<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997
OR
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to .
------------- ------------
Commission File Number: 0-26544
PREMENOS TECHNOLOGY CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0367912
(State of incorporation) (IRS Employer
Identification No.)
1000 Burnett Avenue
Concord, California 94520
(Address of principal executive offices)
510-688-2700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
The number of shares outstanding of the registrant's common stock as of May 1,
1997 was 11,728,556.
Page 1 of 12
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PREMENOS TECHNOLOGY CORP.
INDEX TO MARCH 31, 1997 FORM 10-Q
Page
----
PART I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations for
the three months ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for
the three months ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - Other Information
Items 1, 2, 3, 4, 5 and 6 10
SIGNATURE 11
Page 2 of 12
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<CAPTION>
PART I
Item 1
PREMENOS TECHNOLOGY CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
( in thousands )
March 31, December 31,
1997 1996
---------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $56,583 $26,638
Short-term investments - 29,844
Trade accounts receivable, net of allowances
of $394 and $348 in 1997 and 1996, respectively 7,923 9,440
Income taxes recoverable 401 551
Prepaid expenses and other assets 848 959
Deferred income taxes 2,874 2,516
------- -------
Total current assets 68,629 69,948
Property and equipment, net 6,660 6,700
Capitalized software development costs, net 5,919 6,037
Other long-term assets 951 1,005
------- -------
Total assets $82,159 $83,690
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,588 $ 4,747
Deferred revenue 7,190 7,017
Current portion of long-term debt 565 597
------- -------
Total current liabilities 11,343 12,361
Long-term debt 124 240
Deferred revenue 324 385
Deferred income taxes 1,406 1,406
------- -------
Total liabilities 13,197 14,392
------- -------
Minority interest in consolidated subsidiary 17 22
------- -------
Stockholders equity:
Common Stock 117 115
Additional paid-in capital 68,766 68,441
Retained earnings 62 720
------- -------
Total stockholders' equity 68,945 69,276
------- -------
Total liabilities and stockholders' equity $82,159 $83,690
======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements.
Page 3 of 12
</TABLE>
<TABLE>
<CAPTION>
PREMENOS TECHNOLOGY CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
( unaudited )
( in thousands, except per share data )
Three Months Ended
March 31,
------------------------
1997 1996
------- -------
<S> <C> <C>
Revenues:
Software licenses $ 4,736 $ 3,924
Services 3,559 2,630
------- -------
Total revenues 8,295 6,554
------- -------
Cost of revenues:
Software licenses 1,189 707
Services 1,746 1,150
------- -------
Total cost of revenues 2,935 1,857
------- -------
Gross margin 5,360 4,697
------- -------
Operating expenses:
Product development 2,815 1,797
Sales and marketing 3,049 2,349
General and administrative 1,034 846
------- -------
Total operating expenses 6,898 4,992
------- -------
Loss from operations (1,538) (295)
Interest income 694 801
Interest expense (25) (44)
Other (125) -
------- -------
Income (loss) before provision (credit) for
income taxes and minority interest (994) 462
Provision (credit) for income taxes (358) 185
Minority interest (5) (2)
------- -------
Net income (loss) $ (631) $ 279
======= =======
Net income (loss) per share ($0.05) $0.02
======= =======
Weighted average number of common and common
equivalent shares outstanding 11,636 11,637
======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements.
Page 4 of 12
</TABLE>
<TABLE>
<CAPTION>
PREMENOS TECHNOLOGY CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
( unaudited )
( in thousands )
Three Months Ended
March 31,
------------------------
1997 1996
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities $ 778 $ 990
------- -------
Cash flows from investing activities:
Proceeds from sale of short-term investments 30,000 51,855
Capitalized software development costs (389) (669)
Acquisition of property and equipment (624) (1,001)
------- -------
Net cash provided by investing activities 28,987 50,185
------- -------
Cash flows from financing activities:
Principal payments on long-term debt (148) (162)
Proceeds from exercise of options 72 115
Proceeds from employee stock purchase
plan stock issuance 256 -
------- -------
Net cash provided by (used in) financing activities 180 (47)
------- -------
Increase in cash and cash equivalents 29,945 51,128
Cash and cash equivalents, beginning of period 26,638 11,495
------- -------
Cash and cash equivalents, end of period $56,583 $62,623
======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements.
Page 5 of 12
</TABLE>
<PAGE>
PREMENOS TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
( unaudited )
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared on the same basis as the audited annual consolidated financial
statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the Company's financial position, results of operations, and
cash flows. The results of operations for the three months ended March 31,
1997 are not necessarily indicative of the results to be expected for the full
year. Certain information and footnote disclosures normally contained in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the annual
Consolidated Financial Statements contained in the Company's December 31, 1996
annual report on Form 10-K.
Page 6 of 12
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Item 2
PREMENOS TECHNOLOGY CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's operating results during the period
included in the accompanying condensed consolidated financial statements.
RESULTS OF OPERATIONS
Revenues
Total revenues for the first quarter of 1997 were $8.3 million compared to
$6.6 million in the first quarter of 1996, representing an increase of 27%.
Software Licenses. Revenues from license fees and royalties were $4.7 million
in the first quarter of 1997 compared to $3.9 million in the first quarter of
1996, representing an increase of 21%. The increase was largely due to
increased acceptance of the Company's EDI/Open translator product for open
systems and revenues derived through the Company's network of distributors,
combined with increasing revenues from sales of the Company's Templar product
and revenues derived from licensing of Prime Factors' products.
Services. Revenues from services were $3.6 million and $2.6 million for the
first quarters of 1997 and 1996, respectively, representing an increase of
35%. Product support and consulting services revenues increased over the
corresponding prior year levels. The Company's product support revenues grew
30% and continue to constitute the largest portion of services revenues.
Product support revenues were $2.9 million and $2.2 million for the first
quarters of 1997 and 1996, respectively, and as a percentage of total revenues
were 35% and 34%, respectively. The growth in services revenues reflects the
continued increase in the Company's installed base of products under support
contracts and increased revenues from software integration and consulting
services.
Cost of Revenues
Cost of revenues for the first quarters of 1997 and 1996 were $2.9 million and
$1.9 million, representing 35% and 28% of total revenues, respectively.
Cost of licenses were $1.2 million and $707,000 for the first quarters of 1997
and 1996, respectively, representing 25% and 18% of software license revenues,
respectively. Cost of licenses includes royalties paid to third parties for
licensed software incorporated into the Company's products, amortization of
capitalized software development costs and costs associated with product
packaging, documentation and software duplication. The increase in cost of
licenses from 1996 to 1997 is attributable to several factors including
increased amortization of capitalized software costs relating to the Company's
two acquisitions in 1996 and the Company's EDI translator and Templar
products, and increased costs relating to the sublicensing from third parties
of technologies embedded in the Company's broadening range of product
offerings.
Cost of services for the first quarters of 1997 and 1996 were $1.7 million and
$1.2 million, representing 49% and 44% of service revenues, respectively. The
increase in costs reflects the Company's increasing emphasis on providing
software integration and consulting services to its customers.
Operating Expenses
Product Development. Product development expenditures consist primarily of
personnel and equipment costs required to conduct the Company's research and
development efforts, including project engineers, product documentation,
internal testing and development, standards and quality assurance. Product
development expenses, net of capitalized software development expenditures,
were $2.8 million and $1.8 million for the first quarters of 1997 and 1996,
representing 34% and 27% of total revenues, respectively. The Company
Page 7 of 12
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capitalized software development expenditures of $389,000 and $669,000 in the
first quarters of 1997 and 1996, respectively, in accordance with Statement of
Financial Accounting Standards No. 86. The amounts capitalized represented
12% and 27% of gross development expenditures of $3.2 million and $2.5 million
for the first quarters of 1997 and 1996, respectively. The Company believes
that research and development expenditures are essential to maintaining its
competitive position and expects these costs to continue to constitute a
significant percentage of revenues. Product development expense and the
capitalization rate may fluctuate from period to period depending in part upon
the number and status of software development projects in process.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and commissions of sales personnel, costs of marketing personnel, and
outside marketing and promotional expenses. Sales and marketing expenses for
the first quarters of 1997 and 1996 increased to $3.0 million from $2.3
million, representing 37% and 36% of total revenues, respectively. The
Company continues to place significant emphasis on direct sales through
building its own sales force. In addition, the Company is continuing to
pursue marketing its products through indirect channels, both domestically and
internationally, in order to increase market share while reducing distribution
costs.
General and Administrative. General and administrative expenses for the first
quarters of 1997 and 1996 were $1.0 million and $846,000, representing 12% and
13% of total revenues, respectively. The Company continues to add personnel
and invest in infrastructure in support of its revenue and staffing growth.
Other Income (Expense), Net
Other income (expense) consists of interest income, interest expense and other
non-operating expenses. Other income, net, was $544,000 and $757,000 for the
first quarters of 1997 and 1996, representing 7% and 12% of total revenues,
respectively. The decrease in other income, net, is primarily due to the
investment of $125,000 in Trailblazer Systems, Inc. ("Trailblazer") pursuant
to their achievement of the first of three agreed-upon technical milestones as
provided for by the Company's agreement with Trailblazer.
Provision (Credit) for Income Taxes
The Company's provision (credit) for income taxes for the first quarter of
1997 was ($358,000), representing an effective income tax rate of (36)%. This
compares to $185,000, or an effective income tax rate of 40%, for the first
quarter of 1996.
Minority Interest
Minority interest of $5,000 and $2,000 for the first quarters of 1997 and
1996, respectively, represents the minority stockholders' proportionate share
of the net income (loss) of the Company's subsidiary, Premenos Corp.
Net Income (Loss)
Net loss for the first quarter of 1997 was $631,000, or $.05 per share,
compared to net income of $279,000, or $.02 per share, for the first quarter
of 1996.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had working capital in excess of $57 million.
Cash and cash equivalents totaled $56.6 million, representing approximately
69% of total assets.
Cash flows from operating activities were $778,000 and $990,000 for the first
three months ended March 31, 1997 and 1996, respectively. For the quarter of
1997, the Company's net loss was more than offset by changes in operating
assets and liabilities and by noncash charges, primarily depreciation and
amortization. For the first quarter of 1996, cash provided by operating
activities resulted primarily from net income, depreciation and amortization,
and changes in operating assets and liabilities.
Page 8 of 12
<PAGE>
Cash provided by investing activities was $29.0 million and $50.2 million for
the first three months of 1997 and 1996, respectively. In the first quarters
of both 1997 and 1996, cash was provided primarily through sales of short-term
investments.
Cash provided by financing activities was $180,000 in the first quarter of
1997 and cash used in financing activities was $47,000 in the first quarter of
1996. Cash provided by financing activities resulted from the exercise of
options in the first quarters of both 1997 and 1996, and from employee stock
purchase plan stock issuances during the quarter ended March 31, 1997. Cash
used in financing activities for the first quarters of both 1997 and 1996
related to long-term debt repayments.
The Company's principal commitments consist of leases on its office facilities
and obligations under its bank term loan facilities and capital leases. The
Company currently has no material commitments for capital expenditures. In
March 1997, the Company's Board of Directors approved the repurchase of up to
one million shares of the Company's common stock on the open market from time
to time. The Company has not repurchased any shares to date under this
program.
The Company believes that its current cash balances and cash flow from
operations will be sufficient to meet its working capital and capital
expenditure requirements through the foreseeable future.
Page 9 of 12
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Part II
PREMENOS TECHNOLOGY CORP.
Other Information
Items 1, 2, 3, and 4
The above items have been omitted as inapplicable.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.22 - Separation Agreement between Premenos Corp. and Richard Ludlow.
11 - Statement of Computation of Earnings Per Common Share
27 - Financial Data Schedule (included with SEC electronic filing only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
March 31, 1997.
Page 10 of 12
<PAGE>
PREMENOS TECHNOLOGY CORP.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PREMENOS TECHNOLOGY CORP.
By:
/s/ H. Ward Wolff
- -------------------------------------------------
H. Ward Wolff
Senior Vice President of Finance and Administration
(Principal Financial and Accounting Officer)
Date: May 15, 1997
Page 11 of 12
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<CAPTION>
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
Three Months Ended
March 31
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Weighted average number of common shares
outstanding 11,635,892 10,578,564
Shares issuable pursuant to warrants and employee
stock option plan, less shares assumed repurchased
at the average fair value during the period (1) - 1,058,767
---------- ----------
Number of shares for computation of
earnings per share 11,635,892 11,637,331
========== ==========
Net income (loss) $ (631,000) $ 279,000
========== ==========
Net income (loss) per share (2) $(0.05) $ 0.02
========== ==========
(1) Excluded in loss periods as impact would be anti-dilutive.
(2) There is no difference between primary and fully diluted net income
(loss) per share.
Page 12 of 12
</TABLE>
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contains summary financial information extracted from Form
10Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 56,583
<SECURITIES> 0
<RECEIVABLES> 7,923
<ALLOWANCES> 394
<INVENTORY> 0
<CURRENT-ASSETS> 68,629
<PP&E> 12,056
<DEPRECIATION> 5,396
<TOTAL-ASSETS> 82,159
<CURRENT-LIABILITIES> 11,343
<BONDS> 0
0
0
<COMMON> 117
<OTHER-SE> 68,828
<TOTAL-LIABILITY-AND-EQUITY> 82,159
<SALES> 8,295
<TOTAL-REVENUES> 8,295
<CGS> 2,935
<TOTAL-COSTS> 6,898
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25
<INCOME-PRETAX> (994)
<INCOME-TAX> (358)
<INCOME-CONTINUING> (631)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (631)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
<PAGE>
Separation Agreement
This Agreement is made as of April 2, 1997 by and among Premenos
Technology Corp., Premenos Corp. (collectively, the "Company") and
Richard A. Ludlow (the "Executive").
Whereas, the Executive has served as Senior Vice President, Sales
for the Company since July 1996 and served the Company and its
predecessor entities in various capacities for a number of years; and
Whereas, the Executive has decided to resign from the Company;
Now therefore, the parties hereto hereby agree as follows:
1. Resignation
The Executive hereby resigns as Senior Vice President, Sales of the
Company, and from any other office or position he may hold with the
Company or any of its subsidiaries, such resignation to be effective as
of the close of business Friday, April 4, 1997 (the "Resignation Date").
2. Compensation and Benefits
2.1 Compensation
The Company shall pay to the Executive an amount equal to one
hundred twenty-two thousand, two hundred and fifteen dollars and sixty-
three cents ($122,215.63) in two installments as follows:
Amount Date of Payment
---------- ---------------------------------
$61,107.82 Eight days after Resignation Date
$61,107.81 October 4, 1997
The Company shall not be obligated to pay, and the Executive shall
not be entitled to receive, the second installment set forth above if
the Executive is in breach of Section 3.4 on the Date of Payment set
forth above for the second installment.
2.2 Vacation Pay
On the Resignation Date, Company shall pay to the Executive in a
single payment the amount of twenty-five thousand, one hundred and
eighty-one dollars and eighty-three cents ($25,181.83), in respect of
all vacation and personal days accrued through the Resignation Date.
2.3 Benefits
The Company shall make the payments for COBRA on behalf of the
Executive for the medical and dental coverage for the shorter of (a) six
months following the Resignation Date, or (b) until Executive is
eligible to participate in a group health insurance plan by reason of
his employment by a third party.
<PAGE>
2.4 Taxes
All amounts payable under this Agreement shall be subject to
applicable federal, state and local tax, FICA, FUTA and similar
withholding requirements. Whether or not subject to withholding, the
Executive acknowledges that the payments and benefits provided hereunder
may be deemed taxable income to the Executive. The Company has not
represented to the Executive, nor has Executive relied on any
representation from the Company, as to the taxability of any payments
made hereunder.
2.5 Certain Company Property
The Executive may, at his option, have use of the Company the
laptop computer and printer issued for his use by the Company for a
period of six months following the Resignation Date, after which
Executive agrees to return the laptop computer and printer to the
Company. The Executive may also retain the cellular phone issued for
his use by the Company. The Executive agrees to surrender to the
Company promptly after the Resignation Date all other Company property
in his possession.
2.6 Full Compensation
Except as expressly set forth in this Agreement, and except with
regard to the Executive's rights under the 401(k) plan of the Company
(which shall survive in accordance with the terms of such plan), and
notwithstanding anything to the contrary contained in any collateral or
verbal agreement or understanding, the Company shall have no obligation
to the Executive with respect to, and the Executive hereby waives, any
compensation, benefits or remuneration of any kind.
2.7 Stock Options
The Company acknowledges that the Executive holds no currently-
exercisable options to acquire the common stock of Premenos Technology
Corp. The Executive releases all rights, if any, to receive or acquire
any other stock, options, warrants or securities of the Company.
2.8 Commissions and Retroactive Salary Increase
In consideration for any and all commissions earned to date during
the calendar year 1997 and for a salary increase effective January 1,
1997, the Company agrees to pay the Executive the amount of fourteen
thousand, nine hundred thirty-seven dollars and forty-five cents
($14,937.45) on the Resignation Date. The Executive hereby waives any
claim he may have to any and all commissions earned by the Executive in
1997 and any and all salary increases.
3. Executive Covenants
3.1 Confidentiality Agreement
The terms of the Confidentiality Agreement dated March 15, 1990 by
and between the Executive and Apparel Computing Systems, Inc., a
predecessor of the Company (the "ACS Agreement"), including, without
limitation, covenants relating to trade secrets, ownership of work
product by the Company, remedies, enforcement and non-exclusivity of
such covenants are hereby expressly affirmed and confirmed by the
Executive and are hereby incorporated herein by reference. In the event
of a conflict between the terms of this Agreement and the ACS Agreement,
the terms of this Agreement shall control.
<PAGE>
3.2 No Disparagement
The Company (including, for purposes of this section, each member
of the Board of Directors and each executive officer other than the
Executive) and the Executive agree and acknowledge that neither will
make any disparaging remarks, whether publicly or privately, about the
other, or the business, affairs, practices or performance of the other.
3.3 No Competition
For a period of six months following the Resignation Date, the
Executive agrees not to market or develop, or participate in the
marketing or development, of a software system performing functions
substantially similar to those performed by any Company software system
(whether completed or under development).
3.4 No Recruiting
For a period of six months following the Resignation Date, the
Executive agrees not to solicit, recruit or hire for employment (or have
solicited, recruited or hired on behalf of any enterprise of which he is
a part) any person employed by the Company on the Resignation Date. The
Executive agrees that, if he is in breach of this Section 3.4, he shall
have no right to receive, and the Company shall have no obligation to
pay, the second installment of monies set forth in Section 2.1 hereof.
4. Mutual Releases
The Company (including, for purposes of this section, each member
of its Board of Directors, officer, employee, agent and attorney, other
than the Executive) on the one hand, and the Executive on the other
hand, each hereby release and discharge the other from all actions,
causes of actions, suits, debts, dues, sums of money, accounts,
reckonings, attorneys fees, covenants, contracts, controversies,
agreements, promises, damages, judgments, executions, claims and demands
whatsoever, in law, admiralty or equity, whether or not arising from
fraud, fraudulent inducement or any matter unknown as of the date
hereof, which against the other party such party, their successors and
assigns ever had, now have or hereafter can, shall or may have for, upon or by
reason of or relating to any matter, action, transaction,
omission, practice, conduct, cause or thing whatsoever to the date
hereof, except such rights as arise under or pursuant to this Agreement.
It is the intention of the parties that this Agreement shall be
deemed a full and final accord and satisfaction of all claims of each
party against the other regarding all actions, relationships,
agreements, arrangements or state of facts or circumstances between the
parties occurring prior to the date of this Agreement.
In furtherance of this intention, the parties hereto each
acknowledge that they are familiar with Section 1542 of the California
Civil Code, which provides: "A general release does not extend to
claims which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which, if known by him, must have
materially affected his settlement with the debtor."
<PAGE>
With regard to the foregoing provision, it is expressly understood and
acknowledged by the parties hereto that the facts or understandings in
respect of which this Agreement is made, including without limitation
the releases provided above may subsequently turn out to be other than
or different from the facts and circumstances now known or believed to
be true; and that the parties hereto, respectively, expressly assume
such risk and agree that this Agreement, including, without limitation
the releases set forth herein, shall be in all respects effective and
not subject to termination or rescission by virtue of any such
difference in facts or circumstances. Without limiting the generality
of the foregoing, the parties hereto hereby waive and release any right
to any benefit which he or it may now or hereafter may have under
Section 1542 of the California Civil Code to the maximum extent
permitted by law.
5. Independent Representation
The Executive acknowledges that he has been represented by Gilmore
F. Diekmann, independent legal counsel, in connection with the
negotiation of this Agreement and related matters. The Company hereby
advises the Executive to consult with an attorney prior to executing
this Agreement. The Executive represents and warrants to the Company
(a) that he has sought such legal counsel and advice as he has deemed
appropriate in connection with the execution hereof and the arrangements
contemplated hereby, including consultation with Mr. Diekmann; (b) that
he has read and understands this Agreement; (c) that he has had a
reasonable amount of time to review and consider this Agreement; (d)
that pursuant to Section 6 hereof he has been afforded at least twenty-
two (22) days to consider this Agreement; and (e) that he has executed
this Agreement voluntarily and without duress, coercion or undue
influence of any kind.
6. Review
The Executive shall have until the close of business on the twenty-
first calendar day following the initial presentation of this Agreement
to accept the terms of this Agreement, including the releases contained
herein. The Company and the Executive acknowledge that the Executive
may use as much of this twenty-one day period as the Executive wishes.
7. Right to Revoke
The Executive may revoke this Agreement within seven days after the
Executive's signing it. Revocation may be made by the Executive by
delivering a written notice of revocation to the notice addresses
provided herein. In order for the revocation to be effective, written
notice must be received by the Company no later than the seventh
calendar day after execution of this Agreement. In the event that the
Executive revokes this Agreement as provided herein, this Agreement
shall be absolutely void, invalid and unenforceable ab initio, no aspect
of this Agreement shall be given effect, and neither the Executive nor
the Company shall be bound in any respect by this Agreement.
<PAGE>
8. Certain Statutes
The Executive acknowledges and agrees that he is fully aware that
there are various federal, state and municipal laws which prohibit
employment discrimination based on, without limitation, the following:
race; age; sex; marital status; sexual orientation; citizenship;
religion; creed; national origin; military or national guard service;
illiteracy; mental, psychological or physical disability; jury duty;
refusal to work excess hours; status as a volunteer fireman;
garnishments; arrest record or previous convictions; or attainment of
pension or employee benefits including retirement, pension and severance
(collectively, the "Statutes"). The Executive also acknowledges and
agrees that he fully understands and is aware that there are federal,
state and municipal agencies which enforce and administer these laws and
ensure the enforcement of the Statutes. The Executive hereby represents
and warrants to the Company that he has not filed any claims, charges,
complaints or causes of action of any kind against the Company with any
federal, state or local agency, administrative body, court or tribunal
with respect to any matter, including the Statutes; and that he has no
knowledge or reason to believe that anyone else has filed any such
claim, charge, complaint or cause of action on his behalf or arising in
connection with his relationship with the Company, and that he shall not
voluntarily participate in any such proceedings.
9. General Provisions
9.1 Notices
Any and all notices given hereunder by any party shall be in
writing and shall be validly given or made to another party if delivered
either personally, by telefacsimile, nationally-recognized overnight
courier, or, if deposited in the United States Mail, certified or
registered, prepaid, return receipt requested. If notice is served
personally, it shall be deemed effective upon receipt. If notice is
served by telefacsimile, it shall be deemed effective upon transmission,
provided that such notice is confirmed in writing by sender within one
day after transmission. If notice is served by overnight courier, it
shall be deemed effective the day after it is sent. If notice is served
by United States Mail, if shall be deemed effective five days after it
is sent. Notice should be sent to the parties are the following
address:
If to the Company:
Premenos Technology Corp.
1000 Burnett Avenue
Concord, CA 94520
Telefacsimile: (510) 602-2422
Attention: General Counsel
If to the Executive:
Richard A. Ludlow
2030 Mallard Drive
Walnut Creek, CA 94596
<PAGE>
9.2 Modification
No amendment, change or modification of this Agreement shall be
valid unless in writing and signed by all of the parties hereto.
9.3 Waiver
No reliance upon a waiver of one or more provisions of this
Agreement shall constitute a waiver of any other provisions hereof.
9.4 Successors and Assigns
All of the terms and provisions contained herein shall inure to the
benefit of and shall be binding upon the parties hereto and their
respective heirs, personal representatives, successors and assigns.
However, no party shall voluntarily assign any rights hereunder, or
delegate any duties hereunder, except upon the prior written consent of
the other.
9.5 Counterparts
This Agreement may be executed in one or more separate
counterparts, any of which may be executed and delivered by
telefacsimile, each of which when so executed shall be deemed to be an
original. Such counterparts shall, together, constitute and shall be
one and the same instrument.
9.6 Entire Agreement
This Agreement constitutes the entire understanding and agreement
of the parties with respect to the subject matter of this Agreement, and
any and all prior agreements, understandings or representations with
respect to the subject matter hereof are hereby terminated and canceled
in their entirety.
In witness whereof, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
RICHARD A. LUDLOW PREMENOS TECHNOLOGY CORP.
and PREMENOS CORP.
/s/ Richard A. Ludlow /s/ Timothy A. Dreisbach
- --------------------------------- By:-------------------------------
Timothy A. Dreisbach, President
