-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uk+h1FetbHDRxAaa/nTiR1q1roAG+4CElSjuS/u6WFjMcBJfHaHv5R5c3rdfviq4 8V2p3395Hc8GXgm0ZIJ1ug== 0000804731-02-000008.txt : 20020813 0000804731-02-000008.hdr.sgml : 20020813 20020813143145 ACCESSION NUMBER: 0000804731-02-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENERA INC CENTRAL INDEX KEY: 0000804731 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 943213541 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09812 FILM NUMBER: 02729176 BUSINESS ADDRESS: STREET 1: ONE MARKET, SPEAR TOWER STREET 2: SUITE 1850 CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1018 BUSINESS PHONE: 4155364744 MAIL ADDRESS: STREET 1: ONE MARKET, SPEAR TOWER STREET 2: SUITE 1850 CITY: SAN FRANCISCO STATE: CA ZIP: 94105-1018 FORMER COMPANY: FORMER CONFORMED NAME: TENERA LP DATE OF NAME CHANGE: 19920703 10-Q 1 q210q2002.txt QUARTER ENDED JUNE 30, 2002 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 June 30, 2002 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from __________ to __________ Commission File Number 1-9812 TENERA, INC. (Exact name of registrant as specified in its charter) Delaware 94-3213541 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Bush Street, Suite 850, San Francisco, California 94104 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 445-3200 ---------------------------- Securities registered pursuant to Section 12(b) of the Act: Common Stock Securities registered pursuant to Section 12(g) of the Act: None 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 on June 30, 2002, was 9,984,259. TABLE OF CONTENTS
PAGE PART I -- FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (Unaudited) ............................................. 1 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition ..... 12 Item 3. Quantitative and Qualitative Disclosures of Market Risk.................................... 16 PART II -- OTHER INFORMATION Item 1. Legal Proceedings ......................................................................... * Item 2. Changes in Securities ..................................................................... * Item 3. Defaults Upon Senior Securities ........................................................... * Item 4. Submission of Matters to a Vote of Security Holders ....................................... 17 Item 5. Other Information ......................................................................... * Item 6. Exhibits and Reports on Form 8-K .......................................................... 17
___________________________ * None. i PART I -- FINANCIAL INFORMATION Item 1. Financial Statements TENERA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts)
- ------------------------------------------------------------------------------------------------------------------ Three Months Ended June 30, Six Months Ended June 30, ------------------------------ ----------------------------- 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------ Revenue .................................. $ 3,489 $ 5,301 $ 7,621 $ 11,174 Direct Costs ............................. 3,301 4,112 6,934 8,636 General and Administrative Expenses ...... 1,637 2,162 3,244 4,256 Other Income (Expense).................... 1 -- (2) -- ------------ ------------- ------------ ------------- Operating Loss ......................... (1,448) (973) (2,559) (1,718) Interest (Expense) Income, Net ........... (25) 13 (39) 34 ------------ ------------- ------------ ------------- Net Loss Before Income Tax Benefit...................... (1,473) (960) (2,598) (1,684) Income Tax Benefit ....................... (174) (278) (159) (489) ------------ ------------- ------------ ------------- Net Loss ................................. $ (1,299) $ (682) $ (2,439) $ (1,195) ============ ============= ============ ============= Net Loss per Share-- Basic ............... $ (0.13) $ (0.07) $ (0.24) $ (0.12) ============ ============= ============ ============= Net Loss per Share-- Diluted ............. $ (0.13) $ (0.07) $ (0.24) $ (0.12) ============ ============= ============ ============= Weighted Average Number of Shares Outstanding-- Basic...... 9,984 9,984 9,984 9,984 ============ ============= ============ ============= Weighted Average Number of Shares Outstanding-- Diluted.... 9,984 9,984 9,984 9,984 ============ ============= ============ ============= - ------------------------------------------------------------------------------------------------------------------
See accompanying notes. 1 TENERA, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
- ---------------------------------------------------------------------------------------------------------------- June 30, December 31, 2002 2001 - ---------------------------------------------------------------------------------------------------------------- (Unaudited) ASSETS Current Assets Cash and cash equivalents ............................................... $ 1,919 $ 1,286 Trade receivables, less allowance of $539 (2001 - $547) Billed ................................................................ 1,119 1,533 Unbilled .............................................................. 1,097 1,259 Income tax receivable ................................................... -- 884 Other current assets .................................................... 338 238 ------------- ------------ Total Current Assets ................................................ 4,473 5,200 Property and Equipment, Net ............................................... 389 546 Other Assets .............................................................. 1,117 1,232 ------------- ------------ Total Assets ..................................................... $ 5,979 $ 6,978 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable ........................................................ $ 993 $ 1,136 Accrued compensation and related expenses ............................... 1,748 1,751 Deferred revenue ........................................................ 252 226 ------------- ------------ Total Current Liabilities ........................................... 2,993 3,113 Long-Term Liabilities Convertible debt and accrued interest ................................... 1,545 -- Commitments and Contingencies Stockholders' Equity Common Stock, $0.01 par value, 25,000,000 authorized, 10,417,345 issued . 104 104 Paid in capital, in excess of par ....................................... 5,692 5,677 Accumulated deficit...................................................... (3,862) (1,423) Treasury stock-- 433,086 shares (2001 - 433,086 shares).................. (493) (493) ------------- ------------ Total Stockholders' Equity ........................................ 1,441 3,865 ------------- ------------ Total Liabilities and Stockholders' Equity ....................... $ 5,979 $ 6,978 ============= ============ - ----------------------------------------------------------------------------------------------------------------
See accompanying notes. 2 TENERA, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (In thousands)
- ------------------------------------------------------------------------------------------------------------- Paid-In Capital in Common Stock Excess Accumulated Treasury of Par Deficit Stock Total ------------------------ Shares Amount - ------------------------------------------------------------------------------------------------------------- December 31, 2001 ...... 9,984 $ 104 $ 5,677 $ (1,423) $ (493) $ 3,865 Net Loss ............... -- -- -- (1,140) -- (1,140) ----------- ------------ ------------ ----------------- ----------- ------------- March 31, 2002 ......... 9,984 $ 104 $ 5,677 $ (2,563) $ (493) $ 2,725 Fair Value of Stock Compensation to Consultant -- -- 15 -- -- 15 Net Loss ............... -- -- -- (1,299) -- (1,299) ----------- ------------ ------------ ----------------- ----------- ------------- June 30, 2002 .......... 9,984 $ 104 $ 5,692 $ (3,862) $ (493) $ 1,441 =========== ============ ============ ================= =========== ============= - -------------------------------------------------------------------------------------------------------------
See accompanying notes. 3 TENERA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
- ---------------------------------------------------------------------------------------------------------------- Six Months Ended June 30, ------------------------------ 2002 2001 - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss ................................................................ $ (2,439) $ (1,195) Adjustments to reconcile net losses to cash provided (used) by operating activities: Depreciation and amortization.......................................... 449 349 Net loss on disposal of assets ........................................ 2 -- Stock compensation to consultant ...................................... 15 -- Changes in assets and liabilities: Trade receivables, net of allowance ................................. 576 1,166 Income tax receivable ............................................... 884 -- Other current assets ................................................ (157) (279) Other assets ........................................................ (104) (488) Accounts payable .................................................... (143) (920) Accrued compensation and related expenses ........................... (3) 88 Deferred revenue .................................................... 26 21 Accrued interest expense ............................................ 45 -- ------------- ------------ Net Cash Used By Operating Activities ............................. (849) (1,258) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property and equipment ................................... (19) (144) Proceeds from sale of assets ............................................ 1 -- ------------- ------------ Net Cash Used in Investing Activities ............................. (18) (144) CASH FLOWS FROM FINANCING ACTIVITIES Sale of convertible debentures.......................................... 1,500 -- Issuance of equity in subsidiary ........................................ -- 2 ------------- ------------ Net Cash Provided by Financing Activities ........................ 1,500 2 ------------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...................... 633 (1,400) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......................... 1,286 2,487 ------------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................ $ 1,919 $ 1,087 ============= ============ - ----------------------------------------------------------------------------------------------------------------
See accompanying notes. 4 TENERA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2002 and 2001 (Unaudited) Note 1. Organization TENERA, Inc. (including its subsidiaries, "TENERA", or the "Company") provides a broad range of professional and technical services, and web-based e-Learning solutions. The Company's professional and technical services are designed to solve complex management, engineering, environmental, health and safety challenges associated with the management of federal government properties, energy assets, and petrochemical and manufacturing concerns. TENERA's web-based e-Learning products and services, provided through the Company's GoTrain Corp. subsidiary ("GoTrain"), are designed to provide a suite of on-line, interactive, environmental, safety and health ("ES&H")compliance and regulatory-driven training applications for use by clients' employees. The Company is principally organized into two operating segments: Professional and Technical Services and e-Learning (see Note 6 to Consolidated Financial Statements). Note 2. Summary of Significant Accounting Policies Basis of Presentation. The accompanying consolidated interim financial statements include the accounts of the Company and its subsidiaries and are unaudited. All intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position at June 30, 2002, and the results of operations and cash flows for the three and six month periods ended June 30, 2002 and 2001, have been made. For further information, refer to the financial statements and notes thereto contained in TENERA, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission ("SEC"). 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 amounts reported in the financial statements and accompanying notes. Actual results could differ materially from these estimates. Cash and Cash Equivalents. As of June 30, 2002, the Company's cash and cash equivalents included money market accounts and commercial paper issued by companies with strong credit ratings. Cash and cash equivalents at December 31, 2001 consist of deposited cash and money market accounts at a banking institution. Cash equivalents are carried at cost, which approximates fair value. The Company includes in cash and cash equivalents, all short-term, highly liquid investments, which mature within three months of acquisition. Concentrations of Credit Risk and Credit Risk Evaluations. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents consist principally of money market accounts. Cash and cash equivalents are held with a domestic financial institution with high credit standing. The Company has not experienced any significant losses on its cash and cash equivalents. The Company conducts business with companies in various industries primarily in the United States, and provides services directly and indirectly for federal government agencies. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Allowances are maintained for potential credit issues, and such losses to date have been within management's expectations. At June 30, 2002, three clients accounted for 45%, 13%, and 12% of the Company's trade receivables. At June 30, 2001, two clients accounted for 55% and 14% of the Company's trade receivables. All the above concentrations relate to Professional and Technical Services Segment clients. Property and Equipment. Property and equipment are stated at cost ($3,365,000 and $3,409,000 at June 30, 2002 and 2001, respectively), net of accumulated depreciation ($2,976,000 and $2,690,000 at June 30, 2002 and 2001, 5 respectively). Depreciation is calculated using the straight-line method over the estimated useful lives, which range from three to five years. 6 Other Assets. Included in this asset category are the costs of internal-use e-Learning operating system software, both acquired and developed by the Company, and certain costs related to the development of the Company's e-Learning training courses used in its application service provider business. These costs have been capitalized in accordance with Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". Under the Company's business model, the Company grants a limited license to its clients to access the Company's training system via the internet. The proprietary software resides on the Company's computers and clients have no other rights to the software. All training and maintenance costs are expensed as incurred. For the six month period ended June 30, 2002, the Company capitalized $104,000 of developed software costs, compared to $488,000 for the same period in 2001. The estimated useful life of costs capitalized is three years. For the first six months of 2002 and 2001, the amortization of capitalized costs on the Company's books totaled $219,000 and $103,000, respectively. In the future, the Company expects to continue to capitalize costs relating to new course development, as well as costs associated with material enhancements and functionality of the existing software, as dictated by the marketplace. This is a business model and segment for the Company that is in its early stage and to date, management believes there have been no indicators of impairment for these assets. Revenue. The Company's Professional and Technical Services Segment primarily offers its services to the United States electric power industry and the Department of Energy ("DOE"). Revenue from time-and-material and cost plus fixed-fee contracts is recognized when service is performed and costs are incurred. Revenue from fixed-price contracts is recognized on the basis of percentage of work completed (measured by costs incurred relative to total estimated project costs) under compliance with Statement of Position 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type Contracts". The Company's e-Learning Segment's nonrefundable upfront subscription/license fees are recognized ratably over the contractual term, which is typically one year. License and subscription revenue recognition commences when delivery of initial access to the learning management system and course(s) occurs. In addition, usage fee revenue is recognized on an actual usage basis. Reserves are maintained for potential sales adjustments and credit losses; such losses to date have been within management's expectations. Actual revenue and cost of contracts in progress may differ from management estimates and such differences could be material to the financial statements. During the first six months of 2002 and 2001, one Professional and Technical Services Segment client accounted for 66% and 74%, respectively, of total Company revenue. Income Taxes. The Company uses the liability method to account for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company recorded a tax benefit of $174,000 in the second quarter of 2002, reflecting federal tax refunds received for years 1999 and 1998 due to enactment in 2002 of the Economic Growth and Tax Relief Reconciliation Act. For the six month period ended June 30, 2002, the net tax benefit of $159,000 reflects the above refund, partially offset by minimum taxes due in certain states related to 2001 activity. Accounting for Stock-Based Compensation. Under the provisions of the TENERA 1992 Option Plan, 1,500,000 shares of TENERA common stock are reserved for issuance upon the exercise of options granted to key employees and consultants. TENERA's 1993 Outside Directors Compensation and Option Plan reserves 500,000 shares for issuance upon exercise of options granted to non-employee directors. The stock options generally vest over a three year period and expire ten years from date of grant. In April 2002, GoTrain adopted the GoTrain Corp. 2002 Stock Option and Stock Plan ("GoTrain Plan") to provide additional incentive to GoTrain employees, directors, and consultants. Under the provisions of the GoTrain Plan, 2,500,000 shares of GoTrain Corp. common stock ("Subsidiary Stock") are reserved for issuance upon exercise of Subsidiary Stock options and Subsidiary Stock purchase rights granted. The Subsidary Stock options generally vest over a five year period and expire ten years from date of grant. Concurrent with 7 implementation of the GoTrain Plan, GoTrain's board of directors granted Subsidary Stock options to employees and directors to acquire 1,156,250 shares of Subsidiary Stock. TENERA and GoTrain account for their respective employee and director stock options in accordance with Accounting Principles Board Opinion No. 25 ("APB 25"). All of the TENERA stock options have been granted at an exercise price equal to the market price of the underlying stock on the date of grant. Therefore, no compensation expense has been recognized for TENERA stock options. GoTrain management believes the exercise price per share approximated the fair value per share of Subsidiary Stock on the date of the grant, and accordingly, no compensation expense was recorded. During the second quarter of 2002, GoTrain also granted 250,000 Subsidiary Stock options to a former officer of, and now consultant to, GoTrain at an exercise price of $.36 per share. These Subsidiary Stock options were granted in exchange for services through April 16, 2004 and cliff vest on that date. The $36,000 value of the Subsidiary Stock options was determined under the guidance of Statement of Financial Standards No. 123 ("FAS 123") using a Black-Scholes option pricing model with the following assumptions: market price of $.31 per share, risk-free interest rate of 5.0%, dividend yield of 0%, volatility factor of .8, and a 10 year contractual term. Under FAS 123, these options will be revalued at the end of each reporting period and stock compensation expense will be recognized ratably over the vesting term. In the quarter ended June 30, 2002, $7,000 of stock compensation expense was recognized and charged to general and administrative expenses. Additionally, as part of the consulting arrangement entered into with the same former GoTrain officer mentioned above, this consultant was allowed to retain 45,000 vested TENERA stock options under the same terms as originally granted, rather than be subject to the forfeiture provisions of the plan related to employee terminations. The 45,000 TENERA stock options are comprised of two grants: 25,000 options expiring March 2005 with an exercise price of $1.36 and 20,000 options expiring April 2006 with an exercise price of $1.26. Because the terms of the grants were modified upon the change from employee to consultant, the modified stock options were accounted for as new grants and the fair value method (FAS 123) was used to determine the values. The valuations of the 25,000 and 20,000 option grants were calculated using the Black-Scholes option pricing model with the following assumptions: market price of $.49 per share for both grants, risk-free interest rate of 3.0% and 3.5%, respectively, dividend yield of 0% for both grants, volatility factor of .8 for both grants, and 3 years and 4 years contractual terms, respectively. The combined value of these modified grants was $8,000 and was charged to TENERA's general and administrative expenses in the quarter ended June 30, 2002. Per Share Computation. Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, warrants and convertible preferred stock, in the weighted average number of common shares outstanding for a period, if dilutive. The determination of fully diluted earnings per share excludes the impact of 1,664,000 additional shares of TENERA common stock, issuable upon the exercise of outstanding stock options, because they are antidilutive. Also excluded from the computation of fully diluted earnings per share as antidilutive are the potential impact of the conversion of GoTrain convertible debentures (see Note 5 to Consolidated Financial Statements) and GoTrain Subsidiary Stock options of 3,333,000 shares and 1,406,250 shares, respectively, to GoTrain common stock. 8 The following table sets forth the computation of basic and diluted earnings per share as required by Financial Accounting Standards Board Statement No. 128: (In thousands, except for per share amounts)
- ------------------------------------------------------------------------------------------------------------------- Three Months Ended June 30, Six Months Ended June 30, ------------------------------- -------------------------------- 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------- Numerator: Net loss .............................. $ (1,299) $ (682) $ (2,439) $ (1,195) ============= ============== ============= ============== Denominator: Denominator for basic earnings per share-- weighted-average shares 9,984 9,984 9,984 9,984 outstanding............................ Effect of dilutive securities: Employee & Director stock options (Treasury stock method) ............. -- -- -- -- ------------- -------------- ------------- -------------- Denominator for diluted earnings per share--weighted-average common and common equivalent shares ............... 9,984 9,984 9,984 9,984 ============= ============== ============= ============== Basic loss per share .................... $ (0.13) $ (0.07) $ (0.24) $ (0.12) ============= ============== ============= ============== Diluted loss per share .................. $ (0.13) $ (0.07) $ (0.24) $ (0.12) ============= ============== ============= ============== - -------------------------------------------------------------------------------------------------------------------
Comprehensive Income. The Company does not have any components of comprehensive income. Therefore, comprehensive income is equal to net earnings reported for all periods presented. Disclosures about Segments of an Enterprise. The Company has two reportable operating segments, which are: Professional and Technical Services and e-Learning (see Note 6 to Consolidated Financial Statements). Recent Accounting Pronouncements. In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144"), which supersedes FAS No. 121, and Accounting Principles Board No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". FAS 144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements". FAS 144 requires that long-lived assets that are disposed of by sale be measured at the lower of book value or fair value less cost to sell. The statement also significantly changes the criteria required to classify an asset as held-for-sale. Additionally, FAS 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. The Company adopted FAS 144 for its fiscal year on January 1, 2002. The adoption of FAS 144 did not have a material effect on the Company's consolidated financial position, results of operations, or cash flows during the first half of 2002. The Company will continue to assess the impact of FAS 144 on the carrying value of its long-lived assets. 9 Note 3. Commitments and Contingencies Leases. The Company occupies facilities under noncancelable operating leases expiring at various dates through 2005. The leases call for proportionate increases due to property taxes and certain other expenses. Rent expense amounted to $361,000 for the six month period ended June 30, 2002 ($346,000 for the same period in 2001). As of June 30, 2002, minimum rental commitments under operating leases, principally for real property, are as follows (in thousands): (Year Ending December 31)
- ---------------------------------------------------------------------------------------------------------------- 2002 ......................................................................................... $ 457 2003 ......................................................................................... 717 2004 ......................................................................................... 468 2005 ......................................................................................... 382 2006 and Thereafter .......................................................................... -- ------------ Total Minimum Payments Required .............................................................. $ 2,024 ============ - ----------------------------------------------------------------------------------------------------------------
Note 4. Long-Term Obligations In June 2001, GoTrain entered into a five-year agreement with SmartForce to co-develop and distribute ES&H and regulatory content via the SmartForce internet platform. Under the agreement, GoTrain retains the ownership of its proprietary content and GoTrain shares in the revenue of any GoTrain content sold by SmartForce. As part of the agreement, GoTrain was required to make an initial payment of $50,000 to SmartForce at inception and quarterly payments of $68,500 commencing September 30, 2001 (due sixty days thereafter), for platform license and maintenance, and integration of existing GoTrain content. The Company has paid $137,000 to SmartForce under the agreement in 2002. As of August 8, 2002, minimum net payments are as follows (in thousands): (Year Ending December 31)
- ---------------------------------------------------------------------------------------------------------------- 2002 ......................................................................................... $ 137 2003 ......................................................................................... 274 2004 ......................................................................................... 274 2005 ......................................................................................... 274 2006 and Thereafter .......................................................................... 206 ------------ Total Minimum Payments Required .............................................................. $ 1,165 ============ - ----------------------------------------------------------------------------------------------------------------
10 Note 5. Convertible Debt In March 2002, The Company's GoTrain subsidiary sold subordinated convertible debentures to private investors for a total principal amount of $1,500,000 ("Series 1 Debenture" - $1,000,000; "Series 2 Debenture" - $500,000). Each debenture bears simple interest at the rate of 8% per annum, with cumulative interest payable only if the debenture is not converted into convertible preferred stock of GoTrain, pursuant to the debenture terms. The maturity date of each debenture is July 31, 2003. The holders of the Series 1 Debenture have the option at any time to convert some or all of the debenture principal balance into preferred stock of GoTrain. Otherwise, the debenture will be automatically converted into preferred stock upon the earlier of July 31, 2003, or in the event of an underwritten public offering of GoTrain common stock. At full conversion, the holders would own approximately 22% of GoTrain, subject to potential dilution from Subsidiary Stock options and Subsidiary Stock purchase rights granted under the GoTrain Plan. GoTrain has the option at any time to repay some or all of the Series 2 Debenture at face value or convert some or all of the debenture into preferred stock. Otherwise, the debenture will automatically convert into preferred stock under the same terms as the Series 1 Debenture. In the event of full conversion, the holders of the Series 2 Debenture would own approximately 11% of GoTrain, subject to potential dilution from Subsidiary Stock options and Subsidiary Stock purchase rights granted under the GoTrain Plan. On June 30, 2002, upon full conversion of the Series 1 and Series 2 debentures and the outstanding Subsidiary Stock options, the holders of the debentures would own approximately 29% of GoTrain. The Company accrued $45,000 of interest expense in the first half of 2002 related to these debentures. 11 Note 6. Segment Information Based on the criteria established by Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information ("FAS 131"), the Company operates in two business segments based on product/service differentiation. In accordance with FAS 131, the Company is required to describe its reportable segments and provide data that is consistent with the data made available to the Company's Chief Operating Decision Maker ("CODM") to assess performance and make decisions. The measure of profit or loss used for each reportable segment is net earnings (loss) before the effect of income taxes. The accounting policies for the segments are the same as for the Company taken as a whole. Certain corporate expenses are allocated to these operating segments and are included for performance evaluation. Annual employee bonuses, if any, are recorded at the corporate level. Assets are not allocated to operating segments for reporting to the Company's CODM and the Company does not prepare segmental balance sheets. Depreciation and amortization expenses are allocated to the operating segments based on the fixed assets in the underlying subsidiaries comprising the segments. There are no intersegment revenues on transactions between reportable segments. Information about the operating segments for the three and six month periods ended June 30, 2002 and 2001, respectively, and reconciliation to the Consolidated Statements of Operations, are as follows: (In thousands)
- ----------------------------------------------------------------------------------------------------------------- Quarter Ended June 30, Six Months Ended June 30, -------------------------- -------------------------- 2002 2001 2002 2001 - -------------------------------------------------------------------- ----------- ----------- ----------- REVENUE Professional and Technical Services.............. $ 3,218 $ 5,064 $ 6,939 $ 10,730 e-Learning ...................................... 271 237 682 444 ----------- ----------- ----------- ----------- Total ......................................... $ 3,489 $ 5,301 $ 7,621 $ 11,174 =========== =========== =========== =========== NET (LOSS) INCOME BEFORE TAX Professional and Technical Services ............. $ (220) $ 154 $ (281) $ 532 e-Learning ...................................... (1,001) (1,006) (1,940) (1,958) Corporate and Other ............................. (252) (108) (377) (258) ----------- ----------- ----------- ----------- Total ......................................... $ (1,473) $ (960) $ (2,598) $ (1,684) =========== =========== =========== =========== DEPRECIATION AND AMORTIZATION EXPENSE Professional and Technical Services ............. $ 12 $ 15 $ 25 $ 32 e-Learning ...................................... 208 159 416 304 Corporate and Other ............................. 4 3 8 13 ----------- ----------- ----------- ----------- Total ......................................... $ 224 $ 177 $ 449 $ 349 =========== =========== =========== =========== - -----------------------------------------------------------------------------------------------------------------
Revenues outside of the United States have been less than 1% of total Company revenues in each of the periods ended June 30, 2002 and 2001, respectively. Therefore, no enterprise-wide geographical data has been provided. The Company provides services and products to clients throughout the United States, and the geographical location of the client is not used for decision-making or performance evaluation. 12 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Forward-Looking Statements With the exception of historical facts, the statements contained in this discussion are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the Safe Harbor provisions created by that statute. Certain statements contained in the following Management's Discussion and Analysis of Results of Operations and Financial Condition, including, without limitation, statements containing the words "believes", "anticipates", "estimates", "expects", "future", "intends", and words of similar import, constitute forward-looking statements that involve risks and uncertainties. Such risks, uncertainties and changes in condition, significance, value and effect could cause the Company's actual results to differ materially from those anticipated events. Such risks and uncertainties include uncertainty of access to capital; the reliance on major customers and concentration of revenue from the government sector; the uncertainty of future profitability; uncertainty regarding competition; reliance on key personnel; uncertainty regarding industry trends and customer demand; and government contract audits. Additional risks are detailed in the Company's filings with the SEC, including its Form 10-K for the year ended December 31, 2001. Critical Accounting Policies The Company considers certain accounting policies related to revenue recognition, allowance for doubtful accounts, and cost capitalization and impairment to be critical policies due to the estimation processes involved in each. Revenue Recognition. A significant portion of the Company's e-Learning Segment revenue relates to sales of custom training courses, set-up fees, and subscription licensing arrangements. Revenue is recognized ratably over the term of the contract and begins when delivery of product occurs. In some cases, the term of the contract is not a fixed time period and management must estimate the expected revenue recognition period based upon cancellation provisions in the contract, as well as experience with similar contracts. Changes in these factors could have a significant effect on e-Learning revenue recognition. Additionally, a portion of the Professional and Technical Services Segment revenue is derived from fixed-price contracts. Revenue for these contracts is recognized using the percentage-of-completion method, which relies on estimates of total expected contract revenue and costs. Recognized revenues are subject to revisions as the contract progresses to completion. Revisions in revenue estimates are made in the period in which the facts that give rise to the revision become known. Allowance for Doubtful Accounts. The Company is required to estimate the collectibility of its trade receivables. A considerable amount of judgment is required in assessing the ultimate realization of these receivables, including the credit-worthiness of each client. If the financial condition of the Company's clients were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Cost Capitalization and Impairment. The Company has significant assets related to the capitalization of costs of internal-use e-Learning operating system software and costs related to the development of e-Learning training courses. The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments. Changes in strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded asset balances. 13 TENERA, INC. Results of Operations (Unaudited)
- ------------------------------------------------------------------------------------------------------------------ Percent of Revenue Percent of Revenue --------------------------- ------------------------- Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------ Revenue ................................................ 100.0% 100.0% 100.0% 100.0% Direct Costs ........................................... 94.6 77.6 91.0 77.3 General and Administrative Expenses .................... 46.9 40.8 42.6 38.1 Other Income ........................................... * -- * -- --------- --------- --------- --------- Operating Loss ...................................... (41.5) (18.4) (33.6) (15.4) Interest (Expense) Income, Net ......................... (0.7) 0.3 (0.5) 0.3 --------- --------- --------- --------- Net Loss Before Income Tax Benefit ..................... (42.2)% (18.1)% (34.1)% (15.1)% ========= ========= ========= ========= - ------------------------------------------------------------------------------------------------------------------ * Less than 0.05%
Results of Operations Net loss before income tax benefit for the three and six-month periods ended June 30, 2002 were $1,473,000 and $2,598,000, respectively, compared to net loss before income tax benefit of $960,000 and $1,684,000, respectively, for the same periods in 2001. The increase in loss primarily results from lower Professional and Technical Services Segment revenue. Specifically, a combination of a reduced number of federal government projects and lower labor billing rates for work at the DOE's Rocky Flats site (the "Rocky Flats Contract"). Professional and Technical Services Segment revenue for the three and six-month periods ended June 30, 2002 decreased 36% and 35%, respectively, ($1.8 million and $3.8 million, respectively) from the same periods in 2001, primarily due to a lower allocation of work to the Company at the Rocky Flats site. For the second quarter and first six months of 2002, the concentration of revenue from government projects was 73% and 71%, respectively, of total Company revenue compared to 72% and 76%, respectively, in the same periods in 2001. Revenue in the e-Learning Segment increased by $34,000 and $238,000, respectively, in the quarter and first half ended June 30, 2002, as compared to the same period in 2001, mainly due to a greater number of new clients. Direct costs were lower in the three and six-month periods of 2002, compared to a year ago, primarily as a result of fewer Professional and Technical Services Segment projects. Gross margin decreased to 5% and 9%, respectively, in the quarter and first half of 2002 from 23% in the same periods of 2001, mainly due to client-mandated lowered labor billing rates for the ongoing Rocky Flats Contract activity, increased integration expenditures related to the SmartForce e-Learning agreement, and higher employee healthcare costs . General and administrative costs, in the quarter and six months ended June 30, 2002, were 24% lower compared to a year ago, primarily reflecting furloughing non-essential personnel under a plan implemented in August 2001. Included in general and administrative expenses for the second quarter 2002 is $15,000 of stock option compensation to a former officer of GoTrain, who provided and will provide e-Learning consulting services (see Note 2 to Consolidated Financial Statements). 14 Net interest expense in 2002 represents accrued interest on the convertible debentures sold in March 2002 by the Company's GoTrain subsidiary (see Note 5 to Consolidated Financial Statements), partially offset by earnings from the investment of cash balances in money market accounts and short-term corporate debt instruments. Net interest income in 2001 represents earnings from the investment of cash balances in money market accounts and short-term corporate debt instruments and was higher than 2002 due to higher average cash balances and higher interest rates during 2001. Contract Backlog During the second quarter of 2002, the Company received written contracts and orders having an estimated value of approximately $1.5 million; $2.0 million associated with the Professional and Technical Services Segment, $.5 million in new e-Learning Segment contracts, and partially offset by a $1.0 million negative adjustment related to a single e-Learning Segment client's revised usage expectations. The activity in the Professional and Technical Services Segment primarily reflects additional work with existing commercial clients and the additional funding of the Rocky Flats Contract . The e-Learning contract activity reflects expansion of work with existing clients and new orders under the SmartForce agreement (see Note 4 to Consolidated Financial Statements). The $1 million adjustment lowering the e-Learning Segment contract value for training course usage was due to a cost reduction program implemented by the Company's client, Motorola, that included significant layoffs of the client's workforce. Contracted backlog for current, active projects totaled approximately $9.3 million as of June 30, 2002, down from $13.9 million at December 31, 2001. The Professional and Technical Services and e-Learning segments account for $6.6 million and $2.7 million, respectively, of the backlog at June 30, 2002. Liquidity and Capital Resources Cash and cash equivalents increased by $633,000 during the first six months of 2002. The increase was due to the sale of convertible debentures ($1,500,000), partially offset by cash used by operations ($849,000), and net acquisition of property and equipment ($18,000). Trade receivables, net of sales allowance, decreased by $576,000 from December 31, 2001, primarily due to lower revenues and increased collections during the period. The allowance for sales adjustments decreased by $8,000 from December 31, 2001, related to the closure and settlement of old government contracts. Income tax receivable decreased by $884,000 from December 31, 2001 due to the receipt in March 2002 of a federal tax refund of 1999 taxes paid. Additionally, the Company received federal tax refunds totaling $174,000 in June 2002 related to years 1999 and 1998 due to enactment in 2002 of the Economic Growth and Tax Relief Reconciliation Act. Other current assets increased by $157,000 from the end of 2001, reflecting increased prepaid expenses associated with insurance renewals. Other assets increased by $104,000 from December 31, 2001, primarily relating to training course and operating system development in the e-Learning Segment (see Note 2 to Consolidated Financial Statements). Accounts payable decreased by $143,000 since the end of 2001 primarily resulting from lower direct costs supporting decreased revenues. Accrued compensation and related expenses decreased by $3,000 during the period, primarily reflecting the reduction in the vacation accrual related to terminated employees. Deferred revenue increased by $26,000 from December 31, 2001 due to a higher level of upfront billing in the e-Learning Segment related to library course subscription fees and custom course fees. Accrued interest expense increased by $45,000 from December 31, 2001 due to the sale of convertible debentures in March 2002 (see Note 5 to Consolidated Financial Statements). No cash dividend was declared in the first six months of 2002. The impact of inflation on project revenue and costs of the Company was minimal. 15 At June 30, 2002, the Company had operating lease commitments through 2005 totaling $2,024,000, principally for real property (see Note 3 to Consolidated Financial Statements). Additionally, the Company has other long-term obligations through 2006, totaling $1,165,000, related to an agreement with SmartForce to co-develop and distribute ES&H and regulatory content via the SmartForce internet platform (see Note 4 to Consolidated Financial Statements). The table below schedules these contractual obligations:
- ---------------------------------------------------------------------------------------------------------------- Contractual Obligations Payments Due By Period --------------------------------------------------------- (In thousands) Total Less Than 1 1 - 3 4 - 5 After 5 Year Years Years Years - ---------------------------------------------------------------------------------------------------------------- Operating Lease Obligations ..................... $ 2,024 $ 909 $ 1,055 $ 60 $ -- Other Long-Term Obligations...................... 1,165 274 548 343 -- -------- -------- -------- -------- -------- Total Contractual Cash Obligations .............. $ 3,189 $ 1,183 $ 1,603 $ 403 $ -- - ----------------------------------------------------------------------------------------------------------------
In March 2002, the Company's GoTrain subsidiary sold subordinated convertible debentures to private investors for a total principal amount of $1,500,000. Each debenture bears simple interest at the rate of 8% per annum, with cumulative interest payable only if the debenture is not converted into preferred stock of GoTrain, pursuant to the debenture terms. The maturity date of each debenture is July 31, 2003. The larger debenture, in the amount of $1,000,000, can be converted at any time by the holder into convertible preferred stock of GoTrain. The other debenture, in the amount of $500,000 can be repaid or converted into preferred stock at any time by GoTrain. Otherwise, the debentures will automatically convert into preferred stock at the earlier of the maturity date, or upon an underwritten public offering of GoTrain common stock. At maximum conversion, the holders would own approximately 33% of GoTrain, subject to potential dilution from Subsidiary Stock options and Subsidiary Stock purchase rights granted under the GoTrain Plan. At June 30, 2002, upon full conversion of the debentures and the outstanding Subsidiary Stock options, the holders of the debentures would own approximately 29% of GoTrain (see Note 5 to Consolidated Financial Statements). Management believes that cash expected to be generated by operations of the Company's Professional and Technical Services Segment, coupled with the tax refunds received in March and June 2002, should be sufficient to enable the Company to support its Professional and Technical Services Segment operations as currently structured through the next twelve months. However, there can be no assurance that the cash generation from the Professional and Technical Services Segment operations will materialize in quantities or timeframes projected by management. The reliance on one major customer in this segment for significant cash receipts, coupled with the likely impact of lowered billing rates for that customer, discussed under Results of Operations, highlights the uncertainty and risks associated with achieving the Company's liquidity targets. The funds generated by the issuance of the GoTrain convertible debentures can only be used for GoTrain operations pursuant to the terms of the debentures. Management expects this private placement financing will support GoTrain's operations through the balance of 2002. There can be no assurance that the cash receipts from the e-Learning Segment will materialize in quantities or timeframes projected by management. The slower than anticipated revenue growth in this segment, which management believes results from a lengthening of the sales cycle and lower projected course usage primarily due to a broad-based economic slowdown in the markets served, highlights the uncertainty and risks associated with achieving the Company's liquidity targets. The Company is currently seeking additional private placement financing for GoTrain. Furthermore, the Company is seeking bank lines of credit for each of its segment operations to provide additional working capital support of their respective business activities. There can be no assurance that such sources of capital will be available in sufficient amounts or on terms favorable to the Company, or at all. 16 Item 3. Quantitative and Qualitative Disclosures of Market Risk The Company has minimal exposure to market and interest risk as the Company invests its excess cash in short-term instruments which mature within 90 days from the date of purchase. The Company does not have any derivative instruments. 17 PART II -- OTHER INFORMATION Item 4. Submission of Matter to a Vote of Security Holders On June 28, 2002, the Company held its Annual Meeting of Stockholders. The following individuals were elected to the Board of Directors:
- ---------------------------------------------------------------------------------------------------------------- Votes Votes For Withheld - ---------------------------------------------------------------------------------------------------------------- William A. Hasler ......................................................... 6,072,108 2,712,086 Robert C. McKay ........................................................... 6,064,108 2,720,086 - ----------------------------------------------------------------------------------------------------------------
The following proposals were approved at the Company's Annual Meeting:
- ---------------------------------------------------------------------------------------------------------------- Votes Votes Broker For Against Abstained Non-Votes - ---------------------------------------------------------------------------------------------------------------- Proposal to ratify the selection of the Company's independent auditors . 8,752,333 21,511 10,350 0 - ----------------------------------------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 4.5 (1) GoTrain Corp. 2002 Stock Option and Stock Plan 11.0 Statement regarding computation of per share earnings: See Notes to Consolidated Financial Statements 99.1 (1) Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 (Robert C. McKay - Chief Executive Officer and President) 99.1 (1) Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes-Oxley Act of 2002 (Jeffrey R. Hazarian - Chief Financial Officer and Executive Vice President) (b) Reports on Form 8-K None. ________________________________ (1) Filed herewith 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 13, 2002 TENERA, INC. By /s/ JEFFREY R. HAZARIAN ------------------------------------------------------ Jeffrey R. Hazarian Executive Vice President and Chief Financial Officer 19 EXHIBIT INDEX Ex. 4.5 GoTrain Corp. 2002 Stock Option and Stock Plan Ex. 99.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 (Robert C. McKay - Chief Executive Officer and President) Ex. 99.2 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 (Jeffrey R. Hazarian - Chief Financial Officer and Executive Vice President) EX-4 2 exhibit4_5.txt JUNE 30, 2002 Exhibit 4.5 GOTRAIN CORP. 2002 STOCK OPTION AND STOCK PLAN 1. Purposes of the Plan. The purposes of this Stock Option and Stock Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan. 2. Definitions. As used herein, the following definitions shall apply: (a) "Administrator" means the Board or any of its Committees as shall be administering the Plan in accordance with Section 4 hereof. (b) "Applicable Laws" means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Options or Stock Purchase Rights are granted under the Plan. (c) "Board" means the Board of Directors of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Committee" means a committee of Directors appointed by the Board in accordance with Section 4 hereof. (f) "Common Stock" means the Common Stock of the Company. (g) "Company" means GOTRAIN CORP., a Delaware corporation. (h) "Consultant" means any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory services to such entity. (i) "Director" means a member of the Board of Directors of the Company. (j) "Disability" means total and permanent disability as defined in Section 22(e)(3) of the Code. (k) "Employee" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (m) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows: (i)Ifthe Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination; or (iii)In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. (n) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. (o) "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option. (p) "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (q) "Option" means a stock option granted pursuant to the Plan. (r) "Option Agreement" means a written or electronic agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. All Option Agreements shall be subject to the terms and conditions of the Plan. (s) "Option Exchange Program" means a program whereby outstanding Options are exchanged for Options with a lower exercise price. (t) "Optioned Stock" means the Common Stock subject to an Option or a Stock Purchase Right. (u) "Optionee" means the holder of an outstanding Option or Stock Purchase Right granted under the Plan. (v) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (w) "Plan" means this 2001 Stock Option and Stock Plan. (x) "Restricted Stock" means shares of Common Stock acquired pursuant to a grant of a Stock Purchase Right under Section 11 below. (y) "Section 16(b)" means Section 16(b) of the Exchange Act. (z) "Service Provider" means an Employee, Director or Consultant. (aa) "Share" means a share of the Common Stock, as adjusted in accordance with Section 12 below. (bb) "Stock Purchase Right" means a right to purchase Common Stock pursuant to Section 11 below. (cc) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be subject to option and sold under the Plan is 2.5 million (2,500,000) Shares; provided, however, that at no time shall the total number of Shares issuable upon exercise of all outstanding Options and the total number of Shares provided for under any stock bonus or similar plan of the Company exceed the applicable percentage as calculated in accordance with the conditions and exclusions set forth in Section 260.140.45 of the California Code of Regulations, based on the Shares of the Company which are outstanding at the time the calculation is made. The Shares may be authorized but unissued shares of Common Stock, or Shares that have been previously granted as Options or Stock Purchase Rights, but which have been reacquired or otherwise reverted to the Plan. If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan, upon exercise of either an Option or Stock Purchase Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan. 4. Administration of the Plan. (a) Administrator. The Plan shall be administered by the Board or a Committee appointed by the Board, which Committee shall be constituted to comply with Applicable Laws. (b) Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, the Administrator shall have the authority in its discretion: (i)to determine the Fair Market Value; (ii) to select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder; (iii)to determine the number of Shares to be covered by each such award granted hereunder; (iv) to approve forms of agreement for use under the Plan; (v) to determine the terms and conditions of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; (vi) to determine whether and under what circumstances an Option may be settled in cash under Section 9(e) instead of Common Stock; (vii)to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option has declined since the date the Option was granted; (viii) to initiate an Option Exchange Program; (ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws; (x)toallow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by Optionees to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; (xi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan; (xii)to adopt modifications, amendments, procedures, subplans and the like as are necessary to comply with provisions of the laws of other countries in which the Company may operate in order to assure the viability of Options granted under the Plan and to enable Optionees employed in such other countries to receive advantages and benefits under the Plan and such laws; and (xiii)to take any other action not inconsistent with the terms of the Plan. (c) Effect of Administrator's Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees. 5. Eligibility. (a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. (b) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. (c) Neither the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee any right with respect to continuing the Optionee's relationship as a Service Provider with the Company, nor shall it interfere in any way with his or her right or the Company's right to terminate such relationship at any time, with or without cause. 6. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board or approval by the shareholders of the Company. It shall continue in effect for a term of 10 years, unless sooner terminated under Section 14 of the Plan. 7. Term of Option. The term of each Option shall be stated in the applicable Option Agreement; provided, however, that the term shall be no more than 10 years from the date of grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five years from the date of grant or such shorter term as may be provided in the Option Agreement. 8. Option Exercise Price and Consideration. (a) The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the following: (i)In the case of an Incentive Stock Option (A) granted to an Employee who, at the time of grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (B) granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option (A) granted to a Service Provider who, at the time of grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (B) granted to any other Service Provider, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant. (iii)For any other Options, the Administrator shall determine the per Share exercise price in compliance with Section 260.140.42 of Title 10 of the California Code of Regulations. (iv) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction. (b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of (1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (5) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, or (6) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. 9. Exercise of Option. (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable according to the terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Except in the case of Options granted to Officers, Directors and Consultants, Options shall become exercisable at a rate of no less than 20% per year over five years from the date the Options are granted. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share. An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. In addition to the exercise price, the Company may require the Optionee to deposit with it amounts sufficient to defray its payroll tax withholding obligations unless the Optionee makes other arrangements to satisfy withholding taxes that are satisfactory to the Company, in its unrestricted discretion. (b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, such Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least 30 days) to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee's Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least six months) to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for 12 months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (of at least six months) to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the Optionee's estate or by a person who acquires the right to exercise the Option by bequest or inheritance. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for 12 months following the Optionee's termination. If, at the time of death, the Optionee is not vested as to the entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (e) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. 10. Non-Transferability of Options and Stock Purchase Rights. Options and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 11. Stock Purchase Rights. (a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must accept such offer. The terms of the offer shall comply in all respects with Section 260.140.42 of Title 10 of the California Code of Regulations. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator. (b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's service with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine. Except with respect to Shares purchased by Officers, Directors and Consultants, the repurchase option shall in no case lapse at a rate of less than 20% per year over five years from the date of purchase. (c) Other Provisions. The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. (d) Rights as a Stockholder. Once the Stock Purchase Right is exercised, the purchaser shall have rights equivalent to those of a stockholder and shall be a stockholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 12 of the Plan. 12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale. (a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Option or Stock Purchase Right, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company. The conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or Stock Purchase Right. (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option or Stock Purchase Right until 15 days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option or Stock Purchase Right would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action. (c) Change in Control. In the event of a merger, reverse merger or other consolidation of the Company in which the Company is not the surviving entity, sale of all or substantially all of the assets, or sale of 50% or more of the outstanding voting securities of the Company (each of which shall constitute a Change in Control) the Company shall use its best efforts to have each outstanding Option and Stock Purchase Right assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be fully exercisable for a period of 15 days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the merger or sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger or sale of assets, the consideration (whether stock, cash or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets. 13. Time of Granting Options and Stock Purchase Rights. The date of grant of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by the Administrator. Notice of the determination shall be given to each Service Provider to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant. 14. Amendment and Termination of the Plan. (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan. (b) Stockholder Approval. The Board shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination. 15. Conditions Upon Issuance of Shares. (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) Investment Representations. As a condition to the exercise of an Option, the Administrator may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required. 16. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 17. Reservation of Shares. The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 18. Stockholder Approval. The Plan shall be subject to approval by the stockholders of the Company within 12 months after the date the Plan is adopted. Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws. 19. Information to Optionees and Purchasers. The Company shall provide to each Optionee and to each individual who acquires Shares pursuant to the Plan, not less frequently than annually during the period such Optionee or purchaser has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan, during the period such individual owns such Shares, copies of annual financial statements. The Company shall not be required to provide such statements to key employees whose duties in connection with the Company assure their access to equivalent information. EX-99 3 exhibit99_1.txt CERTIFICATION JUNE 30, 2002 Exhibit 99.1 TENERA, Inc. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of TENERA, Inc.(the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert C. McKay, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Robert C. McKay - -------------------------- Robert C. McKay Chief Executive Officer and President August 13, 2002 EX-99 4 exhibit99_2.txt CERTIFICATION JUNE 30, 2002 Exhibit 99.2 TENERA, Inc. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of TENERA, Inc.(the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey R. Hazarian, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Jeffrey R. Hazarian - -------------------------- Jeffrey R. Hazarian Chief Financial Officer and Executive Vice President August 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----