
DATED AS OF NOVEMBER 7, 1995
BY AND AMONG
EAGLE POINT SOFTWARE CORPORATION,
EAGLE POINT ACQUISITION CORP.,
ECOM ASSOCIATES, INC.
AND
THE STOCKHOLDERS OF ECOM ASSOCIATES, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER
<TABLE>
<CAPTION>
<S> <C>
1.1. The Merger....................................................... 1
1.2. Filing of Articles of Merger..................................... 1
1.3. Closing.......................................................... 2
1.4. Merger Consideration............................................. 2
1.5. Indemnity Escrow................................................. 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF EAGLE POINT
2.1. Organization of Eagle Point...................................... 3
2.2. Purchaser........................................................ 3
2.3. Authorization.................................................... 3
2.4. Non-Contravention................................................ 4
2.5. Valid Shares..................................................... 4
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
3.1. Organization..................................................... 4
3.2. Subsidiaries and Investments..................................... 5
3.3. Capital Stock of the Company..................................... 5
3.4. Authorization.................................................... 6
3.5. Non-Contravention................................................ 6
3.6. Financial Statements............................................. 7
3.7. Operations Since Balance Sheet Date.............................. 7
3.8. No Undisclosed Liabilities...................................... 10
3.9. Taxes........................................................... 10
3.10. Availability of Assets and Legality of Use...................... 11
3.11. Governmental Permits............................................ 12
3.12. Real Property................................................... 12
3.13. Real Property Leases............................................ 12
3.14. Condemnation.................................................... 13
3.15. Personal Property............................................... 13
3.16. Personal Property Leases........................................ 13
3.17. Intellectual Property........................................... 13
3.18. Accounts Receivable; Inventories................................ 16
3.19. Title to Assets................................................. 16
3.20. Employees....................................................... 16
3.21. Employee Matters................................................ 17
3.22. Employee Benefit Plans.......................................... 17
3.23. Contracts....................................................... 17
3.24. Status of Contracts............................................. 19
3.25. No Violation, Litigation or Regulatory Action................... 19
3.26. Insurance....................................................... 20
</TABLE>
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<CAPTION>
<S> <C>
3.27. Environmental Protection........................................ 20
3.28. Stockholders' Assets............................................ 21
3.29. No Finder....................................................... 21
3.30. Transactions with Affiliates.................................... 21
3.31. Pooling of Interests............................................ 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
4.1. Authority....................................................... 21
4.2. Non-Contravention; Required Consents............................ 22
4.3. Ownership of Company Common Stock............................... 22
4.4. Investment...................................................... 22
4.5. Rule 144........................................................ 23
ARTICLE V ADDITIONAL AGREEMENTS OF THE PARTIES
5.1. Ordinary Course................................................. 23
5.2. Access Prior to Closing; Certain Notices........................ 24
5.3. Regulatory and Other Authorizations............................. 24
5.4. Further Assurances.............................................. 25
5.5. Company Financial Statements.................................... 25
5.6. Delivery of Documents........................................... 25
5.7. Employees....................................................... 25
5.8. Eagle Point Financial Statements................................ 25
5.9. Continued Relationships......................................... 25
5.10. Transfer of Company Common Stock; Agreement to Vote
for Merger................................................... 25
5.11. Preserve Accuracy of Representations and Warranties............. 26
5.12. Notification by the Company of Certain Matters.................. 26
5.13. Necessary Actions............................................... 26
5.14. Release of Stockholders from Guarantees......................... 26
5.15. Termination of 1989 Buy/Sell Agreement.......................... 27
ARTICLE VI CONDITIONS TO CLOSING
6.1. The Company's and the Stockholders' Conditions to
Close........................................................ 27
6.2. Eagle Point's Conditions to Close............................... 28
ARTICLE VII THE CLOSING
7.1. Deliveries by the Company and the Stockholders.................. 30
7.2. Eagle Point's Deliveries........................................ 30
ARTICLE VIII INDEMNIFICATION
8.1. Indemnification by Stockholders................................. 31
8.2. Indemnification by Eagle Point.................................. 33
8.3. Indemnity by Stockholders Limited to Indemnity
Escrowed Shares.............................................. 33
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
8.4. Additional Limitations.......................................... 34
8.5. Notice of Claims................................................ 34
8.6. Third Party Claims.............................................. 35
8.7. Exclusive Remedy................................................ 36
ARTICLE IX TERMINATION
9.1. Termination..................................................... 37
9.2. Effect of Termination........................................... 37
ARTICLE X RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT; REGISTRATION
10.1. Restrictions on Transferability................................. 38
10.2. Restrictive Legend.............................................. 38
10.3. Notice of Proposed Transfers.................................... 39
10.4. Piggy-Back Registration......................................... 39
10.5. Indemnification................................................. 41
10.6. Expenses of Registration........................................ 42
10.7. Termination of Registration Rights.............................. 42
ARTICLE XI MISCELLANEOUS
11.1. Expenses........................................................ 43
11.2. Notices......................................................... 43
11.3. Assignment...................................................... 44
11.4. Interpretation.................................................. 44
11.5. Counterparts.................................................... 44
11.6. Amendment....................................................... 45
11.7. Entire Agreement................................................ 45
11.8. Binding Effect.................................................. 45
11.9. Survival........................................................ 45
11.10. Severability.................................................... 45
11.11. Third Parties................................................... 46
11.12. Waivers......................................................... 46
11.13. Governing Law; Arbitration...................................... 46
11.14. Definitions..................................................... 46
</TABLE>
EXHIBITS
A Form of Agreement and Plan of Merger
B Form of Indemnity Escrow Agreement
C Form of Horn Employment Agreement
C-1 Form of Horn Non-Competition Agreement
D Form of Buettner Employment Agreement
D-1 Form of Buettner Non-Competition Agreement
E Form of Moeschberger Employment Agreement
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F Form of Director's Resignation
SCHEDULES
2.4 Non-Contravention
3.1 Organization
3.3 Capital Stock of the Company
3.5 Non-Contravention
3.6 Financial Statements
3.7 Operations Since Balance Sheet Date
3.8 No Undisclosed Liabilities
3.9 Taxes
3.10 Availability of Assets and Legality of Use
3.11 Governmental Permits
3.13 Real Property Leases
3.15 Personal Property
3.16 Personal Property Leases
3.17 Intellectual Property
3.18 Accounts Receivable
3.19 Title to Assets
3.20 Employees
3.21 Employee Relations
3.22(a) Plans
3.22(b) ERISA Plans
3.23 Contracts
3.25 No Violation, Litigation or Regulatory Action
3.26 Insurance
3.27(d) Facilities
3.32 Transactions and Affiliates
4.2 Stockholder Non-Contravention
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SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT dated as of November 7, 1995 by and among Eagle
Point Software Corporation, a Delaware corporation ("Eagle Point"), Eagle Point
Acquisition Corp., a Wisconsin corporation ("Purchaser"), ECOM Associates, Inc.,
a Wisconsin corporation (the "Company"), and the undersigned stockholders of the
Company (individually, a "Stockholder" and collectively, the "Stockholders").
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Eagle Point, Purchaser and the Company are entering into an Agreement and Plan
of Merger of even date herewith (the "Merger Agreement"), in the form of Exhibit
A attached hereto, which provides, among other things, for the merger of
Purchaser with and into the Company (the "Merger") pursuant to the applicable
laws of the State of Wisconsin;
WHEREAS, the parties hereto believe it is desirable to enter into this
Agreement in order to set forth the representations and warranties made by Eagle
Point, the Company and the Stockholders in connection with the Merger, to set
forth certain covenants and agreements of the parties and to set forth various
other provisions relating to the Merger and the relative rights and obligations
of the parties with respect thereto; and
WHEREAS, certain terms are defined in the Merger Agreement which shall have
the same meaning when used in this Agreement unless otherwise defined herein,
the definitions of such terms being incorporated herein as if set forth in full
herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. THE MERGER. Subject to the terms and conditions of this Agreement
and as more particularly described in the Merger Agreement, Purchaser shall be
merged with and into the Company at the Effective Time (as defined in the Merger
Agreement).
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1.2. FILING OF ARTICLES OF MERGER. The Company, Eagle Point and the
Purchaser shall cause Articles of Merger ("Articles of Merger"), duly executed
in accordance with Section 180.1105 of Wisconsin Business Corporation Law (the
"WBCL"), to be filed on the Closing Date (or on such other date as Eagle Point
and the Company may agree) with the Secretary of State of the State of Wisconsin
in accordance with the WBCL.
1.3. CLOSING. The closing of the Merger (the "Closing") shall take place
on November 9, 1995, or on such other date as Eagle Point and the Company may
agree. The time and date on which the Closing is actually held is sometimes
referred to herein as the "Closing Date."
1.4. MERGER CONSIDERATION. Subject to the provisions of Article I of the
Merger Agreement, as of the Effective Time, by virtue of the Merger, the
aggregate outstanding shares of Company Common Stock immediately prior to the
Effective Time shall be converted, in the aggregate, into 29,730 shares of Eagle
Point common stock, par value $.01 per share ("Eagle Point Shares"). Of the
29,730 Eagle Point Shares issuable in connection with the Merger, certificates
representing 26,757 of such shares shall be distributed to the Stockholders as
of the Effective Time in accordance with the Merger Agreement. Certificates
representing the remaining 2,973 shares shall be deposited in the escrow account
described in Section 1.5 below and shall be held and subsequently disbursed in
accordance with the terms, conditions and provisions of the Indemnity Escrow
Agreement described in Section 1.5.
1.5. INDEMNITY ESCROW. On or prior to the Closing Date, the Company, the
Stockholders, Eagle Point and Dennis D. Faber, Jr., P.C., as escrow agent (the
"Escrow Agent"), shall enter into an Indemnity Escrow Agreement, substantially
in the form of Exhibit B (the "Indemnity Escrow Agreement"), providing for the
establishment of an escrow account with the Escrow Agent to secure the
obligations of the Stockholders to Eagle Point pursuant to Article VIII. At the
Closing, Eagle Point shall deposit into the escrow account so established 2,973
Eagle Point Shares (the "Indemnity Escrowed Shares"), with such shares so
deposited to be held and subsequently disbursed in accordance with the terms,
conditions and provisions of the Indemnity Escrow Agreement. The right of any
Stockholder to receive any Indemnity Escrowed Shares held in such escrow account
shall be conditioned upon such Indemnity Escrowed Shares not being otherwise
distributed in accordance with the Indemnity Escrow Agreement to indemnify or
reimburse Eagle Point for Losses or Expenses in accordance with Section VIII.
Upon termination of the Indemnity Escrow Agreement, any Indemnity Escrowed
Shares remaining in such
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escrow account (after making adequate provision for any distributions to Eagle
Point, as contemplated by the immediately preceding sentence) (such remaining
shares being herein referred to as the "Distributable Indemnity Escrowed
Shares") shall be distributed to the Stockholders in such proportion and in such
manner as provided in the Merger Agreement and the Indemnity Escrow Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EAGLE POINT
Eagle Point represents and warrants to the Company and the Stockholders as
follows:
2.1. ORGANIZATION OF EAGLE POINT. Eagle Point is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to carry on its business as
now conducted.
2.2. PURCHASER. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Wisconsin.
Purchaser has not conducted any business activities prior to the date of this
Agreement, other than the negotiation and execution of this Agreement and the
Merger Agreement. All outstanding shares of capital stock of Purchaser are
owned, beneficially and of record, by Eagle Point.
2.3. AUTHORIZATION. (a) Eagle Point has full corporate power and
authority to enter into this Agreement, the Merger Agreement, the Indemnity
Escrow Agreement, the Horn Employment Agreement, the Buettner Employment
Agreement and the Moeschberger Employment Agreement, to consummate the
transactions contemplated hereby and thereby and to comply with the terms,
conditions and provisions hereof and thereof. The execution, delivery and
performance by Eagle Point of this Agreement, the Merger Agreement, the
Indemnity Escrow Agreement, the Horn Employment Agreement, the Buettner
Employment Agreement and the Moeschberger Employment Agreement, and the actions
to be taken by Eagle Point contemplated hereby and thereby have been duly and
validly authorized by the Board of Directors of Eagle Point and no other
corporate proceedings on the part of Eagle Point are necessary with respect
hereto or thereto. This Agreement, the Merger Agreement, the Indemnity Escrow
Agreement, the Horn Employment Agreement, the Buettner Employment Agreement and
the Moeschberger Employment Agreement constitute the valid and binding
obligations of Eagle Point, in each case enforceable in accordance with its
terms, subject to (i) general principles of equity, regardless of whether
enforcement is sought in a pro-
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<PAGE>
ceeding in equity or at law, and (ii) bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium, receivership or other similar laws relating
to or affecting creditors' rights generally.
(b) Purchaser has full corporate power and authority to enter into
this Agreement and the Merger Agreement, to consummate the transactions
contemplated hereby and thereby and to comply with the terms, conditions and
provisions hereof and thereof. The execution, delivery and performance by
Purchaser of this Agreement and the Merger Agreement and the actions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors and the sole stockholder of Purchaser and no other corporate
proceedings on the part of Purchaser are necessary with respect hereto or
thereto. This Agreement and the Merger Agreement constitute the valid and
binding obligations of Purchaser, in each case enforceable in accordance with
its terms, subject to (i) general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law, and (ii) bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium, receivership or
other similar laws relating to or affecting creditors' rights generally.
2.4. NON-CONTRAVENTION. Neither the execution or delivery of this
Agreement, the Merger Agreement, the Indemnity Escrow Agreement, the Horn
Employment Agreement, the Buettner Employment Agreement or the Moeschberger
Employment Agreement by Eagle Point or this Agreement or the Merger Agreement by
Purchaser, nor the consummation of the transactions contemplated hereby or
thereby by Eagle Point and Purchaser, will (a) conflict with or result in the
breach of any term or provision of, or constitute a default under, the
respective charters or Bylaws of Eagle Point or Purchaser or any material
agreement, instrument or indenture to which Eagle Point or Purchaser is a party
or by which either is bound; (b) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Eagle Point or Purchaser; or (c)
require, as of the date hereof, the approval, consent, waiver, authorization or
act of, or the making by Eagle Point or Purchaser of any declaration, filing or
registration with, any third party or any Governmental Body, except for the
filing of a copy of the Articles of Merger with the Secretary of State of the
State of Wisconsin and except as set forth in Schedule 2.4 attached hereto.
2.5. VALID SHARES. The issuance of the Eagle Point Shares in connection
with the Merger has been duly authorized on behalf of Eagle Point and such
shares, when issued pursuant to this Agreement and the Merger Agreement, will be
duly and validly
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<PAGE>
issued and outstanding, fully paid and nonassessable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders, jointly and severally, represent and
warrant to Eagle Point as follows:
3.1. ORGANIZATION. The Company is a corporation duly organized and
validly existing under the laws of the State of Wisconsin and has filed with the
Wisconsin Secretary of State the most recent annual report required to be filed
by it. The Company is duly qualified to transact business as a foreign
corporation and is in good standing in each of the jurisdictions listed in
Schedule 3.1, which jurisdictions are the only ones in which the ownership or
leasing of its properties or the conduct of its business requires such
qualification, and no other jurisdiction has demanded, requested or otherwise
indicated that the Company is required to so qualify. The Company has full
corporate power and authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted. The Company
has delivered or otherwise made available to Eagle Point true and complete
copies of the Company's Articles of Incorporation, as in effect on the date
hereof, Bylaws, as in effect on the date hereof, minute books and stock transfer
records.
3.2. SUBSIDIARIES AND INVESTMENTS. The Company does not, directly or
indirectly, (a) own, of record or beneficially, or own or hold the right to
acquire, any outstanding voting or equity securities or other voting or equity
interests in any corporation, partnership, joint venture or other entity or (b)
otherwise control any such corporation, partnership, joint venture or other
entity.
3.3. CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of (i) 2,500 shares of Common Stock, no par value per share
("Company Common Stock"), 455 of which are duly and validly issued and
outstanding, fully paid and nonassessable (except to the extent otherwise
provided by Section 180.0622(2)(b) of the WBCL, as judicially interpreted), 600
of which are held by the Company as treasury shares and the remainder of which
have never been issued by the Company and (ii) 240 shares of Preferred Stock,
$.01 par value per share, of which no shares are outstanding and 240 shares are
held by the Company as treasury shares. None of the issued and outstanding
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<PAGE>
shares of Company Common Stock has been issued in violation of the preemptive
rights of any person or in violation of applicable federal or state securities
laws. Except for this Agreement, the Merger Agreement and the Stock Restriction
and Purchase Agreement dated 1989 among the Company and the Stockholders (the
"1989 Buy/Sell Agreement"), there are no agreements, arrangements, warrants,
options, puts, calls, rights or other commitments, plans or understandings of
any character relating to the issuance, sale, purchase, redemption, conversion,
exchange, registration, voting, or transfer of any shares of Company Common
Stock or any other securities of the Company. Except as set forth on Schedule
3.3 and except pursuant to applicable laws, there are no restrictions, including
but not limited to self-imposed restrictions, on the retained earnings of the
Company or on the ability of the Company to declare and pay dividends.
Schedule 3.3 sets forth a true and complete list of the name and address of
each of the holders of record of the Company Common Stock and the respective
number of outstanding shares held of record by each such holder; such Company
Common Stock is held free and clear of all Encumbrances created by the Company
and, to the knowledge of the Company, such shares are beneficially owned by such
holders free and clear of all Encumbrances.
3.4. AUTHORIZATION. The Board of Directors of the Company has declared
the Merger advisable and has duly resolved to recommend that the Merger and the
Merger Agreement be approved by the Stockholders. The Stockholders have each
duly approved the Merger and the Merger Agreement. The Company has full
corporate power and authority to enter into this Agreement, the Merger Agreement
and the Indemnity Escrow Agreement and to consummate the transactions
contemplated hereby and thereby and to comply with the terms, conditions and
provisions hereof and thereof. The execution, delivery and performance by the
Company of this Agreement, the Merger Agreement and the Indemnity Escrow
Agreement and the actions to be taken by the Company contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Company. The affirmative vote of a majority of the votes that
holders of the outstanding shares of Company Common Stock are entitled to cast
is the only vote of the holders of any class or series of the Company's capital
stock necessary to approve the Merger Agreement and the transactions
contemplated thereby. Each of this Agreement, the Merger Agreement and the
Indemnity Escrow Agreement constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms, subject to (a) general
principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law, and (b) bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium, receivership or other similar laws relating
to or affecting
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creditors' rights generally.
3.5. NON-CONTRAVENTION. Except for the 1989 Buy/Sell Agreement which the
Company and the Stockholders will terminate at or prior to Closing, neither the
execution or delivery of this Agreement or the Merger Agreement by the Company
nor the consummation of the transactions contemplated hereby or thereby by the
Company will (a) conflict with or result in the breach of any term or provision
of, or constitute a default under, the Articles of Incorporation or Bylaws of
the Company; (b) result in a default, or give rise to any right of termination,
cancellation or acceleration, under any provisions of any material agreement
(including, without limitation, any loan agreements or promissory note),
indenture or instrument to which the Company is a party or by which the Company
or is bound; (c) result in the creation or imposition of any Encumbrance on any
of the property of the Company; (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company; or (e) require on the
part of the Company or the Stockholders, as of the date hereof, the approval,
consent, waiver, authorization or act of, or the making by the Company of any
declaration, filing or registration with, any third party or any Governmental
Body, except for the filing of a copy of the Articles of Merger with the
Secretary of State of the State of Wisconsin and except as set forth on Schedule
3.5 attached hereto.
3.6. FINANCIAL STATEMENTS. Schedule 3.6 contains (a) the unaudited
balance sheets of the Company as of March 31, 1994 and 1995 and the related
statements of income and statements of retained earnings of the Company for the
years ended March 31, 1994 and 1995, and the notes to such financial statements
(collectively, the "Company's Financial Statements") and (b) the unaudited
balance sheet (the "Balance Sheet") of the Company as of September 30, 1995 (the
"Balance Sheet Date") and the related statement of income of the Company for the
six-month period ended September 30, 1995 (collectively, the "Company's Interim
Financial Statements").
Except as set forth on Schedule 3.6, the Company's Financial Statements
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis except as may be noted therein, are true and
correct and present fairly the financial condition and the results of operations
and cash flows of the Company as of the dates and for the periods indicated. The
Company's Interim Financial Statements were prepared in accordance with
generally accepted accounting principles applied on a basis consistent with the
Company's Financial Statements except as may be noted therein, are true and
correct and present fairly the financial condition and results of
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operations and cash flows of the Company as of the Balance Sheet Date and for
the nine-month period then ended, subject to normal year-end adjustments.
3.7. OPERATIONS SINCE BALANCE SHEET DATE. (a) Except as set forth on
Schedule 3.7, during the period from the Balance Sheet Date to the date hereof,
inclusive, there has been:
(i) no material adverse change in the Business or the results of
operations, properties or condition (financial or otherwise) of the
Company, and no fact or condition exists or is contemplated or threatened
which might reasonably be expected to cause such a change in the future;
and
(ii) no damage, destruction, loss or claim made or filed against the
Company (whether or not covered by insurance) or condemnation or other
taking which materially adversely affects the Business or the results of
operations, properties or condition (financial or otherwise) of the
Company.
(b) Except as set forth on Schedule 3.7, since the Balance Sheet
Date, the Company has conducted the Business only in the ordinary course and in
conformity with past practice. Without limiting the generality of the foregoing,
since the Balance Sheet Date, except as set forth on Schedule 3.7, the Company
has not:
(i) sold, leased, transferred or otherwise disposed of (including any
transfers from the Company to any of its Affiliates), or mortgaged or
pledged, or imposed or suffered to be imposed any Encumbrance (other than
Permitted Encumbrances) on, any of the assets reflected on the Balance
Sheet or any assets acquired after the Balance Sheet Date, except for sales
of inventory in the ordinary course of business consistent with past
practice;
(ii) canceled without fair consideration therefor any debts owed to
or claims held by the Company (including the settlement of any claims or
litigation) or waived any rights of material value;
(iii) created, incurred, guaranteed or assumed any indebtedness for
borrowed money or entered into any capitalized leases;
(iv) accelerated collection of any note or
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account receivable to a date prior to the date such collection would have
occurred in the ordinary course of business consistent with past practice;
(v) delayed payment of any account payable or other liability of the
Company beyond its due date or the date when such liability would have been
paid in the ordinary course of business consistent with past practice;
(vi) allowed the levels of raw materials, supplies, work-in-process,
finished goods or other materials included in its inventory to vary in any
material respect from levels customarily maintained;
(vii) granted any bonus or other special compensation or increased
the compensation or benefits payable or to become payable to any directors,
officers or employees except, in the case of employees, for increases in
the normal course of operations consistent with past compensation practice
or instituted any increase in or otherwise amended any profit sharing,
bonus, incentive, deferred compensation, insurance, pension, retirement,
medical, hospital, disability, welfare or other employee benefit plan
except for increases required by law;
(viii) sold, assigned or transferred any patents, trademarks,
tradenames, copyrights, Software (as defined in Section 3.17) (except in
the ordinary course of business consistent with past practice), trade
secrets or other similar intangible assets, or disclosed any proprietary or
confidential information to any person or entity (other than Eagle Point,
its Affiliates and agents);
(ix) extended credit other than in the ordinary course of business or
permitted any change in credit practices or in the method of maintaining
books, accounts or business records;
(x) declared, set aside or paid any dividend or made any other
distribution (whether in cash, stock or other property) to any of the
Stockholders in respect of any Company Common Stock or other securities of
the Company;
(xi) purchased, redeemed, called for purchase or redemption or
otherwise acquired any shares of Company
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Common Stock or any other securities of the Company;
(xii) made any write-down of the value of any inventory or write-offs
as uncollectible of any notes or accounts receivable except for write-downs
and write-offs in the ordinary course of business and consistent with past
practice, none of which would reasonably be expected to have a material
adverse effect on the Business or the results of operations, properties or
condition (financial or otherwise) of the Company;
(xiii) made capital expenditures involving aggregate payments in
excess of $20,000;
(xiv) except as otherwise contemplated herein, entered into any
transaction other than in the ordinary course of business or any
transaction (not involving purchases and sales of inventory) including
commitments for expenditures in excess of $20,000;
(xv) made any changes in the accounting methods or practices followed
by the Company; or
(xvi) agreed or committed to do or authorized any of the foregoing.
3.8. NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule 3.8, to
the knowledge of the Company or any of the Stockholders, the Company is not
subject to any obligation or liability of a kind required to be included as a
liability on the Company's balance sheets under the method of accounting
described at Section 3.6 hereof (including, without limitation, unasserted
claims whether known or unknown), whether absolute, contingent, accrued or
otherwise, which is not shown or which is in excess of amounts shown or
recovered for on the Balance Sheet, other than (a) liabilities of the same
nature as those set forth in the Balance Sheet and the notes thereto and (b)
such other liabilities, in each case reasonably incurred in the ordinary course
of business after the Balance Sheet Date, none of which, individually or in the
aggregate, would have a material adverse effect on the Business or the results
of operations, properties or condition (financial or otherwise) of the Company
and none of which is a liability for breach of contract, breach of warranty,
tort, infringement or other lawsuit.
3.9. TAXES. (a) Except as set forth on Schedule 3.9, (i) all Tax
Returns, required to be filed by or on behalf of the Company prior to the
Closing Date have been or will be timely filed and such Tax Returns as so filed
are or will be
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complete and accurate and disclose all Taxes required to be paid for the periods
covered thereby; (ii) no extension of time in which to file any such Tax Returns
is in effect or has been requested; (iii) all Taxes for which the Company is
liable relating to any period ending on or prior to the Closing Date (or the
portion of any Tax period ending on or prior to the Closing Date) shall have
been paid or, if not yet due and payable, properly accrued for as of the Closing
Date; (iv) all Taxes for which the Company is liable for periods beginning
before and ending on or after the Closing Date have been paid as required by law
in a timely manner or, if not yet due and payable, have been properly accrued
for; (v) all Taxes which the Company is required by law to withhold or to
collect for payment have been duly withheld and collected, and have been paid or
will be paid to the proper Governmental Body; (vi) there are no Tax liens
(except for liens relating to current Taxes not yet due) on any property of the
Company and no basis exists for any such liens; (vii) no audit of any kind has
been conducted with respect to any Tax Return by an appropriate Taxing
authority; (viii) all deficiencies which have been asserted as a result of such
examinations have been fully paid or finally settled, and no issue has been
raised in any such examination which, by application of similar principles,
reasonably would be expected to result in assertion of a deficiency for any
other year not so examined; (ix) neither the Company has executed or entered
into a closing agreement pursuant to Section 7121 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any predecessor provision or any similar
provision of state, local or foreign law; (x) there are no outstanding
agreements or waivers extending the statutes of limitations with respect to the
assessment of any Tax and no such agreements or waivers have been requested;
(xi) the Company has not incurred any liability with respect to Taxes based upon
income, operations, purchases, sales, payroll, licenses, compensation, business,
capital stock or surplus, properties or assets except in the ordinary course of
business, or any liabilities for interest or penalties with respect to the
foregoing; and (xii) there is no action, suit, investigation, audit, claim or
assessment pending or proposed or threatened with respect to Taxes of the
Company or any of its subsidiaries and no basis exists therefor.
(b) As a result of the Merger, none of the Company, the Surviving
Corporation or Eagle Point will be obligated to make a payment to an individual
employed by the Company that would be a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code, without
regard to whether such payment is reasonable compensation for personal services
performed or to be performed in the future.
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(c) For any Taxable period as to which the relevant statute of
limitations will not have expired as of the Closing Date, the Company has not
been a member of an affiliated group (as defined in Section 1504(a) of the Code
without regard to the limitations contained in Section 1504(b) of the Code) or
has filed Tax Returns with a group of corporations filing a combined,
consolidated or unitary income Tax Return.
3.10. AVAILABILITY OF ASSETS AND LEGALITY OF USE. Except as set forth on
Schedule 3.10, the assets owned or leased by the Company, or which the Company
is entitled to use under license or other agreements, constitute all the assets
used by the Company in the conduct of the Business (including, but not limited
to, all books, records, computers and computer programs and data processing
systems), and the tangible assets owned or leased by the Company are in good
condition (subject to normal wear and tear) and serviceable condition and are
suitable for the uses for which they are intended, and any intangible asset
listed on Schedule 3.17(a)(ii) will perform as specified in the User Manual for
such intangible asset. Except as set forth on Schedule 3.10, to the knowledge of
the Company and the Stockholders, (a) all such assets and their uses conform to
all applicable laws, regulations, rules, ordinances, codes, licenses, franchises
and permits (including, without limitation, all electrical, building, zoning,
environmental and occupational safety and health Requirements of Law), and (b)
no written notice of any existing violation of any of such matters relating to
such assets or their use has been received by the Company or any of the
Stockholders.
3.11. GOVERNMENTAL PERMITS. The Company owns, holds or possesses all
governmental licenses, franchises, permits, privileges, variances, immunities,
approvals and other authorizations which are necessary to entitle it to own,
lease, operate and use its assets and properties and to carry on and conduct the
Business substantially as currently conducted (herein collectively called
"Governmental Permits"). Schedule 3.11 sets forth a list and brief description
of each such Governmental Permit.
The Company has fulfilled and performed its respective obligations under
each of such Governmental Permits, and no event has occurred or condition or
state of facts exists which constitutes or, after notice or lapse of time or
both, would constitute a breach or default under any such Governmental Permit,
or permits or, after notice or lapse of time or both, would permit revocation or
termination of any such Governmental Permit, or which might adversely affect the
right of the Company under any such Governmental Permit. No notice of
cancellation, of default
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or of any dispute concerning any Governmental Permit, or of any event, condition
or state of facts described in the preceding sentence, has been received or is
known by the Company or any of the Stockholders. Except as set forth on Schedule
3.11, each of the Governmental Permits is valid, subsisting and in full force
and effect and will continue in full force and effect after the Closing, in each
case without (a) the occurrence of any breach, default or forfeiture of rights
thereunder or (b) the consent, approval, or act of, or the making of any filing
with, any Governmental Body or other party.
3.12. REAL PROPERTY. The Company does not own any real property and there
does not exist any option or right to purchase held by the Company to acquire
any real property.
3.13. REAL PROPERTY LEASES. Schedule 3.13 sets forth a list and brief
description of each lease or similar agreement (with each such listed lease or
similar agreement attached thereto) under which the Company is lessee of, or
holds or operates, any real property owned by any third party. Except as set
forth on Schedule 3.13, there are no subleases, tenancies or other rights of
occupancy affecting all or any part of such leases. The Company has the right to
quiet enjoyment of the premises described in any lease identified on such
Schedule for the full term of each such lease or similar agreement (and any
renewal option related thereto) relating thereto, and the leasehold or other
interest of the Company therein is not subject or subordinate to any Encumbrance
held by persons claiming by, through or under the Company, except for Permitted
Encumbrances.
3.14. CONDEMNATION. Neither the whole nor any part of any real property
listed on Schedule 3.12 or Schedule 3.13 is subject to any pending suit for
condemnation or other taking by any public authority and, to the knowledge of
the Company or any of the Stockholders, no such condemnation or other taking is
threatened.
3.15. PERSONAL PROPERTY. Schedule 3.15 contains a detailed list as of
October 15, 1995 of all machinery, equipment, vehicles, furniture and other
personal property owned by the Company having an original cost of $1,000 or
more.
3.16. PERSONAL PROPERTY LEASES. Schedule 3.16 contains a brief
description of each lease or other agreement or right, whether written or oral,
under which the Company is lessee of, or holds or operates, any machinery,
equipment, computer hardware and related peripheral equipment, vehicle or other
tangible personal property owned by a third party.
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3.17. INTELLECTUAL PROPERTY. (a) Schedule 3.17 contains a list and
detailed description of:
(i) all United States and foreign patents and patent applications and
patent disclosures (whether or not patentable or reduced to practice) owned
or controlled by the Company, showing in each case: the registered or other
owner of the patent, patent application, patent disclosure or invention;
the product, work product, device or process covered thereby, the
application and/or registration date, number and country (if any) and the
name of each inventor to any of the foregoing;
(ii) all United States and foreign copyrights, registered or
unregistered, copyrighted works and copyright registration applications
owned or controlled by the Company, showing in each case: the title of the
copyright or copyrighted work; the product, work product, device, process,
service, business or publication to which the same relates; the application
and/or registration date, number and country (if any); the registered or
other owner; and each author to any of the foregoing;
(iii) all computer software programs and software systems (including,
without limitation, all data, databases, compilations, tool sets, related
documentation and materials, whether in source code, object code or human
readable form and regardless of media), developed by or for the Company or
otherwise used in the Business ("Software"), showing in each case the
title, release, serial/registration number and quantity;
(iv) all United States, state and foreign trademarks, service marks
and trade names for which registrations have been issued or applied for by
the Company, and all other United States, state and foreign trademarks,
service marks and trade names owned or used by the Company or in which the
Company or holds any right, license, sublicense or interest, showing in
each case the product, device, process, service, business or publication
covered thereby, the registered or other owner, registration date and
number, if any, and, in the case of any such right, license, sublicense or
interest, a description thereof;
(v) all agreements, commitments, contracts, understandings, licenses,
sublicenses, assignments and
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indemnities which relate or pertain to any asset, property or right of the
character described in the preceding clause to which the Company is a
party, showing in each case the parties and the material terms;
(vi) all licenses, sublicenses or agreements which are material to
the Business and which relate or pertain to mailing lists, know-how, trade
secrets, disclosures or uses of ideas to which the Company is a party,
showing in each case the parties and the material terms; and
(vii) all registered and unregistered assumed or fictitious names
under which the Company is conducting the Business or has within the
previous three years conducted the Business.
(b) All patents listed on Schedule 3.17 as being owned, controlled or
used by the Company are valid and in force and all patent applications of the
Company or any of its subsidiaries listed therein are in good standing, all
without challenge of any kind, and, except as otherwise set forth on Schedule
3.17, the Company owns the entire right, title and interest in and to such
patents and patent applications, free and clear of all Encumbrances, except
Permitted Encumbrances. All of the registrations for trademarks, service marks,
trade names and copyrights listed on Schedule 3.17 as being owned, controlled or
used by the Company are valid and in force and all applications for such
registrations are pending and in good standing, all without challenge of any
kind, and, except as otherwise set forth on Schedule 3.17, the Company owns the
entire right, title and interest in and to all such trademarks, service marks,
trade names and copyrights so listed as well as the registrations and
applications for registration therefor, free and clear of all Encumbrances,
except Permitted Encumbrances. Correct and complete copies of all the patents
and patent applications and of all of the trademarks, service marks, trade names
and copyrights and registrations, applications or deposits therefor and all the
agreements, commitments, contracts, understandings, licenses, sublicenses,
assignments, and indemnities listed on Schedule 3.17 have heretofore been
delivered or otherwise made available by the Company to Eagle Point.
(c) Except as disclosed on Schedule 3.17, the Company owns the entire
right, title and interest in and to, free and clear of all Encumbrances, except
Permitted Encumbrances, or has the perpetual royalty-free right to use, all
patents, trademarks, service marks, trade names, copyrights, inventions,
improvements, processes, formulae, trade secrets, Software, mailing lists,
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know-how, and proprietary or confidential information used in conducting the
Business. Except as set forth on Schedule 3.17, to the knowledge of the Company
or any of the Stockholders, no infringement of any patent, patent right,
trademark, service mark, trade name, copyright, proprietary or other property
right has occurred or results in any way from the operations or business of the
Company. No claim of invalidity of any patent described on Schedule 3.17 has
been made, and no proceedings are pending or, to the knowledge of the Company or
any of the Stockholders, threatened against the Company, which challenge the
validity, ownership or use of any patent, trademark, service mark, trade name or
copyright or the ownership or use of any other right or property described on
Schedule 3.17, and, except as specifically disclosed on Schedule 3.17, none of
the Company or any of the Stockholders knows of any infringing use of any of the
same by others. Except as specifically disclosed on Schedule 3.17, none of the
Company or any of the Stockholders has had any notice of, and, to the knowledge
of the Company or any of the Stockholders, there is no basis for, a claim
against the Company or that the operations, activities, products, equipment,
machinery or processes of the Company infringe the patents, trademarks, service
marks, trade names, copyrights, proprietary or other property rights of others.
(d) Except as set forth on Schedule 3.17, to the knowledge of the
Company or any of the Stockholders, all Software (i) has been developed and
used, and is owned exclusively, by the Company; (ii) has never been improperly
copied or used in violation of any intellectual property right, agreement,
license or sublicense; (iii) has been maintained and protected with appropriate
proprietary notices, confidentiality and non-disclosure agreements and such
other measures as are necessary to protect the proprietary, trade secret or
confidential information contained therein; (iv) includes the source code,
system documentation, statements of principles of operation and schematics, as
well as any pertinent commentary, explanation, program (including compilers),
"workbenches," tools and higher level (or "proprietary") language used for the
development, maintenance and implementation of the Software that may be
necessary to render such materials understandable and usable by a trained
computer programmer so that such computer programmer could develop, maintain,
support and compile all versions of the Software currently in use or used in the
Business since January 1, 1992; and (v) is not subject to any site, equipment or
other operational limitations.
(e) Except as set forth on Schedule 3.17, to the knowledge of the
Company or any of the Stockholders, all personnel, including employees, agents,
consultants and contractors,
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who have contributed to or participated in the conception and development of the
Software on behalf of the Company either (i) have been party to a "work-for-
hire" arrangement or agreement with the Company, in accordance with applicable
federal and state law, that gives the Company full, effective, exclusive and
original ownership of all the Software; or (ii) have executed appropriate
instruments of assignment in favor of the Company as assignee that have conveyed
to the Company full, effective and exclusive ownership of all the Software.
3.18. ACCOUNTS RECEIVABLE; INVENTORIES. (a) All accounts receivable of
the Company have arisen from bona fide transactions by the Company in the
ordinary course of business and, to the knowledge of the Company, or any of the
Stockholders, are not subject to counterclaims or setoffs. Except as set forth
on Schedule 3.18, no such receivable has been outstanding for more than 90 days
beyond its due date. Eighty-five percent (85%) of the accounts receivable
reflected on the Balance Sheet are good and collectible in the ordinary course
of business at the aggregate amounts recorded in respect thereof.
3.19. TITLE TO ASSETS. Except as set forth on Schedule 3.19, the Company
has good title to all of its tangible assets reflected on the Balance Sheet or
thereafter acquired (except those sold or otherwise disposed of in the ordinary
course of business consistent with past practice), free and clear of all
Encumbrances except Permitted Encumbrances.
3.20. EMPLOYEES. The only full-time employees of the Company are: the
Stockholders, James Michael and Judith Horn. Schedule 3.20 contains the annual
compensation and a description of the fringe benefits provided to each such
employee as of October 15, 1995. As of the date hereof, all bonuses payable to
employees of the Company for services performed on or prior to the date hereof
have been paid in full and there are no outstanding agreements, understandings
or commitments of the Company with respect to any bonuses or increases in
compensation.
3.21. EMPLOYEE MATTERS. Except as set forth on Schedule 3.21, the Company
and has complied with all applicable laws, rules and regulations which relate to
prices, wages, hours, discrimination in employment and collective bargaining and
to the operation of the business and is not liable for any arrears of wages or
any taxes or penalties for failure to comply with any of the foregoing.
3.22. EMPLOYEE BENEFIT PLANS. (a) Set forth on Schedule 3.22(a) is a
true and complete list of each "employee pension benefit plan" (as such term is
defined in Section 3(2) of
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ERISA) (the "Pension Plans") and each "employee welfare benefit plan" (the
"Welfare Plans") maintained by the Company or which provides or will provide
benefits to present or prior employees of the Company (the Pension Plans and
Welfare Plans being the "ERISA Benefit Plans"). In addition, set forth on
Schedule 3.22(a) is a true and complete list of each stock ownership, stock
purchase or stock option plan maintained by the Company. Except as set forth on
Schedule 3.22(a), the Company has never maintained or been required to
contribute to any "employee pension benefit plan" subject to Section 302 of
ERISA or any "multiemployer plan," as such term is defined in Section 3(37) of
ERISA. The Company does not have, and has not had since 1987, any ERISA
Affiliate.
(b) Neither the Company nor any of the Stockholders, any other
"disqualified person" (within the meaning of Section 4975 of the Code) or any
"party in interest" (within the meaning of Section 3(14) of the Code) has
engaged in any non-exempt prohibited transaction (within the meaning of Section
4975 of the Code or Section 406 of ERISA) with respect to any of the ERISA
Benefit Plans. Except as disclosed on Schedule 3.22(b), each of the ERISA
Benefit Plans (i) has been administered in accordance with its terms and (ii)
complies in form, and has been administered in accordance, with the requirements
of ERISA and, where applicable, the Code. Except as disclosed on Schedule
3.22(b), the Company has no obligations under any of the ERISA Benefit Plans or
otherwise to provide health benefits to its former employees, except as
specifically required by law. The Company has at all times complied with the
health care continuation requirements of Part 6 of Title I of ERISA.
3.23. CONTRACTS. Except as set forth on Schedule 3.23 or any other
Schedule hereto, the Company is not a party to or bound by:
(a) any contract for the purchase, sale or lease of real property or
any option to purchase or sell real property;
(b) any contract which is material to the Business and which relates
to the purchase, licensing or development of any computer software, hardware or
data bases used or to be used by the Company, excluding licensing agreements
under which the Company, in the ordinary course of its business, licenses others
to use software;
(c) any purchase order, agreement or commitment obligating the
Company, to purchase any products, publications or services or to provide any
advertising in the Company's publications and which (i) is not terminable by the
Company without
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payment or penalty upon 60 days' (or less) notice, (ii) relates to purchases in
an aggregate amount exceeding $5,000 or (iii) is presently expected to result in
a loss upon completion or performance thereof in an amount in excess of $5,000;
(d) any indebtedness, obligation or liability for borrowed money, or
liability for the deferred purchase price of property in excess of $5,000
(excluding normal trade payables), or any instrument guaranteeing any
indebtedness, obligation or liability, or any obligation to incur any
indebtedness, obligation or liability;
(e) any joint venture, partnership or other arrangement involving a
sharing of profits involving the Company;
(f) any agreement which is material to the Business and which
includes provisions regarding minimum volumes or volume discounts, excluding
outstanding price quotations;
(g) any agreement which is material to the Business and pursuant to
which a rebate, discount, bonus, commission or other payment with respect to the
sale of any product or publication of the Company or the provision of any
advertising in the Company's publications will be payable or required after the
Closing;
(h) any guarantee of the obligations of the Company's customers,
suppliers, officers, directors, employees or Affiliates or others;
(i) any consignment, distributor, dealer, manufacturer's
representative, sales agency, advertising representative or advertising or
public relations contract which is material to the Business;
(j) any agreement limiting the Company's ability to engage in any
business anywhere in the world;
(k) any confidentiality agreement, other than with Eagle Point; or
(l) any contract not made in the ordinary course of business.
3.24. STATUS OF CONTRACTS. Each of the leases, contracts and other
agreements listed on Schedules 3.13, 3.16, 3.17, 3.22(a) and 3.23,
(collectively, the "Material Contracts"), constitutes a valid and binding
obligation of the Company and, to the knowledge of the Company or any of the
Stockholders, the
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other parties thereto, and is in full force and effect and each of the Material
Contracts (except as set forth in Schedule 3.5 and except for those Material
Contracts which by their terms will expire prior to the Closing Date or will be
otherwise terminated prior to the Closing Date in accordance with the provisions
hereof) will continue in full force and effect after the Closing Date, in each
case without breaching the terms thereof or resulting in the forfeiture or
impairment of any rights thereunder and without the consent, approval or act of,
or the making of any filing with, any other party. The Company has fulfilled and
performed its obligations under each of the Material Contracts and the Company
is not in, or, to the knowledge of the Company and the Stockholders, alleged to
be in, breach or default under, nor is there or, to the knowledge of the Company
and the Stockholders, is there alleged to be any basis for termination of any of
the Material Contracts. To the knowledge of the Company or any of the
Stockholders, no other party to any of the Material Contracts has breached or
defaulted thereunder. No event has occurred and no condition or state of facts
exists which, with the passage of time or the giving of notice or both, would
constitute such a default or breach by the Company or, to the knowledge of the
Company or either of the Stockholders, by any other party. The Company is not
currently renegotiating any of the Material Contracts or paying liquidated
damages in lieu of performance thereunder.
3.25. NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as set forth
on Schedule 3.25:
(a) To the knowledge of the Company and the Stockholders, the Company
has complied with all laws, regulations, rules, writs, injunctions, ordinances,
franchises, decrees stipulations, awards or orders of any Governmental Body
which are applicable to the Company;
(b) No notice has been served upon the Company by any Governmental
Body or other person of any violation of any Requirements of Law or calling
attention to the necessity of any work, repairs, new construction, installation
or alteration of any real or personal property owned, leased or used by the
Company;
(c) There are no lawsuits, claims, suits, proceedings or, to the
knowledge of the Company or any of the Stockholders, threatened against the
Company or investigations pending regarding the Company nor, to the knowledge of
the Company or any of the Stockholders, is there any basis for any of the same,
and there are no lawsuits, suits or proceedings pending or contemplated in which
the Company is the plaintiff or claimant;
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and
(d) There is no action, suit or proceeding pending or, to the
knowledge of the Company or any of the Stockholders, threatened which questions
the legality or propriety of the transactions contemplated by this Agreement.
3.26. INSURANCE. Schedule 3.26 sets forth a list and brief description
(including nature of coverage, limits, deductibles, premiums and the loss
experience for the most recent three years with respect to each type of
coverage) of all policies or binders of insurance maintained, owned or held by
the Company which are in effect on the date hereof. Such policies and binders
are in full force and effect. The Company has complied with each of such
insurance policies and binders and has not failed to give any material notice or
present any claim thereunder in a due and timely manner.
3.27. ENVIRONMENTAL PROTECTION. (a) All Facilities and property
(including underlying groundwater) which are currently owned, operated or leased
(including Facilities or properties subleased to a third party) by the Company
were, during any period of ownership, operation or leasing (including subleasing
to a third party) by the Company, and continue to be, in compliance with all
applicable federal, state or local statutes, laws, ordinances, codes, rules,
regulations, guidelines or any binding determinations of any Governmental Body
(including consent decrees and administrative orders) relating to protection of
the environment or public or worker health and safety (collectively,
"Environmental Laws").
(b) There has been no Release by the Company of any Contaminant on,
in, under or from any Facility now or previously owned, operated or leased by
the Company.
(c) The Company is not subject to the environmental liabilities of
any third party, whether by contractual agreement or operation of law.
(d) Schedule 3.27(d) sets forth a true and complete list of each
Facility previously owned, operated or leased by the Company.
3.28. STOCKHOLDERS' ASSETS. Except for artwork in offices, personal
effects and reference books, none of the Stockholders owns any assets or
properties relating to or used by the Company in the Business.
3.29. NO FINDER. The Company has not paid or become
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obligated to pay any fee or commission to any broker, finder or intermediary for
or on account of the transactions contemplated by this Agreement.
3.30. TRANSACTIONS WITH AFFILIATES. Except for the employment of the
Stockholders and Judith Horn by the Company, and except as set forth on Schedule
3.32, since January 1, 1994, there have been no material transactions in respect
of the Company between the Company and any officer, director or other Affiliate
of the Company (including spouses, children and other relatives of any of the
foregoing).
3.31. POOLING OF INTERESTS. The Company has not taken any of the
following actions:
(a) Except for the 1989 Buy/Sell Agreement, changed, amended or altered
the rights or privileges of, or imposed any restrictions on, any share
of Company Common Stock from the rights and privileges of such Company
Common Stock which are set forth in the Company's Articles of
Incorporation and By-laws.
(b) From November 1, 1993 to the date hereof, changed the equity interests
of the Company in contemplation of the transactions to be consummated
by this Agreement and the Merger Agreement (including distributions to
any holder of Company Common Stock.)
(c) Reacquired any shares of the Company for purposes of consummating any
type of business combination.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
Each Stockholder, severally and not jointly, represents and warrants to
Eagle Point as follows:
4.1. AUTHORITY. Such Stockholder has the capacity to enter into this
Agreement, to consummate the transactions contemplated hereby and to comply with
the terms, conditions and provisions hereof. This Agreement constitutes the
valid and binding obligation of such Stockholder, enforceable in accordance with
its terms, subject to (a) general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law, and (b) bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium, receivership or
other similar
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laws relating to or affecting creditors' rights generally. At or prior to
Closing, such Stockholder will execute and deliver to the Company and Eagle
Point a written consent whereby such Stockholder will indicate such
Stockholder's consent to and approval of the execution and delivery of this
Agreement and the Merger Agreement and the consummation of the transactions
contemplated hereby and thereby and such Stockholder will waive such
Stockholder's rights of appraisal under the WBCL with respect to the Merger and
any rights such Stockholder may have to pursue a claim against the members of
the Company's Board of Directors for breach of fiduciary duty in approving the
Merger.
4.2. NON-CONTRAVENTION; REQUIRED CONSENTS. Except for the 1989 Buy/Sell
Agreement (which will be terminated at or prior to the Closing) and except as
set forth on Schedule 4.2 attached hereto, neither the execution of this
Agreement by such Stockholder nor the consummation of the Merger (a) will result
in the breach of any term or provision of, constitute a default under, or
accelerate or change the performance otherwise required under, or result in the
creation of any Encumbrance upon any Company Common Stock owned by such
Stockholder pursuant to, any agreement (including without limitation any loan
agreement or promissory note), indenture, instrument, order, law or regulation
to which such Stockholder is a party or by which such Stockholder is bound or
(b) require the approval, consent, waiver, authorization or act of, or the
making by such Stockholder of any declaration, filing or registration with any
third party or any Governmental Body.
4.3. OWNERSHIP OF COMPANY COMMON STOCK. The residence address of such
Stockholder and the number and percentage of the shares of Company Common Stock
held by such Stockholder are set forth on Schedule 3.3 attached hereto. Such
shares are owned by such Stockholder as indicated on said Schedule 3.3 of record
and beneficially, free and clear of all Encumbrances (other than restrictions
under the Securities Act of 1933, as amended (the "Securities Act"), and the
rules and regulations thereunder, and state securities laws).
4.4. INVESTMENT. Such stockholder is acquiring the Eagle Point Shares for
investment for such Stockholder's own account, not as a nominee or agent, and
not with the view to, or for resale in connection with, any distribution
thereof. Such Stockholder understands that the Eagle Point Shares to be
delivered under Sections 1.4 and 1.5, if any, have not been registered under the
Securities Act and are being issued to such Stockholder in reliance upon an
exemption therefrom which depends upon, among other things, the bona fide nature
of such Stockholder's investment intent and the accuracy of the Company's
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and Stockholder's representations as expressed herein.
4.5. RULE 144. Such Stockholder acknowledges that the Eagle Point Shares
must be held indefinitely unless subsequently registered under the Securities
Act or an exemption from such registration is available. Such Stockholder is
aware of the provisions of Rule 144 promulgated under the Securities Act which
permits limited resale of unregistered shares subject to the satisfaction of
certain conditions, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the issuer of such shares, the resale occurring after the expiration of
minimum holding periods after a party has purchased and paid for the security to
be sold, the resale being effected through a "brokers' transaction" or in
transactions directly with a "market maker" (as provided by Rule 144(f)) and the
number of shares being sold during any three-month period not exceeding
specified limitations.
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PARTIES
5.1. ORDINARY COURSE. The Company and the Stockholders, jointly and
severally, covenant that prior to the Closing, without Eagle Point's written
consent, the Company shall not:
(a) take or authorize any of the actions set forth in Section 3.7(b);
(b) issue or sell any shares of its capital stock of any class, or
issue or sell any securities convertible into, or options with respect to, or
warrants to purchase or rights to subscribe to, any shares of its capital stock
of any class, or make any commitment to issue or sell any such shares or
securities;
(c) directly or indirectly solicit or negotiate with respect to any
inquiries or proposals from any person relating to: (i) the merger or
consolidation of the Company with any person, (ii) the direct or indirect
acquisition by any person of any of the assets of the Company (other than the
sale of assets in the ordinary course of business consistent with past practice,
not otherwise prohibited by this Section 5.1), or (iii) the acquisition of
direct or indirect beneficial ownership or control of the Company or any
securities thereof by any person.
(d) agree or commit to do or authorize any of the
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foregoing.
5.2. ACCESS PRIOR TO CLOSING; CERTAIN NOTICES. (a) Upon reasonable
notice, the Company, each of its directors, officers, agents and employees, and
the Stockholders shall afford Eagle Point and its representatives, (including,
without limitation, its independent public accountants, banks or other lenders'
representatives and attorneys) reasonable access during regular business hours
from the date hereof through the Closing to any and all of the premises,
properties, contracts, books, records, data and personnel of the Company or
relating to its operations. Eagle Point may contact the customers and vendors of
the Company upon prior notice to the Company. The Company, its directors,
officers, agents and employees, and the Stockholders shall cooperate fully in
connection with the foregoing. The Company and the Stockholders shall use their
respective best efforts to provide to Eagle Point such information and documents
concerning the Company as reasonably may be requested and obtained without undue
effort or expense upon the part of the Company or the Stockholders. The Company
and the Stockholders promptly shall notify Eagle Point of any change or event
which would reasonably be expected to materially and adversely affect the
Business or the results of operations, properties or condition (financial or
otherwise) of the Company.
(b) The Company covenants that prior to the Closing the Company will
promptly notify Eagle Point of any notice or any pending, threatened or
contemplated lawsuit, claim, suit, proceeding or Governmental Body investigation
which, if existing on the date hereof, would have been disclosable pursuant to
Section 3.25(b) or (c).
5.3. REGULATORY AND OTHER AUTHORIZATIONS. (a) The Company, Eagle Point
and the Stockholders will act diligently and reasonably, and shall cooperate in
good faith with each other, to secure before the Closing Date, each consent,
approval or waiver, in form and substance reasonably satisfactory to the Company
or Eagle Point, required to be obtained to satisfy the conditions set forth in
Section 6.1 and Section 6.2 below; provided that neither the Company, any of the
Stockholders, Eagle Point nor the Purchaser shall have any obligation to pay any
consideration in order to obtain any such consents or approvals.
(b) During the period prior to the Closing Date, the Company, Eagle
Point and the Stockholders shall act diligently and reasonably, and shall
cooperate with each other, to secure any consents and approvals of any
Governmental Body required to satisfy the conditions set forth in Sections 6.1
and 6.2 below; provided, however, that the Company shall not make any agreement
or understanding affecting its assets or the Business as a
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condition for obtaining any such consents or approvals except with the prior
written consent of Eagle Point.
5.4. FURTHER ASSURANCES. At any time and from time to time at or after
the Closing, the parties agree to cooperate with each other, to execute and
deliver such other documents, instruments of transfer or assignment, files,
books and records and do all such further acts and things as may be reasonably
required to carry out the transactions contemplated hereby.
5.5. COMPANY FINANCIAL STATEMENTS. The Company shall promptly provide to
Eagle Point copies of any financial statements prepared with respect to the
Company as of a date or for a period subsequent to that reflected in the
Company's Interim Financial Statements.
5.6. DELIVERY OF DOCUMENTS. Subject to the satisfaction of the conditions
to their respective obligations contained in Article VI, the parties shall cause
the delivery of the respective documents required to be delivered or caused to
be delivered by them pursuant to Article VII.
5.7. EMPLOYEES. The Company and each Stockholder hereby acknowledge that,
after the Closing, neither Eagle Point nor the Company, as the Surviving
Corporation, has any obligation to continue the employment by the Company of any
of the employees of the Company; except for the employment of Dan Horn pursuant
to the Horn Employment Agreement, David Buettner pursuant to the Buettner
Employment Agreement and Kathleen Moeschberger pursuant to the Moeschberger
Employment Agreement.
5.8. EAGLE POINT FINANCIAL STATEMENTS. Eagle Point shall have delivered
to the Company and each Stockholder Eagle Point's Annual Report on Form 10-K for
the fiscal year ended June 30, 1995, which includes audited financial statements
for such fiscal year.
5.9. CONTINUED RELATIONSHIPS. After the date hereof and through the
Closing the Company shall use all reasonable efforts to preserve intact the
business of the Company and keep available the services of its officers and
employees and maintain good relationships with suppliers, advertising and other
customers and others having business relations with the Company.
5.10. TRANSFER OF COMPANY COMMON STOCK; AGREEMENT TO VOTE FOR MERGER.
(a) Each Stockholder covenants that prior to the Closing, without Eagle Point's
written consent, such Stockholder shall not (i) sell, transfer, mortgage,
pledge,
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otherwise dispose of or suffer to be imposed any Encumbrance on any share of
Company Common Stock held by such Stockholder or (ii) grant to any person (other
than Eagle Point or Purchaser) any proxy or other right to vote any shares of
Company Common Stock held by such Stockholder or over which such Stockholder
exercises voting power in a manner that would be inconsistent with its covenants
set forth in this Agreement.
(b) Each Stockholder covenants to execute any further written consent
required under the WBCL to evidence that such Stockholder has voted, or caused
there to be voted, any and all shares of Company Common Stock held by such
Stockholder or over which such Stockholder exercises voting power to approve the
Merger Agreement and the Merger.
5.11. PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Between the
date hereof and the Closing Date, each of the parties hereto shall refrain from
taking any action which would render any of its, his or her respective
representations or warranties contained in Article II, III, or IV of this
Agreement inaccurate as of the Closing Date. Each party shall promptly notify
the other of any action, suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
legality of any transaction contemplated by this Agreement or the Merger
Agreement.
5.12. NOTIFICATION BY THE COMPANY OF CERTAIN MATTERS. During the period
prior to the Closing Date, the Company will promptly advise Eagle Point in
writing of (a) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement, and (b) any material default by
the Company or any Stockholder under this Agreement or event which, with notice
or lapse of time of both, would become such a default on or prior to the Closing
Date.
5.13. NECESSARY ACTIONS. Eagle Point, the Purchaser, the Company and the
Stockholders shall use all reasonable efforts to effect the Merger as promptly
as possible after the date hereof.
5.14. RELEASE OF STOCKHOLDERS FROM GUARANTEES. At or prior to Closing,
Eagle Point shall use its best commercially reasonable efforts to obtain:
(a) The release of the Stockholders and their spouses from their
respective personal guarantees of indebtedness and obligations of the Company to
Park Bank (the "Bank Release"); and
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(b) The release of the Stockholders from their respective guarantees
of the Indenture of Lease dated June 6, 1991 between the Company, as Lessee, and
the Brandywine Company, as Lessor (the "Property Release").
In the event that Eagle Point, after using its best commercially
reasonable efforts, shall not be able to obtain the Bank Release or the Property
Release, Eagle Point shall fully indemnify and hold harmless the Stockholders
and their spouses for any liabilities incurred in connection with the personal
guarantees of the Stockholders and their spouses described in paragraphs (a) and
(b) of this Section 5.14.
5.15. TERMINATION OF 1989 BUY/SELL AGREEMENT. At or prior to Closing,
the Company and the Stockholders shall terminate the 1989 Buy/Sell Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
6.1. THE COMPANY'S AND THE STOCKHOLDERS' CONDITIONS TO CLOSE. The
obligations of the Company and the Stockholders under this Agreement are subject
to the satisfaction at or prior to the Closing of each of the following
conditions, but compliance with any or all of such conditions may be waived, in
writing, by the Company or the Stockholders, as the case may be:
(a) The representations and warranties of Eagle Point contained in
this Agreement shall be true and correct on the date hereof and on the Closing
Date (except to the extent that they expressly relate to an earlier date);
(b) Eagle Point shall have performed and complied in all material
respects with all of the covenants and agreements contained in this Agreement
(other than in Section 5.6) and satisfied all of the conditions required by this
Agreement to be performed or complied with or satisfied by Eagle Point at or
prior to the Closing;
(c) Eagle Point and the Company shall have received all approvals and
actions of or by all Governmental Bodies, which are necessary to consummate the
transactions contemplated hereby;
(d) On the Closing Date, there shall be no injunction, restraining
order or decree of any nature of any court or Govern-
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mental Body in effect that restrains or prohibits the consummation of the
transactions contemplated by this Agreement;
(e) No action, suit or proceeding shall have been instituted by any
person or entity, or threatened by any Governmental Body, before a court or
Governmental Body, to restrain or prevent the carrying out of the transactions
contemplated by this Agreement;
(f) The Merger Agreement and the Merger shall have been duly approved
by Eagle Point as the sole stockholder of Purchaser;
(g) Eagle Point shall have executed and delivered to the Stockholders
the Horn Employment Agreement, the Buettner Employment Agreement and the
Moeschberger Employment Agreement;
(h) Eagle Point, the Company, the Stockholders and the Escrow Agent
shall have entered into the Indemnity Escrow Agreement; and
(i) A certificate, dated as of the Closing, signed by an officer of
Eagle Point to the effect set forth in clauses (a) through (h), inclusive, of
this Section 6.1.
6.2. EAGLE POINT'S CONDITIONS TO CLOSE. The obligations of Eagle
Point under this Agreement are subject to the satisfaction at or prior to the
Closing of each of the following conditions, but compliance with any or all of
any such conditions may be waived, in writing, by Eagle Point:
(a) The representations and warranties of the Company and the
Stockholders contained in this Agreement shall be true and correct on the date
hereof and on the Closing Date (except to the extent that they expressly relate
to an earlier date);
(b) The Company and the Stockholders shall have performed and
complied in all material respects with all the covenants and agreements
contained in this Agreement (other than Section 5.6) and satisfied all the
conditions required by this Agreement to be performed or complied with or
satisfied by it or them at or prior to the Closing;
(c) Eagle Point and the Company shall have received all approvals and
actions of or by all Governmental Bodies, which are necessary to consummate the
transactions contemplated hereby;
(d) On the Closing Date, there shall be no injunction,
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restraining order or decree of any nature of any court or Governmental Body in
effect that restrains or prohibits the consummation of the transactions
contemplated by this Agreement or the Merger Agreement;
(e) No action, suit or proceeding shall have been instituted by any
person or entity, or threatened by any Governmental Body, before a court or
Governmental Body, to restrain or prevent the carrying out of the transactions
contemplated by this Agreement or that would, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Business or the
results of operations, properties or condition (financial or otherwise) of the
Company;
(f) The Company shall have received all necessary consents or
approvals, in form and substance reasonably satisfactory to Eagle Point, to the
transactions contemplated by this Agreement as specified in Schedule 3.5
attached hereto;
(g) The Merger Agreement and the Merger shall have been duly approved
by the affirmative vote of the holders of all of the shares of Company Common
Stock outstanding and entitled to vote with respect thereto;
(h) No stockholder of the Company shall have exercised rights of
appraisal under the WBCL with respect to the Merger;
(i) Since the Balance Sheet Date, there shall not have occurred any
material adverse change in the Business or the results of operations, properties
or condition (financial or otherwise) of the Company;
(j) Dan Horn shall have entered into an Employment Agreement and a
Non-Competition Agreement, in the respective forms of Exhibit C and Exhibit C-1
hereto (collectively, the "Horn Employment Agreement"), David Buettner shall
have entered into an Employment Agreement and a Non-Competition Agreement, in
the respective forms of Exhibit D and Exhibit D-1 hereto (collectively, the
"Buettner Employment Agreement"), and Kathleen Moeschberger shall have entered
into an Employment Agreement and a Non-Competition Agreement, in the respective
forms of Exhibit E and Exhibit E-1 hereto (the "Moeschberger Employment
Agreement");
(k) Eagle Point, the Company, the Stockholders and the Escrow Agent
shall have entered into the Indemnity Escrow Agreement;
(l) Eagle Point shall have received resignations, effective as of the
Closing, of each director of the Company in
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the form of Exhibit F attached hereto;
(m) Eagle Point shall have been advised by Deloitte & Touche L.L.P.
that the Merger and the transactions contemplated hereby and thereby will likely
be treated by the Securities and Exchange Commission as a pooling of interests
for accounting purposes; and
(n) Certificates, dated as of the Closing, signed by the Stockholders
and by the President of the Company, respectively, to the effect set forth in
clauses (a), (b), and (h) of this Section 6.2, with the Certificate signed by
the President of the Company to be to the additional effect set forth in clauses
(c) through (j), inclusive, and (l) of this Section 6.2.
ARTICLE VII
THE CLOSING
7.1. DELIVERIES BY THE COMPANY AND THE STOCKHOLDERS. At the
Closing, the Company and the Stockholders shall deliver the following to Eagle
Point:
(a) A certificate of status from the Wisconsin Secretary of State
stating that the Company is a domestic corporation organized under the laws of
Wisconsin, has filed the most recent annual report required to be filed by it
and has not filed articles of dissolution;
(b) Copies of duly adopted resolutions of the Board of Directors of
the Company and the Stockholders approving the Merger and the execution,
delivery and performance of this Agreement and the Merger Agreement and the
other agreements and instruments contemplated hereby and thereby, certified by
the Secretary of the Company;
(c) The duly executed Horn Employment Agreement, Buettner Employment
Agreement and Moeschberger Employment Agreement;
(d) The duly executed Indemnity Escrow Agreement;
(e) A true and complete copy of the Articles of Incorporation, as in
effect on the Closing Date, of the Company, certified by the Secretary of State
of the State of Wisconsin, and a true and complete copy of the Bylaws, as in
effect on the Closing Date, of the Company, certified by the Secretary of the
Company;
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(f) Duly executed consents of each Stockholder, to the effect
described in Section 4.1; and
7.2. EAGLE POINT'S DELIVERIES. At the Closing, Eagle Point shall
deliver the following to the Company and the Stockholders:
(a) Certificate of good standing from the Secretary of State of the
State of Delaware stating that Eagle Point is a validly existing corporation in
good standing;
(b) Certificate of status for the Purchaser from the Wisconsin
Secretary of State; and
(c) Copies of duly adopted resolutions of Eagle Point's and the
Purchaser's Board of Directors and the sole shareholder of Purchaser approving
the execution, delivery and performance of this Agreement and the Merger
Agreement, certified by the Secretary or an Assistant Secretary of Eagle Point
or the Purchaser.
ARTICLE VIII
INDEMNIFICATION
8.1. INDEMNIFICATION BY STOCKHOLDERS. Each of the Stockholders,
jointly and severally, agrees to indemnify and hold harmless (in accordance with
the provisions of and subject to the limitations set forth in Section 8.3) Eagle
Point and the Company, as the Surviving Corporation, from and against any and
all Losses and Expenses incurred by Eagle Point or the Company in connection
with or arising from:
(a) any breach by any Stockholder or the Company of, or other failure
by any Stockholder or the Company to perform, any of the covenants of any
Stockholder or the Company contained in this Agreement or in any other agreement
(other than the Horn Employment Agreement, Buettner Employment Agreement or
Moeschberger Employment Agreement) executed and delivered by or on behalf of any
Stockholder or the Company pursuant to this Agreement or in any certificate or
other document delivered by any Stockholder or the Company pursuant to this
Agreement;
(b) any breach of any warranty or the inaccuracy of any
representation of the Company or any Stockholder contained in this Agreement or
any certificate or other document delivered by or on behalf of the Company or
any Stockholder pursuant to this Agreement; provided, however, that any
obligation of the Stockholders to indemnify and hold harmless Eagle Point and
the
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Company, as the Surviving Corporation, from and against any and all Losses and
Expenses in connection with or arising from any breach of any warranty, or
inaccuracy of any representation, made in any provision of Section 3.17, shall
be determined without regard to the "to the knowledge of the Company or any of
the Stockholders" qualifier contained in any provision of Section 3.17;
(c) any and all stock transfer Taxes, real estate transfer or gains
Taxes, sales Taxes, or other similar Taxes imposed by the State of Wisconsin, or
any political subdivision thereof, as a result of the transactions contemplated
by this Agreement or the Merger Agreement; and
(d) any fees, expenses, commissions or other costs (including all
legal, accounting, actuarial or consulting fees and expenses) incurred by the
Company or the Stockholders in connection with the preparation, negotiation and
execution of this Agreement, the Merger Agreement and the Indemnity Escrow
Agreement and consummation by the Company on or prior to Closing of the
transactions contemplated hereby or thereby, to the extent that such fees,
expenses, commissions or costs exceed $10,000;
provided, however, that the Stockholders shall not be required to indemnify and
hold harmless Eagle Point under this Section 8.1 with respect to any Loss and
Expense incurred by Eagle Point as a result of any breach, inaccuracy,
proceeding or other situation described in paragraph (a) or (b) of this Section
8.1 (other than any fraudulent breach or inaccuracy) unless, until and only to
the extent that the aggregate amount of all Loss and Expense incurred by Eagle
Point with respect to paragraphs (a) or (b) exceeds $5,000. The Stockholders
acknowledge and agree that the obligation to indemnify and hold harmless
pursuant to this Section 8.1 is an obligation solely of the Stockholders and
that, from and after the Closing, none of the Stockholders shall have any right
of contribution from the Company, its successors, or any assigns of any of them
in respect of the obligations of the Stockholders under this Section 8.1 and
that the right to recover from the Stockholders shall not require Eagle Point to
seek any recovery from the Company in respect of any Loss or Expense.
Except for the indemnification provided for in Article X, the
indemnification provided for in this Section 8.1 shall be the only available
remedy to Eagle Point under this Agreement, the Merger Agreement and the
transactions contemplated hereby and thereby and shall terminate twelve months
after the Closing Date (and no claims shall be made by Eagle Point under this
Section 8.1 thereafter), except that the indemnification by the Stockholders
shall continue as to:
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(A) the covenants, representations and warranties of the
Stockholders in Sections 3.4, 4.1, 4.3, 4.4 and 5.4 and Article X or
in respect of any breach or inaccuracy described in subsection (a) or
(b) above which is fraudulent on the part of the Company or the
Stockholders, as to all of which no time limitation shall apply other
than any applicable statute of limitations; and
(B) any Loss or Expense as to which Eagle Point has notified any
Stockholder in accordance with the requirements of Section 8.5 on or
prior to the date such indemnification would otherwise terminate in
accordance with this Section 8.1, as to which the obligation of the
Stockholders shall continue until the liability of the Stockholders
shall have been determined pursuant to this Article VIII, and Eagle
Point shall have been reimbursed in accordance with and to the extent
contemplated by the provisions of Section 8.3 for the full amount of
such Loss and Expense, if any, incurred by Eagle Point.
8.2. INDEMNIFICATION BY EAGLE POINT. Eagle Point agrees to indemnify and
hold harmless the Stockholders from and against any and all Losses and Expenses
incurred by the Stockholders in connection with or arising from:
(a) any breach, or alleged breach, by Eagle Point of, or other
failure by Eagle Point to perform, any of the covenants of Eagle Point contained
in this Agreement or in any other agreement (other than the Horn Employment
Agreement, Buettner Employment Agreement or Moeschberger Employment Agreement)
executed and delivered by or on behalf of Eagle Point pursuant to this Agreement
or in any certificate or other document delivered by Eagle Point pursuant to
this Agreement;
(b) any breach, or alleged breach, of any warranty or the inaccuracy,
or alleged inaccuracy, of any representation of Eagle Point contained in this
Agreement or any certificate or other document delivered by or on behalf of
Eagle Point pursuant to this Agreement;
provided, however, the Stockholders acknowledge and agree that the obligations
of Eagle Point pursuant to the terms of this
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Section 8.2 to indemnify and hold harmless the Stockholders shall be limited to,
in the aggregate, $55,000, and shall terminate twelve months after the Closing
Date.
8.3. INDEMNITY BY STOCKHOLDERS LIMITED TO INDEMNITY ESCROWED SHARES.
Eagle Point acknowledges and agrees that the obligations of the Stockholders at
any particular time pursuant to Section 8.1 to indemnify and hold harmless Eagle
Point (other than in respect of any breach by any Stockholder of its
representations and warranties contained in Sections 3.4, 4.1, 4.3 or 4.4 and
other than in respect of any fraudulent breach) shall be limited to, and paid,
settled, satisfied and discharged solely from, any Indemnity Escrowed Shares
(including dividends, if any, thereon) then on deposit in the escrow account
established pursuant to the Indemnity Escrow Agreement and, except in respect of
any breach by any Stockholder of its representations and warranties contained in
Sections 3.4, 4.1, 4.3 or 4.4 or in respect of any fraudulent breach, shall be
non-recourse to any Stockholder or any assets or properties of any Stockholder
(other than such Stockholder's rights and interest, if any, in such Indemnity
Escrowed Shares deposited in the escrow account established pursuant to the
Indemnity Escrow Agreement).
8.4. ADDITIONAL LIMITATIONS.
(a) An indemnifying party shall have no obligation to pay
indemnification for any Loss or Expense to the extent that recovery for such
Loss or Expense is actually paid to the indemnified party under any policy of
insurance. To the extent that an indemnified party is subsequently paid by an
insurance company for any Loss or Expense with respect to which payment was
previously received by the indemnified party hereunder, the indemnified party
shall promptly, upon receipt of the insurance proceeds, reimburse the
indemnifying party from the insurance proceeds in an amount up to the
indemnifying party's prior payment to the indemnified party with respect to such
Loss or Expense.
(b) In calculating any Loss or Expense there shall be deducted the
amount of any income tax benefit available to any indemnified person (or any of
its Affiliates) with respect to such Loss or Expense (after giving effect to the
tax effect of receipt of the indemnification payments).
(c) The amount of any indemnification otherwise payable to an
indemnified party with respect to a Loss or Expense, arising from the
disallowance by the relevant taxing authority of a tax deduction or tax credit
previously taken by
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the indemnified party, shall be reduced to the extent of the tax benefit to the
indemnified party, because it is permitted to deduct or amortize all or any part
of the amount that was disallowed as a deduction, or to use all or any part of
the tax credit that was disallowed, for the taxable period in question and/or
any taxable period thereafter, with appropriate discounts for timing factors.
8.5. NOTICE OF CLAIMS. (a) If Eagle Point believes that it or the
Company has suffered or incurred any Loss or incurred any Expense, Eagle Point
shall so notify the Stockholders and the Escrow Agent promptly in writing
describing such Loss or Expense, the amount thereof, if known, and the method of
computation of such Loss or Expense, all with reasonable particularity and
containing a reference to the provisions of this Agreement or other agreement,
instrument or certificate delivered pursuant hereto in respect of which such
Loss or Expense shall have occurred. If any action at law or suit in equity is
instituted by or against a third party with respect to which Eagle Point intends
to claim any liability or expense as Loss or Expense under this Article VIII,
Eagle Point shall promptly notify the Stockholders and the Escrow Agent of such
action or suit.
(b) If the Stockholders believe that they have suffered or incurred
any Loss or incurred any Expense, the Stockholders shall so notify Eagle Point
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement or other agreement, instrument or certificate delivered pursuant
hereto in respect of which such Loss or Expense shall have occurred. If any
action at law or suit in equity is instituted by or against a third party with
respect to which the Stockholders intend to claim any liability or expense as
Loss or Expense under this Article VIII, the Stockholders shall promptly notify
Eagle Point of such action or suit.
(c) The amount to which an indemnified person shall be entitled under
this Article VIII shall be determined: (i) by the written agreement between the
indemnified person and the indemnifying party; (ii) by arbitration in accordance
with Section 11.13 hereof; or (iii) by any other means to which the indemnified
person and the indemnifying party shall agree. The judgment or decree of a court
shall be deemed final when the time for appeal, if any, shall have expired and
no appeal shall have been taken or when all appeals taken have been finally
determined. The indemnified person shall have the burden of proof in
establishing the amount of the Loss and Expense suffered by it.
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(d) Notwithstanding the foregoing, the failure of any person hereto
to give any notice described in this Section 8.5 shall not relieve any party
hereto of its obligations hereunder, except to the extent such failure shall
have prejudiced such party.
8.6. THIRD PARTY CLAIMS. (a) Subject to Section 8.6(b), any person
indemnified under this Article VIII shall have the right to conduct and control,
through counsel of its choosing, any third party claim, action, suit,
proceeding, investigation or other claim giving rise to a claim for
indemnification hereunder (a "Third Party Claim") and the person indemnified may
compromise or settle the same, provided that the indemnified person shall give
the indemnifying party at least 10 days' advance notice of any proposed
compromise or settlement. The indemnified person shall permit the indemnifying
party to participate in the defense of any Third Party Claim through counsel
chosen by it, provided that the fees and expenses of such counsel shall be borne
by the indemnifying party. Subject to Section 8.6(b), any compromise or
settlement with respect to a claim for money damages effected after the
indemnifying party by notice to the indemnified person shall have disapproved
such compromise or settlement shall discharge the indemnifying party from
liability with respect to the subject matter thereof, and no amount in respect
thereof shall be claimed as Loss or Expense under this Article VIII.
(b) If the remedy sought in any Third Party Claim is solely money
damages and will have no continuing effect on the business, reputation or future
business prospects of any indemnified person, the indemnifying party shall have
15 business days after receipt of the notice referred to in the last sentence of
Section 8.5(a) to notify the indemnified person that it elects to conduct and
control such Third Party Claim. If the indemnifying party gives the foregoing
notice, the indemnifying party shall have the right to undertake, conduct and
control, through counsel of its own choosing and at the sole expense of the
indemnifying party, the conduct and settlement of such Third Party Claim, and
the indemnified person shall cooperate with the indemnifying party in connection
therewith; provided that (x) the indemnifying party shall not thereby permit to
exist any lien, encumbrance or other adverse charge upon any asset of any
indemnified person; (y) the indemnifying party shall permit the indemnified
person to participate in such conduct or settlement through counsel chosen by
the indemnified person, but the fees and expenses of such counsel shall be borne
by the indemnified person except as provided in clause (z) below; and (z) the
indemnifying party shall agree promptly to reimburse to the extent required
under this Article VIII the indemnified person for the full amount of
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any Loss arising from or relating to such Third Party Claim and all related
Expense incurred by the indemnified person, except fees and expenses of counsel
for the indemnified person incurred after the assumption of the conduct and
control of such Third Party Claim by the indemnifying party. So long as the
indemnifying party is contesting any such Third Party Claim in good faith, the
indemnified person shall not pay or settle any such Third Party Claim.
Notwithstanding the foregoing, the indemnified person shall have the right to
pay or settle any such Third Party Claim, provided that in such event the
indemnified person shall waive any right to indemnity therefor by the
indemnifying party, and no amount in respect thereof shall be claimed as Loss or
Expense under this Article VIII.
8.7. EXCLUSIVE REMEDY. Eagle Point and the Company acknowledge and agree
that, from and after the Closing, except for any claim and the related
indemnification described in Article X, their sole and exclusive remedy with
respect to any and all claims relating to the subject matter of this Agreement
or the Merger Agreement shall be pursuant to the indemnification provisions set
forth in this Article VIII. In furtherance of the foregoing, Eagle Point and the
Company hereby waive, from and after the Closing, to the fullest extent
permitted under applicable law, any and all rights, claims and causes of action
either of them may have against the Stockholders relating to the subject matter
of this Agreement or the Merger Agreement arising under or based upon any
federal, state or local statute, law, ordinance, rule, permit or regulation.
ARTICLE IX
TERMINATION
9.1. TERMINATION. This Agreement shall be terminated automatically in the
event the Merger Agreement is terminated in accordance with its terms. Anything
contained in this Agreement to the contrary notwithstanding, this Agreement may
also be terminated at any time prior to the Closing Date:
(a) By the mutual consent of the Company and Eagle Point;
(b) By the Company or Eagle Point if the Closing shall not have
occurred on or before December 31, 1995 (or such later date as shall be mutually
agreed to in writing by the Company, the Stockholders and Eagle Point); provided
that the party seeking termination is not in default or breach of this
Agreement;
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(c) By the Company in the event of a breach by Eagle Point of any of
its representations, warranties or covenants contained in this Agreement, which
breach is not cured by Eagle Point within 10 days after written notice of such
breach;
(d) By Eagle Point in the event of a breach by the Company or the
Stockholders of any of their respective representations, warranties and
covenants contained in this Agreement, which breach is not cured by the Company
or the Stockholders with 10 days after written notice of such breach; or
(e) By Eagle Point in the event that it is advised by Deloitte &
Touche L.L.P. that it is reasonably likely that the Merger will not be treated
by the Securities and Exchange Commission as a pooling of interests for
accounting purposes.
9.2. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to the preceding Section of this Agreement, all further
obligations of the parties under this Agreement and the Merger Agreement shall
be terminated without further liability of any party or its stockholders,
directors or officers to the other parties, provided that nothing herein shall
relieve any party from liability for its wilful breach of this Agreement or the
Merger Agreement.
ARTICLE X
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT; REGISTRATION
10.1. RESTRICTIONS ON TRANSFERABILITY. The Eagle Point Shares acquired by
the Stockholders in connection with the Merger shall not be sold, assigned,
transferred or pledged except upon the conditions specified in this Article X,
which conditions are intended, among other things, to ensure compliance with the
provisions of the Securities Act. Each Stockholder will cause each proposed
purchaser, assignee, transferee or pledgee of such Eagle Point Shares to agree
to take and hold such Eagle Point Shares subject to the provisions and upon the
conditions specified in this Article X, subject, nevertheless, to any
requirement of law that the Stockholder's property remain within such
Stockholder's control.
10.2. RESTRICTIVE LEGEND. Each certificate representing the Eagle Point
Shares acquired by the Stockholders in connection with the Merger and any other
securities issued in respect of such Eagle Point Shares upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar
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event, shall (unless otherwise permitted by the provisions of Section 10.3) be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR THE SECURITIES LAWS OF ANY STATE. SUCH SHARES MAY NOT BE SOLD,
TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS EAGLE
POINT SOFTWARE CORPORATION RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE
COUNSEL FOR EAGLE POINT SOFTWARE CORPORATION) REASONABLY ACCEPTABLE TO
EAGLE POINT SOFTWARE CORPORATION STATING THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID
ACT AND THE SECURITIES LAWS OF ANY APPLICABLE STATE. IN ADDITION, SUCH
SHARES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER CONTAINED IN THE
SUPPLEMENTAL AGREEMENT DATED AS OF NOVEMBER 7, 1995 BETWEEN EAGLE POINT
SOFTWARE CORPORATION, EAGLE POINT ACQUISITION CORP., ECOM ASSOCIATES, INC.
AND THE STOCKHOLDERS OF ECOM ASSOCIATES, INC. A COPY OF SUCH AGREEMENT
COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF EAGLE POINT SOFTWARE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF SUCH CORPORATION.
The Company and each Stockholder consents to Eagle Point making a
notation on its records and giving instructions to any transfer agent of such
Eagle Point Shares in order to implement the restrictions on transfer
established in this Section 10.2 and Section 10.3.
10.3. NOTICE OF PROPOSED TRANSFERS. (a) The holder of each
certificate representing Eagle Point Shares required to bear the legend set
forth in Section 10.2 ("Restricted Securities") by acceptance thereof agrees to
comply in all respects with any provisions of this Section 10.3 applicable to
such Restricted Securities. At least ten days prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than a
transfer not involving a change in beneficial ownership), unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to Eagle Point of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient
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detail and shall be accompanied, at such holder's expense, by either (a) a
written opinion of legal counsel (such opinion to be reasonably satisfactory to
Eagle Point), addressed to Eagle Point, to the effect that the proposed transfer
of the Restricted Securities may be effected without registration under the
Securities Act or (b) a "no action" letter from the Securities and Exchange
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Securities
and Exchange Commission that action be taken with respect thereto, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to Eagle Point. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made in
compliance with Rule 144 of the Securities Act, the appropriate restrictive
legend set forth in Section 10.2, except that such certificate shall not bear
such restrictive legend if in the opinion of counsel for such holder and Eagle
Point such legend is not required in order to establish compliance with any
provisions of the Securities Act.
10.4. PIGGY-BACK REGISTRATION. (a) Notice of Registration. If, at
any time or from time to time, Eagle Point shall determine to register any Eagle
Point Shares, either for its own account or the account of a stockholder of
Eagle Point, other than (i) a registration relating solely to employee benefit
plans, or (ii) a registration relating solely to Rule 145 of the Securities Act,
the Company will:
(i) promptly give to each Stockholder written notice thereof; and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Eagle Point Shares acquired by the Stockholders in
connection with the Merger ("Registrable Securities") specified in a
written request or requests made within 30 days after receipt of such
written notice from Eagle Point by any Stockholder.
(b) Underwriting. If the registration in respect of which Eagle
Point gives notice is for a registered public offering involving an
underwriting, Eagle Point shall so advise the Stockholders as a part of the
written notice given pursuant to Section 10.4(a). In such event the right of
any Stockholder to registration pursuant to Section 10.4(a) shall be conditioned
upon such Stockholder's participation in such underwriting and
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<PAGE>
the inclusion of Registrable Securities in the underwriting to the extent
provided herein. All Stockholders, if proposing to distribute their securities
through such underwriting, shall (together with Eagle Point and the other
Stockholders distributing their Registrable Securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by Eagle Point.
Notwithstanding any other provision of this Section 10.4, if the managing
underwriter determines that marketing factors require a limitation of the number
of Registrable Securities to be underwritten, the managing underwriter may limit
the Registrable Securities to be included in such registration. Eagle Point
shall so advise all Stockholders, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Stockholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Stockholders at the
time of filing the registration statement. If any Stockholder disapproves of the
terms of any such underwriting, he or she may elect to withdraw therefrom,
without the loss to such Stockholder of any rights under this Article X, by
written notice to the Company and the managing underwriter. Any securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration and shall not be transferred in a public distribution prior to 180
days after the effective date of the registration statement relating thereto.
(c) Right to Terminate Registration. Eagle Point shall have the
right to terminate or withdraw any registration initiated by it under this
Section 10.4 prior to the effectiveness of such registration whether or not any
Stockholder has elected to include securities in such registration.
10.5. INDEMNIFICATION. (a) Each Stockholder will, if Registrable
Securities held by such Stockholder are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify and
hold harmless Eagle Point, each of its directors and officers, each underwriter,
if any, of Eagle Point's securities covered by such registration statement, and
each person who controls Eagle Point or such underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
or liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material
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<PAGE>
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse Eagle Point, each of its officers and
directors, each person controlling Eagle Point, and each such underwriter and
each person who controls any such underwriter for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to Eagle Point by an instrument
duly executed by such Stockholder expressly for use therein. Notwithstanding the
foregoing, the liability of each Stockholder under this Section 10.5 shall be
limited to an amount equal to the aggregate public offering price of the
Registrable Securities sold by such Stockholder, unless such liability arises
out of or is based upon willful conduct by such Stockholder.
(b) Each party entitled to indemnification under this Section 10.5
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnification may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at the
Indemnified Party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Article X unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof, the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
10.6. EXPENSES OF REGISTRATION. All Registration Expenses (being
defined as all expenses incurred by Eagle Point in complying with Section 10.4,
including all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for Eagle Point, blue sky fees
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and expenses, and the expense of any special audits incident to or required in
connection with any such registration) incurred in connection with any
registration pursuant to this Article X shall be borne by Eagle Point. Unless
otherwise stated, all other Selling Expenses (being defined as all underwriting
discounts, selling commissions and stock transfer taxes applicable to the
Registrable Securities registered by the Stockholders and all fees and
disbursements of counsel for the Stockholders) relating to the Registrable
Securities registered on behalf of the Stockholders shall be borne by the
Stockholders pro rata on the basis of the number of shares so registered.
Notwithstanding the foregoing, Eagle Point shall not be required to effect or to
pay any Registration Expenses of any registration commenced pursuant to Section
10.4, the request of which registration has been subsequently withdrawn by
Stockholders of a number of shares of Registrable Securities such that there are
not Stockholders of Registrable Securities intending to participate in the
registration sufficient to request such a registration, in which case such
expenses shall be borne by the Stockholders of the Registrable Securities
requesting or causing such withdrawal.
10.7. TERMINATION OF REGISTRATION RIGHTS. Any and all registration
rights granted by Eagle Point to any Stockholder pursuant to Section 10.4 shall
terminate and any and all obligations and rights of both Eagle Point and such
Stockholder granted under Section 10.4 or Section 10.6 shall be null and void at
the time any such Registrable Securities held by such Stockholder may be
transferred by such Stockholder in compliance with Rule 144(k) under the
Securities Act.
ARTICLE XI
MISCELLANEOUS
-------------
11.1. EXPENSES. (a) Eagle Point shall bear the expenses and fees of
counsel to the Company or the Stockholders and the Company's accountants
incurred by the Company or the Stockholders in connection with the preparation,
negotiation and execution of this Agreement, the Merger Agreement, the Indemnity
Escrow Agreement, the Horn Employment Agreement, the Buettner Employment
Agreement or the Moeschberger Employment Agreement and consummation of the
transactions contemplated hereby and thereby, subject to the indemnification of
Eagle Point provided in Section 8.1(d) for any fees, expenses or costs described
therein which, in the aggregate, exceed $10,000; provided, however, the
outstanding legal bill to the Company in the amount of $865.00 shall be paid by
the Company prior to the date hereof and such payment shall not be subject to
the terms of this Agreement.
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<PAGE>
(b) Except as otherwise provided herein, Eagle Point shall bear its
own expenses and fees and commissions (including, but not limited to, all
compensation and expenses of counsel, consultants and accountants) incurred in
connection with its preparation, negotiation and execution of this Agreement,
the Merger Agreement, the Indemnity Escrow Agreement, the Horn Employment
Agreement, the Buettner Employment Agreement or the Moeschberger Employment
Agreement and consummation of the transactions contemplated hereby or thereby.
11.2. NOTICES. Any notices or other communications required under this
Agreement shall be in writing, shall be deemed to have been given when delivered
in person, by telex or telecopier, when delivered to a recognized next business
day courier, or, if mailed, when deposited in the United States mail, first
class, registered or certified, return receipt requested, with proper postage
prepaid, addressed as follows or to such other address as notice shall have been
given pursuant hereto:
If to the Stockholders or the Company prior to Closing, to:
ECOM Associates, Inc.
8324 North Steven Road
Milwaukee, Wisconsin 53223
Attention: Dan Horn, President
Telecopy: (414) 365-2110
and if to the Stockholders after the Closing, to:
8324 North Steven Road
Milwaukee, Wisconsin 53223
Telecopy: (414) 365-2110
with a copy to:
Michael, Best & Friedrich
100 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Bartlett C. Petersen
Telecopy: (414) 277-0656
If to Eagle Point or the Purchaser, to:
Eagle Point Software Corporation
4131 Westmark Drive
Dubuque, Iowa 52002-2627
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<PAGE>
Attention: Dennis J. George, Chief Financial
Officer, Vice President, Secretary and Treasurer
Telecopy: (319) 556-8424
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden
Telecopy: (312) 853-7036
11.3. ASSIGNMENT. Prior to the Effective Time, this Agreement may
not be assigned, by operation of law or otherwise. Following the Effective Time,
any party may assign any of its rights hereunder, but no such assignment shall
relieve it of its obligations hereunder.
11.4. INTERPRETATION. The article and section headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement. Whenever the context may
require, any pronoun used herein shall include the corresponding masculine,
feminine or neuter forms.
11.5. COUNTERPARTS. This Agreement may be executed in two 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; and shall become binding
when two or more counterparts have been signed by each of the parties hereto and
delivered to each of Eagle Point, Purchaser, the Stockholders and the Company.
11.6. AMENDMENT. This Agreement may not be amended, modified or
supplemented except by a writing signed by an authorized representative of each
of the parties hereto.
11.7. ENTIRE AGREEMENT. This Agreement and the Merger Agreement
(including the Schedules and Exhibits attached hereto) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
11.8. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and
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<PAGE>
permitted assigns.
11.9. SURVIVAL. The covenants, agreements, indemnities,
representations and warranties of the Company, the Stockholders or Eagle Point
made in or pursuant to this Agreement shall survive the Closing notwithstanding
any investigation made or information obtained by or on behalf of Eagle Point;
provided, however, that, except as otherwise provided in Article VIII, the
representations and warranties of the Company, the Stockholders or Eagle Point
contained herein or in any certificate delivered with respect thereto (other
than the representations and warranties contained in Sections 3.4, 4.1, 4.3 or
4.4 which shall survive for the applicable statute of limitations period) shall
terminate twelve months after the Closing Date. Except as otherwise expressly
provided in Article VIII, no claim shall be made for breach of any
representation or warranty contained herein or in any certificate delivered with
respect thereto under this Agreement after the date on which such
representations and warranties shall terminate as set forth in this Section.
11.10. SEVERABILITY. Wherever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective in the jurisdiction involved to the extent, but
only to the extent, of such invalidity, illegality or unenforceability without
invalidating the remainder of such invalid, illegal or unenforceable provision
or provisions or any other provisions hereof, unless such a construction would
be unreasonable.
11.11. THIRD PARTIES. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any person or entity that is not a party hereto or
a successor or permitted assign of such a party.
11.12. WAIVERS. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provi-
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<PAGE>
sion of this Agreement shall not be construed to be a waiver of such provision,
nor in any way to affect the validity of this Agreement or any part hereof or
the right of any party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.
11.13. GOVERNING LAW; ARBITRATION. (a) This Agreement shall be
governed by and construed in accordance with the internal laws (as opposed to
the conflicts of law provisions) of the State of Wisconsin.
(b) If the parties hereto are unable to resolve a dispute, such
dispute shall be submitted to binding arbitration in accordance with the
Commercial Arbitration Rules (the "Rules") of the American Arbitration
Association then in effect, and judgment on the award rendered by the arbitrator
may be entered in any court having jurisdiction. The arbitration shall be
conducted in Milwaukee, Wisconsin. There shall be a single arbitrator. Eagle
Point and the Stockholders shall agree upon the appointment of such arbitrator
within thirty (30) days after the arbitration is initiated, failing which the
arbitrator shall be appointed as provided in the Rules. The arbitrator shall be
independent of and have no prior connection with any of the parties. The
reasonable costs and expenses of the arbitrator shall be shared equally between
Eagle Point and the Stockholders.
11.14. DEFINITIONS. In this Agreement, the following terms have the
meanings specified or referred to in this Section 11.14 and shall be equally
applicable to both the singular and plural forms.
"Affiliate" shall mean: any person or entity (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, the person or entity involved, including, without
limitation, officers and directors, (b) that directly or beneficially owns or
holds 5% or more of any equity interest in the person or entity involved, or (c)
5% or more of whose voting securities (or in the case of a person which is not a
corporation, 5% or more of any equity interest) is owned directly or
beneficially by the person or entity involved. As used herein, the term
"control" shall mean possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a person or entity,
whether through ownership of securities, by contract or otherwise.
"Balance Sheet" has the meaning specified in Section 3.6.
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<PAGE>
"Balance Sheet Date" has the meaning specified in Section 3.6.
"Buettner Employment Agreement" has the meaning specified in Section
6.2(j).
"Business" means the businesses engaged in by the Company as of the
date of this Agreement.
"Closing" has the meaning specified in Section 1.3.
"Closing Date" has the meaning specified in Section 1.3.
"Company Common Stock" has the meaning specified in Section 3.3(a).
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, medical waste, special waste, asbestos, petroleum or
petroleum-derived substance, radioactive material or waste, or any constituent
of any such substance or waste and including, without limitation, any substance
which any Governmental Body or lawful representative thereof requires to be
controlled, removed, monitored, encapsulated or remediated or otherwise
addressed for the purposes of protection of the environment or public or worker
health and safety.
"Current Market Price" as used with reference to Eagle Point Shares,
means, as of any date of determination, the per share closing sale price of a
share of common stock, par value $.01 per share, of Eagle Point on The Nasdaq
National Market (as reported in the Midwest edition of the Wall Street Journal)
for such date (or, if such date is not a trading date, as of the most recent
trading date).
"Distributable Indemnity Escrowed Shares" has the meaning specified in
Section 1.5.
"Effective Time" has the meaning specified in Section 1.1.
"Encumbrance" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, covenant or other restriction of any kind.
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<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means (a) any corporation which at, or at any time
before, the Closing Date is or was a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code) as the Company
or any predecessor of the Company; (b) any partnership, trade or business
(whether or not incorporated) which at, or at any time before, the Closing Date
is or was under common control (within meaning of Section 414(c) of the Code)
with the Company; and (c) any entity, which at, or at any time before, the
Closing Date is or was a member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as either the Company or any predecessor
of the Company, any corporation described in clause (a) or any partnership,
trade or business described in clause (b).
"Escrow Agent" has the meaning specified in Section 1.5.
"Expenses" means any and all reasonable expenses incurred in
connection with investigating, defending or asserting any claim, action, suit or
proceeding incident to any matter indemnified against hereunder (including,
without limitation, court filing fees, court costs, arbitration fees or costs,
witness fees, and reasonable fees and disbursements of legal counsel,
investigators, consultants, expert witnesses, accountants and other
professionals).
"Facility" means any real or personal property, plant, building,
facility, structure, underground storage tank, or equipment or unit, or other
asset owned, used, leased or operated by the Company.
"Financial Statements" has the meaning specified in Section 3.6.
"Governmental Body" means any court, government (federal, state, local
or foreign), department, commission, board, bureau, agency, official or other
regulatory, administrative or governmental authority.
"Horn Employment Agreement" has the meaning specified in Section
6.2(j).
"Indemnity Escrow Agreement" has the meaning specified in Section 1.5.
"Interim Financial Statements" has the meaning
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specified in Section 3.6.
"Knowledge." As used in this Agreement, any reference to the
"knowledge" of the Company or the Stockholders, or the like, shall mean those
matters which are actually known by any of the Stockholders, without any duty of
investigation or inquiry or any constructive or imputed knowledge being
attributable to any of them.
"Losses" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.
"Moeschberger Employment Agreement" has the meaning specified in
Section 6.2(j).
"Permitted Encumbrances" means: (a) encumbrances for taxes or
assessments or other governmental charges which are not yet due and payable; (b)
materialmen's, merchants', carriers', worker's, repairer's, or other similar
Encumbrances arising in the ordinary course of business which are not yet due or
payable; (c) purchase money security interests; and (d) the security interest of
Park Bank in all of the assets of the Company.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any Facility of any
Contaminant, including the movement of Contaminants through or in the air, soil,
surface water, groundwater or Facility.
"Requirements of Law" means any federal, state or local law, rule or
regulation, Governmental Permit or other binding determination of any
Governmental Body.
"Securities Act" has the meaning specified in Section 4.3.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (a)
any federal, state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add-on minimum, ad valorem,
transfer, excise, stamp or environmental tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any Governmental Body; and (b) liability of the Company for the
payment of amounts with respect to payments of a type described in clause (a) as
a
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result of being a member of an affiliated, consolidated, combined or unitary
group, or as a result of any obligation of the Company under any Tax sharing
arrangement or Tax indemnity arrangement.
"Tax Returns" means any return, report or similar statement required
to be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"WBCL" has the meaning specified in Section 1.2.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
EAGLE POINT SOFTWARE CORPORATION
By:
---------------------------------------
Rodney L. Blum
Chairman, President and Chief Executive Officer
EAGLE POINT-ACQUISITION CORP.
By:
---------------------------------------
Rodney L. Blum
President
ECOM ASSOCIATES, INC.
By:
---------------------------------------
Daniel G. Horn
President
STOCKHOLDERS:
----------------------------------------
Daniel G. Horn
----------------------------------------
David A. Buettner
----------------------------------------
Kathleen M. Moeschberger
----------------------------------------
Donald R. Buettner
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Exhibit F
---------
[Form of Director's Resignation]
November __, 1995
To the Board of Directors of
ECOM Associates, Inc.
Ladies and Gentlemen:
I hereby resign from my position[s] as [insert titles of offices] [and
a director] of ECOM Associates, Inc. (the "Company"), such resignation to be
effective concurrently with the consummation of the merger of Eagle Point
Acquisition Corp., a Wisconsin corporation ("Purchaser"), with and into the
Company pursuant to the terms and conditions of the Agreement and Plan of Merger
dated November __, 1995 among Eagle Point Software Corporation, Purchaser and
the Company.
Very truly yours,
______________________________
Name:
<PAGE>
Exhibit 10.17
ASSET PURCHASE AGREEMENT
------------------------
This Agreement ("Agreement") is made and entered into this 17th day of
July, 1996, by and between Computer Integrated Building Corporation, a
California corporation ("Seller") and Eagle Point Software Corporation, a
Delaware corporation with principal place of business in Dubuque, Iowa
("Buyer").
WITNESSETH:
-----------
WHEREAS, Seller is engaged in the business of developing and marketing
computer software products and in pursuance thereof, has accumulated assets and
inventory more particularly described herein; and
WHEREAS, Buyer wishes to purchase the assets of Seller delineated in this
Agreement upon all the terms and conditions stated herein.
NOW, THEREFORE, for valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereto AGREE as follows:
1. SALE AND PURCHASE OF ASSETS
---------------------------
For the purchase price hereinafter set forth, and on the terms and subject
to the conditions set forth in this Agreement, Seller will, at the Closing (as
hereinafter defined), sell, assign, convey, transfer and deliver to Buyer, free
and clear of all liens and encumbrances of every kind and description, and Buyer
will purchase from Seller, the following assets of Seller (hereinafter
"Assets"):
(a) All copyrights, trademarks, trade names, service marks, patents,
or other intellectual property rights of any type or description
(regardless of whether the same have been formally registered), in which
and to the extent Seller has an ownership interest in the same, including,
but not limited to, any interest of any type or description in any computer
software products now on the market or under development and specifically
including products known as "SolidBuilder." With respect to the foregoing
product lines and without limiting the above-described assets, the parties
agree that this sale includes a transfer from Seller to Buyer of all rights
to the use of the above-described product names, as well as Seller's
corporate name, fictitious or assumed names, abbreviations and derivative
names and logos. As a consequence, and following Closing, Seller shall no
longer do business under the name "Computer Integrated Building Corporation
or SolidBuilder" or market any products which include the name "Computer
Integrated Building Corporation or SolidBuilder" or any assumed or
fictitious names, abbreviations or derivative names. If requested by Buyer,
Seller shall also take steps to change its corporate name at Buyer's
expense. Following Closing, therefore, Buyer shall have exclusive right to
all information concerning the Seller's product line and client base
including customer lists, addresses, phone
<PAGE>
numbers, and other identifying information or marketing documentation of
whatever sort.
(b) With regard to the above and foregoing Assets, there is attached
hereto Exhibit "A-1."
(1) Exhibit "A-1" contains a list and description (showing in
each case any product, device, process, service, business, or
publication covered thereby, the registered or other owner, expiration
data and number, if any) of all copyrights, patents, and trademarks
(including all assumed or fictitious names under which Seller is
conducting the business or has within the previous five (5) years
conducted the business) owned by, licensed to, or used by Seller in
connection with the conduct of the business.
(2) Exhibit "A-1" contains a list and description (showing in
each case any owner, licensor, or licensee) of all software owned by,
licensed to, or used by Seller in the conduct of the business.
(3) Exhibit "A-1" contains a list and description (showing in
each case the parties thereto and the material terms thereof) of all
agreements, contracts, licenses, sublicenses, assignments, and
indemnities which relate to (i) any copyrights, patent rights, or
trademarks listed in Exhibit "A-1," (ii) any trade secrets owned by,
licensed to, or used by Seller in connection with the conduct of the
business, or (iii) any software listed in Exhibit "A-1."
(4) Except as disclosed in Exhibit "A-1," Seller either: (i)
owns the entire right, title, and interest in and to the intellectual
property and software included in the purchased Assets, free and clear
of any encumbrance; or (ii) has the perpetual, royalty-free right to
use the same.
(5) Except as disclosed in Exhibit "A-1": (i) all registrations
for copyrights, patent rights, and trademarks identified in Exhibit "
A-1" as being owned by Seller are valid and in force, and all
applications to register any unregistered copyrights, patent rights,
and trademarks so identified are pending and in good standing, all
without challenge of any kind; (ii) Seller has the sole and exclusive
right to bring actions for infringement or unauthorized use of the
intellectual property and software owned by Seller and included in the
purchased Assets, and to the best knowledge of Seller, there is no
basis for any such action. Correct and complete copies of: (x)
registrations for all registered copyrights, patent rights, and
trademarks identified in Exhibit "A-1" as being owned by Seller; and
(y) all pending applications to
2
<PAGE>
registered unregistered copyrights, patent rights, and trademarks
identified in Exhibit "A-1" as being owned by Seller (together with
any subsequent correspondence or filings relating to the foregoing)
have heretofore been delivered by Seller to Buyer.
(6) Except as set forth in Exhibit "A-1," no infringement of any
intellectual property right of any other person has occurred or
results in any way from the operations of Seller's business, no claim
of any infringement of any intellectual property right of any other
person has been made or asserted in respect of the operations of
Seller's business and Seller has not had notice of, or knowledge of
any reasonable basis for, a claim against Seller that the operations,
activities, products, software, equipment, machinery, or processes of
the business infringe any intellectual property right of any other
person.
(7) Except as disclosed in Exhibit "A-1": (i) the software
included in the purchased Assets is not subject to any transfer,
assignment, site, equipment, or other operational limitations; (ii)
Seller has maintained and protected the software included in the
purchased Assets that it owns ("owned software") (including, without
limitation, all source code and system specifications) with
appropriate proprietary notices (including, without limitation, the
notice of copyright in accordance with the requirements of 17. U.S.C.,
(S) 401), confidentiality and non-disclosure agreements and such other
measures as are necessary to protect the proprietary, trade secret, or
confidential information contained therein; (iii) the owned software
has been registered or is eligible for protection and registration
under applicable copyright law and has not been forfeited to the
public domain; (iv) Seller has copies of all releases or separate
versions of the owned software so that the same may be subject to
registration in the United States Copyright Office; (v) Seller has
complete and exclusive right, title, and interest in and to the owned
software; (vi) Seller has developed the owned software through its own
efforts and for its own account without the aid or use of any
consultants, agents, independent contractors, or persons (other than
persons that are employees of Seller); (vii) the owned software does
not infringe any intellectual property right of any other person;
(viii) any owned software includes the source code, system
documentation, statements of principles of operation and schematics,
as well as any pertinent commentary, explanation, program (including
compilers), work benches, tools, and higher level (or "proprietary")
language used for the development, maintenance, implementation, and
use thereof, so that a trained computer programmer versed in the
language in which source code was written could develop, maintain,
support, compile, and use all
3
<PAGE>
releases or separate versions of the same that are currently subject
to maintenance obligations by Seller; (ix) there are no agreements or
arrangements in effect with respect to the marketing, distribution,
licensing, or promotion of the owned software by any other person (x)
the owned software complies with all applicable requirements of laws
relating to the export or re-export of the same; and (xi) the owned
software may be exported or re-exported to all countries without the
necessity of any license, other than to those countries specified as
prohibited destinations pursuant to applicable regulations of the U.S.
Department of Commerce and/or the United States State Department.
(8) Except as disclosed in Exhibit "A-1," all employees, agents,
consultants, or contractors who have contributed to or participated in
the creation or development of any copyrightable, patentable, or trade
secret material on behalf of Seller or any predecessor in interest
thereto either: (i) is a party to a "work-for-hire" agreement under
which Seller is deemed to be the original owner/author of all property
rights therein; or (ii) has executed an assignment or an agreement to
assign in favor of Seller (or such predecessor in interest, as
applicable) of all right, title, and interest in such material.
(c) Those Assets set forth on Exhibit "A-2" attached hereto and
incorporated herein by this reference.
2. PURCHASE PRICE OF ASSETS
------------------------
2.1 Cash Payment. In consideration of the sale by Seller of the Assets,
and in full and complete payment therefor, Buyer agrees, subject to the terms
and conditions contained herein, to pay Seller a Purchase Price (herein so
called) equal to Five Hundred and Fifty Thousand Dollars ($550,000.00) payable
in cash at time of Closing.
2.2 Earn-Out Payment
(a) Calculation. In addition to the foregoing cash payment, Seller
may receive an additional "earn-out payment" conditioned upon the achievement of
the revenue milestones set forth below generated from the sale of Seller's
Product by Buyer during the 12 month period immediately following the Closing
(as defined in Paragraph 9 below, i.e., 364 days following the date of closing),
hereinafter referred to as the "Earn-Out Period." If, during the Earn-Out
Period, revenues generated from Sellers' Product exceed $550,000, then the earn-
out payment would be equal to 0.75 times the revenues over $550,000 up to a
revenue of $743,400. Should revenues, during the Earn-Out Period, exceed
$743,400, then the earn-out payment would be equal to 0.75 times the revenues
over $550,000 and 0.50 times the revenues over $743,400.
4
<PAGE>
For purposes of this Paragraph 2.2(a) "Seller's Product" shall mean all versions
(including the Windows version under development) of the SolidBuilder software
and the SolidBuilder Symbols library together with all upgrades and training
associated therewith designed and sold for the home building market. For
purposes of this Paragraph 2.2 (a), "revenues" shall mean and be equal to gross
revenues recognized by Buyer on an accrual basis in accordance with GAAP and
generated from the license or sale of Seller's Product less any applicable
royalties paid or payable by Buyer, sales tax., and sales returns and
allowances. Buyer agrees to make its commercial best efforts to market and sell
Seller's Product so as to enhance revenues, to this end, Buyer agrees not to
modify sales patterns so as to reduce revenues.
By way of example:
<TABLE>
<CAPTION>
Example One Example Two
----------- -----------
<S> <C> <C>
Revenues (one year after Closing Date) $700,000 $1,486,800
Purchase Price $550,000 $ 550,000
Earn-out $112,500 $ 145,050
Additional Earn-out $ 0 $ 371,700
TOTAL $662,500 $1,066,750
</TABLE>
(b) Payment. At the Buyer's option the calculated Earn-out can be
paid in lump sum or in installments. If the Earn-out is to be paid in a lump
sum, then such payment must be made within 90 days from the end of the Earn-out
period. If the Earn-out is to be paid in installments, then the payments will be
in equal quarterly installments over a one year period. Such installment
payments shall be evidenced by a promissory note (in the form attached hereto as
Exhibit "E") from Buyer to Seller for the full amount of the Earn-out payment as
calculated pursuant to Paragraph 2.2(a) above. Such note shall provide for
payment to Seller in equal quarterly installments, amortized over one (1) year,
and bearing interest at a rate of prime (the rate charged to preferred
commercial lenders as reported in the Wall Street Journal) on June 30, 1997.
2.3 Allocation of Purchase Price. Seller and Buyer further agree that the
allocation of the Purchase Price of the Assets shall be as set forth in Exhibit
"B" as is attached hereto, and no party will take any position, for whatever
purposes, inconsistent with such allocation.
2.4 Audit Rights. Buyer agrees to maintain, until the expiration of one
year following the Earn-Out Period, complete books, records and accounts
regarding (i) Seller's Product sold, licensed or distributed by Buyer during the
Earn-Out Period, (ii) gross revenues, applicable royalties paid or payable by
Buyer, sales tax., and sales returns and allowances attributable to Seller's
Product during the Earn-Out Period, and (iii) the earn-out payment made by Buyer
to Seller. Seller and its agents shall have the right to examine such books,
records and accounts of Buyer during Buyer's normal business hours to verify
Buyer's reports on the amount of earn-out due and payable to Seller under this
Agreement. If any such examination discloses a shortfall in payment of earn-out
to Seller of more than five percent (5%), Buyer agrees to pay or reimburse
Seller or its agents for the reasonable expenses of such examination.
5
<PAGE>
3. PAYMENT OF LIABILITIES
----------------------
Except for the those obligations set forth on Exhibit "F," which Buyer
agrees to assume and pay, the parties stipulate and agree that Buyer shall not
assume any liabilities or contractual obligations of Seller (including, but not
limited, to any employment contracts, accrued or unpaid vacation of Seller's
employees, or other obligations of Seller arising out of any relationship of
employment). Seller shall indemnify, defend, and hold Buyer harmless from and
against all debts, liabilities, obligations, or commitments attributable to or
arising in connection with Seller's business prior to Closing, including, but
not limited to, all debts, taxes (of any kind), liabilities, and obligations of
Seller, absolute, contingent, known, or unknown, existing, or arising on or
resulting from events which occurred or failed to occur on or before Closing and
specifically including any claim, loss, damage, or deficiency resulting directly
or indirectly from any misrepresentation, breach, non-fulfillment, or non-
compliance with any of the terms of any agreement on the part of Seller, any
product liability or any notes payable. Seller agrees to pay any sales, use, or
excise taxes arising solely by reason of the transactions contemplated by this
Agreement. In addition, Seller will pay for all client refunds of sales of
products or services made by Seller prior to the date of this agreement, and
will indemnify and hold Buyer harmless from any liability or expense associated
with its failure to do so including reasonable attorney's fees.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
---------------------------------------------------
Seller hereby represents, warrants and covenants with Buyer that, except as
set forth in the schedules to this Agreement delivered to Buyer concurrently
herewith (the "Seller's Schedule of Exceptions"), all of the following
statements are true, accurate and correct:
(a) Organization and Good Standing of Corporation. Seller is now and
at the Closing will be a corporation validly existing in good standing
under the laws of the state of its incorporation, and will have full right,
power and authority to (i) carry on the business presently conducted by it
and to own, lease and operate its assets and properties, (ii) enter into
this Agreement and (iii) consummate the transactions provided for herein.
(b) Assets. Seller, at the Closing, shall have good and marketable
title free and clear of any mortgage, lien, charge, security interest or
other encumbrance to all of the Assets.
(c) Contracts and Leases. Seller is not now and at the Closing will
not be in default under any of the leases, contracts or agreements, whether
oral or written, to which it is a party, nor will the execution of this
Agreement and the consummation of the transactions contemplated hereby
result in any default under any such leases, contracts or agreements. The
transactions contemplated hereby do not require the consent of any lessor,
third party or governmental agency except as shall have been obtained by
Seller prior to the Closing.
6
<PAGE>
(d) Authority to do Business. Through date of Closing, Seller shall
be authorized to do business as a corporation in all states in which such
authorization is required, except where the failure to so qualify would not
have a material adverse effect on the Seller.
(e) Litigation and Proceedings. Except as outlined in Exhibit "A-1"
there are no actions, suits or proceedings pending or to the knowledge of
Seller, threatened against or affecting Seller which may result in any
material adverse change in the business, operations, properties or assets
of Seller. Seller shall indemnify and hold Buyer harmless from and against
any and all costs (including reasonable attorney fees), judgments, fines,
or other expenses associated with any such actions, suits, or proceedings
and specifically including those costs associated with the potential and
actual actions referred about and recited in Exhibit "A-1."
(f) Taxes. Seller has filed, and between the date hereof and the
Closing shall file, all federal and state income, general excise and other
tax returns required to be filed by it and Seller has paid all taxes which
have become due pursuant to such returns or pursuant to any assessment
received by Seller. Seller shall indemnify and hold Buyer harmless, from
and against all tax-related penalties or additional taxes arising from
Seller's ownership and/or operation of the business of Seller prior to
Closing.
(g) Conduct Prior to Closing. Prior to Closing, Seller warrants and
represents that it will not:
i. Increase in any manner the compensation of any employees
of the Seller, pay or agree to pay a pension, retirement, allowance,
or other employee benefit to any employees of the Seller not required
by an existing plan, agreement, or arrangement with such person; or
commit itself to pay any additional pension, profit-sharing, bonus,
incentive, deferred compensation, stock purchase, stock option, group
insurance, severance pay, retirement, or other employee benefit plan,
agreement, or arrangement, or employee agreement with or for the
benefit of any persons employed by Seller;
ii. Permit any current insurance policies to be canceled or
terminated or any of the coverages thereunder to lapse unless the
Seller replaces such policy with comparable coverage;
iii. Enter into any agreement or incur any obligation other
than in the ordinary course of business which exceeds Three Thousand
Five Hundred Dollars ($3,500.00) without the permission of Buyer. Nor
enter into any agreement, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement;
7
<PAGE>
iv. Become subject to any liability or obligation (absolute or
contingent) except liabilities incurred or obligations under contracts
entered into in the ordinary course of business;
v. Enter into or terminate any lease of real or personal
property;
vi. Sell, abandon, or otherwise dispose or pledge, mortgage,
or otherwise encumber any of its assets other than in the ordinary
course of business, or make any commitment relating to any such
assets, other than in the ordinary course of business, or make any
commitment relating to any such assets, other than in the ordinary
course of business, or cancel or waive any claim or right of
substantial value;
vii. Enter into any collective bargaining agreement;
viii. Incur, assume, guarantee, or otherwise become liable with
respect to any indebtedness for money borrowed, or make any payment
with respect to any obligation for money borrowed, except as required
by the terms thereof or pursuant to existing loan agreements;
ix. Operate other than in the ordinary course of business and
will not, by way of example, and not by way of limitation, accelerate
accounts receivable or delay accounts payable;
x. Take any action which would disaffect customers or
negatively impact customer loyalty and, to this end, shall keep
available the services and present relationships with persons having
business dealings with Seller.
(h) Warranties to Survive Closing. Seller's warranties and
representations shall survive the Closing.
(i) Full Disclosure. No representation, warranty or covenant of
Seller contained herein or in any exhibit attached hereto, nor any
documents or other written information furnished to Buyer in connection
herewith, contains or will contain any untrue statement of a material fact,
or omits to state a material fact required to be stated herein or therein
or necessary to make the statements contained herein or therein, in light
of the circumstances in which they were made, not misleading.
(j) No Undisclosed Liabilities. Seller is not subject, with respect
to its business, to any liability (including, without limitation,
unasserted claims, whether
8
<PAGE>
known or unknown) whether absolute, contingent, accrued or otherwise, which
is not shown or which is in excess of amounts shown or reserved for in the
balance sheet, other than liabilities of the same nature as those set forth
in the balance sheet and the notes thereto and reasonably incurred in the
ordinary course of business after the balance sheet date.
(k) Covenants True on Closing. By execution hereof. Seller warrants
that it has performed all covenants contained in this Agreement and
required to be performed as of date of Closing. Seller further warrants by
execution hereof that the warranties contained herein of Seller will be
true at Closing just as they are at time of execution. Signature of the
President hereon, shall constitute his certification to the truth of the
foregoing on behalf on the Seller.
(l) No Conflict With Other Instruments. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, will not result in the breach of any term or
provisions of or constitute a default under an indenture, mortgage, deed of
trust or other material agreement or instrument to which Seller is a party
or by which the assets or properties of either of such entities are bound,
will not conflict with any provisions of the Certificates of Incorporation
or bylaws of Seller and will not constitute an event which with the lapse
of time or action by a third party, or both, could result in any default
under any of the foregoing or result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of Seller or upon the
capital stock of Seller.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller that, except as set forth in
the schedules to this Agreement as may be delivered to the Seller herewith (the
"Buyer's Schedule of Exceptions"), all of the following statements are true,
correct and accurate:
(a) Organization of Buyer. Buyer is now and at the Closing will be a
corporation duly organized and is validly existing and in good standing
under the laws of the State of Delaware and will have full right, power and
authority to (i) carry on the business presently conducted by it and to
own, lease and operate its assets and properties, (ii) enter into this
Agreement and (iii) consummate the transactions provided for herein.
(b) Authorization; Necessary Approvals. The execution and delivery
of this Agreement, and the consummation of the transactions contemplated
hereby, have been, or prior to the Closing will have been, duly and validly
authorized by all necessary corporate action on the part of the Buyer.
Buyer shall have obtained all director and shareholder approvals, if any,
necessary for the consummation of the transactions contemplated hereby
prior to the Closing.
9
<PAGE>
(c) No Conflict With Other Instruments. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, will not result in the breach of any term or provision
of or constitute a default under an indenture, mortgage, deed of trust or
other material agreement or instrument to which Buyer is a party or by
which the assets or properties of Buyer are bound, will not conflict with
any provisions of the Certificates of Incorporation or bylaws of Buyer and
will not constitute an event which with the lapse of time or action by a
third party, or both, could result in any default under any of the
foregoing or result in the creation of any lien, charge or encumbrance upon
any of the assets or properties of Buyer or upon the capital stock of
Buyer.
(d) Approval of Agreements. Buyer has full power, authority and
legal right to enter into this Agreement and to consummate the transactions
contemplated hereby and this Agreement constitutes the legal, valid and
binding obligation of Buyer enforceable in accordance with its terms.
(e) Warranties to Survive Closing. Buyer's warranties and
representations shall survive the Closing and any investigation made by or
on behalf of Seller.
(f) Third Party Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration
or filing with, any federal, state or local governmental authority or other
third party on the part of Buyer is required in connection with the
consummation of the transactions contemplated by this Agreement.
(g) Litigation and Proceedings. There are no actions, suits or
proceedings pending or to the knowledge of Buyer, threatened against or
affecting Buyer, which may result in any material adverse effect on Buyer's
business. There is no action, suite, proceeding or investigation by Buyer
currently pending or threatened or that buyer intends to initiate that
could reasonably be expected to have a material adverse effect on Buyer's
business.
(h) Full Disclosure. No representation, warranty or covenant of
Buyer contained herein or in any exhibit attached hereto, nor any document
or other written information furnished to the Company or the Shareholders
in connection herewith, contains or will contain any untrue statement of a
material fact, or omits to state a material fact required to be stated
herein or therein or necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not
misleading.
6. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER
---------------------------------------------
10
<PAGE>
The obligations of Buyer and Seller to cause the transactions contemplated
by this Agreement to be consummated shall be subject to the satisfaction at or
prior to the Closing of all of the following conditions, except as such parties
may waive such conditions in writing:
(a) Approvals and Consents. All orders, consents and approvals, if
any, in form and substance reasonably satisfactory to the parties hereto
and their respective counsel, necessary for the lawful consummation of the
transactions contemplated by this Agreement shall have been obtained.
(b) Litigation. At the Closing, there shall not be pending or
threatened litigation in any court or any proceeding by any governmental
commission, board or agency, with a view to seeking or in which it is
sought to restrain or prohibit consummation of the transactions
contemplated by this Agreement, and, to the knowledge of any of the parties
hereto, no investigations by any governmental agency shall be pending or
threatened which might result in any such suit, action or other
proceedings.
(c) Non-Competition Agreement. The principal shareholder(s) of
Seller, Eugene Murphy, Faith Morgan and Bruce Wicinas*, shall have executed
and delivered a Covenant to Not Compete in form attached hereto as Exhibit
"C." Notwithstanding anything herein to the contrary, such Noncompetition
Agreement shall be executed contemporaneous with this Agreement. *The
parties acknowledge that although certificates representing ownership of
shares of Seller have not yet issued, Bruce Wicinas is presently entitled
to the issuance of same pursuant to an understanding with Seller and he is
therefore to be considered a shareholder of Seller for all purposes under
this Agreement.
(d) Employment of Seller's Key Employees. Prior to closing, Eugene
Murphy, Faith Morgan and Bruce Wicinas, shall execute the Employment
Agreement and the Eagle Point Confidentiality, Trade Secret, and Non-
Competition Agreement in the form attached hereto as Exhibits "D" and
"D-1." Notwithstanding anything herein to the contrary, said Employment
Agreement shall be executed contemporaneous with this Agreement.
7. CONDITIONS TO OBLIGATIONS OF SELLER
-----------------------------------
The obligation of Seller to cause the transactions contemplated by this
Agreement to be consummated shall be subject to the satisfaction on or before
the Closing of all of the following conditions, except as Seller may waive such
conditions in writing:
(a) Representations, Warranties and Covenants. All representations
and warranties of Buyer contained in this Agreement shall be true in all
material respects as of the Closing as if such representations and
warranties were made as of the Closing.
8. CONDITIONS TO OBLIGATIONS OF BUYER
----------------------------------
11
<PAGE>
The obligation of Buyer to cause the transactions contemplated by this
Agreement to be consummated shall be subject to the satisfaction at or prior to
the Closing of all of the following conditions, except as Buyer may waive such
conditions in writing.
(a) Representations, Warranties and Covenants. All representations
and warranties of Seller contained in this Agreement shall be true in all
material respects as of the Closing as if such representations and
warranties were made as of the Closing.
(b) Condition. The agreement among Seller, Roger Schroff and Stephen
Schroff in the form of Exhibit "G" attached hereto shall have been executed
and delivered by the parties thereto.
(c) Additional Condition. Seller shall have entered into an
agreement with Truswal Systems Corporation rescinding a certain "Software
Agreement" dated October 21, 1994.
9. CLOSING
-------
The Closing of the transactions contemplated by this Agreement shall take
place at Buyer's corporate offices at Dubuque, Iowa, contemporaneous with
removal of the contingencies set forth in Paragraphs 8(b) and 8(c) above but in
no event later than July 31, 1996, or at such time as may be agreed upon by the
parties hereto. In the event the contingency ies referred to in Paragraph s 8(b)
and 8(c) are not removed by Seller on or before July 31, 1996, then this entire
Agreement and all attending agreements shall be voidable at the option of Buyer
by written notice to Seller. At the Closing, Seller will deliver to Buyer such
Bills of Sale, Assignments, and such other documents as may be necessary to vest
complete and indefeasible title to the Assets in Buyer. Buyer shall deliver to
the Seller Five Hundred and Fifty Thousand Dollars ($550,000.00) as required
hereunder. Buyer, Seller, and as appropriate, the identified shareholders of
Seller shall further execute and deliver an Assumption Agreement in the form
attached hereto as Exhibit "H", the Employment Agreements (collectively Exhibit
"D"), and the Eagle Point Software Corporation Employee Confidentiality and
Noncompetition Agreement (collectively Exhibit "D-1"), and such other documents
and instruments and take such further action as may be necessary or appropriate
to consummate the transactions contemplated by this Agreement.
10. EXPENSES
--------
Each party shall bear its own costs and expenses, including fees and
expenses of counsel, incurred in connection with the transactions contemplated
by this Agreement.
11. BULK SALES LAW
--------------
Seller has requested Buyer to waive compliance by Seller with the
provisions of any "Bulk Sales Law" and Buyer agrees to do so upon the express
agreement of Seller to save and hold
12
<PAGE>
Buyer harmless of and from any and all claims or liabilities of which Seller is
liable under Section 3 hereof except for those liabilities expressly assumed by
Buyer. Upon first receiving actual knowledge of any fact or circumstance which
would give rise to a claim for indemnification hereunder, Buyer shall give
notice of such fact or circumstance to Seller; provided, that Seller shall not
be released by any failure of Buyer to give such notice unless Seller is
materially and adversely affected by such failure. Upon being advised by Buyer
of the existence of a claim against Buyer for which Seller is liable pursuant to
the terms of this Agreement, Seller may, at its option, pay, settle or defend
such claim; provided, that Buyer may participate, at its expense, in the defense
of any such claim. In the event Buyer is required to actually pay any claim for
which Seller is liable under Section 3 hereof, Seller shall reimburse Buyer, as
appropriate, within ten (10) days of receiving a request for such reimbursement.
Buyer, however, shall not directly pay a claim unless judgment has been entered
against Buyer and Seller has not timely taken steps to stay enforcement of the
judgment. In the event Seller fails to make any such payment in the timely
manner, Buyer shall have the right to set off any amount owed to them by Seller
pursuant to the foregoing provisions, against any amounts owed by Buyer to
Seller.
12. INDEMNIFICATION
---------------
(a) Seller agrees to and does hereby indemnify and hold harmless Buyer
against any claims, losses, expenses (including reasonable attorney's
fees), obligations, deficiencies and liabilities which arise or result from
or are related to (i) any breach or failure of Seller to perform any of its
covenants or agreements set forth herein or (ii) the inaccuracy of any
representation or warranty made by Seller herein.
(b) Buyer agrees to and does hereby indemnify and hold harmless Seller
against any claims, losses, expenses (including reasonable attorney's
fees), obligations, deficiencies and liabilities which arise or result from
or are related to (i) any breach or failure of Buyer to perform any of its
covenants or agreements set forth herein or (ii) the inaccuracy of any
representation or warranty made by Buyer herein.
13. POST CLOSING REVIEW BY BUYER
----------------------------
From and after the date of this Agreement and continuing beyond the
Closing, Seller shall cooperate with Buyer and provide to Buyer all financial
information within Seller's possession or control that may be required to enable
Buyer to comply with the requirements imposed by Buyer's auditors or state or
federal regulators.
14. CONFIDENTIALITY/PUBLIC ANNOUNCEMENT
-----------------------------------
Except as permitted or except as otherwise required by law or the rules of
any applicable national securities exchange, Seller, Eugene R. Murphy, Faith
Morgan, and Bruce Wicinas shall not make or cause to be made, any public or
other announcement with respect to the transactions contemplated hereby without
prior written consent from Buyer. Seller further agrees that it shall
13
<PAGE>
make its best efforts to ensure that none of Seller's agents or employees make
or cause to be made any announcement prohibited hereunder.
15. MISCELLANEOUS
-------------
(a) This Agreement contains the entire agreement between the parties
hereto with respect to the transaction contemplated herein, and supersedes
all prior agreement, arrangements, or understandings relating to the
subject matter hereof. No change, addition, or amendment shall be made
except by a written agreement signed by the parties hereon.
(b) If any provisions of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect and the offending provision shall, to the extent
possible, be so construed and reformed as to render the same enforceable.
If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall nevertheless remain in full force and
effect in all other circumstances.
(c) The waiver by either party of a breach or violation of any
provision of this Agreement shall not operate as or be construed to be a
waiver of any subsequent breach hereof.
(d) Any and all notices required or permitted to be given under this
Agreement will be sufficient if furnished in writing, sent by registered or
certified mail to the principal business address of each party, addressed
to its President.
(e) This Agreement shall be interpreted, construed, and governed
according to the laws of the State of Iowa.
(f) The captions herein contained are for convenience only and shall
in no manner be construed as a part of this Agreement.
(g) Any dispute or claim arising out of or in connection with this
Agreement will be finally settled by binding arbitration in Iowa under the
Rules of Arbitration of the International Chamber of Commerce by one
arbitrator appointed in accordance with said rules. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, the parties may apply to any court
of competent jurisdiction for injunctive relief without breach of this
arbitration provision.
(h) All rights, remedies, duties, or obligations created or
established by this Agreement which, by their nature or context, are
intended to extend beyond execution hereof, shall survive closing.
(i) This Agreement will be binding upon, inure the benefit of, and be
enforceable by the parties hereon and their respective heirs, personal
14
<PAGE>
representatives, successors, and assigns, NOTWITHSTANDING THE FOREGOING,
NEITHER PARTY MAY ASSIGN ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT
WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER.
(j) This Agreement is executed in multiple originals, either or both
of which shall be regarded as the original Agreement. Prior to execution of
the signature originals, the parties shall execute signature pages of this
Agreement, and the agreements set out in Exhibits "C" hereof and shall
exchange facsimiles of their signatures by electronic transmission. All
such agreements shall be effective upon receipt by each party of such
facsimile transmissions. Thereafter, originals shall be executed first by
Buyer and then by Seller. Buyer's draft original shall then be returned to
Buyer by express mail.
(k) In the event of a suit to construe or interpret the terms of this
agreement, the general rule of laws that ambiguities shall be applies
against the drafter hereof shall not apply.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their authorized representatives, effective the day and year first above
written.
BUYER SELLER
- ----- ------
EAGLE POINT SOFTWARE CORPORATION COMPUTER INTEGRATED BUILDING CORPORATION
By: Rod Blum By: Eugene R. Murphy
_____________________________ _________________________________
Rod Blum, Its President Eugene R. Murphy, Its President
By: Dennis J. George By: Faith Morgan
_____________________________ _________________________________
Dennis J. George, Its Secretary Faith Morgan, Its Secretary
15
<PAGE>
EXHIBIT "A-1"
This exhibit refers to the Sale and Purchase of Assets of the agreement between
Eagle Point Software Corporation (the Buyer) and Computer Integrated Building
Corporation (the Seller).
List and Description of copyrights, patents and trademarks (Section 1.b.1)
- --------------------------------------------------------------------------
There are no copyrights, patents, or trademarks owned by, licensed to, or used
by Seller except for copyright notices as displayed on documentation, diskettes
and opening screens of the software, including an opening screen for
SolidBuilder and for SilverScreen and any common law copyrights that arise as a
consequence.
Company and product names used are CIB, SolidBuilder, Computer Integrated
Building.
Software Licenses (Section 1.b.2)
- ---------------------------------
The product SilverScreen, licensed from SDC, and PKZIP are licensed to the
Seller for use in Seller's product SolidBuilder. Symbols libraries used in
SolidBuilder (licensed from New Dimensions) are licensed to the Seller on a
royalty free basis.
Miscellaneous commercial software programs used in Seller's business includes
Word 6, Word 5, Excel, Lotus, ACT, Brief and other programs.
Seller has placed copyright notices on discs, manuals and initial pop-up screen
for its software products.
Agreements, Contracts, Licenses, etc. (Section 1.b.3)
- -----------------------------------------------------
SDC - Seller has 4 agreements with Schroff Development Corporation:
a. Development Contract
b. Non-disclosure Agreement
c. Licensing Agreement
d. Extension of license agreement to Truswal.
There are no copyrights, patent rights or trademarks other than those noted
above.
Agreements are provided only for SDC software. All other software products used
are commercially available products.
Seller has an agreement with Shelly Simpson of New Dimensions for royalty free
use of SolidBuilder Symbols and Enhanced Symbols.
1
<PAGE>
Title (Section 1.b.4)
- ---------------------
Seller owns rights to SolidBuilder.
Seller has royalty free rights for symbols but does not own symbols. Buyer
accepts that symbols can be transferred.
Seller has an agreement with SDC for use of its SilverScreen software for use
with Seller's SolidBuilder product. Seller is not assigning this right to Buyer.
Buyer will be responsible for future SilverScreen contracts.
Registrations (Section 1.b.5)
- -----------------------------
There are no registrations for copyrights, patent rights and trademarks.
There are no applications for copyrights, patent rights and trademarks.
There is no known basis for infringement or unauthorized use of Seller's
software.
Known infringements (Section 1.b.6)
- -----------------------------------
There are no known claims against Seller except for a lawsuit filed by Tricom
pictures, which Seller is defending. The suit has not been reduced to judgment
and there are no liens imposed on the Assets.
Proprietary and other notices (Section 1.b.7)
- ---------------------------------------------
Software product is limited to particular PC hardware and software
configurations as described in its literature.
Seller has not filed proprietary notices or included notices in accordance with
requirements of 17.U.S.C. 401.
Seller has placed copyright notices on all discs, manual and initial pop-up
screen for software. Seller has taken no action to forfeit the software to the
public domain to the best of Seller's knowledge.
Seller has copies of the current software released (Version 4.0).
Seller has not developed the owned software through its own efforts. Seller has
used consultants, agents, independent contractors and persons that are not
employees of seller. Except as described below, Seller has paid such employees,
consultants, agents, independent contractors and persons that are not employees
of Seller for the services they provided to Seller and accordingly has
transferred to Seller the contributions such persons made to the Assets.
2
<PAGE>
SDC (Schroff Development Corporation) contributed to the Asset pursuant to a
development agreement with Seller which was executed in 1989. Seller has not
fulfilled all its payment obligations under this contract but will do so and
will obtain a release from SDC contemporaneous with Closing.
Seller's standard non-disclosure agreements which have a term of 5 years have
been signed with the following people:
Charles Collum 3/3/94
Steve Perez 3/9/94
Jason Star 3/1/93
Bruce Wicinas 5/13/89
Leslie Ann Gorman 9/5/90
Gary Criss 10/23/90
Ron Rogers 12/10/91
Dave Weadock 12/14/90
John Brown 4/28/89
John Patton 3/9/90
Larry Shephard 2/5/90
Express Designs 5/5/90
Shelly Simpson 4/23/95
Howard Bromberg 8/31/92
Matt Thompson 7/5/96
The owned software does not infringe on any intellectual property rights to the
best knowledge of the Seller.
A programmer trained in Solid Modelling, Silver C, SilverScreen and CAD
application development can maintain, develop, support, and compile and use all
releases of the program.
There are marketing and distribution agreements with the SolidBuilder Marketing
Group and Lindstrom Builders for SolidBuilder and an OEM agreement with Truswal.
The software may or may not comply with legal requirements relating to the
export or re-export of the software. Seller has made no effort to export
software.
Seller does not know if the owned software may be exported or re-exported to all
countries without the necessity of any license.
Agreements (Section 1.b.8)
- --------------------------
Although Seller has paid all of the following CIB employees, agents and
consultants for the contributions they may have made to the Assets, none has
signed a work-for-hire agreement or executed a written agreement to assign
anything in favor of Seller with the exception of Gary Criss and Dave Weadock.
Some of them have signed non-disclosure agreements.
3
<PAGE>
Notwithstanding the foregoing, all contributions made by the persons below have
been transferred to Seller.
Pat Murphy Faith Morgan Roger House
Bruce Wicinas Dave Weadock Steve Perez
Shelly Simpson Serge Clement Gary Criss
Ron Rogers Michael Dooley Larry Shepard
Harry Hitchcock Bob Portnoy Jim Gleaves
Jerry Lindsey Charles Roig Miriah Hall
Morris Carey Jerry Bragstad Jason Star
Mile Pecerraro Steve Lightman Brendon Coe
Allen Haney Matt Thompson Charles Collum
John Robinson Paul Sannamen Dick Coe
Patrick Stohl Ty Forsick Bob Bingenhiemer
Yvonne Gahagan David Murphy Carlos Acura
Susan Murphy Juliette Marin Wendy Marget
Seena Garoway
The following individuals were employed by SDC in connection with the
development work done on SolidBuilder by SDC and Seller has not fulfilled all
its payment obligations under the SDC development contract.
Roger Schroff Jeff Howe
Moe Dubriel Don Elliot
Seller will fulfill such obligations or obtain a release contemporaneous with
Closing.
No present or past CIB sales personnel or sales support personnel have ever
signed a work-for-hire agreement or assignment.
4
<PAGE>
EXHIBIT "A-2"
Software Asset
- --------------
SolidBuilder source code for current version.
SolidBuilder source code for next version. (DOS and Windows)
Symbols source models.
SolidBuilder and Symbols object code. (product being shipped)
Enhanced Symbols source models.
Estimating Data base.
User Manuals and Tutorials. (hardcopy and electronic)
Support logs.
Marketing and Sales
- -------------------
Customer and lead databases
Customer files
Trade Show Booth and signs
Collateral Art Work
Collateral Material
Other Assets - Equipment and Furniture:
- ---------------------------------------
Computers:
486DX33, 8 RAM, 250 HD, Gateway 14" SVGA Monitor
486DX50, 16 RAM, Ambra 14" SVGA
486DX25, 340 HD, 14" Qume SVGA
486SX33, 8 RAM, 250 HD, 15" Microscan, SVGA
486DX33, 16 RAM, 250 HD, Dell SVGA 14"
486DX-2 80, 8 RAM, Proton A Monitor
486DX-2 66, 14" Mitsubishi SVGA
486DX 100, 15" Microscan, SVGA
PS/2 model 70, 386-16, Mag InnDivision 14" SVGA
Pentium 100, SVGA Monitor
HP LaserJet III
HP LaserJet IV Plus
Other Equipment and furnishings
Pitney Bowes postage scale
Smith Corona Typewriter XL 1900
Macro Tel Phone System with phones
1 HP FAX 900
2 - 1 tan, 1 gray 4 drawer file cabinets
1
<PAGE>
1 - tan 5 drawer file cabinet
2 - 2 drawer file cabinets
6 fold up 5' office tables
3 - 5' desks
4 - 5' desks with returns
3 Computer keyboard supports
Typing table
3 wood bookcases (1 plain, 1 gray, 1 large white press board)
2 - tan metal book shelves in shipping
2 - 7' x 6' metal shelves in shipping
6 cubicle dividers
8 stacking chairs
9 office chairs
10' tower for show booth and 4 signs for it
5 - 8' panels for show display
3 - 3' panels for show display
16 bit Ether net NIC's w/BNC connectors
Network cable - 250' RG 58 A/U
All commercial software (editors, spreadsheets, etc.) used in company.
2
<PAGE>
EXHIBIT "B"
The parties agree that the Purchase Price shall be allocated among the Assets as
follows:
ALLOCATION
<TABLE>
<CAPTION>
<S> <C>
Tangible Personal Property $ 20,000
Capitalized Proprietary Software $ 32,221
Purchased Software Research & Development To Be
Further Developed For Sales To Customers $473,717
Goodwill $ 24,062
--------
$550,000
</TABLE>
Each party agrees that it will not take any position for tax reporting purposes
that is inconsistent with the allocation set forth above.
<PAGE>
EXHIBIT "C"
COVENANT NOT TO COMPETE
This Agreement ("Agreement") is made and entered into this 17th day of
July, 1996, by and between Eugene R. Murphy, Faith Morgan, Bruce Wicinas, all
residents of California, (hereinafter sometimes, collectively "Covenantors") and
Eagle Point Software Corporation, a Delaware corporation with principal place of
business in Dubuque, Iowa ("EPSC").
W I T N E S S E T H :
---------------------
WHEREAS, Covenantors are shareholders of Computer Integrated Building, Inc.
("CIB"), which have entered into an agreement with EPSC for the sale of its
assets (hereinafter "Asset Purchase Agreement"); and
WHEREAS, the Asset Purchase Agreement between CIB and EPSC is conditioned
upon and contemplates the execution of the instant Agreement by certain of its
principal shareholders for the consideration recited in the Asset Purchase
Agreement.
NOW, THEREFORE, in consideration of the Asset Purchase Agreement, the
parties hereto AGREE as follows:
1. Covenant Not to Compete: The Covenantors hereby acknowledge and agree
that they possess trade secrets and personal influence with customers gained
during their employment with CIB which could be deeply and permanently injurious
to EPSC were such information to be put to use by them or a competitive business
enterprise. As a consequence, Covenantors agree that they will not, for a period
of three (3) years immediately following execution of the Asset Purchase
Agreement, for any reasons, voluntarily or involuntarily, whether or not for
compensation, be affiliated or associated with a company, or division of a
company or business entity which is engaged in a business competitive with EPSC,
and does business anywhere in the United States, either as an owner, partner,
joint venture, shareholder (other than ownership of less than one percent of the
securities of a publicly held corporation) employee, agent, officer, director,
consultant, or otherwise; provided, however, that Covenantors may be affiliated
or associated with a division of a company that is not engaged in a business
competitive with Buyer notwithstanding that any entity with which such division
is affiliated or associated, or any entity controlling or under common control
with such division (including, without limitation, the company of which such
division is a part), is engaged in a business competitive with Buyer. Moreover,
Covenantors shall not solicit or do business with current customers of CIB or
future customers of EPSC for a period of three years immediately following
execution hereof, for any reason, voluntarily or involuntarily, except as
permitted below. Covenantors further hereby acknowledge and agree that for
purposes of this Agreement, that a business enterprise shall be considered
competitive if it is engaged in the business of developing or distributing home
building design/construction software, whether such competition occurs at time
of execution hereof or at any time this covenant is invoked by EPSC. Covenantors
shall be allowed to sell, create, market
<PAGE>
or perform modeling services to businesses whose address is within a 250 mile
radius of Occidental, California or Yellow Springs, Ohio. Covenantors shall be
allowed to be affiliated with a divison of a company or entity as long as that
division does not engage in business that is competitive with Buyer as set forth
in this document.
2. Reformation: If any provision of this Agreement shall be invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect and the offending provision or provisions shall, to the extent
possible, be so modified and reformed as to render the same enforceable. If any
provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances.
3. Assignment: This Agreement shall not be assignable by Covenantors and
any purported assignment hereof shall not be valid and binding.
4. Governing Law: This Agreement shall be construed and interpreted
according to the laws of the State of Iowa.
5. Enforcement: In the event of a suit to enforce the provisions of this
Agreement, EPSC shall be entitled, in addition to any other remedies available
at law or in equity, to recover from Covenantor(s) all costs and expenses
associated with enforcing its rights hereunder including reasonable attorney's
fees.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
effective the day and year first above written.
EAGLE POINT SOFTWARE CORPORATION COVENANTORS
By:
------------------------------- -------------------------------
Rod Blum, Its President Eugene R. Murphy
By:
------------------------------- -------------------------------
Dennis J. George, Its Secretary Faith Morgan
-------------------------------
Bruce Wicinas
2
<PAGE>
EXHIBIT "D"
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into this 29th day of July, 1996, by and
between Eagle Point Software Corporation, a Delaware corporation (hereinafter
"Corporation") and Eugene R. Murphy, a resident of the state of California
(hereinafter "Employee").
W I T N E S S E T H :
---------------------
WHEREAS, Corporation and Computer Integrated Building Corporation, a
California corporation, have entered into a certain Asset Purchase Agreement
(hereinafter the "Purchase Agreement"); and
WHEREAS, said Purchase Agreement contemplates and is conditioned upon
execution of the instant Agreement.
NOW, THEREFORE, for valuable consideration and receipt and sufficiency of
which is hereby acknowledged, the parties hereto AGREE as follows:
1. Parties and Purpose. The Parties to this Agreement are Corporation and
Employee who intend no third party beneficiaries hereto. The purpose of this
Agreement is to define the relationship between Corporation as employer and
Employee an employee of Corporation.
2. Duties and Performance. Corporation hereby employs Employee as its
Product Manager of the Home Building Market and Employee accepts employment by
Corporation as upon all the terms and conditions hereinafter set forth. In
discharge of his responsibilities, Employee shall operate at the direction and
be subject to the control of Corporation's Board of Directors, President, Chief
Financial Officer, and such other officers or employees as may be identified,
from time to time, by the Board or President as having authority over him, and
shall perform such services and tasks as may be assigned to him from time to
time by the Board, the President, or such other officers or employees as may be
designated.
In addition, and not in limitation of Employee's responsibilities as
identified herein, Employee shall devote his full-time professional efforts to
Corporation. To this end, Employee shall devote a minimum of forty (40) hours
per week between the hours of 8:00 a.m. and 5:00 p.m. Pacific Time, Monday
through Friday, in fulfillment of his obligations hereunder. A more specific
recitation of Employee's duties and responsibilities may be provided, at the
option of Corporation, in a separate writing or writings. Any such writing(s)
shall be subject to change, from time to time, and without notice by
Corporation. In no event, however, shall such writing(s) change the general
nature of Employee's duties beyond those duties normally associated with a
similar position to that accepted by Employee at Corporation. By way of
example, and not by way of limitation, Employee's duties shall include
responsibility for creation and review of documentation/tutorials, assist and
aid in technical assistance/support, assist in the creation of
<PAGE>
marketing materials, completion of monthly status reports, creation of Phase
1/Phase 2 design documents, strategic account sales, product development and
market research, and travel as necessary or convenient to accomplish the
foregoing.
3. Term and Termination. Employee is engaged by Corporation for a term
commencing July 29, 1996, and terminating July 28, 1997, unless sooner
terminated as provided herein.
3.1 Employee may terminate this Agreement at any time and for any reason
upon fifteen (15) days' written notice to Corporation.
3.2 Corporation may terminate this Agreement prior to July 28, 1997, upon
the occurrence of any one of the following:
a. Any act of theft (as that term is defined in Chapter 714, Code of
Iowa 1993, as amended), embezzlement, or other documented proof of material
dishonesty;
b. Any documented proof of willful disloyalty to Corporation,
including, but not limited to, the willful usurpation of business opportunities,
divulging of confidential information, and/or trade secrets (as defined in
Exhibit "D-1" attached hereto), or the acquisition of an equity interest in any
directly competitive business enterprise;
c. Material inattention to or neglect of duties as set forth in
Paragraph 2 above, provided that such material inattention or neglect is not
isolated to a single incident and is not corrected by Employee following at
least one written warning from Corporation;
d. A documented pattern of insubordinate conduct or any single act of
material insubordination;
e. A violation of any material provision of this Agreement including,
but not limited to, any provision of the Eagle Point Software Corporation
Employee Confidentiality and Noncompetition Agreement attached hereto as Exhibit
"D-1";
f. The disability of Employee. As used herein, "disability" shall
mean any injury or illness which prevents Employee from performing each of the
material duties of his position for a period of ninety (90) days or longer.
g. Death of Employee
3.3 Corporation may immediately terminate this Agreement pursuant to
Section 3.2(a) and Section 3.2(b) upon written or oral notice to Employee. This
Agreement shall terminate automatically in the event of the death of Employee.
In the event of a termination of this Agreement by Corporation pursuant to
Section 3.2(a), Section3.2(b) or Section 3.2(g), Corporation shall not be
obligated to pay Employee any salary hereunder, other than as may be
2
<PAGE>
owed to Employee for prior periods, and shall not be required to continue any
benefits of Employee hereunder.
3.4 Corporation may terminate this Agreement pursuant to Section 3.2(c),
Section 3.2(d), Section 3.2(e), Section 3.2(f) by giving Employee two (2) weeks
written notice of such termination. Corporation shall not be obligated to pay
Employee any salary hereunder, other than as may be owed to Employee for prior
periods, and shall not be required to continue any benefits of Employee
hereunder.
3.5 If Corporation terminates this Agreement for any reason other than as
listed in Section 3.2, Corporation shall be obligated to continue to pay
Employee his then current annual base salary, payable in accordance with
Corporation's normal payroll practices, and Corporation shall be required to
continue to provide Employee with his then current benefits (as defined in
Paragraph 5 below), both until July 28, 1997.
4. Compensation. In consideration of the services of Employee
hereunder, Employee shall receive the following:
(a) Salary and Bonus. For the term hereof, Employee shall receive a
base salary of Sixty Thousand ($60,000) Dollars payable in equal bi-weekly
installments of Two Thousand Three Hundred Seven Dollars and Sixty Nine Cents
($2,307.69). In addition, Employee shall be extended the opportunity to earn a
bonus not to exceed Twelve Thousand ($12,000) Dollars during the term hereof.
One-half of bonus earned, if any, shall be based upon meeting or exceeding
personal quarterly sales quotas to be established by Corporation; and one-half
of bonus earned, if any, shall be based upon achieving, to Corporation's
satisfaction, quarterly goals to be established by Corporation. Bonus(es) shall
be paid on a quarterly basis; and
(b) Stock Options. At the first meeting of the Board of Director's
of Buyer following closing, Employee shall be granted options to purchase Six
Thousand Seven Hundred and Fifty (6,750) shares of Corporation's common stock in
accordance with the Eagle Point Software Corporation Stock Option Plan. Such
options shall be exercisable three years after the date of grant. The date of
exercise for a portion of the shares or all of the shares may be accelerated
based on accomplishment of certain milestones as identified below:
(i) The exercise date with respect to Two Thousand Two Hundred
and Fifty (2,250) shares of the granted stock options shall accelerate
to the first business day of the month following completion of the
month when Corporation has realized revenues upon the sale of
"Seller's Product" (as defined in Paragraph 2.2 of the Asset Purchase
Agreement of even date herewith) equal to Seven Hundred Forty Three
Thousand Four Hundred ($743,400) Dollars; and
(ii) The exercise date with respect to an additional Two Thousand
Two Hundred and Fifty (2,250) shares of the granted stock options
shall accelerate to the first business day of the month following
completion of the month when Corporation has realized revenues upon
the sale of "Seller's Product" (as defined
3
<PAGE>
in Paragraph 2.2 of the Asset Purchase Agreement of even date
herewith) equal to Nine Hundred Twenty Nine Thousand Two Hundred Fifty
($929,250) Dollars; and
(iii) The exercise date with respect to the final Two Thousand
Two Hundred and Fifty (2,250) shares of the granted stock options
shall accelerate to the first business day of the month following
completion of the month when Corporation has realized revenues upon
the sale of "Seller's Product" (as defined in Paragraph 2.2 of the
Asset Purchase Agreement of even date herewith) equal to One Million
One Hundred Fifteen Thousand One Hundred ($1,115,100) Dollars.
Exercise date(s) for the granted stock options shall not accelerate unless the
realized revenues described in sub paragraphs (i), (ii), and (iii) are achieved
during the term of this Agreement.
5. Vacation and Benefits. Employee shall be entitled to paid
vacation according to Corporation's existing policy for other similarly situated
salaried employees, as may be amended, at Corporation's discretion, from time to
time. In determining the amount of paid vacation available to Employee,
Employee's years of service on behalf of Computer Integrated Building
Corporation, (referred to in the recitals hereto) shall be counted as years of
service on behalf of Corporation.
In addition to the compensation provided for in Paragraph 4 above, Employee
shall be entitled to participate in Corporation's standard benefit package
available to other similarly situated salaried employees subject, of course, to
Employee's eligibility as determined by any insurance company or plan
administrator. Nothing herein, however, shall prevent Corporation from
eliminating benefits presently provided or altering plan designs as the Board of
Directors may determine in their sole and absolute discretion.
6. Working Facilities and Support Staff. Corporation shall
furnish Employee with such facilities, clerical and technical support, office
equipment, and /or supplies necessary to Employee to discharge his duties and
responsibilities hereunder, as the Board of Directors or the President, in their
sole and absolute discretion, shall deem appropriate. The Parties acknowledge
and agree, however, that Employee shall not be required to relocate from Sonoma,
County, California, during the term of this Agreement.
7. Reformation. If, for reasons beyond the parties' control, and
in spite of the provisions of Paragraph 10(e) below, this Agreement should be
subject to the laws of the State of California, then, to the extent necessary,
this Agreement shall be reformed and modified so as to bring the same into
compliance with the laws of the State of California and shall not be deemed null
and void for failure to comply with the same.
8. Master Employee Confidentiality and Noncompetition Agreement.
As a condition of employment, Employee shall execute the Eagle Point Software
Corporation Employee Confidentiality and Noncompetition Agreement which is
attached hereto and incorporated herein by this reference as Exhibit "D-1."
4
<PAGE>
9. Ownership of Inventions. All ideas, inventions, and other developments
or improvements conceived or reduced to practice by Employee, alone or with
others, during the term of this Agreement, whether or not during working hours,
that are within the scope of Corporation's business operation or that relate to
any of Corporation's work or projects, shall be owned by Corporation.
10. Miscellaneous.
-------------
(a) This Agreement contains the entire agreement between the parities
hereto with respect to the transaction contemplated herein, and
supersedes all prior agreement, arrangements, or understandings
relating to the subject matter hereof. No change, addition, or
amendment shall be made except by a written agreement signed by the
parties hereto.
(b) If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall nevertheless
remain in full force and effect and the offending provision shall, to
the extent possible, be so construed and reformed as to render the
same enforceable. If any provision is held invalid or unenforceable
with respect to particular circumstances, it shall nevertheless remain
in full force and effect in all other circumstances.
(c) The waiver by either party of a breach or violation of any
provision of this Agreement shall not operate as or be construed to be
a waiver of any subsequent breach hereof.
(d) Any and all notices required or permitted to be given under this
Agreement will be sufficient if furnished in writing, sent by
registered or certified mail to the principal business address in the
case of Corporation, or his last known residence address in the case
of Employee.
(e) This Agreement shall be interpreted, construed, and governed
according to the laws of the State of Iowa.
(f) The captions herein contained are for convenience only and shall
in no manner be construed as a part of this Agreement.
(g) All rights, remedies, duties, or obligations created or
established by this Agreement which, by their nature or context, are
intended to extend beyond execution hereof, shall survive closing.
(h) This Agreement will be binding upon, inure the benefit of, and be
enforceable by the parties hereto and their respective heirs, personal
representative successors, and assigns.
5
<PAGE>
IN WITNESS WHEREOF, Corporation has caused its corporate name to be signed
by its duly authorized officer and Employee has set his hand, all being done on
the date here first above written.
EAGLE POINT SOFTWARE CORPORATION EMPLOYEE
By: _________________________ _________________________
Rod Blum, Its President Eugene R. Murphy
By: __________________________
Dennis J. George, Its Secretary
6
<PAGE>
EXHIBIT "D"
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into this 29th day of July, 1996, by and
between Eagle Point Software Corporation, a Delaware corporation (hereinafter
"Corporation") and Faith Morgan, a resident of the state of California
(hereinafter "Employee").
W I T N E S S E T H :
---------------------
WHEREAS, Corporation and Computer Integrated Building Corporation, a
California corporation, have entered into a certain Asset Purchase Agreement
(hereinafter the "Purchase Agreement"); and
WHEREAS, said Purchase Agreement contemplates and is conditioned upon
execution of the instant Agreement.
NOW, THEREFORE, for valuable consideration and receipt and sufficiency of
which is hereby acknowledge, the parties hereto AGREE as follows:
1. Parties and Purpose. The Parties to this Agreement are Corporation
and Employee who intend no third party beneficiaries hereto. The purpose of this
Agreement is to define the relationship between Corporation as employer and
Employee an employee of Corporation.
2. Duties and Performance. Corporation hereby employs Employee as
a Senior Account Executive in the Building Design and Construction Division and
Employee accepts employment by Corporation as upon all the terms and conditions
hereinafter set forth. In discharge of her responsibilities, Employee shall
operate at the direction and be subject to the control of Corporation's Board of
Directors, President, Chief Financial Officer, and such other officers or
employees as may be identified, from time to time, by the Board or President as
having authority over her, and shall perform such services and tasks as may be
assigned to her from time to time by the Board, the President, or such other
officers or employees as may be designated.
In addition, and not in limitation of Employee's responsibilities as
identified herein, Employee shall devote her full-time professional efforts to
Corporation. To this end, Employee shall devote a minimum of forty (40) hours
per week between the hours of 8:00 a.m. and 5:00 p.m. Pacific Time, Monday
through Friday, in fulfillment of her obligations hereunder. A more specific
recitation of Employee's duties and responsibilities may be provided, at the
option of Corporation, in a separate writing or writings. Any such writing(s)
shall be subject to change, from time to time, and without notice by
Corporation. In no event, however, shall such writing(s) change the general
nature of Employee's duties beyond those duties normally associated with a
similar position to that accepted by Employee at Corporation. By way of
example, and not by way of limitation, Employee's duties shall include
responsibility for the attainment of personal
<PAGE>
quarterly sales quotas and to a lessor extent, aid and assist in the transfer of
CIB marketing and product knowledge and tactics to Eagle Point.
3. Term and Termination. Employee is engaged by Corporation for a
term commencing July 29, 1996, and terminating January 28, 1997, unless sooner
terminated as provided herein.
3.1 Employee may terminate this Agreement at any time and for any reason
upon fifteen (15) days' written notice to Corporation.
3.2 Corporation may terminate this Agreement prior to January 28, 1997,
upon the occurrence of any one of the following:
a. Any act of theft (as that term is defined in Chapter 714, Code of
Iowa 1993, as amended), embezzlement, or other documented proof of material
dishonesty;
b. Any documented proof of willful disloyalty to Corporation,
including, but not limited to, the willful usurpation of business opportunities,
divulging of confidential information, and/or trade secrets (as defined in
Exhibit "D-1" attached hereto), or the acquisition of an equity interest in any
directly competitive business enterprise;
c. Material inattention to or neglect of duties as set forth in
Paragraph 2 above, provided that such material inattention or neglect is not
isolated to a single incident and is not corrected by Employee following at
least one written warning from Corporation;
d. A documented pattern of insubordinate conduct or any single act of
material insubordination;
e. A violation of any material provision of this Agreement including,
but not limited to, any provision of the Eagle Point Software Corporation
Employee Confidentiality and Noncompetition Agreement attached hereto as Exhibit
"D-1";
f. The disability of Employee. As used herein, "disability" shall
mean any injury or illness which prevents Employee from performing each of the
material duties of her position for a period of ninety (90) days or longer.
g. Death of Employee
3.3 Corporation may immediately terminate this Agreement pursuant to
Section 3.2(a) and Section 3.2(b) upon oral or written notice to Employee. This
Agreement shall terminate automatically in the event of the death of Employee.
In the event of a termination of this Agreement by Corporation pursuant to
Section 3.2(a), Section 3.2(b) or Section 3.2(g), Corporation shall not be
obligated to pay Employee any salary hereunder, other than as may be owed to
Employee for prior periods, and shall not be required to continue any benefits
of Employee hereunder.
2
<PAGE>
3.4 Corporation may terminate this Agreement pursuant to Section 3.2(c),
Section 3.2(d), Section 3.2(e), Section 3.2(f) by giving Employee two (2) weeks
written notice of such termination. Corporation shall not be obligated to pay
Employee any salary hereunder, other than as may be owed to Employee for prior
periods, and shall not be required to continue any benefits of Employee
hereunder.
3.5 If Corporation terminates this Agreement for any reason other than as
listed in Section 3.2, Corporation shall be obligated to continue to pay
Employee her then current annual base salary, payable in accordance with
Corporation's normal payroll practices, and Corporation shall be required to
continue to provide Employee with her then current benefits (as defined in
Paragraph 5 below), both until January 28, 1997.
4. Compensation. In consideration of the services of Employee hereunder,
Employee shall receive the following:
(a) Salary and Bonus. For the term hereof, Employee shall receive a
base salary of Fifteen Thousand ($15,000) Dollars payable in equal bi-weekly
installments of One Thousand One Hundred Fifty Three Dollars and Eighty Five
Cents ($1,153.85). In addition, Employee shall be extended the opportunity to
earn a bonus not to exceed Six Thousand ($6,000) Dollars during the term hereof.
The bonus earned, if any, shall be based upon meeting or exceeding personal
quarterly sales quotas to be established by Corporation. Bonus(es) shall be paid
on a quarterly basis.
5. Vacation and Benefits. Employee shall be entitled to paid vacation
according to Corporation's existing policy for other similarly situated salaried
employees, as may be amended, at Corporation's discretion, from time to time. In
determining the amount of paid vacation available to Employee, Employee's years
of service on behalf of Computer Integrated Building Corporation, (referred to
in the recitals hereto) shall be counted as years of service on behalf of
Corporation.
In addition to the compensation provided for in Paragraph 4 above, Employee
shall be entitled to participate in Corporation's standard benefit package
available to other similarly situated salaried employees subject, of course, to
Employee's eligibility as determined by any insurance company or plan
administrator. Nothing herein, however, shall prevent Corporation from
eliminating benefits presently provided or altering plan designs as the Board of
Directors may determine in their sole and absolute discretion.
6. Working Facilities and Support Staff. Corporation shall furnish
Employee with such facilities, clerical and technical support, office equipment,
and /or supplies necessary to Employee to discharge her duties and
responsibilities hereunder, as the Board of Directors or the President, in their
sole and absolute discretion, shall deem appropriate. The Parties acknowledge
and agree, however, that Employee shall not be required to relocate from Sonoma,
County, California, during the term of this Agreement.
3
<PAGE>
7. Reformation. If, for reasons beyond the parties' control, and in spite
of the provisions of Paragraph 10(e) below, this Agreement should be subject to
the laws of the State of California, then, to the extent necessary, this
Agreement shall be reformed and modified so as to bring the same into compliance
with the laws of the State of California and shall not be deemed null and void
for failure to comply with the same.
8. Master Employee Confidentiality and Noncompetition Agreement. As a
condition of employment, Employee shall execute the Eagle Point Software
Corporation Employee Confidentiality and Noncompetition Agreement which is
attached hereto and incorporated herein by this reference as Exhibit "D-1."
9. Ownership of Inventions. All ideas, inventions, and other
developments or improvements conceived or reduced to practice by Employee, alone
or with others, during the term of this Agreement, whether or not during working
hours, that are within the scope of Corporation's business operation or that
relate to any of Corporation's work or projects, shall be owned by Corporation.
10. Miscellaneous.
-------------
(a) This Agreement contains the entire agreement between the parties
hereto with respect to the transaction contemplated herein, and
supersedes all prior agreement, arrangements, or understandings
relating to the subject matter hereof. No change, addition, or
amendment shall be made except by a written agreement signed by the
parties hereto.
(b) If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall nevertheless
remain in full force and effect and the offending provision shall, to
the extent possible, be so construed and reformed as to render the
same enforceable. If any provision is held invalid or unenforceable
with respect to particular circumstances, it shall nevertheless remain
in full force and effect in all other circumstances.
(c) The waiver by either party of a breach or violation of any
provision of this Agreement shall not operate as or be construed to be
a waiver of any subsequent breach hereof.
(d) Any and all notices required or permitted to be given under this
Agreement will be sufficient if furnished in writing, sent by
registered or certified mail to the principal business address in the
case of Corporation, or his last known residence address in the case
of Employee.
(e) This Agreement shall be interpreted, construed, and governed
according to the laws of the State of Iowa.
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<PAGE>
(f) The captions herein contained are for convenience only and shall
in no manner be construed as a part of this Agreement.
(g) All rights, remedies, duties, or obligations created or
established by this Agreement which, by their nature or context, are
intended to extend beyond execution hereof, shall survive closing.
(h) This Agreement will be binding upon, inure the benefit of, and be
enforceable by the parties hereto and their respective heirs, personal
representative successors, and assigns.
IN WITNESS WHEREOF, Corporation has caused its corporate name to be signed
by its duly authorized officer and Employee has set his hand, all being done on
the date here first above written.
EAGLE POINT SOFTWARE CORPORATION EMPLOYEE
By:
------------------------------- ---------------------------------------
Rod Blum, Its President Faith Morgan
By:
-------------------------------
Dennis J. George, Its Secretary
5
<PAGE>
EXHIBIT "D"
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into this 29th day of July, 1996, by and
between Eagle Point Software Corporation, a Delaware corporation (hereinafter
"Corporation") and Bruce Wicinas, a resident of the state of California
(hereinafter "Employee").
W I T N E S S E T H :
---------------------
WHEREAS, Corporation and Computer Integrated Building Corporation, a
California corporation, have entered into a certain Asset Purchase Agreement
(hereinafter the "Purchase Agreement"); and
WHEREAS, said Purchase Agreement contemplates and is conditioned upon
execution of the instant Agreement.
NOW, THEREFORE, for valuable consideration and receipt and sufficiency of
which is hereby acknowledge, the parties hereto AGREE as follows:
1. Parties and Purpose. The Parties to this Agreement are Corporation
and Employee who intend no third party beneficiaries hereto. The purpose of this
Agreement is to define the relationship between Corporation as employer and
Employee an employee of Corporation.
2. Duties and Performance. Corporation hereby employs Employee as
a Senior Systems Analyst in the Building Design and Construction Division and
Employee accepts employment by Corporation as upon all the terms and conditions
hereinafter set forth. In discharge of his responsibilities, Employee shall
operate at the direction and be subject to the control of Corporation's Board of
Directors, President, Chief Financial Officer, and such other officers or
employees as may be identified, from time to time, by the Board or President as
having authority over him, and shall perform such services and tasks as may be
assigned to him from time to time by the Board, the President, or such other
officers or employees as may be designated.
In addition, and not in limitation of Employee's responsibilities as
identified herein, Employee shall devote his full-time professional efforts to
Corporation. To this end, Employee shall devote a minimum of forty (40) hours
per week between the hours of 8:00 a.m. and 5:00 p.m. Pacific Time, Monday
through Friday, in fulfillment of his obligations hereunder. A more specific
recitation of Employee's duties and responsibilities may be provided, at the
option of Corporation, in a separate writing or writings. Any such writing(s)
shall be subject to change, from time to time, and without notice by
Corporation. In no event, however, shall such writing(s) change the general
nature of Employee's duties beyond those duties normally associated with a
similar position to that accepted by Employee at Corporation. By way of
example, and not by way of limitation, Employee's duties shall include those
responsibilities as outlined on Appendix A of this Agreement.
<PAGE>
3. Term and Termination. Employee is engaged by Corporation for a
term commencing July 29, 1996, and terminating July 28, 1997, unless sooner
terminated as provided herein.
3.1 Employee may terminate this Agreement at any time and for any reason
upon fifteen (15) days' written notice to Corporation.
3.2 Corporation may terminate this Agreement prior to July 28, 1997, upon
the occurrence of any one of the following:
a. Any act of theft (as that term is defined in Chapter 714, Code of
Iowa 1993, as amended), embezzlement, or other documented proof of material
dishonesty;
b. Any documented proof of willful disloyalty to Corporation,
including, but not limited to, the willful usurpation of business opportunities,
divulging of confidential information, and/or trade secrets (as defined in
Exhibit "D-1" attached hereto), or the acquisition of an equity interest in any
directly competitive business enterprise;
c. Material inattention to or neglect of duties as set forth in
Paragraph 2 above, provided that such material inattention or neglect is not
isolated to a single incident and is not corrected by Employee following at
least one written warning from Corporation;
d. A documented pattern of insubordinate conduct or any single act of
material insubordination;
e. A violation of any material provision of this Agreement including,
but not limited to, any provision of the Eagle Point Software Corporation
Employee Confidentiality and Noncompetition Agreement attached hereto as Exhibit
"D-1";
f. The disability of Employee. As used herein, "disability" shall
mean any injury or illness which prevents Employee from performing each of the
material duties of his position for a period of ninety (90) days or longer.
g. Death of Employee
3.3 Corporation may immediately terminate this Agreement pursuant to
Section 3.2(a) and Section 3.2(b) upon oral or written notice to Employee. This
Agreement shall terminate automatically in the event of the death of Employee.
In the event of a termination of this Agreement by Corporation pursuant to
Section 3.2(a), Section 3.2(b) or Section 3.2(g), Corporation shall not be
obligated to pay Employee any salary hereunder, other than as may be owed to
Employee for prior periods, and shall not be required to continue any benefits
of Employee hereunder.
2
<PAGE>
3.4 Corporation may terminate this Agreement pursuant to Section 3.2(c),
Section 3.2(d), Section 3.2(e), Section 3.2(f) by giving Employee two (2) weeks
written notice of such termination. Corporation shall not be obligated to pay
Employee any salary hereunder, other than as may be owed to Employee for prior
periods, and shall not be required to continue any benefits of Employee
hereunder.
3.5 If Corporation terminates this Agreement for any reason other than as
listed in Section 3.2, Corporation shall be obligated to continue to pay
Employee his then current annual base salary, payable in accordance with
Corporation's normal payroll practices, and Corporation shall be required to
continue to provide Employee with his then current benefits (as defined in
Paragraph 5 below), both until July 28, 1997.
4. Compensation. In consideration of the services of Employee hereunder,
Employee shall receive the following:
(a) Salary and Bonus. For the term hereof, Employee shall receive a
base salary of Sixty Thousand ($60,000) Dollars payable in equal bi-weekly
installments of Two Thousand Three Hundred Seven Dollars and Sixty Nine Cents
($2,307.69). In addition, Employee shall be extended the opportunity to earn a
bonus not to exceed Twelve Thousand ($12,000) Dollars during the term hereof.
The bonus earned, if any, shall be based upon achieving, to Corporation's
satisfaction, quarterly goals to be established by Corporation. Bonus(es) shall
be paid on a quarterly basis; and
(b) Stock Options. At the first meeting of the Board of Director's
of Buyer following closing, Employee shall be granted options to purchase Four
Thousand Five Hundred (4,500) shares of Corporation's common stock in accordance
with the Eagle Point Software Corporation Stock Option Plan. Such options shall
be exercisable three years after the date of grant. The date of exercise for a
portion of the shares or all of the shares may be accelerated based on
accomplishment of certain milestones as identified below:
(i) The exercise date with respect to One Thousand Five
Hundred (1500) shares of the granted stock options shall accelerate to
the first business day of the month following completion of the month
when Corporation has realized revenues upon the sale of "Seller's
Product" (as defined in Paragraph 2.2 of the Asset Purchase Agreement
of even date herewith) equal to Seven Hundred Forty Three Thousand
Four Hundred ($743,400) Dollars; and
(ii) The exercise date with respect to an additional One
Thousand Five Hundred (1500) shares of the granted stock options shall
accelerate to the first business day of the month following completion
of the month when Corporation has realized revenues upon the sale of
"Seller's Product" (as defined in Paragraph 2.2 of the Asset Purchase
Agreement of even date herewith) equal to Nine Hundred Twenty Nine
Thousand Two Hundred Fifty ($929,250) Dollars; and
3
<PAGE>
(iii) The exercise date with respect to the final One Thousand
Five Hundred (1500) shares of the granted stock options shall
accelerate to the first business day of the month following completion
of the month when Corporation has realized revenues upon the sale of
"Seller's Product" (as defined in Paragraph 2.2 of the Asset Purchase
Agreement of even date herewith) equal to One Million One Hundred
Fifteen Thousand One Hundred ($1,115,100) Dollars.
Exercise date(s) for the granted stock options shall not accelerate unless the
realized revenues described in sub paragraphs (i), (ii), and (iii) are achieved
during the term of this Agreement.
5. Vacation and Benefits. Employee shall be entitled to paid vacation
according to Corporation's existing policy for other similarly situated salaried
employees, as may be amended, at Corporation's discretion, from time to time. In
determining the amount of paid vacation available to Employee, Employee's years
of service on behalf of Computer Integrated Building Corporation, (referred to
in the recitals hereto) shall be counted as years of service on behalf of
Corporation.
In addition to the compensation provided for in Paragraph 4 above, Employee
shall be entitled to participate in Corporation's standard benefit package
available to other similarly situated salaried employees subject, of course, to
Employee's eligibility as determined by any insurance company or plan
administrator. Nothing herein, however, shall prevent Corporation from
eliminating benefits presently provided or altering plan designs as the Board of
Directors may determine in their sole and absolute discretion.
6. Working Facilities and Support Staff. Corporation shall furnish
Employee with such facilities, clerical and technical support, office equipment,
and/or supplies necessary to Employee to discharge his duties and
responsibilities hereunder, as the Board of Directors or the President, in their
sole and absolute discretion, shall deem appropriate. The Parties acknowledge
and agree, however, that Employee shall not be required to relocate from
Berkeley, County, California, during the term of this Agreement.
7. Reformation. If, for reasons beyond the parties' control, and in spite
of the provisions of Paragraph 10(e) below, this Agreement should be subject to
the laws of the State of California, then, to the extent necessary, this
Agreement shall be reformed and modified so as to bring the same into compliance
with the laws of the State of California and shall not be deemed null and void
for failure to comply with the same.
8. Master Employee Confidentiality and Noncompetition Agreement. A a
condition of employment, Employee shall execute the Eagle Point Software
Corporation Employee Confidentiality and Noncompetition Agreement which is
attached hereto and incorporated herein by this reference as Exhibit "D-1."
9. Ownership of Inventions. All ideas, inventions, and other developments
or improvements conceived or reduced to practice by Employee, alone or with
others, during the term of this Agreement, whether or not during working hours,
that are within the scope of
4
<PAGE>
Corporation's business operation or that relate to any of Corporation's work or
projects, shall be owned by Corporation.
10. Miscellaneous.
-------------
(a) This Agreement contains the entire agreement between the parities
hereto with respect to the transaction contemplated herein, and
supersedes all prior agreement, arrangements, or understandings
relating to the subject matter hereof. No change, addition, or
amendment shall be made except by a written agreement signed by the
parties hereto.
(b) If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall nevertheless
remain in full force and effect and the offending provision shall, to
the extent possible, be so construed and reformed as to render the
same enforceable. If any provision is held invalid or unenforceable
with respect to particular circumstances, it shall nevertheless remain
in full force and effect in all other circumstances.
(c) The waiver by either party of a breach or violation of any
provision of this Agreement shall not operate as or be construed to be
a waiver of any subsequent breach hereof.
(d) Any and all notices required or permitted to be given under this
Agreement will be sufficient if furnished in writing, sent by
registered or certified mail to the principal business address in the
case of Corporation, or his last known residence address in the case
of Employee.
(e) This Agreement shall be interpreted, construed, and governed
according to the laws of the State of Iowa.
(f) The captions herein contained are for convenience only and shall
in no manner be construed as a part of this Agreement.
(g) All rights, remedies, duties, or obligations created or
established by this Agreement which, by their nature or context, are
intended to extend beyond execution hereof, shall survive closing.
(h) This Agreement will be binding upon, inure the benefit of, and be
enforceable by the parties hereto and their respective heirs, personal
representative successors, and assigns.
5
<PAGE>
IN WITNESS WHEREOF, Corporation has caused its corporate name to be signed
by its duly authorized officer and Employee has set his hand, all being done on
the date here first above written.
EAGLE POINT SOFTWARE CORPORATION EMPLOYEE
By:
-------------------------------- -------------------------
Rod Blum, Its President Bruce Wicinas
By:
--------------------------------
Dennis J. George, Its Secretary
6
<PAGE>
Appendix "A" to Bruce Wicinas Employment Agreement
================================================================================
JOB TITLE: SENIOR SYSTEMS ANALYST
Basic Responsibilities:
. MAINTAIN AND ENHANCE EXISTING APPLICATION AND SYSTEMS SOFTWARE.
The Senior Systems Analyst should be capable of handling software
maintenance and new development tasks with no supervision. The Senior
Systems Analyst is not attached to any single Group, but has the ability
to maintain or enhance any product within the entire division. In
addition to application software, a Senior Systems Analyst may maintain
and enhance in-house applications, such as software production.
. REVIEW, REVISE AND CREATE DESIGN DOCUMENTS WITH PROGRAMMING GROUP
LEADER, PRODUCT ENGINEER.
A Senior Systems Analyst is skilled in the understanding and execution
of Eagle Point Design Documents, and working with the Programming Group
Leader and Product Engineers, provides assistance and technical
leadership in their creation. A Senior Systems Analyst may sit in on
Product Direction Meetings to offer technical insights.
. CODE NEW APPLICATION AND SYSTEMS SOFTWARE.
A Senior Systems Analyst takes responsibility for complex development
tasks, such as a suite of related commands or even entire product lines.
A Senior Systems Analyst creates new functionality without code
duplication and seeks methods to further consolidate existing code. A
Senior Systems Analyst actively searches for new ways to optimize
development and improve products from a technical standpoint, and
devotes research toward that end.
. EVALUATE, RECOMMEND AND CREATE DEVELOPMENT TOOLS, PLATFORMS, AND
ANCILLARY SYSTEMS
A Senior Systems Analyst performs technical testing and evaluation of
development tools such as compilers, editors, and CASE tools, operating
platforms such as CADD systems and operating systems, and ancillary
systems such as production. The Senior Systems Analyst is skilled in
developing in-house development support tools tailored to Eagle Point's
needs.
. PREPARE TIME ESTIMATES FOR ALL TASKS.
At the Senior Systems Analyst level, task management skills are mature.
Time estimates should be reliable, and the Senior Systems Analyst should
be able to give reasonably accurate (plus/minus 25%) estimates for
larger-scale projects given only verbal descriptions (for feasibility
studies).
. PROVIDE TRAINING AND GUIDANCE TO ENTIRE DEVELOPMENT STAFF.
The Senior Systems Analyst provides technical assistance to development
personnel, in both application and pure programming matters. This may
take place on a one-to-one level, or the Senior Systems Analyst may
conduct in-house training for groups of Development staff.
. SPECIAL TASKS AS ASSIGNED BY PROGRAMMING MANAGER.
EAGLE POINT PROGRAMMING CAREER PATHS - Senior Systems Analyst
<PAGE>
EXHIBIT "D-1"
EAGLE POINT SOFTWARE CORPORATION
EMPLOYEE CONFIDENTIALITY
AND
NONCOMPETITION AGREEMENT
In consideration of my employment by, and compensation from, Eagle Point
Software Corporation, or any division, subsidiary, or affiliated corporation or
business enterprise (hereinafter collectively referred to as "EPSC"), I agree as
follows:
COVENANT OF CONFIDENTIALITY
1. I agree to devote my full time and ability to EPSC's interests during
my regular hours of employment and for whatever additional time may be properly
required of me. I agree not to engage in employment or other business
commitments outside of my regular hours of employment if such employment or
commitments would tend to impair my ability to meet my regular job
responsibilities of EPSC.
2. Because of my work as an employee of EPSC will expose me to trade
secrets (as defined and understood in Chapter 550, Code of Iowa 1993, as
amended) and confidential information of EPSC or information of others that EPSC
has agreed to maintain in confidence, (such trade secrets and other information
hereinafter referred to as "Confidential Information"), I agree: (i) to use any
Confidential Information disclosed to me solely in the performance of my work at
EPSC and not to disclose it to any person not authorized to receive it, to
refrain from using Confidential Information for the advancement of my personal
interests, including the promotion of the interests of any future employers I
may have; and (ii) to comply with the policies and procedures of EPSC regarding
the safe keeping of Confidential Information as may be developed or amended from
time to time.
3. In the event my employment with EPSC is terminated for any reason,
voluntarily or involuntarily, at any time, if so requested by EPSC, I will
promptly return and deliver to EPSC all Confidential Information that was given
to me or was in my possession or held by me or through me, in whatever form
whatsoever, including, without limitation, all written information general and
technical documentation, customer lists, business plans, marketing plans,
pricing data, financial data, or any copies thereof, in any media in which any
of the Confidential Information is embodied including, but not limited to,
computer programs or disks, in either source code or machine readable form. I
agree that during or after my employment with EPSC, I will not make copies of
any Confidential Information or retain any such items or copies thereof in my
possession or keep such items under my control and that I will not pass on any
Confidential Information or copies thereof to any persons inside or outside of
Eagle Point Software Corporation other than in the course of performing services
for EPSC in accordance with its corporate policies and that I will not try to
sell or make any profit or economic benefit for myself or my future employer
from the use or sale of any Confidential Information.
<PAGE>
COVENANT NOT TO COMPETE
4. I hereby acknowledge and agree that I possess trade secrets and
personal influence with customers gained during my employment with CIB which
could be deeply and permanently injurious to EPSC were such information to be
put to use by me or a competitive business enterprise. As a consequence, I agree
that I will not, for a period of eighteen (18) months immediately following
termination of my employment for any reason, voluntarily or involuntarily,
whether or not for compensation, be affiliated or associated with a company or a
division of a company or business entity which is engaged in a business
competitive with EPSC, and does business anywhere in the United States, either
as an owner, partner, joint venture, shareholder (other than ownership of less
than one percent of the securities of a publicly held corporation) employee,
agent, officer, director, consultant, or otherwise; provided, however, that I
may be affiliated or associated with a division of a company that is not engaged
in a business competitive with Buyer notwithstanding that any entity with which
such division is affiliated or associated, or any entity controlling or under
common control with such division (including, without limitation, the company of
which such division is a part), is engaged in a business competitive with Buyer.
Moreover, I shall not solicit or do business with current customers of CIB or
future customers of EPSC for a period of eighteen (18) months immediately
following termination of my employment for any reason, voluntarily or
involuntarily, except as permitted below. I further hereby acknowledge and agree
that for purposes of this Agreement, that a business enterprise shall be
considered competitive if it is engaged in the business of developing or
distributing home building design/construction software, whether such
competition occurs at time of execution hereof or at any time this covenant is
invoked by EPSC. Notwithstanding the foregoing, I understand that I shall be
allowed to sell, create, market or perform modeling services to businesses whose
address is within a 250 mile radius of Occidental, California or Yellow Springs,
Ohio.
ADDITIONAL COVENANTS
5. I further agree that in the event my employment with EPSC is terminated
for any reason, voluntarily or involuntarily, I will not, for a period of
eighteen (18) months following such termination, make any statement or perform
any act intended to advance an interest of any existing or prospective
competitor of EPSC in its relationships and dealings with existing or potential
clients, or solicit or encourage any other employee of EPSC to do any act that
is disloyal to EPSC or inconsistent with EPSC's interests or in violation of any
provision of this Agreement.
6. I further agree that in the event my employment with EPSC is terminated
for any reason, voluntarily or involuntarily, I will not for a period of
eighteen (18) months following such termination, directly or indirectly, hire,
employ, solicit for employment, or advise or recommend to any other person that
the employer solicit for employment any employee of EPSC.
OWNERSHIP OF INVENTIONS
2
<PAGE>
7. I understand and agree that all ideas, inventions, and other
developments or improvements conceived by me or reduced to practice by me, alone
or with others, during the term of this Agreement, whether or not during working
hours, that are within the scope of EPSC's business operations or that relate to
any of EPSC's work or projects, shall be owned by EPSC.
REFORMATION
8. If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect and the offending provision or provisions shall, to the extent
possible, be so modified and reformed as to render the same enforceable. If any
provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances. If for reasons beyond the parties' control, and in spite of
Paragraph 11 below, this Agreement should be subject to the laws of the State of
California, then, to the extent necessary, this Agreement shall be reformed and
modified so as to bring the same in to compliance with the laws of the State of
California and shall not be deemed null and void for failure to comply with the
same.
NOT CONTRACT OF EMPLOYMENT
9. I understand that this Agreement does not constitute a contract of
employment nor establish any right in me to continued employment by EPSC. I
understand that this Agreement in no way limits EPSC's right to terminate my
employment at any time at EPSC's sole discretion subject only to any written
Agreement of Employment as may exist between me and EPSC. I also understand and
agree that this Agreement shall survive the termination of my employment for any
reason, whether voluntary or involuntary.
APPLICABLE LAW
10. I understand and agree that this Agreement shall be governed,
constructed, and interpreted consistent with the laws of the State of Iowa.
ENFORCEMENT
11. I understand and agree that in the event of a suit to enforce the
provisions of this Agreement, EPSC shall be entitled, in addition to any other
remedies available at law or in equity, to recover from me all costs and
expenses associated with enforcing its rights hereunder including reasonable
attorney's fees.
ACKNOWLEDGEMENT OF RECEIPT
12. I acknowledge receipt of a copy of this document, and agree that with
respect to the subject matter hereof, it represents my entire understanding with
EPSC, superseding any previous oral or written communications, representations,
understandings, or agreements with EPSC or any officer or representative
thereof.
3
<PAGE>
EAGLE POINT SOFTWARE CORPORATION EMPLOYEE
By: ________________________________ __________________________________
Rod Blum, Its President Eugene R. Murphy
By: ________________________________
Dennis J. George, Its Secretary
4
<PAGE>
EXHIBIT "D-1"
EAGLE POINT SOFTWARE CORPORATION
EMPLOYEE CONFIDENTIALITY
AND
NONCOMPETITION AGREEMENT
In consideration of my employment by, and compensation from, Eagle Point
Software Corporation, or any division, subsidiary, or affiliated corporation or
business enterprise (hereinafter collectively referred to as "EPSC"), I agree as
follows:
COVENANT OF CONFIDENTIALITY
1. I agree to devote my full time and ability to EPSC's interests during
my regular hours of employment and for whatever additional time may be properly
required of me. I agree not to engage in employment or other business
commitments outside of my regular hours of employment if such employment or
commitments would tend to impair my ability to meet my regular job
responsibilities of EPSC.
2. Because of my work as an employee of EPSC will expose me to trade
secrets (as defined and understood in Chapter 550, Code of Iowa 1993, as
amended) and confidential information of EPSC or information of others that EPSC
has agreed to maintain in confidence, (such trade secrets and other information
hereinafter referred to as "Confidential Information"), I agree: (i) to use any
Confidential Information disclosed to me solely in the performance of my work at
EPSC and not to disclose it to any person not authorized to receive it, to
refrain from using Confidential Information for the advancement of my personal
interests, including the promotion of the interests of any future employers I
may have; and (ii) to comply with the policies and procedures of EPSC regarding
the safe keeping of Confidential Information as may be developed or amended from
time to time.
3. In the event my employment with EPSC is terminated for any reason,
voluntarily or involuntarily, at any time, if so requested by EPSC, I will
promptly return and deliver to EPSC all Confidential Information that was given
to me or was in my possession or held by me or through me, in whatever form
whatsoever, including, without limitation, all written information general and
technical documentation, customer lists, business plans, marketing plans,
pricing data, financial data, or any copies thereof, in any media in which any
of the Confidential Information is embodied including, but not limited to,
computer programs or disks, in either source code or machine readable form. I
agree that during or after my employment with EPSC, I will not make copies of
any Confidential Information or retain any such items or copies thereof in my
possession or keep such items under my control and that I will not pass on any
Confidential Information or copies thereof to any persons inside or outside of
Eagle Point Software Corporation other than in the course of performing services
for EPSC in accordance with its corporate policies and that I will not try to
sell or make any profit or economic benefit for myself or my future employer
from the use or sale of any Confidential Information.
<PAGE>
COVENANT NOT TO COMPETE
4. I hereby acknowledge and agree that I possess trade secrets and
personal influence with customers gained during my employment with CIB which
could be deeply and permanently injurious to EPSC were such information to be
put to use by me or a competitive business enterprise. As a consequence, I agree
that I will not, for a period of eighteen (18) months immediately following
termination of my employment for any reason, voluntarily or involuntarily,
whether or not for compensation, be affiliated or associated with a company, or
a division of a company or business entity which is engaged in a business
competitive with EPSC, and does business anywhere in the United States, either
as an owner, partner, joint venture, shareholder (other than ownership of less
than one percent of the securities of a publicly held corporation) employee,
agent, officer, director, consultant, or otherwise; provided, however, that I
may be affiliated or associated with a division of a company that is not engaged
in a business competitive with Buyer notwithstanding that any entity with which
such division is affiliated or associated, or any entity controlling or under
common control with such division (including, without limitation, the company of
which such division is a part), is engaged in a business competitive with Buyer.
Moreover, I shall not solicit or do business with current customers of CIB or
future customers of EPSC for a period of eighteen (18) months immediately
following termination of my employment for any reason, voluntarily or
involuntarily, except as permitted below. I further hereby acknowledge and agree
that for purposes of this Agreement, that a business enterprise shall be
considered competitive if it is engaged in the business of developing or
distributing home building design/construction software, whether such
competition occurs at time of execution hereof or at any time this covenant is
invoked by EPSC. Notwithstanding the foregoing, I understand that I shall be
allowed to sell, create, market or perform modeling services to businesses whose
address is within a 250 mile radius of Occidental, California or Yellow Springs,
Ohio.
ADDITIONAL COVENANTS
5. I further agree that in the event my employment with EPSC is terminated
for any reason, voluntarily or involuntarily, I will not, for a period of
eighteen (18) months following such termination, make any statement or perform
any act intended to advance an interest of any existing or prospective
competitor of EPSC in its relationships and dealings with existing or potential
clients, or solicit or encourage any other employee of EPSC to do any act that
is disloyal to EPSC or inconsistent with EPSC's interests or in violation of any
provision of this Agreement.
6. I further agree that in the event my employment with EPSC is terminated
for any reason, voluntarily or involuntarily, I will not for a period of
eighteen (18) months following such termination, directly or indirectly, hire,
employ, solicit for employment, or advise or recommend to any other person that
the employer solicit for employment any employee of EPSC.
OWNERSHIP OF INVENTIONS
2
<PAGE>
7. I understand and agree that all ideas, inventions, and other
developments or improvements conceived by me or reduced to practice by me, alone
or with others, during the term of this Agreement, whether or not during working
hours, that are within the scope of EPSC's business operations or that relate to
any of EPSC's work or projects, shall be owned by EPSC.
REFORMATION
8. If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect and the offending provision or provisions shall, to the extent
possible, be so modified and reformed as to render the same enforceable. If any
provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances. If for reasons beyond the parties' control, and in spite of
Paragraph 11 below, this Agreement should be subject to the laws of the State of
California, then, to the extent necessary, this Agreement shall be reformed and
modified so as to bring the same in to compliance with the laws of the State of
California and shall not be deemed null and void for failure to comply with the
same.
NOT CONTRACT OF EMPLOYMENT
9. I understand that this Agreement does not constitute a contract of
employment nor establish any right in me to continued employment by EPSC. I
understand that this Agreement in no way limits EPSC's right to terminate my
employment at any time at EPSC's sole discretion subject only to any written
Agreement of Employment as may exist between me and EPSC. I also understand and
agree that this Agreement shall survive the termination of my employment for any
reason, whether voluntary or involuntary.
APPLICABLE LAW
10. I understand and agree that this Agreement shall be governed,
constructed, and interpreted consistent with the laws of the State of Iowa.
ENFORCEMENT
11. I understand and agree that in the event of a suit to enforce the
provisions of this Agreement, EPSC shall be entitled, in addition to any other
remedies available at law or in equity, to recover from me all costs and
expenses associated with enforcing its rights hereunder including reasonable
attorney's fees.
ACKNOWLEDGEMENT OF RECEIPT
12. I acknowledge receipt of a copy of this document, and agree that with
respect to the subject matter hereof, it represents my entire understanding with
EPSC, superseding any previous oral or written communications, representations,
understandings, or agreements with EPSC or any officer or representative
thereof.
3
<PAGE>
EAGLE POINT SOFTWARE CORPORATION EMPLOYEE
By: ________________________________ __________________________________
Rod Blum, Its President Faith Morgan
By: ________________________________
Dennis J. George, Its Secretary
4
<PAGE>
EXHIBIT "D-1"
EAGLE POINT SOFTWARE CORPORATION
EMPLOYEE CONFIDENTIALITY
AND
NONCOMPETITION AGREEMENT
In consideration of my employment by, and compensation from, Eagle Point
Software Corporation, or any division, subsidiary, or affiliated corporation or
business enterprise (hereinafter collectively referred to as "EPSC"), I agree as
follows:
COVENANT OF CONFIDENTIALITY
1. I agree to devote my full time and ability to EPSC's interests during
my regular hours of employment and for whatever additional time may be properly
required of me. I agree not to engage in employment or other business
commitments outside of my regular hours of employment if such employment or
commitments would tend to impair my ability to meet my regular job
responsibilities of EPSC.
2. Because of my work as an employee of EPSC will expose me to trade
secrets (as defined and understood in Chapter 550, Code of Iowa 1993, as
amended) and confidential information of EPSC or information of others that EPSC
has agreed to maintain in confidence, (such trade secrets and other information
hereinafter referred to as "Confidential Information"), I agree: (i) to use any
Confidential Information disclosed to me solely in the performance of my work at
EPSC and not to disclose it to any person not authorized to receive it, to
refrain from using Confidential Information for the advancement of my personal
interests, including the promotion of the interests of any future employers I
may have; and (ii) to comply with the policies and procedures of EPSC regarding
the safe keeping of Confidential Information as may be developed or amended from
time to time.
3. In the event my employment with EPSC is terminated for any reason,
voluntarily or involuntarily, at any time, if so requested by EPSC, I will
promptly return and deliver to EPSC all Confidential Information that was given
to me or was in my possession or held by me or through me, in whatever form
whatsoever, including, without limitation, all written information general and
technical documentation, customer lists, business plans, marketing plans,
pricing data, financial data, or any copies thereof, in any media in which any
of the Confidential Information is embodied including, but not limited to,
computer programs or disks, in either source code or machine readable form. I
agree that during or after my employment with EPSC, I will not make copies of
any Confidential Information or retain any such items or copies thereof in my
possession or keep such items under my control and that I will not pass on any
Confidential Information or copies thereof to any persons inside or outside of
Eagle Point Software Corporation other than in the course of performing services
for EPSC in accordance with its corporate policies and that I will not try to
sell or make any profit or economic benefit for myself or my future employer
from the use or sale of any Confidential Information.
<PAGE>
COVENANT NOT TO COMPETE
4. I hereby acknowledge and agree that I possess trade secrets and
personal influence with customers gained during my employment with CIB which
could be deeply and permanently injurious to EPSC were such information to be
put to use by me or a competitive business enterprise. As a consequence, I agree
that I will not, for a period of eighteen (18) months immediately following
termination of my employment for any reason, voluntarily or involuntarily,
whether or not for compensation, be affiliated or associated with a company, or
a division of a company or business entity which is engaged in a business
competitive with EPSC, and does business anywhere in the United States, either
as an owner, partner, joint venture, shareholder (other than ownership of less
than one percent of the securities of a publicly held corporation) employee,
agent, officer, director, consultant, or otherwise; provided, however, that I
may be affiliated or associated with a division of a company that is not engaged
in a business competitive with Buyer notwithstanding that any entity with which
such division is affiliated or associated, or any entity controlling or under
common control with such division (including, without limitation, the company of
which such division is a part), is engaged in a business competitive with Buyer.
Moreover, I shall not solicit or do business with current customers of CIB or
future customers of EPSC for a period of eighteen (18) months immediately
following termination of my employment for any reason, voluntarily or
involuntarily, except as permitted below. I further hereby acknowledge and agree
that for purposes of this Agreement, that a business enterprise shall be
considered competitive if it is engaged in the business of developing or
distributing home building design/construction software, whether such
competition occurs at time of execution hereof or at any time this covenant is
invoked by EPSC. Notwithstanding the foregoing, I understand that I shall be
allowed to sell, create, market or perform modeling services to businesses whose
address is within a 250 mile radius of Occidental, California or Yellow Springs,
Ohio.
ADDITIONAL COVENANTS
5. I further agree that in the event my employment with EPSC is terminated
for any reason, voluntarily or involuntarily, I will not, for a period of
eighteen (18) months following such termination, make any statement or perform
any act intended to advance an interest of any existing or prospective
competitor of EPSC in its relationships and dealings with existing or potential
clients, or solicit or encourage any other employee of EPSC to do any act that
is disloyal to EPSC or inconsistent with EPSC's interests or in violation of any
provision of this Agreement.
6. I further agree that in the event my employment with EPSC is terminated
for any reason, voluntarily or involuntarily, I will not for a period of
eighteen (18) months following such termination, directly or indirectly, hire,
employ, solicit for employment, or advise or recommend to any other person that
the employer solicit for employment any employee of EPSC.
OWNERSHIP OF INVENTIONS
2
<PAGE>
7. I understand and agree that all ideas, inventions, and other
developments or improvements conceived by me or reduced to practice by me, alone
or with others, during the term of this Agreement, whether or not during working
hours, that are within the scope of EPSC's business operations or that relate to
any of EPSC's work or projects, shall be owned by EPSC.
REFORMATION
8. If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect and the offending provision or provisions shall, to the extent
possible, be so modified and reformed as to render the same enforceable. If any
provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances. If for reasons beyond the parties' control, and in spite of
Paragraph 11 below, this Agreement should be subject to the laws of the State of
California, then, to the extent necessary, this Agreement shall be reformed and
modified so as to bring the same in to compliance with the laws of the State of
California and shall not be deemed null and void for failure to comply with the
same.
NOT CONTRACT OF EMPLOYMENT
9. I understand that this Agreement does not constitute a contract of
employment nor establish any right in me to continued employment by EPSC. I
understand that this Agreement in no way limits EPSC's right to terminate my
employment at any time at EPSC's sole discretion subject only to any written
Agreement of Employment as may exist between me and EPSC. I also understand and
agree that this Agreement shall survive the termination of my employment for any
reason, whether voluntary or involuntary.
APPLICABLE LAW
10. I understand and agree that this Agreement shall be governed,
constructed, and interpreted consistent with the laws of the State of Iowa.
ENFORCEMENT
11. I understand and agree that in the event of a suit to enforce the
provisions of this Agreement, EPSC shall be entitled, in addition to any other
remedies available at law or in equity, to recover from me all costs and
expenses associated with enforcing its rights hereunder including reasonable
attorney's fees.
ACKNOWLEDGEMENT OF RECEIPT
12. I acknowledge receipt of a copy of this document, and agree that with
respect to the subject matter hereof, it represents my entire understanding with
EPSC, superseding any previous oral or written communications, representations,
understandings, or agreements with EPSC or any officer or representative
thereof.
3
<PAGE>
EAGLE POINT SOFTWARE CORPORATION EMPLOYEE
By: ________________________________ __________________________________
Rod Blum, Its President Bruce Wicinas
By: ________________________________
Dennis J. George, Its Secretary
4
<PAGE>
EXHIBIT "E"
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND NOT WITH A VIEW TO OR IN CONNECTION WITH THE SALE OR
DISTRIBUTION THEREOF. SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, OR ASSIGNED IN THE
ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN
SPECIFIC LIMITED CIRCUMSTANCES, AN OPINION OF COUNSEL FOR THE HOLDER, CONCURRED
IN BY COUNSEL FOR THE COMPANY, STATING THAT SUCH SALE, TRANSFER, OR ASSIGNMENT
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID
ACT.
EAGLE POINT SOFTWARE CORPORATION
PROMISSORY NOTE
$________________ Dubuque, Iowa
1. Principal and Interest. Eagle Point Software Corporation, a Delaware
corporation (the "Company"), for value received, hereby promises to pay to the
order of [Computer Integrated Building Corporation] (the "Holder") in lawful
money of the United States, the principal amount of ___________ dollars
($__________), together with interest at an annual rate of ___________ percent
(____%). The principal amount owed hereunder, together with interest, shall be
paid to the Holder by the Company in four equal installments, with the first
installment of $__________ to be paid on October ____, 1997, the second
installment of $__________ to be paid on January ____, 1998, the third
installment of $__________ to be paid on April __, 1998 and the fourth
installment of $__________ to be paid on July __, 1998. Upon payment in full of
all principal and interest payable hereunder, this Promissory Note (the "Note")
shall be surrendered to the Company for cancellation.
2. Prepayment. The Company may prepay this Note in whole or in part and
without penalty at any time. All payments hereon, including any prepayment,
shall be applied first to accrued interest and second to the reduction of the
principal.
3. Events of Default. The following events shall constitute events of
default (the "Events of Default"):
<PAGE>
a. Default in the payment of any amount due hereunder;
b. Appointment of a receiver, conservator, custodian, trustee, or
similar individual, officer or committee of, or for any property
of, the Company, which appointment is not dismissed within thirty
(30) days thereafter; or
c. Commencement of any proceeding, suit or action under any
provisions of the Bankruptcy Act, as amended, or any similar
statute, for adjudication as a bankrupt, reorganization,
composition, extension, arrangement, wage earner's plan,
receivership, liquidation or dissolution by or against the
Company which is not stayed within thirty (30) days thereafter.
4. Manner of Making Payments. Payments hereunder shall be made in lawful
money of the United States of America.
5. Costs of Enforcement. Should any action be instituted for the
collection of this Note, the reasonable costs and attorneys' fees of the Holder
incurred in connection therewith shall be paid by the Company.
6. Governing Law. This Note and the rights and obligations of the Company
and the Holder hereunder shall be governed by and construed in accordance with
the laws of the State of Iowa.
7. Amendment. This Note may not be amended except in writing duly signed
on behalf of the Company and by the Holder.
8. Notices. Any notice, other communication, or payment required or
permitted hereunder shall be in writing and shall be deemed to have been given
upon delivery, if personally delivered, or five days after deposit, if deposited
in the United States mail for mailing by certified mail, postage prepaid, and
addressed as follows:
If to Holder: ________________________________
________________________________
________________________________
If to the Company: Eagle Point Software Corporation
4131 Westmark Drive
Dubuque, Iowa 52002-2627
Attention: President
<PAGE>
Each of the above addressees may change its address for purposes of this
paragraph by giving to the other addressee notice of such new address in
conformity with this paragraph.
9. Acceleration. This Note shall become immediately due and payable (i)
upon the occurrence of an event of default pursuant to Section 3 hereof, (ii) if
the Company commences any proceeding in bankruptcy laws, or (iii) if such
proceedings are commenced against the Company, or a receiver or trustee is
appointed for the Company or a substantial part of its property, and such
proceeding or appointment is not dismissed or discharged within sixty (60) days
after its commencement.
10. Miscellaneous. The Company hereby waives presentment, demand for
performance, notice of non-performance, protest, notice of protest and notice of
dishonor. No delay on the part of the Holder in exercising any right hereunder
shall operate as a waiver of such right or any other right.
Dated: _________________ EAGLE POINT SOFTWARE CORPORATION
By:_____________________________
Title:__________________________
<PAGE>
EXHIBIT "F"
OBLIGATION EXCEPTIONS
With respect to the 10 items listed below, Buyer will assume all payment
obligations associated therewith which are attributable to periods following the
closing. For example, debt relating to ads, cards decks, etc, that have been
incurred prior to the closing are the responsibility of the Seller. For
example, lease payments will be taken over by Buyer prorated to date of closing.
1. NAHB Reservation 7,920
2. Builders ad for July 2,242
3. Builders ad for August 1,121
4. Professional Builder ad/article July 2,762
5. Professional Builder ad August 680
6. Craftsman Card deck - August 18 1,489
7. Professional Bldr. Card Deck 2,400
8. Buyer to assume copier lease
9. Buyer to assume office lease
10. Buyer will assume phone and utility obligations
Buyer will assume upgrade commitments of no more than 15 software
customers.
Buyer will assume support agreements for no more than 40 users.
Buyer will assume 60 day support for all new customers.
Buyer will reimburse Seller for any expenses approved by Buyer incurred
after closing.
1
<PAGE>
EXHIBIT "G"
ACKNOWLEDGMENT AND RELEASE
In consideration of the $62,627 receipt of which is hereby acknowledged by
Schroff Development Corporation, the undersigned, on behalf of Schroff
Development Corporation (and/or any predecessor of successor entity(ies) or
individuals) do hereby release, forgive and discharge Computer Integrated
Building Corporation from any and all liabilities, including, without
limitation, any liabilities or obligations respecting past or future royalties,
arising under the following series of agreements - Mutual Non-Disclosure
Agreement dated October 17, 1989, Joint Software Development and Joint Marketing
Agreement dated November 17, 1989, and Agreement dated March 5, 1990. Schroff
Development Corporation does further assign and transfer to Computer Integrated
Building Corporation all right, title and interest to all contributions,
developments, inventions, upgrades or other improvements to the proprietary
software product currently known as SolidBuilder.
Signed by and on behalf of Schroff Development Corporation (and/or any
predecessor of successor entity(ies) or individuals).
Date: July __, 1996 _______________________________
Roger Schroff
Date: July __, 1996 _______________________________
Stephen Schroff
<PAGE>
EXHIBIT "H"
ASSUMPTION AGREEMENT
This Assumption Agreement (the "Agreement") is made as of the 29th day of
July, 1996 by and between Eagle Point Software Corporation, a Delaware
corporation ("Buyer") and Computer Integrated Building Corporation, a California
corporation ("Seller"). Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in that certain Asset Purchase
Agreement by and between Buyer and Seller dated as of July 17, 1996 (the "Asset
Purchase Agreement").
WHEREAS, pursuant to the Asset Purchase Agreement, Seller has agreed to
sell to Buyer the Assets;
WHEREAS, pursuant to the Asset Purchase Agreement, Buyer has agreed to
assume the liabilities, listed on Exhibit "F" thereto (the "Assumed
Liabilities") and this Agreement is intended to evidence the assumption of the
Assumed Liabilities by Buyer.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Assumption of Assumed Liabilities. Seller hereby transfers, delegates
and assigns all of its liabilities, obligations and duties in respect of the
Assumed Liabilities to Buyer. Buyer hereby accepts from Seller the transfer,
delegation and assignment of the Assumed Liabilities and assumes and agrees to
pay, perform and discharge, and shall forever indemnify and hold harmless Seller
from and against all of the Assumed Liabilities. Notwithstanding anything in
this Agreement to the contrary, Seller does not assign, and Buyer does not
assume, any of liabilities that are not Assumed Liabilities.
2. Primacy of Asset Purchase Agreement. It is acknowledged and agreed
that this Agreement is intended only to document the assumption and transfer of
the Assumed Liabilities to Buyer, and that the Asset Purchase Agreement is the
exclusive source of the agreement and understanding between Seller and Buyer
respecting the Assets and the Assumed Liabilities.
This Agreement shall be binding upon the successors and assigns of Buyer
and shall inure to the benefit of the successors and assigns of Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
EAGLE POINT SOFTWARE CORPORATION COMPUTER INTEGRATED BUILDING CORPORATION
By:_______________________________ By:_______________________________
Rod Blum, Its President Eugene R. Murphy, Its President
By:_______________________________ By:_______________________________
Dennis J. George, Its Secretary Faith Morgan, Its Secretary
1
<PAGE>
SELLERS SCHEDULE OF EXCEPTIONS
1. Office rent is not paid up to date. On closing Seller will bring rent
prorated to date of closing.
2. Seller is in default for certain trade debt as noted in Seller's books
which have been supplied to Buyer.
3. Seller has verbal obligation to negotiate payment with Shelly Simpson
should company elect to use additional advanced symbols he has developed.
4. Seller has not filed latest tax returns and will do so after closing.
Seller has been advised by accountant that no taxes are currently owing.
5. Seller is in litigation with Tricom Pictures.
6. Certain expense reimbursements to Pat Murphy and Faith Morgan have not been
listed in CIB liabilities.
7. The office lessor must consent to the assignment of office lease to buyer,
Lessor has made verbal commitment to do so.
8. Seller's staff have vacation time accrued. Buyer agrees to give employees
time off for the vacation time accrued as employees of Seller.
9. Seller may have undisclosed liabilities to SolidBuilder Marketing Group.
1
<PAGE>
BUYERS SCHEDULE OF EXCEPTIONS
None.
1
<PAGE>
BILL OF SALE
Reference hereby is made to that certain Asset Purchase Agreement by and
between Computer Integrated Building Corporation ("Seller") and Eagle Point
Software Corporation ("Buyer") dated as of July 17, 1996 (the "Agreement").
Capitalized terms used in this Bill of Sale and not otherwise defined shall have
the meanings ascribed to such terms in the Agreement.
In accordance with Section 1 of the Agreement, Seller, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby transfer, convey, sell, assign and deliver to Buyer,
all of the Assets.
Seller does not sell to Buyer and Buyer does not purchase from Seller any
interest in any of Seller's assets other than the Assets.
This Bill of Sale shall be binding upon the successors and assigns of
Seller and shall inure to the benefit of the successors and assigns of Buyer as
permitted under the Agreement.
It is acknowledged and agreed that this Bill of Sale is intended only to
document the sale and assignment of the Assets to Buyer, and that the Agreement
is the exclusive source of the agreement and understanding between Seller and
Buyer respecting the Assets. Nothing in this Bill of Sale shall limit, expand
or otherwise affect any of the representations, warranties, agreements or
covenants contained in the Agreement. If any provision of this Bill of Sale is
construed to conflict with any provision of the Agreement, the provision of the
Agreement shall control.
IN WITNESS WHEREOF, Seller has cause this Bill of Sale to be duly executed
as of the 29/th/ day of July, 1996.
COMPUTER INTEGRATED BUILDING CORPORATION
By:
--------------------------------------
Eugene R. Murphy, Its President
By:
--------------------------------------
Faith Morgan, Its Secretary
Acknowledged this 29th day of July, 1996:
EAGLE POINT SOFTWARE CORPORATION
By:
-------------------------------
Rod Blum, Its President
By:
-------------------------------
Dennis J. George, Its Secretary
<PAGE>
COVENANT NOT TO COMPETE
This Agreement ("Agreement") is made and entered into this 17th day of
July, 1996, by and between Eugene R. Murphy, Faith Morgan, Bruce Wicinas, all
residents of California, (hereinafter sometimes, collectively "Covenantors") and
Eagle Point Software Corporation, a Delaware corporation with principal place of
business in Dubuque, Iowa ("EPSC").
W I T N E S S E T H :
---------------------
WHEREAS, Covenantors are shareholders of Computer Integrated Building, Inc.
("CIB"), which have entered into an agreement with EPSC for the sale of its
assets (hereinafter "Asset Purchase Agreement"); and
WHEREAS, the Asset Purchase Agreement between CIB and EPSC is conditioned
upon and contemplates the execution of the instant Agreement by certain of its
principal shareholders for the consideration recited in the Asset Purchase
Agreement.
NOW, THEREFORE, in consideration of the Asset Purchase Agreement, the
parties hereto AGREE as follows:
1. Covenant Not to Compete: The Covenantors hereby acknowledge and agree
that they possess trade secrets and personal influence with customers gained
during their employment with CIB which could be deeply and permanently injurious
to EPSC were such information to be put to use by them or a competitive business
enterprise. As a consequence, Covenantors agree that they will not, for a period
of three (3) years immediately following execution of the Asset Purchase
Agreement, for any reasons, voluntarily or involuntarily, whether or not for
compensation, be affiliated or associated with a company, or division of a
company or business entity which is engaged in a business competitive with
EPSC, and does business anywhere in the United States, either as an owner,
partner, joint venture, shareholder (other than ownership of less than one
percent of the securities of a publicly held corporation) employee, agent,
officer, director, consultant, or otherwise; provided, however, that Covenantors
may be affiliated or associated with a division of a company that is not engaged
in a business competitive with Buyer notwithstanding that any entity with which
such division is affiliated or associated, or any entity controlling or under
common control with such division (including, without limitation, the company of
which such division is a part), is engaged in a business competitive with Buyer.
Moreover, Covenantors shall not solicit or do business with current customers of
CIB or future customers of EPSC for a period of three years immediately
following execution hereof, for any reason, voluntarily or involuntarily, except
as permitted below. Covenantors further hereby acknowledge and agree that for
purposes of this Agreement, that a business enterprise shall be considered
competitive if it is engaged in the business of developing or distributing home
building design/construction software, whether such competition occurs at time
of execution hereof or at any time this covenant is invoked by EPSC. Covenantors
shall be allowed to sell, create, market or perform modeling services to
businesses whose address is within a 250 mile radius of Occidental, California
or Yellow Springs, Ohio.
<PAGE>
2. Reformation: If any provision of this Agreement shall be invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect and the offending provision or provisions shall, to the extent
possible, be so modified and reformed as to render the same enforceable. If any
provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances.
3. Assignment: This Agreement shall not be assignable by Covenantors and
any purported assignment hereof shall not be valid and binding.
4. Governing Law: This Agreement shall be construed and interpreted
according to the laws of the State of Iowa.
5. Enforcement: In the event of a suit to enforce the provisions of this
Agreement, EPSC shall be entitled, in addition to any other remedies available
at law or in equity, to recover from Covenantor(s) all costs and expenses
associated with enforcing its rights hereunder including reasonable attorney's
fees.
IT WITNESS WHEREOF, the parties have caused this Agreement to be executed
effective the day and year first above written.
EAGLE POINT SOFTWARE CORPORATION COVENANTORS
By: /s/ ROD BLUM /s/ EUGENE R. MURPHY
---------------------------------- ----------------------------------
Rob Blum, Its President Eugene R. Murphy
By: /s/ DENNIS J. GEORGE /s/ FAITH MORGAN
---------------------------------- ----------------------------------
Dennis J. George, Its Secretary Faith Morgan
/s/ BRUCE WICINAS
----------------------------------
Bruce Wicinas
2
<PAGE>
EXHIBIT 11.1
EAGLE POINT SOFTWARE CORPORATION
CALCULATION OF SHARES USED IN DETERMINING PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
---------------------------------
1996 1995 1994
---------------------------------
<S> <C> <C> <C>
SHARES USED IN DETERMINING
PRIMARY EARNINGS PER SHARE:
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,931,084 3,864,581 5,000,000
WEIGHTED AVERAGE COMMON SHARES ISSUED
WITHIN A ONE YEAR PERIOD PRIOR TO THE
COMPANY'S STOCK OFFERING AT PRICES
BELOW THE OFFERING PRICE OF $13.00 PER
SHARE 1,488 10,091
NET EFFECT OF STOCK OPTIONS BASED ON THE
TREASURY STOCK METHOD USING THE
AVERAGE MARKET PRICE DURING THE PERIOD 26,899
---------------------------------
TOTAL WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,957,988 3,873,126 5,010,091
=================================
SHARES USED IN DETERMINING FULLY
DILUTED EARNINGS PER SHARE:
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,931,084 3,864,581 5,000,000
WEIGHTED AVERAGE COMMON SHARES ISSUED
WITHIN A ONE YEAR PERIOD PRIOR TO THE
COMPANY'S STOCK OFFERING, AT PRICES
BELOW THE OFFERING PRICE OF $13.00 PER
SHARE 1,488 10,091
NET EFFECT OF STOCK OPTIONS BASED ON THE
TREASURY STOCK METHOD USING THE
AVERAGE MARKET PRICE DURING THE PERIOD 26,899
---------------------------------
TOTAL WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,957,988 3,873,126 5,010,091
=================================
</TABLE>
<PAGE>
EXHIBIT 21.1
EAGLE POINT SOFTWARE CORPORATION
LIST OF SUBSIDIARIES
1. ECOM Associates, Inc. Wisconsin Corporation
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
WE CONSENT TO THE INCORPORATION BY REFERENCE IN REGISTRATION STATEMENT NOS.
33-96914, 33-96916, 33-96918 OF EAGLE POINT SOFTWARE CORPORATION FORM S-8 OF OUR
REPORT DATED JULY 29, 1996, APPEARING IN THIS ANNUAL REPORT ON FORM 10-K OF
EAGLE POINT SOFTWARE CORPORATION FOR THE YEAR ENDED JUNE 30, 1996.
/s/ DELOITTE & TOUCHE LLP
DES MOINES, IOWA
SEPTEMBER 25, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 3,106,704
<SECURITIES> 7,508,561
<RECEIVABLES> 4,096,864
<ALLOWANCES> 251,344
<INVENTORY> 369,172
<CURRENT-ASSETS> 15,269,911
<PP&E> 8,123,472
<DEPRECIATION> 2,178,952
<TOTAL-ASSETS> 24,595,799
<CURRENT-LIABILITIES> 3,054,684
<BONDS> 900,710
<COMMON> 49,417
0
0
<OTHER-SE> 20,879,511
<TOTAL-LIABILITY-AND-EQUITY> 20,928,928
<SALES> 19,162,124
<TOTAL-REVENUES> 19,162,124
<CGS> 5,073,263
<TOTAL-COSTS> 5,073,263
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 126,385
<INTEREST-EXPENSE> (23,791)
<INCOME-PRETAX> 3,176,031
<INCOME-TAX> 1,099,632
<INCOME-CONTINUING> 2,076,399
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,076,399
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
