-----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, TLDrhxUp+2uhPvBS/2hNfj0wJNRojlqCDCilBILFLdfk1K2ESCubXv+v3sNxaBv1 gfrOQNMgihXB0SB89axeug== /in/edgar/work/20000728/0000950127-00-000426/0000950127-00-000426.txt : 20000921 0000950127-00-000426.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950127-00-000426 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JETFORM CORP CENTRAL INDEX KEY: 0000887614 STANDARD INDUSTRIAL CLASSIFICATION: [7372 ] IRS NUMBER: 000000000 STATE OF INCORPORATION: A1 FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11898 FILM NUMBER: 680758 BUSINESS ADDRESS: STREET 1: 560 ROCHESTER ST STE 400 CITY: OTTAWA ONTARIA CANAD STATE: A6 BUSINESS PHONE: 6132303676 MAIL ADDRESS: STREET 1: JETFORM CORP STREET 2: 560 ROCHESTER ST OTTAWA CANADA 10-K 1 0001.txt ANNUAL REPORT U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K X ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF - ----- 1934 For the fiscal year ended April 30, 2000. TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE - ----- ACT OF 1934 For the transition period from _____ to _______ Commission file number 1-111898 JetForm Corporation (Exact name of Registrant as specified in its Charter) Canada N/A (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 560 Rochester Street Ottawa, ON K1S 5K2, Canada (Address of principal executive offices) Issuer's telephone number including area code: 613-230-3676 Securities registered under Section 12(b) of the Exchange Act: Name of each exchange on which Title of each class registered Common shares, without par value Pacific Stock Exchange Securities registered under Section 12(g) of the Exchange 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting and non voting stock held by non-affiliates of the registrant computed by reference to the last price at which the stock was sold as reported on the NASDAQ Stock Market on July 20, 2000 was US$82,966,114. For the purpose of determining this amount, voting stock held by officers, directors and stockholders whose ownership exceeds five percent are excluded. This determination of affiliate status is provided for purposes of this report and does not represent an admission by either the registrant or any such person as to the status of such person. State the number of the issuer's Common Shares outstanding on July 20, 2000; 19,625,919 DOCUMENTS INCORPORATED BY REFERENCE NONE JETFORM CORPORATION TABLE OF CONTENTS PART I PAGE ITEM 1...............BUSINESS 4 ITEM 2...............PROPERTIES 15 ITEM 3...............LEGAL PROCEEDINGS 15 ITEM 4...............SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15 PART II ITEM 5...............MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 16 ITEM 6...............SELECTED FINANCIAL DATA 18 ITEM 7...............MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19 ITEM 7A..............QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS 29 ITEM 8...............FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 29 ITEM 9...............CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 53 PART III ITEM 10..............DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 54 ITEM 11..............EXECUTIVE COMPENSATION 58 ITEM 12..............SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 63 ITEM 13..............CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 64 PART IV ITEM 14..............EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 66 SIGNATURES 71 This Annual Report on Form 10-K ("Report"), contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933. Discussions containing such forward-looking statements may be found in Items 1, and 7 hereof, as well as within this Report generally. In addition, when used in this Report, the words "believes", "intends", "anticipates", "expects", and similar expressions are intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially from those described in the forward-looking statements as a result of changes in technology, changes in industry standards, new product introduction by competitors, increased participation in the enterprise software market by major corporations and other matters set forth in this Report (see Item 1. Business - "Risk Factors"). The Company does not undertake any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. PART I Item 1. BUSINESS THE COMPANY JetForm Corporation (which, together with its subsidiaries is referred to herein as "JetForm" or the "Company") was incorporated as Jorag Computer Systems Ltd. pursuant to the Canada Business Corporations Act on June 10, 1982. By Articles of Amendment dated September 28, 1982, the Company changed its name to Indigo Software Ltd. By Articles of Amendment dated September 30, 1991, the Company changed its name to JetForm Corporation. The Company's registered head and principal office is located at 560 Rochester Street, Ottawa, Ontario, K1S 5K2. The following chart sets forth certain information concerning the principal subsidiaries of the Company as at April 30, 2000: JetForm Corporation (Delaware, U.S.A.) JetForm U.K. Limited (England & Wales) JetForm France SA (France) JetForm Corporation 100% (Canada) JetForm Pacific Pty Ltd. (Australia) JetForm Scandinavia AB (Sweden) JetForm Deutschland GmbH (Germany) JetForm Technologies Limited (Ireland) JetForm Japan K.K. (Japan) JetForm PTE LTD (Singapore) Overview JetForm Corporation develops software solutions that automate business processes, transforming them into e-processes. JetForm solutions enable companies and governments to lower operating costs, increase revenues and reduce cycle times. The Company's core strengths are in intelligent XML forms, process automation and customer-focused document output. Management believes the Company is well positioned within the e-business market to attract and serve a worldwide market in the electronic processes, electronic document presentment and electronic forms arenas. JetForm's sales force and service professionals, who operate in 11 countries, focus on sales and services to end users and support the Company's numerous partnerships. Through strategic partnerships with system integrators, solution partners, international distributors and original equipment manufacturer's (OEMs) further leverage the Company's global reach. JetForm has also established key technology alliances with, among others, Microsoft, Hewlett-Packard, IBM, SAP and Xerox, to broaden market acceptance for its solutions. JetForm customers include The Australian Department of Defence, Axel Springer Verlag AG, Bank of America, BankBoston, Chase Manhattan, China Life Insurance Company, Cigna, DaimlerChrysler, Hydro Quebec, Fidelity Employer Services Company (FESCO), Kodak, Merck Microsoft, Minnesota Mining and Manufacturing Co., Nationwide Building Society, New Brunswick Department of Supply and Services, PaineWebber, Pennsylvania Department of Public Welfare, Prudential Real Estate and Relocation Services, SAFECO, Siemens Nixdorf Informationssysteme, SNCF, U.S. Army, U.S. Department of Defense, Volvo, Wachovia Bank and Wells Fargo. Industry Background Organizations are adopting e-business models at an accelerated pace. They are evolving their traditional business models to digital-based models using process automation, electronic document presentment and intelligent data capture. Companies recognize the competitive advantage they gain from reduced cycle times and costs and improved service for their customers, partners and suppliers. Government agencies also recognize the benefits of being able to better serve their citizens. e-Process e-Business is powered by process automation-the interaction of employees, customers, partners and suppliers through integrated front- and back-office enterprise applications. When a company needs to automate a cross-functional or cross-enterprise process that integrates disparate applications, interoperability becomes an issue. A pragmatic approach for overcoming this issue is to integrate these departmental applications with an enterprise-wide process automation tool. e-Document Presentment Documents such as invoices and statements often serve as the key point of contact between an organization and its customers, partners and suppliers. The demands of the current e-business revolution require dynamic, personalized business documents to be delivered through multiple channels in a variety of formats-paper, e-mail, fax and the Web. This revolution will not eliminate entirely the need for paper, so organizations are striving to operate in this hybrid paper-Web world. e-Forms Business and government are continuing to strive to improve their administrative efficiencies by automating paper-based solutions. Organizations' intranets have become the portals to initiate business processes. The evolution of the Internet from a publishing vehicle to a service-delivery vehicle is requiring organizations to offer customer service over the Internet; whether it be to complete a required form, access account information or check on the status of a customer service request. The JetForm Solution JetForm's e-process, e-document presentment and e-forms technologies provide organizations with the capability to adopt e-business models, giving them a competitive advantage in their respective industries. JetForm's solutions are complemented by its professional services team, which facilitates product implementation, and its customer services team, which provides ongoing support. e-Process JetForm's e-process framework integrates people, processes and applications in e-business. It is an Extensible Mark-up Language ("XML") based process automation solution that contains rich work management capabilities and provides companies with the capability to deliver their services and products across multiple media, including the Internet, wireless, mobile, e-mail and agents or brokers. o Safeco Corporation - in business since 1923, is a Fortune 500 diversified financial services company based in Seattle. Safeco and its more than 17,000 independent agents and financial advisors provide premier insurance and financial services to individual and business customers. Recently SAFECO used JetForm's e-process technology to develop an application that lets independent agents and brokers order, process and receive surety bonds online, in near real time. The application's efficiency and cost-savings will allow SAFECO to bring more products to market, and to increase market share by making it easier for independent agents and brokers to do business with SAFECO. The company plans to leverage JetForm's e-process technology to build multiple applications, ensuring SAFECO stays at the forefront of the financial services industry. e-Document Presentment JetForm's e-document presentment solutions allow organizations to produce professional quality document output from their line-of-business, legacy or ERP applications. The data generated from these business applications is merged with an electronic document template to dynamically generate documents in multiple formats for delivery to multiple devices, including print, e-mail, fax and the Web. o Healthaxis.com - Healthaxis.com is a leading provider of advanced technology solutions for healthcare administration. Acting as an intermediary, Healthaxis.com provides support to insurance carriers, Blue Cross/Blue Shield organizations, third-party administrators and self-administered employers. Their services include business-to-business (B2B) Internet-enabled applications that address the processing and flow of information among participants. JetForm's electronic document presentment technology creates the complex documents and integrated electronic and printed document output it needed to meet the challenges of the hybrid paper-Web world. Through its dynamic sub-forms capabilities, the content, look and feel of Healthaxis.com's forms is controlled dynamically by the data ensuring the document is accurate and easy to read. As a result of implementing JetForm's technology, Heathaxis.com realizes a cost savings of $US1 per document, a significant savings given that the company produces over 18 million documents each year. e-Forms JetForm is the e-forms industry leader, providing graphical XML-based design tools that create compliant forms to capture data. JetForm provides support for multiple platforms, whether the end user is filling out a form at a desktop, on a disconnected handheld device or even on a mobile device with Internet access. The Company's intelligent e-forms are robust in their ability to capture and validate data, perform calculations or access data throughout the organization. JetForm's e-form solutions can be used within governments and businesses wishing to improve efficiencies and save costs. According to Gartner Group, 80 per cent of all business documents are forms. These forms may need to be signed, participate in a workflow or be stored in a document management system. o Kansas Department of Transportation - The Kansas Department of Transportation (KDOT) accumulates massive amounts of information about new and existing transportation infrastructure. With reduced staff levels, the rising tide of information was becoming increasingly difficult to manage and process. The answer was JetForm e-process technology. To guide enterprise implementation, KDOT developed the Generic Implementation Methodology (GIM), a repeatable process any business unit can use. Of the e-process applications KDOT has deployed to date, one of the most innovative is a solution that creates and updates over 3,000 project authorizations and schedules annually. Developed without the need to rewrite mainframe-based legacy systems, this e-process eliminates duplicate data entry, automates processing and electronic distribution, and automatically converts the final forms to Adobe Acrobat PDF format and stores the form and any attachment in the KDOT document management system. KDOT is now able to accommodate an increasing workload with existing staff levels. The success of the GIM in this and many other e-process applications spurred Kansas to recognize KDOT as the state's lead agency for e-process initiatives. Corporate Strategy JetForm's strategic vision is to be the global industry standard in e-Process, e-Document Presentment, and e-Forms solutions. The Company plans to achieve this vision through the following strategies. Expand Worldwide Sales and Distribution Management believes that the e-business market in North America and globally represents a significant growth opportunity as organizations strive to evolve traditional business models into e-business models. JetForm plans to continue to invest in its worldwide distribution capacity to increase market share and penetration. This investment will include expanding the direct sales force within the established and new sales offices in North America and around the globe. Extend Strategic Alliances JetForm intends to build relationships with leading system integrators to extend its reach and provide comprehensive solutions to its customers. JetForm believes these relationships facilitate access to strategic projects that often generate large commitments from its customers and can reduce the length of its sales cycles. In addition, JetForm believes the software deployment expertise and industry knowledge of system integrators shortens the implementation time of its product and helps to secure add-on business. Increase Visibility JetForm intends to devote significant resources to marketing efforts to increase customer and industry awareness of its software and services. These increased marketing efforts will include hiring additional marketing personnel, increasing brand awareness through advertising, launching a focused press and industry analyst campaign and expanding participation in related industry events. Through these marketing efforts, JetForm intends to demonstrate the value of its software and services to enterprises and thereby increase its market share. Leverage Existing Customer Base Management believes its significant base of customers provides an opportunity for additional sales of current and future software, as well as ongoing maintenance revenue. A majority of JetForm's customers have not yet purchased its full suite of products or currently only use them in specific business units or locations. Management believes that JetForm can sell more deeply into this customer base by expanding these partial deployments into enterprise-wide implementations as well as by cross-selling additional software and services. Extend Technological Leadership JetForm's XML-based products provide the foundation for the development of new and innovative e-business solutions and allow JetForm's products to be easily adapted to new and existing standards, protocols and platforms. This architecture enables JetForm's products to surround and extend multiple operating systems, applications, business processes and data sources. Management believes that JetForm's product capabilities significantly differentiate it from its competitors. By continuing to invest in research and development, JetForm believes that it will extend its technological leadership in the market. Products The Company offers scaleable e-process, e-document presentment and e-forms solutions for enterprises to adopt e-business models. The JetForm solution is comprised of a combination of software products and associated implementation and support services. The Company's product lines have been designed and developed with a modular, open-systems architecture and support many industry standard interfaces to e-mail, groupware, Internet/intranet and business application software. The Company's products are sold individually or in combination. The actual price to an end user or reseller can vary substantially from customer to customer depending on location, the number of licensed users and the combination of products and services to be provided. e-Process e-Process Framework - For companies who need to integrate multiple applications, processes and people from their brick and mortar businesses into their e-businesses, the e-process framework is an XML-based, process automation platform that allows organizations to model, deploy and manage business processes. Unlike application integration tools, packaged applications or Web development tools, the framework integrates people and processes with existing systems and supports multi-channel delivery including the Internet, wireless, mobile and e-mail. e-Document Presentment Central and Central Pro - JetForm Central and Central Pro provide connectivity to line-of-business applications for producing document output for print, fax, e-mail and the Web. They combine an easy-to-use design tool for the creation of dynamic e-document templates. Output Pak for SAP R/3 - JetForm's Output Pak for SAP R/3 provides document output for SAP R/3 applications. It expands the scope of R/3 applications by allowing customers to create and integrate e-forms with their R/3 business processes. With a BAPI-certified interface, it provides a flexible and cost-effective way to create and maintain forms specifically for the SAP R/3 environment. Output Pak for Oracle - JetForm Output Pak for Oracle Applications provides document output from Oracle applications. It expands the scope of Oracle Applications by allowing customers to create and integrate e-forms with their Oracle business processes. With an Oracle CAI -certified interface, it provides a flexible and cost-effective way to create and maintain forms specifically for the Oracle environment. It provides professional-looking output, readability for users and a better corporate image for organizations. Forms Pak for PeopleSoft Student Administration - JetForm Forms Pak for PeopleSoft Student Administration provides document output from the PeopleSoft Student Administration module. It allows the higher-education community using PeopleSoft Student Administration applications to output line-of-business documents such as U.S. federal government-compliant loan forms, student invoices and financial award notices. e-Forms ReachForm - JetForm's latest e-Forms technology, ReachForm, provides an intelligent form filling experience to everyone on the Internet regardless of browser type or computing device, with no download or plug-in. A single-form template can be deployed to multiple platforms. FormFlow99 - JetForm's FormFlow99 is an e-forms solution that provides application interoperability, zero administration capabilities, process and routing security, integration capabilities and applications functionality. Pocket Form - JetForm Pocket Form, for the Microsoft Windows Powered Pocket PC, HPC and HPC Pro operating systems, enables mobile computing professionals to use e-forms to efficiently collect data, complete business transactions with a legally-binding signature and remotely initiate a workflow. JetForm's e-process framework and JetForm's Pocket Form provide an enterprise development environment for mobile solutions. Services As at April 30, 2000, the Company had a team of 120 professionals who are responsible for consulting, custom software development, forms design and technical support. Consulting services include assisting customers to configure, implement and integrate the Company's products and, when required, customize products and design automated processes to meet customers' specific business needs. In addition, the Company offers e-forms design services. This broad range of services provides customers with the ability to streamline business processes. The Company also provides customers with ongoing technical support by way of phone, fax and the Web. The technical support team works closely with customers to diagnose problems and address system integration issues to ensure the customer receives the full benefit of the JetForm solution. The Company maintains support facilities that permit real-time testing and replication of customer problems. JetForm operates two support centers. The Ottawa support center provides coverage for North America while coverage for Europe is provided out of the Dublin support center. The Company's software products are typically sold with annual maintenance and support contracts. The annual service fee is generally 18 per cent of the corporate price of the software purchased and entitles the customer to remote support, product upgrades and maintenance releases. Maintenance and support contracts can also be tailored to meet customer-specific needs. Sales, Marketing and Distribution The Company's sales strategy is to achieve broad market penetration worldwide by employing a sales force focused on sales to end users. JetForm also supports its strategic partners including systems integrators, consulting firms, solution partners, OEMs and international distributors. The Company's marketing strategy supports the various focuses of the sales force and includes market research and industry analyst relations; targeted print, Web and direct mail advertising; public relations activities, lead-generating events, seminars and conferences; Web, multi-media and printed marketing collateral; and field-focused education tools and communication. The Company's sales force operates from 16 offices, with five in the United States near the following centers: Atlanta, Chicago, New York, San Francisco and Washington; two in Canada and one in each of the United Kingdom, Dublin, France, Germany, Sweden, Japan and China. The Company's sales force primarily targets Fortune 500 companies, with a particular focus on the financial services industry, ERP/manufacturing, e-business, commercial, mid market and the government sector. Trained in the Solution Selling methodology, the Company's sales force builds on relationships with current clients while increasing the Company's presence in the e-business market and delivering business value to its customers. The JetForm Partner Program Through JetForm's Partner Program, the Company is able to develop relationships with organizations that provide complementary products and services extending its reach and core competencies. The Program is designed for medium-sized integrators and large consulting firms that have a focus on implementing and/or developing integrated solutions. JetForm partners with different types of organizations for e-process, e-document presentment and e-forms through a variety of partner categories. Solution Partners: Star IT, Enterprise Resolutions, Evergreen, Pro Technologies, OrdiPlan, Calian Technologies System Integrators: CGI, The Hunter Group, Core Technology Partners OEM Partners: Alltel, EDS, Unisys, Symix, Glovia, CMI, Teklynx, CSC, Dairyland, 3M Technology Partners: Microsoft, Entrust, PenOp, Silanis, VeriSign, SAP, Oracle, PeopleSoft, JD Edwards, HP, Xerox, Zebra, Dazel, TopCall Distributors: Ingram Customers The Company's customers include a wide variety of organizations with an emphasis on the financial services industry and the government sector. The Company has an international customer base with customers outside of North America representing 44 per cent of revenues for the year ended April 30, 2000, and 31 per cent and 27 per cent of revenues for the years ended April 30, 1999 and April 30, 1998, respectively. A selected list of users of JetForm's e-process, e-document presentment and e-forms products is set forth below in the following table.
North America International Financial Services: Bank of Montreal Australia and New Zealand Banking Chase Manhattan Group Limited CIGNA Corp. Commonwealth Bank of Australia PaineWebber Incorporated Dresdner Bank Prudential Real Estate and Relocation Lloyds Bank Services National Australia Bank Limited SAFECO Union Bank of Switzerland USERS Incorporated Nationwide Building Society Wachovia Bank Wells Fargo Government: Hydro-Quebec Australian Department of Defence Industry Canada Chinese Service Center for Scholarly New Brunswick Dept. of Supply & Services Exchange U.S. Army Frankfurt Airport Authority U.S Army Medical Command Swedish Car Test U.S. Department of the Treasury Swedish Health Organization U.S. Postal Service UK Department of Social Security (DSS) U.S. Social Security Administration Pennsylvania Department of Public Welfare State of Wisconsin Other: Kodak DaimlerChrysler Nestle Ford Motor Company GE Aircraft Schindler Corp. Dr Pepper/7Up SNCF Bombardier Inc. Volvo AB Minnesota Mining and Manufacturing Co Merck Owens Corning Axel Springer Verlag Procter & Gamble Company Technology: Hewlett-Packard Company Siemens Nixdorf Informationssysteme AG Microsoft Corporation Symantec Corporation
Product Development As of April 30, 2000, the Company employed 152 full time employees in its research and development group. JetForm's development team is engaged in development, testing, product management, quality assurance and documentation focused primarily on e-process, e-document presentment and e-forms and related technologies. The research and development team, located in Ottawa, consists of people with a broad base of experience built within JetForm, other product development companies and the IT industry. The Company's innovative research and development projects focus efforts in each of JetForm's global product lines to take full advantage of Web-centric solutions in the e-process market. This work builds on the key strengths of the Company's current product lines, provides maintenance and enhancements for current product lines and integration with the dynamic hardware and software technology environment. Competition The market for JetForm's software and services is highly competitive, quickly evolving and subject to rapid technological change. Management expects competition to intensify in the future. JetForm's potential competitors vary in size and in the scope and breadth of the products and services offered. The Company's competitors fit into three separate areas. The first is process automation solutions from organizations such as Vitria and Staffware. The second is electronic document output from organizations such as Optio, StreamServe, Xenos and AFP Technology. The third is electronic forms from organizations such as Adobe, Cardiff, PureEdge and Shana. Management believes that JetForm is differentiated relative to its competitors due to its XML technology, which allows for integration between cross-functional and cross-enterprise applications, and the end-to-end automation solutions it offers. Management believes that, to the best of its knowledge, none of JetForm's competitors provide all of this functionality. Intellectual Property The Company distributes its products under software license agreements that generally grant customers perpetual licenses to use, rather than own, the Company's products and that contain various provisions protecting the Company's ownership and confidentiality of the underlying technology. The source code of the Company's products is protected as a trade secret and as unpublished copyrighted work. The Company also periodically obtains licenses to use or copy software written or supplied by third parties for inclusion into or as part of the functionality of the Company's products. Such licenses usually are perpetual in nature, subject to the regular payment of royalties by the Company as specified in the licenses and generally on terms and conditions comparable to those terms on which the Company licenses its own products. The Company has registered JetForm as a trademark in the United States and Canada and has applications issued or pending in all foreign countries in which it has distributor representation. The Company acquired, as part of the Delrina Assets, all of Delrina's relevant trademarks including FormFlow. Employees As of April 30, 2000, the Company had 549 employees of which 524 were full-time employees. Employees include 152 in research and development, 82 in North American sales, 71 in international sales, 30 in marketing, 120 in systems and consulting services and 69 in management and internal corporate services. Of the full-time employees, 384 are located in Canada, 39 are located in the United States, 14 are located in the United Kingdom, 17 are located in France, 30 are located in Ireland, 11 are located in Germany, 10 are located in Sweden, 3 are located in China and 16 are located in Japan. None of the Company's employees is represented by a labor union or subject to a collective bargaining agreement, and the Company believes that its relations with its employees are good. RISK FACTORS In considering an investment in the securities of the Company, a prospective purchaser should consider the following risk factors. Variability in Quarterly Results The Company's revenues and operating results have varied substantially from period to period. Product revenues are difficult to forecast due to the fact that the Company's sales cycle, from initial trial to multiple copy licenses, varies substantially from customer to customer. The sales cycle for the Company's three lines of business; e-process, e-Document Presentment and e-forms generally ranges from three to 18 months. The Company has in the past relied to a great extent on revenue derived from small numbers of large product licenses in every quarter. Orders are generally filled when they are received and the Company does not operate with a material order backlog. Therefore, product revenues in any period are substantially dependent on orders booked and shipped or the fulfillment in that period of the Company's obligations under Irrevocable Commitment Licenses, and variations in the timing of product sales or fulfillment of its obligations can cause material variations in operating results from period to period. In addition, the Company typically has realized a disproportionately high amount of its revenues and income in the last month of each quarter and, as a result, the magnitude of quarterly fluctuations may not become evident until late in, or at the end of, a given quarter. Accordingly, delays in product delivery or in the closing of sales near the end of a quarter could cause quarterly revenues and, to a greater degree, net income, to fall substantially short of anticipated levels. Due to the foregoing factors, the Company believes that period to period comparisons of its operating results are not necessarily meaningful and that such comparisons cannot be relied upon as indicators of future performance. There can be no assurance that future revenues and operating results will not vary substantially. It is also possible that in one or more quarters the Company's revenues or operating results will fall below the expectations of public market analysts and investors. In either case, the price of the Common Shares could be materially adversely affected. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Competition The market for JetForm's software and services is highly competitive, quickly evolving and subject to rapid technological change. Management expects competition to intensify in the future. JetForm's current and potential competitors vary in size and in the scope and breadth of the products and services offered. The Company's competitors fit into three separate areas. The first is process automation solutions from organizations such as Vitria and Staffware. The second is electronic document output from organizations such as Optio, StreamServe, Xenos and AFP Technology. The third is electronic forms from organizations such as Adobe, Cardiff, PureEdge and Shana. Rapid Technological Change The market for the Company's products and services is characterized by rapidly changing technology, evolving industry standards and new product introductions. The Company's future success will depend in part upon its ability to enhance its existing products and services and to develop and introduce new products and services to meet changing client requirements. The process of developing software products and solutions such as those offered by the Company is extremely complex and is expected to become increasingly complex and expensive in the future with the introduction of new platforms and technologies. There can be no assurance that the Company will successfully complete the development of new products and solutions in a timely fashion or that the Company's current or future products and solutions will satisfy the future needs of its customers. Management of Growth The Company intends to expand its worldwide sales force and distribution channels. Rapid growth, including geographic expansion, could place a significant strain on the Company's management, operations and other resources. The Company's ability to manage its growth will require it to continue to invest in its operations, including its financial and management information systems and controls, and to retain, motivate and effectively manage its employees. If the Company's management is unable to manage the Company's growth effectively, the quality of the Company's products and services, the Company's ability to retain key personnel and its results of operations could be materially adversely affected. Third Party Dependence The Company's ability to remain competitive and respond to technological change is in part dependent upon the products and services of third parties, including vendors of application solutions. In the event that the products of such third parties have design defects or flaws, or if such products are unexpectedly delayed in their introduction, the Company's business, financial condition and results of operations could be materially adversely affected. Dependence Upon Key Personnel The success of the Company will be largely dependent on certain key employees including A. Kevin Francis, its President and Chief Executive Officer. The loss of the services of Mr. Francis or certain other key employees could have a material adverse effect on the Company's business and prospects. The Company's success is highly dependent on its continuing ability to identify, hire, train, retain and motivate highly qualified management, technical, sales and marketing personnel, including recently appointed officers and other employees. Competition for such personnel is intense, and there can be no assurance that the Company will be able to attract, integrate or retain highly qualified, technical, sales, marketing and managerial personnel in the future. The inability to attract and retain the necessary management, technical and sales and marketing personnel could have a material adverse effect on the Company's business, financial condition and results of operations. International Operations and Geographic Concentration Sales of the Company's products outside of the United States and Canada represented approximately 42% of the Company's product revenues for the year ended April 30, 2000, and approximately 37% and 27% of the Company's product revenues for the years ended April 30, 1999 and 1998, respectively. The Company anticipates that sales outside of the United States and Canada will continue to account for a significant portion of total revenue. These revenues are subject to certain risks including exchange rate changes, imposition of government controls, export license requirements, restrictions on the import/export of technology, political instability, trade restrictions, changes in tariffs and taxes, differences in copyright protection and difficulties in managing accounts receivable and term accounts receivable. There can be no assurance that these factors will not have a material adverse effect on the Company's future results of operations. Exchange Rate Risks; Currency Fluctuations Most of the Company's revenues are denominated in U.S. dollars, although the Company's expenses are primarily incurred in Canadian dollars and it reports its financial results in Canadian dollars. Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar could have a material adverse effect on the Company's reported results. As the Company continues to expand its European and Rest of World operations, its risk exposure to currencies other than the U.S. dollar and the Canadian dollar will also increase. Reliance on Intellectual Property The Company's success is heavily dependent upon its proprietary technology. The Company does not hold any patents relating to its software products. The Company regards its software products as proprietary and relies for protection upon copyright, trademark and trade secret laws as well as restrictions on disclosure and transferability contained in its software license agreements with customers. In spite of these precautions, it may be possible for unauthorized third parties to copy or otherwise obtain and use the Company's products or technology. In addition, effective copyright, trademark and trade secret protection may be unavailable or limited in certain foreign countries. The Company also periodically obtains licenses to use or copy software written or supplied by third parties for use in the Company's products. If such licenses are terminated by such third parties, there can be no assurance that any necessary licenses or rights could be obtained on terms satisfactory to the Company to allow continued use of such third party software which may be necessary for the functionality or features of the Company's products. Certain of the Company's software products and solutions could infringe existing intellectual property rights of others. A number of companies, including leading software companies, have obtained patents, some of which could be found to be infringed by the Company's products and solutions. If any infringement of intellectual property rights does exist in JetForm's products, there can be no assurance that the necessary licenses or rights could be obtained on terms satisfactory to the Company or that the Company would not be required to modify or discontinue distributing the infringing software products. A finding of infringement could have a material adverse effect on the Company's business, financial condition and results of operations. The threat or commencement of litigation against the Company by third parties to enforce alleged intellectual property rights, whether or not such intellectual property rights are found to exist or to have been infringed by the Company, could have a material adverse impact on the market price of the Common Shares, could prove costly for the Company to defend and could direct significant management resources away from the operations of the Company. Product Defects and Product Liability The Company's software products are highly complex and sophisticated and could from time to time contain design defects or software errors that could be difficult to detect and correct. Errors, bugs or viruses may result in loss of or delay in market acceptance or loss of client data. Although the Company has not experienced material adverse effects resulting from any software defects or errors to date, there can be no assurance that, despite testing by the Company and its clients, errors will not be found in new products. In addition, the Company regularly provides a warranty with its products. There can be no assurance that the financial impact of these obligations will not be significant in the future, especially in the event of a major product defect. The Company's products are used by many of its clients to perform mission critical functions. As a result, design defects, software errors, misuse of the Company's products, incorrect data from external sources or other potential problems that may arise from the use of the Company's products could result in claims for financial or other damages from the Company's customers. As is customary in the software industry, the Company does not maintain product liability insurance. Although the Company's license agreements with its customers typically contain provisions designed to limit the Company's exposure to potential claims, such provisions may not effectively protect the Company against such claims and related liabilities and costs. Accordingly, any such claim could have a material adverse effect upon the Company's business, financial condition and results of operations. Volatility of Stock Price On the basis of the history of the trading prices of the Common Shares and the stock prices of other technology companies, the market price of the Common Shares may be highly volatile and may be affected by factors other than the Company's results. Factors such as announcements of technological innovations or new products by the Company's competitors, changes in the conditions of the e-forms, e-process and e-document presentment markets, changes in public market analysts' expectations regarding future earnings and fluctuations in the rate of exchange between foreign currencies and the Canadian dollar may have an impact on the market price of the Common Shares. In addition, general economic, political and market conditions, such as recessions, economic treaties, elections or military conflicts, may adversely affect the market price of the Common Shares. Item 2. PROPERTIES Facilities The following table sets forth the location of the principal offices of the Company, their uses, and the lease expiry date. The Company considers its facilities to be in good condition. The specific location of these facilities is not material to the Company's business.
Location Use Lease Expiry Ottawa, Ontario, Canada Executive offices, customer support, consulting September, 2006 services, training services, sales, marketing and administration Toronto, Ontario, Canada Regional sales office November, 2000 Falls Church, Virginia, USA U.S. Government sales and marketing headquarters, April, 2000 regional sales Dallas, Texas, USA Regional sales office November, 2000 Mountain View, California, USA Regional sales office October, 2000 Oak Brook, Illinois, USA Regional sales office June, 2000 New York, New York, USA Regional sales office April, 2005 Atlanta, Georgia, USA Regional sales office November, 2000 Boston, Massachusetts, USA Regional Sales Office December, 2000 Boulogne, France Regional sales office July, 2002 Falkenberg, Sweden Regional sales office June, 2000 Ratingen, Germany Regional sales office April, 2002 Thames Valley, UK Regional Sales Office November, 2000 Dublin, Ireland European Services Centre January, 2024 Tokyo, Japan Asia Pacific Office January, 2002 Beijing, China Regional sales office March, 2000
Item 3. LEGAL PROCEEDINGS The Company is not a party to any material litigation. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the year ended April 30, 2000. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Price Range of Common Shares The Company's Common Shares are quoted on the NASDAQ National Market under the symbol "FORM", the Pacific Stock Exchange under the symbol "JTF", and on The Toronto Stock Exchange under the symbol "JFM". The following table sets forth, for the periods indicated, the high and low closing sales prices of the Common Shares as reported on the NASDAQ National Market. High Low Year Ended April 30, 1999 First Quarter....................... US$22.88 US$15.63 Second Quarter...................... 20.38 12.25 Third Quarter....................... 15.25 9.63 Fourth Quarter...................... 11.63 3.13 Year Ended April 30, 2000 First Quarter....................... US$ 5.12 US$ 3.12 Second Quarter...................... 4.40 3.12 Third Quarter....................... 7.56 3.43 Fourth Quarter...................... 12.31 5.12 Holders As of July 20, 2000, there were 228 holders of record of Common Shares. A substantial number of Common Shares of the Company are held by depositories, brokerage firms and financial institutions in "street name". Based upon the number of annual reports and proxy statements requested by such nominees, management of the Company estimates that there are more than 16,500 beneficial holders of Common Shares. Dividends During the fiscal years ended April 30, 2000, 1999 and 1998, the Company did not declare or pay cash dividends on its Common Shares, and does not anticipate paying any dividends in the foreseeable future, but intends to retain future earnings for reinvestment to finance its business. Limitations Affecting Security Holders There is no law or government decree or regulation in Canada that restricts the export or import of capital, or affects the remittances of dividends, insurance or other payments to a non-resident holder of Common Shares, other than the withholding tax requirements described below. Taxation The following discussion summarizes certain tax considerations relevant to an investment by individuals and corporations who, for income tax purposes, are resident in the United States and not in Canada, hold Common Shares as capital property, and do not use or hold the Common Shares in carrying on business through a permanent establishment or in connection with a fixed base in Canada (collectively, "Unconnected US Shareholders"). The Canadian tax consequences of an investment in the Common Shares by investors who are not Unconnected US Shareholders may be expected to differ substantially from the tax consequences discussed herein. The discussion is based upon the provisions of the Income Tax Act (Canada) (the "Tax Act"), the Convention between Canada and the United States of America with respect to taxes on Income and on Capital (the "Convention") and the published administrative practices of Revenue Canada, Taxation and judicial decisions, all of which are subject to change. This discussion does not take into account the tax laws of the various provinces or territories of Canada. This discussion is intended to be a general description of the Canadian tax considerations and does not take into account the individual circumstances of any particular shareholder. Any cash dividends and stock dividends on the Common Shares payable to Unconnected US Shareholders generally will be subject to Canadian withholding tax. Under the Convention, the rate of withholding tax generally applicable to Unconnected US Shareholders is 15%. In the case of a United States corporate shareholder owning 10% or more of the voting shares of the Company, the applicable withholding tax under the Convention is 5%. Capital gains realized on the disposition of Common Shares by Unconnected US Shareholders will not be subject to tax under the Tax Act unless such Common Shares are taxable Canadian property within the meaning of the Tax Act. Common Shares will generally not be taxable Canadian property to a holder unless, at any time during the five-year period immediately preceding a disposition, the holder, or persons with whom the holder did not deal at arm's length, or any combination thereof, owned 25% or more of the issued shares of any class or series of the Company. If the Common Shares are considered taxable Canadian property to a holder, the Convention will generally exempt Unconnected US Shareholders from tax under the Tax Act in respect of a disposition of Common Shares provided the value of the shares of the Company is not derived principally from real property situated in Canada. Neither Canada nor any province thereof currently imposes any estate taxes or succession duties. Item 6. SELECTED FINANCIAL DATA The selected consolidated financial data as at and for each of the years in the five year period ended April 30, 2000, have been derived from the Company's audited Consolidated Financial Statements and Notes thereto, included in Item 8. "Financial Statements and Supplementary Data", and should be read in conjunction therewith. The Consolidated Financial Statements are prepared on the basis of U.S. GAAP and are expressed in Canadian dollars. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Year ended April 30, ----------------------------------------------------------------------------- 2000 1999 1998 1997 1996 --------- ----------- ----------- ------------ ----------- (in thousands of Canadian dollars, except share and per share amounts) Statement of Operations Data: Revenues Product......................... $ 52,583 $ 66,662 $ 74,781 $ 54,935 $ 31,600 Service......................... 41,734 47,550 36,446 21,679 11,855 --------- ----------- ----------- ------------ ----------- 94,317 114,212 111,227 76,614 43,455 --------- ----------- ----------- ------------ ----------- Costs and expenses Cost of product................. 12,053 9,164 7,539 4,677 2,491 Cost of service................. 12,373 19,058 15,259 10,805 6,125 Sales and marketing............. 45,097 53,315 40,214 29,140 16,697 General and administrative...... 12,168 10,722 9,846 8,618 5,513 Research and development........ 15,423 15,384 10,620 7,422 3,905 Depreciation and amortization.................... 10,300 11,568 11,631 8,190 3,593 Gain on sale of assets(1)....... (1,813) -- -- -- -- Restructuring(2)................ (1,106) 30,503 -- -- -- Repurchase of Moore Options(3)...................... -- -- -- 47,084 -- In process research and development(4).................. -- -- -- 106,962 -- --------- ----------- ----------- ------------ ----------- 104,495 149,714 95,109 222,898 38,324 --------- ----------- ----------- ------------ ----------- Operating income (loss)......... (10,178) (35,502) 16,118 (146,284) 5,131 Investment and other income (expense)....................... 3,163 3,815 (3,564) (2,003) 1,466 --------- ----------- ----------- ------------ ----------- Income (loss) before taxes...... (7,015) (31,687) 12,554 (148,287) 6,597 Provision for (recovery of) income taxes.................... 1,086 (2,552) 1,690 193 2,449 --------- ----------- ----------- ------------ ----------- Net income (loss)............... $ (8,101) $(29,135) $ 10,864 $ (148,480) $4,148 ========= =========== =========== ============ =========== Basic income (loss) per share........................... Net income (loss) per share........................... $ (0.41) $(1.47) $ 0.65 $ (10.03) $ 0.39 Weighted average number of shares.......................... 19,915,893 19,826,057 16,622,835 14,796,852 10,650,807 Fully diluted income (loss) per share........................... Net income (loss) per share........................... $ (0.41) $(1.47) $ 0.62 $ (10.03) $ 0.34 Weighted average number of shares.......................... 19,915,893 19,826,057 17,615,595 14,796,852 12,137,946
(1) On May 1, 1999 the Company sold all of the Common and Preferred shares of its multimedia subsidiary, Why Interactive, to a third party for total consideration of $6.4 million. (2) On March 17, 1999 the Company announced a restructuring plan which included the write-down of certain capital assets, reductions in the number of employees, closure of certain facilities and other costs totaling $30.5 million. See Note 15 to the Consolidated Financial Statements included elsewhere in this Form 10-K. During the year ended April 30, 2000 the Company was successful in reducing its total expected liability under facilities leases and severance arrangements by $ 1.1 million. (3) Effective June 27, 1996, the Company repurchased the Moore options for consideration of US$34.0 million, paid for by the issuance of 1,813,334 Common Shares. (4) On September 10, 1996, the Company acquired certain assets including title to intellectual property, that were formerly part of the E-Forms software group of Delrina Corporation. During the year ended April 30, 1997, the Company recorded a non-recurring charge of $107.0 million for purchased in process research and development relating to this acquisition.
As at April 30, --------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---------- ----------- ----------- ----------- ----------- (in thousands of Canadian dollars) Balance Sheet Data: Cash and cash equivalents............... $42,092 $47,262 $ 91,604 $ 34,450 $ 20,198 Accounts receivable..................... 21,416 29,274 31,347 24,276 8,482 Term accounts receivable................ 5,466 19,576 13,187 11,676 11,260 Working capital......................... 33,568 43,744 70,370 30,409 29,716 Total assets............................ 121,336 156,705 216,567 142,988 88,879 Long term debt including current maturities.............................. 10,000 32,557 73,404 101,518 -- Shareholders' equity.................... 76,302 84,930 112,149 16,089 67,033
The Company publishes its consolidated financial statements in Canadian dollars. The following table sets forth, for the periods indicated, certain exchange rates based on the exchange rates reported by the Federal Reserve Bank of New York as the noon buying rates in New York City for cable transfers in foreign currencies, as certified for customs purposes (the "Noon Buying Rate"). Such rates quoted are the number of U.S. dollars per Canadian dollar and are the inverse of the Noon Buying Rate.
Year ended April 30, --------------------------------------------------------------------- 2000 1999 1998 1997 1996 ----------- ----------- ----------- ----------- ----------- High....... US$0.6969 US$0.6882 US$0.7317 US$0.7513 US$0.7527 Low........ 0.6607 0.6341 0.6832 0.7145 0.7224 Average(1). 0.6803 0.6601 0.7093 0.7329 0.7344 Period End. 0.6748 0.6863 0.6992 0.7157 0.7342
(1) The average of the month-end exchange rates during such periods. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The following discussion of the Company's results of operations and of its liquidity and capital resources should be read in conjunction with the information contained in the Consolidated Financial Statements and related Notes thereto. The following discussion provides a comparative analysis of material changes for the years ended April 30, 2000, 1999 and 1998, in the financial condition and results of operations of the parent company ("JetForm") and its wholly-owned subsidiaries: JetForm Corporation (a Delaware corporation), JetForm Pacific Pty Limited ("JetForm Pacific"), JetForm Scandinavia AB ("JetForm Nordic"), JetForm France SA ("JetForm France"), JetForm UK Limited ("JetForm UK"), JetForm Deutschland GmbH ("JetForm Germany"), JetForm Technologies Limited ("JetForm Ireland"), JetForm Japan K.K. ("JetForm Japan") and JetForm PTE Ltd ("JetForm Singapore"). JetForm and its wholly-owned subsidiaries are collectively referred to herein as the "Company". Results of Operations The Company's revenues and operating results have varied substantially from period to period. With the exception of its consulting services operation, the Company has historically operated with little backlog of orders because its software products are generally shipped as orders are received. The Company records product revenue from packaged software and irrevocable commitments to purchase products when persuasive evidence of an arrangement exists, the software product has been shipped, there are no significant uncertainties surrounding product acceptance, the fees are fixed and determinable and collection is considered probable. As a result, product revenue in any period is substantially dependent on orders booked and shipped in that period and on the receipt of irrevocable commitment license agreements. Product revenue is difficult to forecast due to the fact that the Company's sales cycle, from initial trial to multiple copy licenses, varies substantially from customer to customer. As a result, variations in the timing of product sales can cause significant variations in operating results from period to period. Product revenue represented 56% of total revenue for the year ended April 30, 2000. Service revenue primarily consists of consulting services, training and technical support. Consulting services include assisting customers to configure, implement and integrate the Company's products and, when required, customize products and design automated processes to meet customers' specific business needs. Service revenue represented 44% of total revenue for the year ended April 30, 2000. Costs and expenses are comprised of cost of product, cost of service, sales and marketing, general and administrative, research and development, depreciation and amortization and other expenses. Cost of product consists of third party commissions, the cost of disks, manuals, packaging, freight, royalty payments to vendors whose software is bundled with certain products, amortization of deferred product development costs and provisions for bad debts. Cost of service includes all costs of providing technical support, training, consulting, custom forms development and application development services. Sales and marketing expenses are principally related to salaries and commissions paid to sales and marketing personnel and the cost of marketing programs. Research and development expenses include personnel and occupancy costs as well as the costs of software development, testing, product management, quality assurance and documentation. Depreciation and amortization includes depreciation and amortization of fixed assets and amortization of other assets, goodwill and distribution rights relating to various acquisitions. The Company amortizes goodwill and distribution rights over their expected useful lives. The Company periodically reviews the carrying value of its capital assets. Any impairments in the carrying value are recognized at that time. The following table sets forth, on a comparative basis for the periods indicated, the components of the Company's product margin, service margin and product and service margin:
Year ended April 30, ---------------------------------------------------------------------------- 2000 1999 1998 ---------------------- ------------------------ ---------------------- (in thousands of Canadian dollars) Product revenue.... $52,583 100% $66,662 100% $74,781 100% Cost of product.... 12,053 23% 9,164 14% 7,539 10% ---------- -------- ---------- ---------- ---------- --------- Product margin..... $40,530 77% $57,498 86% $67,242 90% ========== ======== ========== ========== ========== ========= Service revenue.... $41,734 100% $47,550 100% $36,446 100% Cost of service.... 12,373 30% 19,058 40% 15,259 42% ---------- -------- ---------- ---------- ---------- --------- Service margin..... $29,361 70% $28,492 60% $21,187 58% ========== ======== ========== ========== ========== ========= Total revenue...... $ 94,317 100% $114,212 100% $111,227 100% Costs of product and service 24,426 26% 28,222 25% 22,798 20% ---------- -------- ---------- ---------- ---------- --------- Product and service margin $69,891 74% $85,990 75% $ 88,429 80% ========== ======== ========== ========== ========== =========
The following table presents, for the periods indicated, consolidated statement of operations data expressed as a percentage of total revenues:
Year ended April 30, --------------------------------------------- 2000 1999 1998 ------------- ------------ ------------ REVENUES Product................................ 56% 58% 67% Service................................ 44% 42% 33% ------------- ------------ ------------ 100% 100% 100% ------------- ------------ ------------ COSTS AND EXPENSES Cost of product........................ 13% 8% 7% Cost of service........................ 13% 17% 14% Sales and marketing.................... 48% 47% 36% General and administrative............. 13% 9% 9% Research and development............... 16% 13% 10% Depreciation and amortization.......... 11% 10% 10% Gain on sale of assets................. -2% -- -- Restructuring........................... -1% 27% -- ------------- ------------ ------------ 111% 131% 86% ------------- ------------ ------------ OPERATING INCOME (LOSS).................. -11% -31% 14% Interest and other income (expense)...... 3% 3% -3% ------------- ------------ ------------ INCOME (LOSS) BEFORE TAXES............... -7% -28% 11% Provision for income taxes............... -1% 2% -2% ------------- ------------ ------------ NET INCOME (LOSS)........................ -9% -26% 10% ============= ============ ============
The following table provides details of product revenue by geographic segment and, within Canada and the United States of America, by distribution channel:
Year ended April 30, Period to Period Increase (Decrease) ---------------------------------------- ------------------------------------ 2000 1999 1998 1999 to 2000 1998 to 1999 ---------- ---------- ------------ --------------- --------------- (in thousands of Canadian dollars) Product revenue by region United States and Canada $ 30,294 $ 42,286 $ 54,226 -28% -22% Europe 18,076 20,051 16,832 -10% 19% Rest of World 4,213 4,325 3,723 -3% 16% ---------- ---------- ------------ $ 52,583 $ 66,662 $ 74,781 -21% -11% ========== ========== ============ Product revenue by channel in the United States and Canada Reseller and OEM $ 17,555 $ 24,779 $ 36,614 -29% -32% Direct Sales 12,739 17,507 17,612 -27% -1% ---------- ---------- ------------ $ 30,294 $ 42,286 $ 54,226 -28% -22% ========== ========== ============
Year Ended April 30, 2000, Compared to the Year Ended April 30, 1999 Revenues Total Revenues: Total revenues decreased 17% to $94.3 million for the year ended April 30, 2000, from $114.2 million for the year ended April 30, 1999. Total revenues consisted of 56% product revenue and 44% service revenue for the year ended April 30, 2000. Product Revenue: Product revenue decreased 21% to $52.6 million for the year ended April 30, 2000, from $66.7 million for the year ended April 30, 1999. Product revenue derived from North America, Europe and Rest of World represented 58%, 34% and 8%, respectively, of product revenue for the year ended April 30, 2000, as compared to 63%, 30% and 7%, respectively, of product revenue for the year ended April 30, 1999. The Company attributes the decrease in product revenue primarily to external market factors including the Year 2000 issue, a shift towards Internet based solutions from traditional client/server solutions, and the emergence of new competitors. The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date sensitive systems may recognize the Year 2000 as 1900 or some other date, resulting in errors when information using Year 2000 dates is processed. As a result, the Company's primary customer base, large financial services organizations and government agencies, who are deeply affected by the Year 2000 problem due to their reliance on computer systems, focused their information technology resources on ensuring Year 2000 readiness. This had an impact on the Company's ability to sell enterprise wide licenses to these customers during the years ended April 30, 2000 and 1999. The Company also experienced a shift of focus by its customers to Internet-based solutions from more traditional client/server solutions and the emergence of new competitors in the areas of process automation, document presentment and pre-packaged solutions. The Company has developed a comprehensive strategy to address the market for Internet-based solutions and the increase in competition. However, there can be no assurance that revenue derived from this strategy will be sufficient to offset the decrease in revenue from the Company's client/server products. Product revenue derived from North America decreased 28% to $30.3 million for the year ended April 30, 2000, from $42.3 million for the year ended April 30, 1999. Reseller and OEM sales, which represented 58% of North American product revenue, decreased 29% to $17.6 million for the year ended April 30, 2000, from $24.8 million for the year ended April 30, 1999. Product revenue from direct sales, which represented 42% of North American product revenue, decreased 27% to $12.7 million for the year ended April 30, 2000, from $17.5 million for the year ended April 30, 1999. Product revenue derived from Europe decreased 10% to $18.1 million for the year ended April 30, 2000, from $20.1 million for the year ended April 30, 1999, primarily due to decreased license revenue from Germany and Sweden. Product revenue derived from Rest of World decreased 3% to $4.2 million for the year ended April 30, 2000, from $4.3 million for the year ended April 30, 1999, primarily due to decreased license revenue from Australia. Service Revenue: Service revenue decreased 12% to $41.7 million for the year ended April 30, 2000, from $47.6 million for the year ended April 30, 1999. For the year ended April 30, 2000, maintenance and support revenue increased 10% to $24.2 million from $21.9 million for the year ended April 30, 1999. The Company's consulting revenue decreased 31% to $17.5 million for the year ended April 30, 2000, from $25.6 million for the year ended April 30, 1999. For the year ended April 30, 1999, consulting revenue included $4.0 million from a former subsidiary of the Company, Why Interactive, which was sold in May 1999. Excluding revenue from Why Interactive, consulting revenue decreased 19%, primarily due to the general decrease in product sales and resulting consulting engagements. Costs and Expenses Total Costs and Expenses: Total costs and expenses were $104.5 million for the year ended April 30, 2000, a decrease of 30% from $149.7 million for the year ended April 30, 1999. Excluding non-recurring items of $2.9 million in fiscal year 2000 and $30.5 million in fiscal year 1999, costs and expenses for the year ended April 30, 2000, decreased by 10%. Cost of Product: Cost of product increased 32% to $12.1 million for the year ended April 30, 2000, from $9.2 million for the year ended April 30, 1999, primarily as a result of an increase in provisions for bad debts. During the year ended April 30, 2000, the Company provided for two large accounts, which amounted to $1.7 million. The product margin decreased to 77% for the year ended April 30, 2000, from 86% for the year ended April 30, 1999, primarily due to lost economies of scale resulting from the decrease in product revenue and the bad debt provisions. Cost of Service: Cost of service decreased 35% to $12.4 million for the year ended April 30, 2000, from $19.1 million for the year ended April 30, 1999, primarily as a result of a decrease in the number of employees resulting from the Company's restructuring in the fourth quarter of fiscal year 1999 and the sale of Why Interactive in May 1999. The service margin increased to 70% for the year ended April 30, 2000, from 60% for the year ended April 30, 1999, primarily as a result of the increased maintenance and support revenue, which traditionally has higher margins than other services. Costs of Product and Service: Costs of product and service decreased 13% to $24.4 million for the year ended April 30, 2000, from $28.2 million for the year ended April 30, 1999. Product and service margin decreased to 74% for the year ended April 30, 2000, from 75% for the year ended April 30, 1999. Sales and Marketing: Sales and marketing expenses decreased 15% to $45.1 million for the year ended April 30, 2000 from $53.3 million for the year ended April 30, 1999, primarily as a result of a decrease in the number of employees resulting from the Company's restructuring in the fourth quarter of fiscal year 1999. The Company expects to expand its direct and indirect sales force during fiscal year 2001. As a percentage of total revenues, sales and marketing increased to 48% for the year ended April 30, 2000, from 47% for the year ended April 30, 1999. General and Administrative: General and administrative expenses increased 13% to $12.2 million for the year ended April 30, 2000, from $10.7 million for the year ended April 30, 1999, primarily due to approximately $2.3 million relating to the write-off of an investment and the departure of certain executives. As a percentage of total revenues, general and administrative expenses increased to 13% for the year ended April 30, 2000, from 9% for the year ended April 30, 1999. Excluding these charges, general and administrative expenses decreased 8% to $9.9 million for the year ended April 30, 2000. As a percentage of total revenues, general and administrative expense (excluding the write-off and departure charges) was 10% for the year ended April 30, 2000, compared to 9% for the year ended April 30, 1999. Research and Development: Research and development expenses remained constant at $15.4 million for both the years ended April 30, 2000 and 1999. During both the years ended April 30, 2000, and April 30, 1999, the Company capitalized approximately $3.6 million of software development costs. Research and development expense was 29% and 23% of product revenue for the years ended April 30, 2000 and 1999, respectively. Depreciation and Amortization: Depreciation and amortization decreased 11% to $10.3 million for the year ended April 30, 2000, from $11.6 million for the year ended April 30, 1999, primarily as a result of the write down of certain intangible assets in the fourth quarter of fiscal year 1999. Restructuring: During the year ended April 30, 2000, the Company was successful in reducing its total expected liability under facilities leases and severance arrangements by approximately $1.1 million. Gain on sale of assets: In May, 1999 the Company sold all of the Common and Preferred shares of its multimedia subsidiary, Why Interactive, to a third party for $6.4 million in cash, debt and convertible debt. This resulted in a gain of $1.8 million. As at April 30, 2000, the Company had received all amounts owed from the third party. Operating Income (Loss): Operating loss was $10.2 million for the year ended April 30, 2000, compared to $35.5 million for the year ended April 30, 1999. Investment and Other Income (Expense): Investment and other income was $3.2 million for the year ended April 30, 2000, compared to $3.8 million for the year ended April 30, 1999, primarily due to a decrease in interest income offset by a gain of $1.5 million from the sale of securities. Provision for Income Taxes: The Company recorded a provision for current income taxes of $1.1 million for the year ended April 30, 2000, compared to a provision for current income taxes of $2.1 million and a recovery of deferred income tax of $4.6 million for the year ended April 30, 1999. Year Ended April 30, 1999, Compared to the Year Ended April 30, 1998 Revenues Total Revenues: Total revenues increased 3% to $114.2 million for the year ended April 30, 1999, from $111.2 million for the year ended April 30, 1998. Total revenues consisted of 58% product revenue and 42% service revenue for the year ended April 30, 1999. Product Revenue: Product revenue decreased 11% to $66.7 million for the year ended April 30, 1999, from $74.8 million for the year ended April 30, 1998. Product revenue derived from North America, Europe and Rest of World represented 63%, 30% and 7%, respectively, of product revenue for the year ended April 30, 1999, as compared to 72%, 23% and 5%, respectively, of product revenue for the year ended April 30, 1998. The Company attributes the decrease in product revenue primarily to external market factors including the Year 2000 issue, a shift towards Internet based solutions from traditional client/server solutions and the emergence of new competitors selling pre-packaged solutions. Product revenue derived from North America decreased 22% to $42.3 million for the year ended April 30, 1999, from $54.2 million for the year ended April 30, 1998. Reseller and OEM sales, which represented 59% of North American product revenue, decreased 32% to $24.8 million for the year ended April 30, 1999, from $36.6 million for the year ended April 30, 1998, primarily due to significant sales from U.S. government resellers and minimum commitments for resale by Moore Corporation Limited in fiscal year 1998. Product revenue from direct sales, which represented 41% of North American product revenue, decreased 1% to $17.5 million for the year ended April 30, 1999, from $17.6 million for the year ended April 30, 1998. Product revenue derived from Europe increased 19% to $20.1 million for the year ended April 30, 1999, from $16.8 million for the year ended April 30, 1998, primarily due to increased license revenue from Germany. Product revenue derived from Rest of World increased 16% to $4.3 million for the year ended April 30, 1999, from $3.7 million for the year ended April 30, 1998, primarily due to increased license revenue from Japan. Service Revenue: Service revenue increased 30% to $47.6 million for the year ended April 30, 1999, from $36.4 million for the year ended April 30, 1998. For the year ended April 30, 1999, maintenance and support revenue increased 25% to $21.9 million from $17.5 million for the year ended April 30, 1998. The Company's other service revenue increased 35% to $25.6 million for the year ended April 30, 1999, from $19.0 million for the year ended April 30, 1998. Costs and Expenses Total Costs and Expenses: Total costs and expenses were $149.7 million for the year ended April 30, 1999, an increase of 57% from $95.1 million for the year ended April 30, 1998. Excluding the provision for restructuring costs of $30.5 million, costs and expenses for the year ended April 30, 1999, increased by 25%. Cost of Product: Cost of product increased 22% to $9.2 million for the year ended April 30, 1999 from $7.5 million for the year ended April 30, 1998, primarily as a result of an increase in third party royalties and amortization of deferred development costs. For the year ended April 30, 1999, total deferred costs charged to cost of product increased to $3.3 million from $2.2 million for the year ended April 30, 1998. The product margin decreased to 86% for the year ended April 30, 1999 from 90% for the year ended April 30, 1998, primarily due to lost economies of scale resulting from the decrease in product revenue. Cost of Service. Cost of service increased 25% to $19.1 million for the year ended April 30, 1999, from $15.3 million for the year ended April 30, 1998, primarily as a result of an increase in the number of employees, particularly in Ireland, due to the expansion in the Company's service revenues. The service margin increased to 60% for the year ended April 30, 1999, from 58% for the year ended April 30, 1998, primarily as a result of gained economies of scale resulting from increased maintenance and support revenue. Costs of Product and Service: Costs of product and service increased 24% to $28.2 million for the year ended April 30, 1999, from $22.8 million for the year ended April 30, 1998. Product and service margin decreased to 75% for the year ended April 30, 1999, from 80% for the year ended April 30, 1998. Sales and Marketing: Sales and marketing expenses increased 33% to $53.3 million for the year ended April 30, 1999, from $40.2 million for the year ended April 30, 1998, primarily as a result of increased sales and marketing staff, commission rates and general marketing activity. As a percentage of total revenues, sales and marketing increased to 47% for the year ended April 30, 1999, from 36% for the year ended April 30, 1998. General and Administrative: General and administrative expenses increased 9% to $10.7 million for the year ended April 30, 1999, from $9.8 million for the year ended April 30, 1998, primarily due to increased spending on management information systems and facilities. As a percentage of total revenues, general and administrative remained constant at 9% for the years ended April 30, 1999 and 1998. Research and Development: Research and development expenses increased 45% to $15.4 million for the year ended April 30, 1999, from $10.6 million for the year ended April 30, 1998, primarily due to an increase in the number of employees and related costs. During the years ended April 30, 1999 and 1998, the Company capitalized approximately $3.6 million and $2.8 million, respectively, of software development costs. Research and development expense were 23% and 14% of product revenue for the years ended April 30, 1999 and 1998, respectively. Depreciation and Amortization: Depreciation and amortization remained constant at $11.6 million for both the year ended April 30, 1999 and 1998, primarily as a result of increased purchases of computer equipment and leasehold improvements offset by the write-down of certain assets relating to the restructuring of the Company. Restructuring: During the year ended April 30, 1999, the Company recorded a provision for restructuring costs of $30.5 million. The restructuring plan announced by the Company included: i) consolidation of management responsibilities and reduction in headcount; ii) closure of redundant facilities; iii) reduction in the carrying value of certain capital assets primarily related to past acquisitions; and iv) cancellation of trade shows and other commitments. Operating Income (Loss): Operating loss was $35.5 million for the year ended April 30, 1999, compared to operating income of $16.1 million for the year ended April 30, 1998, primarily due to the provision for restructuring costs. Excluding this charge, operating loss was $5.0 million for the year ended April 30, 1999. Investment and Other Income: Investment and other income was $3.8 million for the year ended April 30, 1999, compared to a net interest expense of $3.6 million for the year ended April 30, 1998 primarily due to a reduction in interest charges on the Delrina obligation and an increase in investment income on cash and cash equivalents. On February 12, 1998, the Company and Delrina re-negotiated certain terms of the asset purchase agreement whereby the Company agreed to accelerate payment of its obligation in consideration for a reduction in the effective interest rate which resulted in a reduction of imputed interest charges (see "Liquidity and Capital Resources - Delrina Obligation"). In April 1998, the Company received net proceeds of $63.7 million from the issuance of 2.2 million special warrants to Canadian investors. Income Taxes: The Company recorded a provision for current income taxes of $2.1 million and a recovery of deferred income tax of $4.6 million for the year ended April 30, 1999, compared to a provision for current income taxes of $2.0 million and a recovery of deferred income tax of $355,000 for the year ended April 30, 1998. As at April 30, 1999, the Company had a deferred tax asset of $56.8 million primarily made up of deductible temporary differences related to the Delrina Assets and the provision for restructuring costs. The Company believes sufficient uncertainty exists regarding the realizability of this net deferred tax asset such that a valuation allowance of $49.2 million has been applied. Liquidity and Capital Resources As at April 30, 2000, and April 30, 1999, the Company had $42.1 million and $47.3 million of cash and cash equivalents respectively. During the year ended April 30, 2000, the Company's cash and cash equivalents decreased by $5.2 million, primarily due to five payments to Delrina totaling $22.6 million offset by cash generated by operations, the sale of certain accounts receivable, and the proceeds from sales of other assets. Operations The Company decreased its investment in the non-cash operating components of working capital during the year ended April 30, 2000, by approximately $17.1 million, primarily due to collections and sales of accounts receivable offset by decreases in accounts payable and accrued liabilities. The Company purchased approximately $5.0 million of fixed assets in the year ended April 30, 2000. The purchases of fixed assets included computer hardware and software, office equipment, furniture and leasehold improvements. During the year ended April 30, 2000, the Company increased its investment in other assets by $3.8 million related primarily to capitalized development costs, prepaid royalties and purchases of other assets. During the year ended April 30, 2000, the Company generated cash of approximately $1.1 million relating to the Company's stock purchase plan and the exercise of stock options by employees and others. Accounts Receivable and Term Accounts Receivable Total accounts receivable and term accounts receivable decreased $22.0 million to $26.9 million at April 30, 2000 from $48.9 million at April 30, 1999, primarily due to the reduction in revenue, the sale of receivables under the Company's receivable purchase agreements, the Company's increased focus on collections and the Company's decision to significantly reduce its previous practice of granting extended payment terms. Accounts receivable decreased to $21.4 million at April 30, 2000 from $29.3 million at April 30, 1999. Term accounts receivable, which are accounts receivable with contracted payment dates exceeding the Company's customary trade terms, decreased by $14.1 million to $5.5 million for the year ended April 30, 2000, from $19.6 million on April 30, 1999. Term accounts receivable primarily arise from the recording of revenue from Irrevocable Commitment Licenses. Under an Irrevocable Commitment License, a customer commits to pay a minimum amount over a specified period of time in return for the right to use or resell up to a specific number of copies of a delivered product for a fixed amount. The amount of revenue recorded is the amount of the minimum commitment over the term of the license, less deemed interest for that part of the license term that is beyond the Company's customary trade terms. Payments under Irrevocable Commitment Licenses are generally received from the customer on the earlier of (i) installation of the Company's products by the customer or delivery to its customers or end users and (ii) specified minimum payment dates in the license agreement. Amounts by which revenues recorded exceed payments received are recorded as accounts receivable. Payments that are expected beyond the Company's customary trade terms are recorded as term accounts receivable. Payments that are expected to be received more than one year from the balance sheet date, are recorded as non-current term accounts receivable. Total license fees over the term of the Irrevocable Commitment License may be greater than the minimum commitment initially recorded as revenue. Revenues from installations or sales of the Company's products in excess of the minimum commitment are recorded by the Company as and when they are reported by the customer. Restructuring On March 17, 1999, the Corporation announced a restructuring plan directed at reducing costs. The key restructuring actions included: o Consolidation of management responsibilities and reduction in headcount. o Closure of redundant facilities. o Reduction in the carrying value of certain capital assets primarily related to past acquisitions. o Cancellation of certain commitments and other costs. The following table summarizes the activity in the restructuring costs during the year ended April 30, 1999 and the year ended April 30, 2000:
Employee Non Cash Total Termination Facilities Other Total Costs Costs Provision -------------------------------------------------------- --------------------------- Restructuring.... $5,252 $ 2,914 $ 726 $ 8,892 $ 21,611 $ 30,503 Cash payments.... (1,175) (36) (207) (1,418) -- (1,418) Non-cash items... -- -- -- -- (21,611) (21,611) -------------------------------------------------------- --------------------------- Balance, April 30, 1999... $4,077 $ 2,878 $ 519 $ 7,474 $ -- $ 7,474 Cash payments.... (2,921) (1,092) (124) (4,137) -- (4,137) Reductions....... (566) (540) -- (1,106) -- (1,106) -------------------------------------------------------- --------------------------- Balance, April 30, 2000... $ 590 $ 1,246 $ 395 $ 2,231 $ -- $ 2,231 ======================================================== =========================== Long term $ -- $1,059 $ 279 $ 1,338 $ -- $ 1,338 balance.. ============== ============= ============= ============ =========== ============
Employee terminations totaled 105 and included 46 in sales and marketing, 40 in research in development, 12 in internal corporate services, and 7 in systems and consulting services. Employee terminations include salary continuance for which the Company is contractually obligated to pay. All employees were terminated on or before April 30, 1999. During the year ended April 30, 2000, the Company's liability for bonuses and other compensation to terminated employees was reduced by $566,000. Facilities costs consisted primarily of $2.1 million and $780,000 related to the closure of the Company's UK and Toronto facilities, respectively. The provision for redundant facilities includes management's best estimates of the total future operating costs of these vacant facilities for the remainder of their respective lease terms. Actual costs could differ from these estimates. During the year ended April 30, 2000, the Company bought out its lease obligation of its vacant Toronto facilities for $420,000 and was successful in subleasing one of its vacant facilities in the United Kingdom. The Company has not been successful in finding alternative arrangements regarding its other vacant facility in the United Kingdom, the lease for which extends to 2010. During the year ended April 30, 2000, the Company's liability for vacant facilities was reduced by $540,000. Other cash costs related primarily to the cancellation of trade shows and other commitments. Non-cash costs include impairment losses of $21.6 million related to assets held for use. The losses are comprised of $16.6 million related to marketing and distribution rights, $3.1 million related to goodwill and $1.9 million related to other capital assets. Delrina Obligation On September 10, 1996, the Company acquired certain assets, including title to intellectual property, related to the forms software group (the "Delrina Assets") of Delrina Corporation ("Delrina"), a subsidiary of Symantec Corporation of Cupertino, California, USA, for a non-interest bearing obligation of US$100.0 million. Under the asset purchase agreement, the Company was required to make unequal quarterly payments to Delrina, from September 27, 1996 to June 27, 2000. This was a non-interest bearing obligation which was originally valued using a discount rate of 6%. On February 12, 1998, the Company and Delrina re-negotiated certain terms of the asset purchase agreement whereby the Company agreed to accelerate payment of its obligation in consideration for a reduction in the effective interest rate, resulting in a reduction in imputed interest charges. As at April 30, 2000, the Company had satisfied its payment obligation to Delrina and no further amount was outstanding under the Delrina debt. Financial Instruments and Credit Facility The Company has entered into receivable purchase agreements with certain third party purchasers. Under the agreements, the Company has the option to sell certain accounts receivable on a recourse basis. The Purchasers have recourse in the event of a trade dispute as defined in the receivables purchase agreements and upon the occurrence of other specified events. As at April 30, 2000, and April 30, 1999, the outstanding balance of accounts receivable sold under these agreements was approximately US$9.7 million and US$ 6.9 million, respectively. The Company believes that none of the receivables sold are at risk of recourse. These sales meet all of the requirements of SFAS 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," for off balance sheet reporting. The Company has a committed $20 million credit facility with the Royal Bank of Canada. The credit facility is made up of (i) a $10 million term facility which bears interest at a rate of 1.5% over the Bankers Acceptance rate of the Bank from time to time and is payable on February 1, 2001; and (ii) a $10 million revolving line of credit which bears interest at the prime rate of the Bank from time to time. As at April 30, 2000, the Company had drawn all of the $10 million term loan facility and fixed the interest rate until July 19, 2000, at 7.11%. The Company had no borrowings against its revolving line of credit as at April 30, 2000. The Company has granted, as collateral for the $20 million credit facility, a general security agreement over JetForm's assets, including a pledge of the shares of certain subsidiaries. The Company believes that it's existing cash and cash equivalents will provide sufficient liquidity to meet the Company's business requirements in the foreseeable future. However, should the Company continue to incur operating losses, its ability to meet its liquidity requirements and to raise additional capital through debt or equity financing may be compromised. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued the Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement establishes accounting and reporting standards for derivative instruments and hedging activities and is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. In June, 1999, the FASB issued SFAS No.137, which delays the effective date of SFAS 133 until fiscal years beginning after June 15, 2000. Currently, as the Company has no derivative instruments, the adoption of SFAS No. 133 would have no impact on the Company's financial condition or results of operations. To the extent the Company begins to enter into such transactions in the future, the Company will adopt the Statement's disclosure requirements in the quarterly and annual financial statements for the year ending April 30, 2002. On March 31, 2000, the Financial Accounting Standards Board (FASB) issued Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation - an interpretation of APB Opinion No. 25 (FIN 44), providing new accounting rules for stock-based Compensation under APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). FIN 44 does not change FASB Statement No. 123, Accounting for Stock based compensation (FAS 123). The new rules are significant and will result in compensation expense in several situations in which no expense is typically recorded under current practice, including option repricing, purchase business combinations and plans that permit tax withholdings. FIN 44 is generally effective for transactions occurring after July 1, 2000, but apply to repricings and some other transactions after December 15, 1998. The Company does not expect the adoption of this Interpretation to have a material impact on its results of operations or financial position. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, which was amended in March 2000 by SAB 101A. The SAB summarizes certain of the SEC staff views in applying generally accepted accounting principles to revenue recognition in financial statements. This SAB is effective beginning the Company's first quarter of fiscal 2001. The Company does not expect the adoption of this SAB to have a material impact on its results of operations or financial position. The Year 2000 The Year 2000 Issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems, which use certain dates in 1999 to represent something other than a date. Although the change in date has occurred, it is not possible to conclude that all aspects of the Year 2000 Issue that may affect the entity, including those related to customers, suppliers or other third parties, have been fully resolved. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company is primarily exposed to market risks associated with fluctuations in interest rates and foreign currency exchange rates. Interest rate risks The Company's exposure to interest rate fluctuations relates primarily to its investment portfolio and its credit facility with its bank. The Company primarily invests its cash in short-term high-quality securities with reputable financial institutions. The interest income from these investments is subject to interest rate fluctuations which management believes would not have a material impact on the financial position of the Company. The Company has a committed $20 million credit facility with the Royal Bank of Canada. The credit facility is made up of (i) a $10 million term loan facility which bears interest at a rate of 1.5% over the Bankers Acceptance rate of the Bank from time to time and is payable on February 1, 2001; and (ii) a $10 million revolving line of credit which bears interest at the prime rate of the Canadian Bank from time to time. As at April 30, 2000, the Company had drawn all of the $10 million term loan facility and fixed the interest rate until July 19, 2000 at 7.11%. The Company had no borrowings against its revolving line of credit as at April 30, 2000. The impact on net interest income of a 100 basis point adverse change in interest rates for the fiscal year ended April 30, 2000 would have been less than $100,000. Foreign Currency Risk The Company has net monetary asset and liability balances in foreign currencies other than the Canadian Dollar, including the U.S. Dollar ("US$"), the Pound Sterling ("GBP"), the Australian dollar ("AUD"), the Swedish Krona ("SEK"), the German Mark ("DM"), the French Franc ("FF"), the Irish Punt ("IEP"), the Euro ("EUR"), and the Japanese Yen ("JPY"). The Company's cash and cash equivalents are primarily held in Canadian and U.S. dollars. As a result, fluctuations in the exchange rate of the U.S. dollar will have an impact on the Company's reported cash position. As at April 30, 2000, a 10% adverse change in foreign exchange rates would not have had a material impact on the Company's reported cash and cash equivalents balance. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Management's Statement of Responsibility 30 Auditors' Report 31 Consolidated Balance Sheets 32 Consolidated Statements of Operations 33 Consolidated Statements of Comprehensive Income 34 Consolidated Statements of Shareholders' Equity 35 Consolidated Statements of Cash Flows 36 Notes to Consolidated Financial Statements 37 MANAGEMENT'S STATEMENT OF RESPONSIBILITY Management is responsible for the preparation of the financial statements and all other information in the Form 10-K filing with the U.S. Securities and Exchange Commission. The financial statements have been prepared in accordance with generally accepted accounting principles and reflect management's best estimates and judgments. The financial information presented elsewhere in the annual report is consistent with the consolidated financial statements. Management has developed and maintains a system of internal controls to provide reasonable assurance that all assets are safeguarded and to facilitate the preparation of relevant, reliable and timely financial information. Consistent with the concept of reasonable assurance, the Company recognizes that the relative cost of maintaining these controls should not exceed their expected benefits. The Audit Committee, which is comprised of independent directors, reviews the consolidated financial statements, considers the report of the external auditor, assesses the adequacy of the Company's internal controls, and recommends to the Board of Directors the independent auditors for appointment by the shareholders. The financial statements were reviewed by the Audit Committee and approved by the Board of Directors. The financial statements were audited by PricewaterhouseCoopers LLP, the external auditors, in accordance with generally accepted auditing standards on behalf of the shareholders. /s/ A. Kevin Francis /s/ Jeffrey McMullen A. Kevin Francis Jeffrey McMullen President and Chief Executive Officer Vice President Finance and Chief Financial Officer PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organization. PRICEWATERHOUSECOOPERS PRICEWATERHOUSECOOPERS LLP Chartered Accountants 99 Bank Street Suite 800 Ottawa Ontario Canada K1P 1E4 Telephone +1 (613) 237 3702 Telephone +1 (613) 237 3936 AUDITORS' REPORT TO THE SHAREHOLDERS OF JETFORM CORPORATION We have audited the consolidated balance sheets of JetForm Corporation as of April 30, 2000 and 1999 and the consolidated statements of operations, comprehensive income, shareholders' equity and cash flows for the years ended April 30, 2000, 1999, and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Canada. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2000 and 1999 and the results of its operations and its cash flows for the years ended April 30, 2000, 1999 and 1998 in accordance with accounting principles generally accepted in the United States. On June 20, 2000, we reported separately to the shareholders of JetForm Corporation on the consolidated financial statements for the same period, prepared in accordance with accounting principles generally accepted in Canada. /s/ PricewaterhouseCoopers LLP Chartered Accountants Ottawa, Canada June 20, 2000 JETFORM CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of Canadian dollars, except share amounts)
April 30, April 30, 2000 1999 -------------- ------------ ASSETS Current assets Cash and cash equivalents................................ $ 42,092 $ 47,262 Accounts receivable (Note 2)............................. 21,416 29,274 Term accounts receivable (Note 2)........................ 5,224 13,486 Unbilled receivables..................................... 4,492 3,455 Inventory................................................ 1,084 1,139 Prepaid expenses ........................................ 2,956 3,727 Asset held for sale...................................... - 3,417 -------------- ------------ 77,264 101,760 Term accounts receivable (Note 2)........................ 242 6,090 Deferred income tax assets (Note 9) ..................... 5,604 4,364 Fixed assets (Note 3).................................... 16,556 18,620 Other assets (Note 4).................................... 21,670 25,871 -------------- ------------ $121,336 $156,705 ============== ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable......................................... $ 7,423 $ 7,874 Accrued liabilities...................................... 10,685 15,656 Unearned revenue......................................... 15,588 12,463 Term loan (Note 6)....................................... 10,000 - Current portion of Delrina obligation (Note 14).......... - 22,023 -------------- ------------ 43,696 58,016 Accrued liabilities (Note 15)............................ 1,338 3,225 Term loan (Note 6)....................................... - 9,998 Delrina obligation (Note 14)............................. - 536 -------------- ------------ 45,034 71,775 -------------- ------------ Commitments (Note10) Shareholders' equity Capital stock (Issued and outstanding -- 19,592,314 Common Shares and 450,448 Preference Shares at April 30, 2000; 19,421,428 Common Shares, 450,448 Preference at April 30, 1999) (Note 7) .......................................... 248,210 247,119 Cumulative translation adjustment........................ (2,670) (1,052) Deficit.................................................. (169,238) (161,137) -------------- ------------ 76,302 84,930 -------------- ------------ $ 121,336 $ 156,705 ============== ============ (the accompanying notes are an integral part of these consolidated financial statements)
Signed on behalf of the Board: /s/ A. Kevin Francis /s/ Abraham Ostrovsky JETFORM CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands of Canadian dollars except share and per share amounts)
Year ended April 30, ------------------------------------------------ 2000 1999 1998 ------------- ------------- ------------- Revenues Product...................................... $ 52,583 $ 66,662 $ 74,781 Service...................................... 41,734 47,550 36,446 ------------- ------------- ------------- 94,317 114,212 111,227 ------------- ------------- ------------- Costs and expenses Cost of product.............................. 12,053 9,164 7,539 Cost of service.............................. 12,373 19,058 15,259 Sales and marketing.......................... 45,097 53,315 40,214 General and administrative................... 12,168 10,722 9,846 Research and development (Note 5)............ 15,423 15,384 10,620 Depreciation and amortization................ 10,300 11,568 11,631 Restructuring (Note 15) ..................... (1,106) 30,503 -- Gain on sale of assets....................... (1,813) -- -- ------------- ------------- ------------- 104,495 149,714 95,109 ------------- ------------- ------------- Operating income (loss)...................... (10,178) (35,502) 16,118 Net investment income (expense) (Note 12) 2,868 3,826 (3,564) Other income (expense)....................... 295 (11) -- ------------- ------------- ------------- Income (loss) before taxes................... (7,015) (31,687) 12,554 Provision for current taxes (Note 9) (1,086) (2,073) (2,045) Recovery of deferred taxes (Note 9) -- 4,625 355 ------------- ------------- ------------- Net income (loss)............................ $ (8,101) $ (29,135) $ 10,864 ============= ============= ============= Basic income (loss) per share (Note 8)....... Net income (loss) per share.................. $ (0.41) $ (1.47) $ 0.65 Weighted average number of shares ........... 19,915,893 19,826,057 16,622,835 Fully diluted income (loss) per share (Note 8) Net income (loss) per share.................. $ (0.41) $ (1.47) $ 0.62 Weighted average number of shares............ 19,915,893 19,826,057 17,615,595 (the accompanying notes are an integral part of these consolidated financial statements)
JETFORM CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands of Canadian dollars)
Year ended April 30, ------------------------------------------------- 2000 1999 1998 ------------- ------------- -------------- Net income (loss)............................ $(8,101) $(29,135) $10,864 Other comprehensive income (loss): Cumulative translation adjustment......... (1,618) (1,052) -- ------------- ------------- -------------- Comprehensive income (loss).................. $(9,719) $(30,187) $10,864 ============= ============= ============== (the accompanying notes are an integral part of these consolidated financial statements)
JETFORM CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands of Canadian dollars except share amounts)
Number issued and outstanding Stated Value ---------------------------------- ---------------------------------------------------------------------------- Total Cumulative Total Common Special Preference Common Special Preference Capital Translation Shareholders' Stock Warrants Stock Stock Warrants Stock Stock Adjustment Deficit Equity ---------- ------------ ---------- -------- --------- ---------- -------- ----------- --------- -------------- Balance as at April 30, 1997... 15,693,623 -- 450,448 $154,016 $ -- $4,939 $158,955 $ -- $(142,866) $ 16,089 Issuance of Common Shares: Pursuant to acquisitions.... 6,918 -- -- 144 -- -- 144 -- -- 144 Repayment of Delrina obligation...... 715,654 -- -- 15,485 -- -- 15,485 -- -- 15,485 Exercise of stock options... 611,946 -- -- 5,917 -- -- 5,917 -- -- 5,917 Issuance of Spe- cial Warrants -- 2,200,000 -- -- 63,650 -- 63,650 -- -- 63,650 Net income for the year..... -- -- -- -- -- -- -- -- 10,864 10,864 ---------- ---------- ------- -------- -------- ------ -------- -------- ---------- --------- Balance as at April 30, 1998... 17,028,141 2,200,000 450,448 175,562 63,650 4,939 244,151 -- (132,002) 112,149 Issuance of Common Shares: Pursuant to acquisitions.... 6,918 -- -- 242 -- -- 242 -- -- 242 Share purchase plan............ 20,768 -- -- 375 -- -- 375 -- -- 375 Exercise of stock options... 165,601 -- -- 2,259 -- -- 2,259 -- -- 2,259 options........... Conversions of Special War- rants........... 2,200,000 (2,200,000) -- 63,742 (63,650) -- 92 -- -- 92 Cumulative translation adjustment....... -- -- -- -- -- -- -- (1,052) -- (1,052) Net Loss for the year......... -- -- -- -- -- -- -- -- (29,135) (29,135) ---------- ---------- ------- -------- -------- ------ -------- -------- ---------- --------- Balance as at April 30, 1999 19,421,428 -- 450,448 242,180 -- 4,939 247,119 (1,052) (161,137) 84,930 Issuance of Common Shares: Pursuant to acquisitions.... 6,918 -- -- 44 -- -- 44 -- -- 44 Share purchase plan............ 49,141 -- -- 282 -- -- 282 -- -- 282 Exercise of stock options... 114,827 -- -- 765 -- -- 765 -- -- 765 Cumulative translation adjustment....... -- -- -- -- -- -- -- (1,618) -- (1,618) Net Loss for the year......... -- -- -- -- -- -- -- -- (8,101) (8,101) ---------- ---------- ------- -------- -------- ------ -------- -------- ---------- --------- Balance as at April 30, 2000 19,592,314 -- 450,448 $243,271 -- $4,939 $248,210 $(2,670) $(169,238) $ 76,302 ========== ========== ======= ======== ======== ====== ======== ======== ========== ========= (the accompanying notes are an integral part of these consolidated financial statements)
JETFORM CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of Canadian dollars)
Year ended April 30, ------------------------------------------------------- 2000 1999 1998 -------------- --------------- ---------------- Cash provided from (used in): Operating activities Net income (loss)........................... $(8,101) $(29,135) $10,864 Items not involving cash: Depreciation and amortization............. 13,941 14,838 13,629 Deferred income taxes..................... -- (4,615) (338) Other non-cash items...................... (246) (3,368) 4,034 Gain on sale of assets.................... (1,813) -- -- Gain on sale of securities................ (1,497) -- -- Restructuring (Note 15) ................... (1,106) 21,611 -- Net change in operating components of working capital (Note 11).............. 17,083 8,055 (6,520) -------------- --------------- ---------------- 18,261 7,386 21,669 -------------- --------------- ---------------- Investing activities Proceeds from sale of assets................ 5,000 -- -- Proceeds from sale of securities............ 2,854 -- -- Purchase of fixed assets.................... (4,990) (8,503) (8,467) Increase in other assets.................... (3,774) (5,949) (9,263) -------------- --------------- ---------------- (910) (14,452) (17,730) -------------- --------------- ---------------- Financing activities Proceeds from issuance of shares............ 1,091 2,968 69,567 Issuance of debt............................ -- 9,998 -- Repayment of Delrina obligation............. (22,560) (50,845) (16,663) -------------- --------------- ---------------- (21,469) (37,879) 52,904 -------------- --------------- ---------------- Effect of exchange rate changes on cash..... (1,052) 603 311 -------------- --------------- ---------------- Increase (decrease) in cash and cash equivalents............................... (5,170) (44,342) 57,154 Cash and cash equivalents, beginning of year................................... 47,262 91,604 34,450 Cash and cash equivalents, end of year...................................... $ 42,092 $47,262 $91,604 ============== =============== ================ (the accompanying notes are an integral part of these consolidated financial statements)
JETFORM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of presentation These consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), and include all assets, liabilities, revenues and expenses of JetForm Corporation ("JetForm") and its wholly-owned subsidiaries: JetForm Corporation (a Delaware corporation), JetForm Pacific Pty Limited ("JetForm Pacific"), JetForm Scandinavia AB ("JetForm Nordic"), JetForm France SA ("JetForm France"), JetForm UK Limited ("JetForm UK"), JetForm Deutschland GmbH ("JetForm Germany"), JetForm Technologies Limited ("JetForm Ireland"), JetForm Japan K.K. ("JetForm Japan"), and JetForm PTE Ltd ("JetForm Singapore"). JetForm and its wholly-owned subsidiaries are collectively referred to herein as the "Company". Investments in businesses that the Company does not control, but over which it can exert significant influence, are accounted for using the equity method. Such investments are periodically evaluated for impairment and appropriate adjustments are recorded, if necessary. (b) Nature of operations The Company develops Web based software solutions for the e-business market in the electronic processes, electronic document presentment and electronic forms arenas. The Company's e-process, e-document presentment and e-forms technologies provide organizations with the capability to adopt e-business models, giving them a competitive advantage in their respective industries. These solutions are complemented by the Company's professional services team, which facilitates product implementation, and its customer services team, which provides ongoing training and support. The Company sells its products and services internationally through multiple channels, which include direct sales to end users, strategic partnerships with system integrators, solution partners, international distributors and original equipment manufacturers. (c) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. (d) Revenue recognition The Company recognizes revenue in accordance with Statement of Position ("SOP") 97-2, "Software Revenue Recognition," issued by the American Institute of Certified Public Accountants ("AICPA") in October 1997 and SOP 98-9 issued in December 1998. The Company records product revenue from packaged software and irrevocable commitments to purchase products when persuasive evidence of an arrangement exists, the software product has been shipped, there are no significant uncertainties surrounding product acceptance, the fees are fixed and determinable and collection is considered probable. Revenues from irrevocable commitments to purchase products with payment terms exceeding the Company's customary trade terms are recorded at the amount receivable less deemed interest. The Company amortizes the difference between the face value of the receivable and the discounted amount over the term of the receivable and records the discount as interest income. Revenue from software product licenses which include significant customization and revenue from services are recognized on a percentage of completion basis, whereby revenue is recorded, based on labor input hours, at the estimated realizable value of work completed to date. Estimated losses on contracts are recognized when they become probable. Unbilled receivables represent consulting work performed under contract and not yet billed. Revenue from maintenance agreements is recognized ratably over the term of the agreement. Unearned revenue represents payments received from customers for services not yet performed. (e) Income Taxes The Company accounts for income taxes under the asset and liability method that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities. The Company provides a valuation allowance on net deferred tax assets when it is more likely than not that such assets will not be realized. (f) Investment tax credits Investment tax credits ("ITCs"), which are earned as a result of qualifying research and development expenditures, are recognized when the expenditures are made and their realization is more likely than not, and are applied to reduce research and development expense in the year. (g) Fixed assets Fixed assets are recorded at cost. Computer software purchased by the Company is recorded as fixed assets when acquired. Costs for internal use software that are incurred in the preliminary project stage and in the post implementation/operation stage are expensed as incurred. Costs incurred during the application development stage, including appropriate website development costs, are capitalized and amortized over the estimated useful life of the software. Depreciation and amortization are calculated using the following rates and bases. Computer equipment.................. 30% declining balance and straight line over 2 to 4 years Software............................ 30% declining balance Furniture and fixtures.............. 20% declining balance Software licenses and purchased rights to improve, market and/or distribute products....... Straight-line over the lesser of the lives of the license or right and 15 years Leasehold improvements.............. Straight-line over the term of the lease The carrying value of fixed assets is periodically reviewed by management, and impairment losses, if any, are recognized when the expected non-discounted future operating cash flows derived from the fixed asset is less than the carrying value of such asset. In the event of an impairment in fixed assets, the discounted cash flows method is used to arrive at the estimated fair value of such asset. (h) Goodwill and other intangibles Goodwill, which represents the purchase price paid for an acquired business in excess of the fair values assigned to identifiable assets, is amortized on a straight-line basis over its expected useful life. In general, goodwill has been expected to have a useful life of seven years. Depreciation and amortization are calculated using the following rates and bases. Delrina technology........................ Straight-line over 3 to 5 years Trademarks, trade names, workforce and other assets............................ Straight-line or declining balance over the useful lives of the assets which range from 3 to 15 years The carrying value of goodwill and enterprise goodwill is periodically reviewed by management, and impairment losses, if any, are recognized when the expected non-discounted future operating cash flows derived from the related business acquired are less than the carrying value of such goodwill. In the event of an impairment in goodwill, the discounted cash flows method is used to arrive at the estimated fair value of such goodwill. (i) Software development costs Costs related to the development of proprietary software are expensed as incurred unless the costs relate to technically feasible and complete products and can reasonably be regarded as assured of recovery through future revenues in which case the costs are deferred and amortized, based on estimated future revenues, on a straight-line basis over the useful life of the product, not to exceed three years. (j) Foreign currency translation The financial statements of the parent company and its subsidiaries have been translated into Canadian dollars in accordance with Statement of Financial Accounting Standards("SFAS") No. 52, "Foreign Currency Translation". The Company's subsidiaries use their local currency as their functional currency. All balance sheet amounts with the exception of Shareholders' Equity have been translated using the exchange rates in effect at year end. Income statement amounts have been translated using the average exchange rate for the year. The gains and losses resulting from the translation of foreign currency statements into the Canadian dollar are reported in comprehensive income and as a separate component of Shareholders' Equity. (k) Cash equivalents Cash equivalents are defined as liquid investments, which have a term to maturity at the time of purchase of less than ninety days. (l) Stock based compensation The Company has elected to continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and to present the pro forma information that is required by SFAS No. 123 "Accounting for Stock Based Compensation" ("SFAS 123"). 2. ACCOUNTS RECEIVABLE Accounts receivable and term accounts receivable are net of an allowance for doubtful accounts of $2.4 million at April 30, 2000, and $1.9 million at April 30, 1999. The Company records revenues from irrevocable commitments to purchase products which do not conform to the Company's customary trade terms at the minimum amount receivable less deemed interest ("Term Accounts Receivable"). The Company uses a discount rate equal to its net cost of borrowing at the time the revenue is recorded, which is 6.5% at April 30, 2000. Under an irrevocable commitment to purchase product, the customer commits to pay a minimum amount over a specified period of time in return for the right to use or resell up to a specific number of copies of a delivered product. The Company records Term Accounts Receivable as non current to the extent that management estimates payment will be received more than one year from the balance sheet date. Payment of Term Accounts Receivable is generally due the earlier of: (i) delivery of the Company's products by the customer to its customers or end users; and (ii) specific dates in the license agreement ("Minimum Payment Dates"). The gross amount of these receivables at April 30, 2000, and April 30, 1999 was $7.2 million and $22.0 million, respectively. As at April 30, 2000, total Term Accounts Receivable with Minimum Payment Dates exceeding one year were approximately $242,000. As at April 30, 1999, total Term Accounts Receivable with Minimum Payment Dates exceeding one year were approximately $6.1 million. The Company's customer base consists of large numbers of diverse customers dispersed across many industries and geographies. As a result, concentration of credit risk with respect to accounts receivable and term accounts receivable is not significant. 3. FIXED ASSETS
April 30, 2000 ----------------------------------------------- Accumulated depreciation Net book Cost and amortization value --------- ----------------- -------- (in thousands of Canadian dollars) Computer equipment....... $16,407 $10,852 $ 5,555 Furniture and fixtures... 8,600 4,258 4,342 Software................. 9,896 5,864 4,032 Leasehold improvements... 4,053 1,426 2,627 --------- ----------------- -------- $38,956 $22,400 $16,556 ========= ================= ======== April 30, 1999 ----------------------------------------------- Accumulated depreciation Net book Cost and amortization value --------- ---------------- -------- (in thousands of Canadian dollars) Computer equipment....... $15,051 $ 8,030 $ 7,021 Furniture and fixtures... 8,410 2,961 5,449 Software................. 7,916 4,065 3,851 Leasehold improvements... 3,270 971 2,299 --------- ----------------- -------- $34,647 $16,027 $18,620 ========= ================= ========
4. OTHER ASSETS
April 30, 2000 ----------------------------------------------- Accumulated Net book Cost amortization value --------- ------------ -------- (in thousands of Canadian dollars) Delrina technology, trademarks, trade names and workforce.... $16,081 $ 9,425 $ 6,656 Goodwill................. 1,216 512 704 Licenses, marketing and distribution rights.................. 6,857 2,632 4,225 Deferred development costs................... 14,724 7,905 6,819 Other assets............. 5,618 2,352 3,266 --------- ------------ -------- $44,496 $22,826 $21,670 ========= ============ ======== April 30, 1999 ----------------------------------------------- Accumulated Net book Cost amortization value --------- ------------ -------- (in thousands of Canadian dollars) Delrina technology, trademarks, trade names and workforce..... $16,081 $ 7,510 $ 8,571 Goodwill................. 1,159 226 933 Licenses, marketing and distribution rights................. 8,482 3,244 5,238 Deferred development costs................... 11,125 4,784 6,341 Other assets............. 6,624 1,836 4,788 --------- ------------ -------- $43,471 $17,600 $25,871 ========= ============ ========
5. RESEARCH AND DEVELOPMENT EXPENSE The following table provides a summary of development costs deferred and the related amortization charged to cost of product in the years ended April 30, 2000, 1999 and 1998.
Year ended April 30, -------------------------------------------- 2000 1999 1998 -------- -------- -------- (in thousands of Canadian dollars) Research and development costs.... $ 20,713 $ 20,559 $ 14,123 Investment tax credits............ (1,690) (1,575) (728) Deferred development costs........ (3,600) (3,600) (2,775) --------- --------- --------- Net research and development expense......................... $ 15,423 $ 15,384 $ 10,620 Amortization of development costs charged to cost of product.......................... $ 3,121 $ 2,636 $ 1,726 ========= ========= =========
6. FINANCIAL INSTRUMENTS AND CREDIT FACILITIES For certain of the Company's financial instruments, including accounts receivable, unbilled receivables, accounts payable, and short term accrued liabilities, the carrying amount approximates the fair value due to their short maturities. The carrying amount of term accounts receivable, after applying an appropriate discount rate, approximates their fair value. Cash and cash equivalents, term loan, the Delrina obligation and long term accrued liabilities are carried at cost, which approximates their fair value. The Company has entered into receivable purchase agreements with third party purchasers. Under the agreements, the Company has the option to sell certain accounts receivable on a recourse basis. The Purchasers have recourse in the event of a trade dispute as defined in the receivables purchase agreements and upon the occurrence of other specified events. As at April 30, 2000, and April 30, 1999, the outstanding balance of accounts receivable sold under these agreements were approximately US$9.7 million and US$ 6.9 million, respectively. The Company believes that none of the receivables sold are at risk of recourse. These sales meet all of the requirements of SFAS 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," for off balance sheet reporting. The Company has a committed $20 million credit facility with the Royal Bank of Canada. The credit facility is made up of (i) a $10 million term loan facility which bears interest at a rate of 1.5% over the Bankers Acceptance rate of the Bank from time to time and is payable on February 1, 2001; and (ii) a $10 million revolving line of credit which bears interest at the prime rate of the Canadian Bank from time to time. As at April 30, 2000, the Company had drawn all of the $10 million term loan facility and fixed the interest rate until July 19, 2000, at 7.11%. The effective rate of interest on this term loan facility for the year ended April 30, 2000, was approximately 6.51%. The Company had no borrowings against its revolving line of credit as at April 30, 2000. The Company has granted as collateral for the $20 million credit facility a general security agreement over JetForm's assets, including a pledge of the shares of certain subsidiaries. 7. CAPITAL STOCK The authorized capital stock of the Company consists of an unlimited number of Common Shares ("Common Shares") and 2,263,782 Convertible Preference Shares ("Preference Shares"). Holders of Common Shares are entitled to one vote for each share held on all matters submitted to a vote of shareholders and do not have cumulative voting rights. Holders of Common Shares are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors at its discretion from funds legally available therefor. Upon the liquidation, dissolution or winding up of the Company the holders of Common Shares are entitled to receive ratably, together with the Preference Shares, the net assets of the Company available after the payment of debts and other liabilities. Holders of Common Shares have no pre-emptive, subscription, redemption or conversion rights. Holders of the Preference Shares are not entitled to receive a fixed dividend but are entitled to receive a dividend as and when declared by the Board of Directors of the Company equal to the dividend declared on its Common Shares. The holders of the Preference Shares are entitled to convert such shares into fully paid and non-assessable Common Shares at a rate equal to one Common Share per Preference Share held (subject to adjustment for share re-classification, reorganizations or for other changes). In the event of the liquidation, dissolution or winding-up of the Company, the holders of the Preference Shares shall rank pari passu, share for share, with the holders of the Common Shares. During the year ended April 30, 1998, the Company issued 2,200,000 special warrants ("Special Warrants") to Canadian investors at a price of US$21.25 per Special Warrant. The net proceeds from the offering after deducting underwriting discounts, fees and expenses were $63.7 million. The Special Warrants were deemed to have been exercised by the holders thereof on June 26, 1998, without payment of additional consideration on the basis of one Common Share for each Special Warrant so held. On June 19, 1998, the Company filed a final prospectus with Canadian securities regulators to register the 2,200,000 Common Shares issuable on exercise of the Special Warrants. The Company does not intend to register such Common Shares under the United States Securities Act of 1933. In June 1990, the Company adopted an Employee Stock Option Plan (the "1990 Plan") pursuant to which 400,000 Common Shares were reserved for the grant of options. On March 4, 1993, the Board of Directors voted to terminate the 1990 Plan effective as of the consummation of the Company's initial public offering dated April 20, 1993, at which time the 1993 Employee Stock Option Plan (the "1993 Plan") became effective. On March 4, 1993, the Board of Directors adopted the 1993 Plan. The 1993 Plan is administered by the Compensation Committee of the Board of Directors and options are not granted at less than the fair market value of the Common Shares on the date of grant. Options outstanding under the 1993 Plan remain in effect pursuant to their terms. Options granted under the 1993 Plan generally have a term of five years and vest at the rate of one-third of the shares covered on each of the first three anniversary dates of the date of grant. Options granted under the 1993 Plan are not transferable and are exercisable only by the optionee during the optionee's lifetime. The Company established the 1995 Plan on June 28, 1995, to replace the 1993 Plan. The 1995 Plan is administered by the Compensation Committee of the Board of Directors and provides for the grant to all eligible full-time employees, directors, officers and others of options to purchase Common Shares at a price based upon the last trading price of the Common Shares on the NASDAQ National Market on the trading day immediately preceding the date of grant. Pursuant to the 1995 Plan, the aggregate number of Common Shares available to be issued is 4,425,763, of which 656,000 are still available for grant as at April 30, 2000. Options granted under the 1995 Plan have a term of four, five or seven years and vest ratably during the first three years following grant. Options also vest automatically on a change in control of the Company. Options granted are non-transferable. On September 11, 1997, the Shareholders of the Company approved the 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan"). A total of 400,000 Common Shares of the Company have been reserved for issuance pursuant to the Stock Purchase Plan. Shares may be purchased under the Stock Purchase Plan by employees through payroll deduction. The purchase price of Common Shares issued under the Stock Purchase Plan is the lower of 95% of the fair market of the Common Shares of the Company at the beginning of each six month offering period and 95% of the fair market value of the Common Shares of the Company at the end of each six month offering period. The following table presents the number of options and warrants outstanding and exercisable, and the weighted average exercise price:
Weighted average Other exercise IPO options price in 1995 1993 1990 Underwriter's and U.S. Plan Plan Plan warrants Moore warrants Total dollars --------- --------- -------- ------------- ---------- ----------- ---------- --------- Number of outstanding options and warrants Balance at April 30, 1,152,054 781,139 84,250 77,478 116,216 90,000 2,301,137 12.70 1997 Grants........... 2,048,905 -- -- -- -- 5,000 2,053,905 13.39 Cancellations and Forfeitures.......... (164,557) (31,830) -- -- -- (2,219) (198,606) 15.25 Exercises............. (60,261) (342,176) (84,250) (77,478) -- (47,781) (611,946) 6.95 ---------- --------- -------- ------------- ---------- ----------- ---------- Balance at April 30, 2,976,141 407,133 -- -- 116,216 45,000 3,544,490 13.95 1998 Grants........... 1,037,960 63,550 -- -- -- -- 1,101,510 4.50 Cancellations and Forfeitures.......... (360,813) (175,059) -- -- -- -- (535,872) 12.49 Exercises............. (47,485) (98,116) -- -- -- (20,000) (165,601) 9.38 ---------- --------- -------- ------------- ---------- ----------- ---------- Balance at April 30, 3,605,803 197,508 -- -- 116,216 25,000 3,944,527 11.71 1999 Grants........... 775,112 -- -- -- -- -- 775,112 6.00 Cancellations and Forfeitures........... (725,759) (99,259) -- -- -- -- (825,018) 12.60 Exercises.............. (38,910) (75,917) -- -- -- -- (114,827) 4.71 ---------- --------- -------- ------------- ---------- ----------- ----------- Balance at April 30, 2000.................. 3,616,246 22,332 -- -- 116,216 25,000 3,779,794 10.63 ========== ========= ======== ============= ========== =========== =========== Weighted average exercise price at April 30, 1998, in U.S. dollars....... $ 14.73 $ 7.70 N/A N/A $ 16.50 $ 11.54 $ 13.95 ========== ========= ======== ============= ========== =========== ========== Weighted average exercise price at April 30, 1999, in U.S. dollars........ $ 11.78 $ 6.93 N/A N/A $ 16.50 $ 15.98 $ 11.71 ========== ========= ======== ============= ========== =========== ========== Weighted average exercise price at April 30, 2000, in U.S. dollars........ $ 10.39 $ 13.15 N/A N/A $ 16.50 $ 15.98 $ 10.63 ========== ========= ======== ============= ========== =========== ========== Number of exercisable options and warrants April 30, 1998......... 509,854 397,974 -- -- 77,478 38,334 1,023,640 12.88 April 30, 1999......... 1,397,776 180,759 -- -- 116,216 25,000 1,719,751 14.44 April 30, 2000......... 1,958,369 22,332 -- -- 116,216 25,000 2,121,917 13.52 Range of exercise prices in U.S. dollars at April 30, 2000 From............. $ 3.75 $ 11.75 N/A N/A $ 16.50 $ 15.25 $ 3.75 To............... $ 22.00 $ 16.00 N/A N/A $ 16.50 $ 18.88 $ 22.00 Range of expiry dates at April 30, 2000 From............. Feb 2001 June 2000 N/A N/A Mar 2001 Aug 2000 June 2000 To............... Dec 2004 June 2000 N/A N/A Mar, 2001 Oct. 2001 Dec 2004
The following table presents the exercise prices and average remaining life of the outstanding options as at April 30, 2000.
---------------------------------------------------------------------------------------------------------------- Range of exercise prices Options Outstanding Options exercisable --------------------------- ------------------------------------------------- ------------------------------- Weighted Weighted Weighted From Number average average average From To Price exercise remaining life Number exercise price ------------ ------------ ------------- -------------- --------------- ------------- --------------- (U.S. dollars) (U.S. dollars) (Years) (U.S. dollars) $ 3.75 $ 3.94 871,877 $ 3.81 2.97 279,124 $ 3.81 4.06 12.88 739,500 6.30 3.80 26,420 11.04 13.00 13.50 1,313,604 13.32 2.57 992,136 13.32 14.31 22.00 854,813 17.12 2.33 824,237 17.12 ------------- ------------- 3,779,794 10.61 2.85 2,121,917 13.52 ============= =============
Options and warrants outstanding at April 30, 1999, had a weighted average remaining contractual life of approximately 3.53 years. The exercise price of all options granted during the years ended April 30, 2000, 1999 and 1998 was equal to the fair market value of the underlying shares at the date of grant. No compensation expense has been recorded in the Consolidated Statements of Operations for stock based compensation. The following table presents net income and earnings per share for the periods presented on a pro forma basis after recording the pro forma compensation expense relating to stock options granted to employees, in accordance with SFAS 123: Year ended April 30, ----------------------------------------------- 2000 1999 1998 ------------- ------------- ------------- (in thousands of Canadian dollars, except per share amounts) Net income (loss) reported.................... $ (8,101) $(29,135) $10,864 Pro forma compensation expense..................... $ (1,384) (6,770) (5,430) ------------- ------------- ------------- Pro forma net income (loss)...................... $ (9,485) $(35,905) $ 5,434 ============= ============= ============= Pro forma basic income (loss) per share............ $ (0.48) $ (1.81) $ 0.33 ============= ============= ============= Pro forma fully diluted income (loss) per share..... $ (0.48) $ (1.81) $ 0.31 ============= ============= ============== SFAS 123 requires that pro forma compensation expense be recognized over the vesting period, based on the fair value of options granted to employees. The pro forma compensation expense presented above has been estimated using the Black Scholes option pricing model. Assumptions used in the pricing model include: (i) risk free interest rates for the periods of between 4.80% and 6.27%; (ii) expected volatility of 40% for the year ended April 30, 2000; 40% for the year ended April 30, 1999; and 35% for the year ended April 30, 1998; (iii) expected dividend yield of nil; and (iv) an estimated average life of three to four years. SFAS 123 requires that pro forma compensation expense be reported for options granted in fiscal years beginning after December 15, 1994, which in the case of the Company, was the year ended April 30, 1996. Since the compensation expense is recognized over the vesting period, the pro forma compensation expense presented above is not necessarily indicative of the pro forma compensation expense that will be reported in future periods if the Company continues to grant options. 8. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings Per Share", which was required to be adopted on December 31, 1997. As a result, the Company has changed the method used to compute income per share and has restated all prior periods. The Common Shares and Preference Shares represent equivalent residual interests and have been included in the computation of weighted average number of shares outstanding for purposes of the earnings per share computation. The reconciliation of the numerator and denominator for the calculation of net income per share and diluted net income per share is as follows: Year ended April 30, ------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ (in thousands of Canadian dollars except share and per share amount) Basic income (loss) per share Net income (loss)............... $ (8,101) $ (29,135) $ 10,864 ============ ============ ============ Weighted average number of shares outstanding............... 19,915,893 19,826,057 16,622,835 ============ ============ ============ Net income (loss) per share....... $ (0.41) $ (1.47) $ 0.65 ============ ============ ============ Fully diluted income (loss) per share Net income (loss)................. $ (8,101) $ (29,135) $ 10,864 ============ ============ ============ Weighted average number of shares outstanding............... 19,915,893 19,826,057 16,622,835 Dilutive effect of stock options*......................... -- -- 992,760 ============ ============ ============ Adjusted weighted average number of shares outstanding..... 19,915,893 19,826,057 17,615,595 ============ ============ ============ Net income (loss) per share....... $ (0.41) $ (1.47) $ 0.62 ============ ============ ============ * All anti-dilutive options have been excluded 9. INCOME TAXES The Company operates in several tax jurisdictions. Its income is subject to varying rates of tax, and losses incurred in one jurisdiction cannot be used to offset income taxes payable in another. The income (loss) before income taxes consisted of the following: Year ended April 30, ---------------------------------- 2000 1999 1998 -------- -------- -------- (in thousands of Canadian dollars) Domestic income (loss)............ $(2,980) $(12,664) $ 8,584 Foreign income (loss)............. (4,035) (19,023) 3,970 -------- --------- ------- Income (loss) before income taxes $(7,015) $(31,687) $12,554 ======== ========= ======= The provision (recovery) for income taxes consist of the following: Year ended April 30, ---------------------------------- 2000 1999 1998 ------ -------- -------- (in thousands of Canadian dollars) Domestic: Current income taxes $ 375 $ 771 $ 587 Deferred income taxes -- 220 (355) ------ -------- ------- $ 375 $ 991 $ 232 Foreign: Current income taxes $ 711 $ 1,302 1,458 Deferred income taxes -- (4,845) -- ------ -------- ------- $ 711 $(3,543) $1,458 ------ -------- ------- Provision for (recovery of) income taxes $1,086 $(2,552) $1,690 ====== ======== ======= The Company has domestic non-capital loss carryforwards of $107.0 million which expire between 2003 and 2006. In addition, the Company has approximately $6.0 million in domestic investment tax credits which begin to expire in 2006. A reconciliation of the combined Canadian federal and provincial income tax rate with the Company's effective income tax rate is as follows: Year ended April 30, ---------------------------------- 2000 1999 1998 -------- -------- -------- (in thousands of Canadian dollars) Expected statutory rate (recovery)..................... (44.52%) (44.62%) 44.62% Expected provision for (recovery of) income tax....... $(3,130) $(14,134) $5,601 Effect of foreign tax rate differences.................... 711 2,816 (313) Non-taxable portion of capital gain................... (372) -- -- Income tax rate changes......... 573 -- -- Provincial tax incentive........ (426) -- -- Non-deductible restructuring charges........................ -- 1,372 -- Change in valuation allowance... 3,393 6,884 (3,824) Other items................... 337 510 226 -------- -------- -------- Provision for income taxes...... $1,086 $(2,552) $ 1,690 ======== ======== ======== The primary temporary differences which gave rise to deferred taxes at April 30, 2000 and 1999 are: Year ended April 30, ------------------------------- 2000 1999 ------------- ------------ (in thousands of Canadian dollars) Deferred tax assets: Scientific research and experimental development expenditures............................. $6,762 $ 3,195 Net operating loss carryforwards........... 20,773 18,670 Depreciation and amortization.............. (4,075) (5,616) Restructuring ............................. 1,081 3,331 In process research and development........ 29,866 31,147 Investment tax credits..................... 3,288 2,954 Marketing and distribution rights.......... (69) (164) Accrued severance and other................ 524 -- ------------- ------------ Total deferred tax asset 58,150 53,517 Less, valuation allowance.................. (52,546) (49,153) ------------- ------------ 5,604 4,364 ============= ============ The valuation allowance for deferred taxes is required due to the Company's operating history and management's assessment of various uncertainties related to their future realization. Since the realization of deferred tax assets is dependent upon generating sufficient taxable income in the tax jurisdictions which gave rise to the deferred tax asset, the amount of the valuation allowance for deferred taxes may be reduced if it is demonstrated that positive taxable income in the various tax jurisdictions is sustainable in the future. 10. COMMITMENTS As at April 30, 2000, the Company was committed under certain operating leases for rental of office premises and equipment as follows: (in thousands of Canadian dollars) Years ending April 30, 2001 $ 4,861 2002 $ 4,555 2003 $ 4,629 2004 $ 4,470 2005 and beyond $15,723 Total rent expense for the years ended April 30, 2000, 1999 and 1998 was $4.9 million, $5.9 million and $3.6 million, respectively. 11. NET CHANGE IN OPERATING COMPONENTS OF WORKING CAPITAL The net change in operating components of working capital is comprised of: Year ended April 30, ---------------------------------- 2000 1999 1998 -------- -------- -------- (in thousands of Canadian dollars) Decrease (increase) in: Accounts receivable and term accounts receivable............. $21,176 $(6,658) $(8,095) Unbilled receivables............. (1,124) 2,984 (3,908) Inventory........................ 55 (14) (47) Prepaid expenses and deferred charges......................... 715 (569) 438 Other........................... (1,231) (1,605) (727) Increase (decrease) in: Accounts payable................. (116) 3,759 (330) Accrued liabilities.............. (5,671) 6,449 3,967 Unearned revenue................. 3,279 3,709 2,182 -------- -------- -------- $17,083 $ 8,055 $(6,520) ======== ======== ======== 12. NET INVESTMENT INCOME The net investment income is comprised of: Year ended April 30, ---------------------------------- 2000 1999 1998 -------- -------- -------- (in thousands of Canadian dollars) Interest income $2,853 $5,910 $ 853 Interest expense (1,482) (2,084) (4,417) Gain on sale of securities 1,497 -- -- ------- ------- ------- Net investment income (expense) $2,868 $3,826 $(3,564) ======= ======= ======== 13. SEGMENTED INFORMATION In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" that was effective for fiscal years beginning after December 15, 1997. The Company adopted this new Statement in fiscal year 1999 and has restated all prior periods. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company's chief decision maker in deciding how to allocate resources and assessing performance. The Company's chief decision maker is the Chief Executive Officer. The Company's reportable segments include Product, Consulting and Customer Support. The Product segment engages in business activities from which it earns license revenues from the Company's software products. The Consulting segment earns revenues from assisting customers in configuring, implementing and integrating the Company's products and, when required, customizing products and designing automated processes to meet the customers specific business needs as well as providing all necessary training. The Customer Support segment earns revenues through after sale support for software products as well as providing software upgrades under the Company's maintenance and support programs. The accounting policies of the Company's operating segments are the same as those described in Note 1. The Company evaluates performance based on the contribution of each segment. The Product segment costs include all costs associated with selling product licenses, consulting services and customer support. The costs of the Consulting and Customer Support segments include all costs associated with the delivery of the service to the customer. Inter-segment revenues as well as charges such as depreciation and amortization, interest expense and overhead allocation are not included in the calculation of segment profit. The Company does not use a measure of segment assets to assess performance or allocate resources. As a result, segment asset information is not presented.
Year ended April 30, 2000 -------------------------------------------------------- Product Consulting Customer Total Support ----------------------------------------------- Revenues $52,583 $17,549 $24,185 $94,317 Costs 35,402 8,920 3,453 47,775 ----------------------------------------------- Contribution $17,181 $ 8,629 $20,732 46,542 ================================== Research and development (15,423) Other expenses (41,053) Restructuring 1,106 Gain on sale of assets 1,813 Provision for income taxes (1,086) -------- Net loss $(8,101) ======== Year ended April 30, 1999 -------------------------------------------------------- Product Consulting Customer Total Support ----------------------------------------------- Revenues $66,662 $25,612 $21,938 $114,212 Costs 43,756 8,843 3,904 56,503 ------------------------------------------------ Contribution $22,906 $16,769 $18,034 57,709 ================================================ Research and development (15,384) Other expenses (43,509) Restructuring (30,503) Recovery of income taxes 2,552 --------- Net loss $(29,135) ========= Year ended April 30, 1998 -------------------------------------------------------- Product Consulting Customer Total Support ----------------------------------------------- Revenues $74,781 $18,959 $17,487 $111,227 Costs 38,974 6,947 1,874 47,795 ------------------------------------------------ Contribution $35,807 $12,012 $15,613 63,432 =================================== Research and development (10,620) Other expenses (40,258) Provision for income taxes (1,690) -------- Net income $10,864 =======
The following table details the revenue and assets attributable to Canada (the Company's country of domicile), the United Sates and all other foreign jurisdictions. The Company attributes revenue to geographic areas based on the location of the customer to which the products or services were sold.
Year ended April 30, ------------------------------------------------------------------------------ 2000 1999 1998 ----------------------- ------------------------ ------------------------ Revenue Fixed and Revenue Fixed and Revenue Fixed and Other Other Other Assets Assets Assets (in thousands of Canadian dollars) Canada $ 5,611 $31,800 $ 6,584 $35,110 $ 15,637 $41,815 United States 55,831 2,592 72,616 3,299 65,915 4,343 Other 32,875 3,834 35,012 6,082 29,675 20,678 ----------- ----------- ----------- ------------ ---------- ------------- $94,317 $38,226 $114,212 $44,491 $111,227 $66,836 =========== =========== =========== ============ ========== =============
14. DELRINA OBLIGATION On September 10, 1996, the Company acquired certain assets, including title to intellectual property, related to the forms software group (the "Delrina Assets") of Delrina Corporation ("Delrina"), a subsidiary of Symantec Corporation of Cupertino, California, USA, for a non-interest bearing obligation of US$100.0 million. This non-interest bearing obligation was originally valued using a discount rate of 6%. Under the asset purchase agreement, the Company was required to make unequal quarterly payments to Delrina, from September 27, 1996 to June 27, 2000. On February 12, 1998, the Company and Delrina re-negotiated certain terms of the asset purchase agreement whereby the Company agreed to accelerate payment of its obligation in consideration for a reduction in the effective interest rate, resulting in a reduction in imputed interest charges. As at April 30, 2000, the Company had satisfied its payment obligation to Delrina and no further amount was outstanding under the Delrina debt. 15. RESTRUCTURING On March 17, 1999, the Corporation announced a restructuring plan directed at reducing costs. The key restructuring actions included: o Consolidation of management responsibilities and reduction in headcount. o Closure of redundant facilities. o Reduction in the carrying value of certain capital assets primarily related to past acquisitions. o Cancellation of certain commitments and other costs. The following table summarizes the activity in the provision for restructuring costs during the years ended April 30, 1999 and April 30, 2000:
Employee Non Cash Total Termination Facilities Other Total Costs Costs Provision ------------------------------------------------- -------- --------- Restructuring provision........... $5,252 $ 2,914 $726 $8,892 $21,611 $30,503 Cash payments........ (1,175) (36) (207) (1,418) -- (1,418) Non-cash items....... -- -- -- -- (21,611) (21,611) ------------------------------------------------- -------- --------- Balance, April 30, 1999...... $4,077 $ 2,878 $519 $7,474 $ -- $ 7,474 Cash payments........ (2,921) (1,092) (124) (4,137) -- (4,137) Reductions........... (566) (540) -- (1,106) -- (1,106) ------------------------------------------------- -------- --------- Balance, April 30, 2000...... $ 590 $ 1,246 $395 $2,231 $ -- $ 2,231 ================================================= ======== ========= Long term balance.... $ -- $ 1,059 $279 $1,338 $ -- $ 1,338 ================================================= ======== =========
Employee terminations totaled 105 and included 46 in sales and marketing, 40 in research in development, 12 in internal corporate services and 7 in systems and consulting services. All employees were terminated on or before April 30, 1999. Employee terminations include salary continuance for which the Company is contractually obligated to pay. During the year ended April 30, 2000, the Company's liability for bonuses and other compensation to terminated employees was reduced by $566,000. Facilities costs consisted primarily of $2.1 million and $780,000 related to the closure of the Company's UK and Toronto facilities, respectively. The provision for redundant facilities includes management's best estimates of the total future operating costs of these vacant facilities for the remainder of their respective lease terms. Actual costs could differ from these estimates. During the year ended April 30, 2000, the Company bought out its lease obligation of its vacant Toronto facilities for $420,000 and was successful in subleasing one of its vacant facilities in the United Kingdom. The Company has not been successful in finding alternative arrangements, the lease for which extends to 2010. During the year ended April 30, 2000, the Company's liability for vacant facilities was reduced by $540,000. Other cash costs related primarily to the cancellation of trade shows and other commitments. Non-cash costs include impairment losses of $21.6 million related to assets held for use. The losses are comprised of $16.6 million related to marketing and distribution rights, $3.1 million related to goodwill, and $1.9 million related to other capital assets. 16. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued the Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement establishes accounting and reporting standards for derivative instruments and hedging activities and is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. In June, 1999, the FASB issued SFAS No.137 which delays the effective date of SFAS 133 until fiscal years beginning after June 15, 2000. Currently, as the Company has no derivative instruments, the adoption of SFAS No. 133 would have no impact on the Company's financial condition or results of operations. To the extent the Company begins to enter into such transactions in the future, the Company will adopt the Statement's disclosure requirements in the quarterly and annual financial statements for the year ending April 30, 2002. On March 31, 2000, the Financial Accounting Standards Board (FASB) issued Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation - an interpretation of APB Opinion No. 25 (FIN 44), providing new accounting rules for stock-based Compensation under APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). FIN 44 does not change FASB Statement No. 123, Accounting for Stock based compensation (FAS 123). The new rules are significant and will result in compensation expense in several situations in which no expense is typically recorded under current practice, including option repricing, purchase business combinations and plans that permit tax withholdings. FIN 44 is generally effective for transactions occurring after July 1, 2000, but apply to repricings and some other transactions after December 15, 1998. The Company does not expect the adoption of this Interpretation to have a material impact on its results of operations or financial position. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, which was amended in March 2000 by SAB 101A. The SAB summarizes certain of the SEC staff views in applying generally accepted accounting principles to revenue recognition in financial statements. This SAB is effective beginning the Company's first quarter of fiscal 2001. The Company does not expect the adoption of this SAB to have a material impact on its results of operations or financial position. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Company is a "foreign private issuer" and as such is not subject to section 16(a) of the Securities and Exchange Act of 1934. The following table sets forth certain information concerning the executive officers and directors of the Company: Name Age Title - ----------------------------- -------- ----------------------------------------- Abraham E. Ostrovsky....... 57 Chairman and Director Kevin Francis.............. 50 President and Chief Executive Officer and Director James Bursey................ 42 Senior Vice President & General Manager, Operations Edward D. Capes............ 46 Vice President, Customer Services and Business Processes Jeffrey McMullen........... 40 Vice President Finance and Chief Financial Officer Gwen Avery................. 37 Vice President, Marketing Operations Donna Morris............... 32 Vice President, Human Resources and Training Eric Stevens............... 39 Vice President, Research and Technology Evangelism David Welch................ 37 Vice President and General Manager, e-Forms Business Group Don Henderson.............. 51 Vice President and General Manager, e-Document Presentment Business Group David Antila............... 40 Vice President and General Manager, e-Process Business Group Declan Kelly............... 39 Senior Vice President and General Manager, European Solution Group Deborah L. Weinstein...... 40 Secretary John B. Kelly.............. 60 Director (1) John Gleed................. 54 Director Thomas E. Hicks............ 47 Director (1) Robert F. Allum............ 54 Director (1) Eric R. Goodwin............ 58 Director (1) Stephen A. Holinski........ 53 Director Graham C. Macmillan........ 47 Director (1) Dennis B. Maloney.......... 53 Director (1) John B. Millard............ 61 Director (1) Donald J. Payne............ 67 Director (1) Michael Rousseau........... 42 Director Murray Shaw................ 54 Director (1) Paul K. Bates.............. 49 Director nominee Patrick Martin............. 59 Director nominee (1) Messrs. John Kelly, Hicks, Allum, Goodwin, MacMillan, Maloney, Millard, Payne and Shaw are not nominees for reappointment as directors at the annual and special meeting of the shareholders of the company to be held on September 6, 2000. Mr. Ostrovsky joined the Corporation in August 1991 as Executive Vice President and Chief Operating Officer. He served as President and Chief Executive Officer from November 1991 to March 1994 and as the Corporation's Chairman and Chief Executive Officer from March 1994 to August 1995, when he resigned as Chief Executive Officer. Mr. Ostrovsky has been Chairman of the Board of Directors and Chief Executive Officer of Compressent Corporation from March 1996 to December 1997. Mr. Ostrovsky is a director of SEEC, Inc., Ixla, Digital Now, CenterBeam and Net Manage. Mr. Francis joined the Corporation on May 15, 2000 as President and Chief Executive Officer. Prior to joining the Corporation, Mr. Francis held a variety of positions with Xerox Canada, most recently as President, Chief Executive Officer and Chairman. Beginning in 1972 as a sales representative, Mr. Francis' extensive experience with Xerox Canada included roles in sales, marketing, customer service, process re-engineering, administration, information systems, general management, customer satisfaction and quality. Mr. Bursey joined the Corporation as Vice President of Services in May 1995. He was promoted to his current position in February 1999. Prior to joining the Corporation, Mr. Bursey was Managing Director Financial Services at SHL Systemhouse and Executive Director at Datacor Atlantic. Mr. Bursey has resigned from the Corporation effective July 31, 2000. Mr. Capes joined the Corporation in January 1999 as Vice President, Product/Program Management. In February 1999 he was promoted to Vice President, Product Development and Customer Services and in June 2000 was appointed Vice President and General Manager, Customer Satisfaction and Business Process Unit. Prior to joining the Corporation, Mr. Capes was Vice President of Public Carrier Networks at Nortel, where he had worked since 1988. Mr. McMullen joined the Corporation in October 1994 as Controller. He was promoted to Vice President and Controller in June 1997 and to his current position as Vice President Finance and Chief Financial Officer in September 1998. Ms. Avery joined the Corporation in October 1998 as Director, Industry Solutions. In March 1999, she became Director, Marketing Communications and was promoted to Vice President, Marketing Operations in November 1999. Prior to joining the Corporation, Ms. Avery was Director, Communications at Fulcrum Technologies and previously held marketing positions at Cognos Incorporated. Ms. Morris joined the Corporation in February 1998 as Manager, Human Resources. In December 1999, Ms. Morris was promoted to Vice President, Human Resources. Prior to joining the Corporation, Ms. Morris was the Manager of Human Resources at Fulcrum Technologies, and previously also held human resources specialist and generalist roles in public, private, and union and non-union organizations. Mr. Stevens joined the Corporation in September 1996. He has held positions as Director, Marketing Strategies and Chief Technical Evangelist within the Company. In March 2000, he was promoted to Vice President, Research and Technology Evangelism. Prior to joining the Corporation, Mr. Stevens was Group Product Manager with Symantec and Delrina. Mr. Welch joined the Corporation in June 1985 as a software developer. During his 15 years with the Corporation, he has held various management positions within the software development, consulting services and alliance management areas. In April 2000, Mr. Welch was promoted to Vice President and General Manager, e-forms Business Unit. Mr. Henderson joined the Corporation in September 1987. Since that time he has held senior positions in sales, alliance programs and product management. Mr. Henderson left the Corporation in 1998 for a period of two (2) years as president of a startup in the mobile computing space. He rejoined the Corporation in May 2000 as Vice President and General Manager of the Electronic Document Presentment business unit. Prior to 1987 Mr. Henderson was president of a small software firm and held various positions with SHL-Systemhouse. Mr. Antila joined the Corporation in January 1998 as Director of Technology, Services. In June 1998 he was promoted to Director and Group Product Manager, a position which he held until June 2000 when he was promoted to his current role as Vice President and General Manager for the e-process Business Unit. Prior to joining the Corporation, Mr. Antila was a co-founder and Chief Technology Officer of WorkFlow Partners & Technology Services, a workflow consultancy acquired by JetForm in 1998. Mr. Declan Kelly joined the Corporation, in January of 1998 as Managing Director of the European Services Operation. In October 1999, Mr. Kelly assumed overall responsibility for the European, Middle East and African operations of the Corporation. Prior to joining the Corporation, Mr. Kelly worked for ICL, a UK based international systems integration house. Ms. Weinstein has served as secretary of the Corporation since September 1993. Ms. Weinstein is a founding partner of LaBarge Weinstein, Canadian legal counsel to the Corporation. From February 1991 to January 1997, Ms. Weinstein was a partner with the law firm of Blake, Cassels & Graydon. Ms. Weinstein currently acts as a director and/or secretary of MOSAID Technologies Incorporated and AIT Advanced Information Technologies Corporation. Mr. John B. Kelly joined the Corporation on March 31, 1994 as President and Chief Operating Officer and was appointed Chief Executive Officer on August 24, 1995. Prior to joining the Corporation he was President and Chief Executive Officer of Why Interactive Inc. (formerly DVS Communications Inc.), a multi-media based integrated learning systems company between 1985 and March 1994. Effective December 1, 1999 Mr. Kelly was no longer employed by the Corporation. Mr. Gleed is a founder of the Corporation and was its President from June 1982 until June 1990, when he was appointed to the position of Senior Vice President and Chief Technology Officer with the Corporation, which he held until his retirement on June 30, 1999. See "Termination of Employment". During fiscal year 2000, Mr. Gleed served as interim Chief Executive Officer from December 1999 to May 2000. Mr. Gleed also served as Chairman of the Board from June 1990 to March 1994. Mr. Hicks is a founder of the Corporation and served as a senior project manager from the Corporation's inception until September 1991, when he was appointed Vice President, Systems Engineering. In March 1994, he was appointed Vice President, Strategic Programs and became Vice President and Chief Information Officer in January 1997. In May 1998, he became Vice President Group Product Manager for the Corporation's Output Products, a position he held until his retirement in June 2000. Mr. Allum has served as a director of the Corporation since 1983. He is a founder of the Corporation and was Chairman of the Board from 1983 until June 1990, when he was appointed to the position of Executive Vice President-- Consulting Services, which he held until March 1994. From March 1994 until April 1996, Mr. Allum was the Corporation's Vice President Special Projects. In April 1996, Mr. Allum resigned as an officer of the Corporation. Mr. Goodwin has served as a director of the Corporation since September 1996. He is a founder of Fulcrum Technologies Inc., a provider of text retrieval software, and was its President and Chief Executive Officer from 1990 until January 1997, when he became its Chairman and Chief Executive Officer. He is currently Chief Executive Officer of Flonetwork Inc. Mr. Holinski has been Executive Vice President and Chief Financial Officer of North American Gateway Inc. since May 1999. Prior to joining North American Gateway, he was the Senior Vice President and Chief Financial Officer of Moore Corporation Limited between May 1994 and May 1999. Prior to joining Moore, Mr. Holinski was Treasurer of Northern Telecom Ltd. from March 1994 until May 1994, and Vice President Product Finance from September 1993 until March 1994. Mr. Holinski was Vice President Finance with Northern Telecom Europe from January 1991 until September 1993. Mr. Macmillan has served as a director of the Corporation since 1994. Mr. Macmillan was a Director of Investment Banking at Richardson Greenshields of Canada Ltd. ("Richardson Greenshields") from 1989 to November 1996. Mr. Macmillan became a Vice President and Director of RBC Dominion Securities Inc. following the acquisition of Richardson Greenshields by RBC Dominion Securities Inc. in November 1996. Mr. Maloney has served as a director of the Corporation since 1994 and is currently President and Chief Operating Officer of HealthAxis.com, a leading supplier of technology solutions to the health care industry. Prior to joining HealthAxis, Mr. Maloney spent 20 years with SHL Systemhouse Inc., most recently as President of the Global Outsourcing Division. Mr. Maloney began his career with IBM Dr. Millard has served as a director of the Corporation since June 1998. Mr. Millard was President and Chief Executive Officer, and director of Mitel Corporation between 1993 and 1998. Prior to joining Mitel, Dr. Millard was Senior Vice President of NEC America from 1990 to 1993. Mr Millard is a director of EGazelles, Mosaid Technologies Incorporated, SiGe Microsystems, Red Line Communications and Positron Public Safety Systems Mr. Payne has served as a director of the Corporation since 1995. He became the Chief Operating Officer of Bitwise Designs Inc. in 1996. Mr. Payne was President of the Air Courier Division, Federal Armored Express, Inc. from 1993 to 1996. From 1990 to 1993, he was President and Chief Executive Officer of Enable Software, Inc. In June 1996, Mr. Payne was elected to the Board of Directors of Flow Management Technologies, a developer of medical software and effective October 1998, he became Director and President of FMT's HealthCare Division. Mr. Rousseau has served as a director of the Corporation since September 1999. He is currently Senior Vice President and Chief Financial Officer of Moore Corporation Limited, and has been since May 1999. Prior to that time, Mr. Rousseau served as Vice President and Chief Financial Officer of Silcorp Limited. Mr. Shaw has served as a director of the Corporation since June 2000. He is currently Director of Business Development at Moore Corporation Limited. Mr. Bates has been the President and CEO of Charles Schwab Canada Co. ("Schwab Canada") the Canadian subsidiary of the on-line brokerage firm Charles Schwab & Co. Inc. since February 1999. Prior to joining Schwab Canada, Mr. Bates was the founder and Chief Executive Officer of Priority Brokerage Inc. which was acquired by Schwab Canada in February 1999. Mr. Bates has also served as President and Chief Operating Officer of the brokerage firms Green Line Investor Services Inc. and Marathon Brokerage Inc. Mr. Martin has been the President and Chief Operating Officer and Chairman of Storage Technology Corporation since July 11, 2000. Prior to joining Storage Technology Corporation he spent 23 years at Xerox Corporation, most recently serving as President, North American Solutions Group. Committees of the Board of Directors There are two standing Committees of the Board of Directors: the Audit Committee and the Compensation Committee. The Board of Directors does not have a Nominating Committee. The Audit Committee oversees the Corporation's financial reporting process and internal controls, and consults with management, the internal accountants, and the Corporation's independent auditors on matters related to the annual audit of the Corporation and the internal controls, published financial statements, accounting principles and auditing procedures being applied. The Committee also reviews management's evaluation of the auditors' independence, and submits to the Board of Directors its recommendations for the appointment of auditors. The members of the Audit Committee are Messrs. Stephen Holinski, Robert Allum, and John Millard. The committee reports to the full Board each time the committee meets. The Compensation Committee has administered the Corporation's 1990 Employee Stock Option Plan and 1993 Employee Stock Option Plan and currently administers the 1995 Stock Option Plan and the 1997 Employee Stock Purchase Plan. The Committee also consults generally with, and makes recommendations to, the Board of Directors on matters concerning executive compensation, including individual salary rates, supplemental compensation and special awards. The members of the Compensation Committee are Messrs. Graham Macmillan, Robert Allum, and Donald Payne. The committee reports to the full Board each time the committee meets. Board and Board Committee Meetings During the fiscal year ended April 30, 2000, the Board of Directors held 11 meetings, the Audit Committee held 5 meetings and the Compensation Committee held 3 meetings. All Directors attended at least 75% of the aggregate of all meetings of the Board and all committees on which they served. Item 11. EXECUTIVE COMPENSATION The following table sets forth the total compensation paid to those individuals who occupied the office of Chief Executive Officer during fiscal year 2000, the four other most highly compensated executive officers of the Company and the former executive officer whose compensation would have been disclosed if he was still employed by the Company for the fiscal years ended April 30, 2000, 1999 and 1998:
Long term Compensation Annual Compansation Awards --------------------- ------------ Name and Principal Position Year ended Number of Other April 30, Salary (1) Bonus(1) Options(2) Compensation(1) John B. Kelly (3) 2000 $455,000 $ - - $ - Former President and Chief 1999 $455,000 $ - 148,150 $ - Executive Officer 1998 $348,750 $111,019 190,000 $ - John Gleed (4) 2000 $247,500 $ - 35,000 $ - President and Chief 1999 $211,250 $ - 25,300 $ - Executive Officer 1998 $202,500 $ 64,463 82,000 $ - James Bursey 2000 $250,000 $100,000 - $ - Senior Vice President 1999 $229,628 $ 40,000 59,340 $ - Operations 1998 $165,000 $ 80,000 47,000 $ - Edward Capes 2000 $175,000 $ 15,000 - $ - Vice President 1999 $ 51,664 $ - 30,300 $ - Product Development 1998 $ - $ - - $ - Jeffrey McMullen 2000 $170,000 $ - - $ - Vice President Finance 1999 $145,000 $ 7,500 25,300 $ - Chief Financial Officer 1998 $ 90,000 $ 25,125 24,260 $ - Declan Kelly (5) 2000 $180,946 $144,856 10,000 $ - Vice President 1999 $126,537 $ 31,992 9,560 $ - European Operations 1998 $ - $ - - $ - Andrew Jackson (6) 2000 $160,000 $ 35,000 - $ - Former Senior Vice President 1999 $133,470 $ 12,300 25,000 $ - Marketing 1998 $ 95,871 $ 17,750 5,180 $ - (1) All references to "$" in this section are to Canadian dollars. (2) The Company has not issued any stock appreciation rights. (3) Base salary is annualised. Mr. Kelly served as President and Chief Executive Officer until December 1999. See "Termination of Employment". (4) Mr. Gleed served as interim President and interim Chief Executive Officer from December 1999 to May 2000 when he retired. See "Employment Agreements" below. (5) Mr. Declan Kelly's salary was converted from Irish Punts using the average exchange rate during the year. (6) Mr. Jackson's employment with the Corporation ended in April 2000. Information regarding his compensation is set forth above since Mr. Jackson would have qualified as one of the four most highly paid executive officers had he been serving as an executive officer of the Corporation at the end of fiscal year 2000. See "Termination of Employment" below.
The following table sets forth the stock options granted during the fiscal year ended April 30, 2000 to each of the Company's executive officers named in the Summary Compensation Table:
2000 Stock Option Grants - ------------------------------------------------------------------------------------------------------------------- % of total Potential Realized Value Shares options at Assumed Annual Rate underlying granted to Exercise of Stock Price number of employees Price per Appreciation over Option options in Fiscal Share Term (2) -------------------------- Name granted 2000 (in US$) Expiry 5% 10% ---- ------- ---- -------- ------ -- --- John Gleed 35,000(1) 4.5% $ 4.750 December 1, 2003 53,029 114,200 John B. Kelly -- -- -- -- -- -- James Bursey -- -- -- -- -- -- Edward Capes -- -- -- -- -- -- Jeffrey McMullen -- -- -- -- -- -- Declan Kelly 10,000(1) 1.3% $ 4.063 October 1, 2003 12,960 27,909 Andrew Jackson -- -- -- -- -- -- Keith Sinclair -- -- -- -- -- -- (1) Options are exercisable starting 6 months after the date of grant, with one-sixth of the shares becoming exercisable at that time and with an additional one-sixth of the option shares becoming exercisable on each successive six month period, with full vesting occurring on the third anniversary date. All options expire on the fourth anniversary date. (2) The calculated potential realized value is expressed in Canadian dollars using the exchange rate in effect at the date of option grant.
2000 Aggregate Option Exercises and Year-end Option Values The following table sets forth the number of shares acquired on exercise of stock options and the aggregate gains realised on exercise during the fiscal year ended on April 30, 2000, by the Company's executive officers named in the Summary Compensation Table. The table also sets forth the number of shares covered by exercisable and unexercisable options held by such executives on April 30, 2000, and the aggregate gains that would have been realised had these options been exercised on April 30, 2000, even though the exercisable options were not exercised, and the unexercisable options could not have been exercised, on April 30, 2000.
Acquired on Unexercised Options Options Exercise at April 30, 2000 at April 30, 2000(b) during Value ----------------------------- ----------------------------- Name Fiscal 2000 realized(a) Exercisable Unexercisable Exercisable Unexercisable ---- ----------- ----------- ----------- ------------- ----------- ------------- John B. Kelly 63,550 $239,078 249,867 104,733 $93,891 $187,783 John Gleed - - 98,768 73,532 28,081 124,147 James Bursey - - 93,114 50,226 65,857 131,714 Jeffrey McMullen - - 34,433 21,619 28,081 56,155 Edward Capes - - 10,101 20,199 28,081 56,155 Declan Kelly - - 10,189 17,371 15,548 45,877 Andrew Jackson - - 17,048 - 27,748 $ - (a) Value is based on the closing price on the date of exercise less the exercise price and the closing exchange rate on the date of exercise. (b) Value of exercisable and unexercisable options is based on the April 30, 2000, closing bid price of US$ 6.0625 per share and exchange rate of US$1.00 = Cdn. $1.4801, less the exercise price. Options are in-the-money if the market value of the shares covered thereby is greater than the option exercise price.
The Corporation does not maintain any long-term incentive plans. Compensation of Directors The Board of Directors has determined for the year ended April 30, 2001 that each non-employee, non-Moore nominated director be paid an annual fee of US$10,000, plus US$1,000 per meeting in person and US$500 per meeting by telephone. In addition, the Chairman of the Board and the Chairman of each Committee of the Board will be paid an additional US$5,000. No directors were granted stock options during the year ended April 30, 2000, except in their capacity as employees of the Corporation, if applicable. Non-employee directors are reimbursed for their reasonable expenses incurred in attending Board and committee meetings. Employment Agreements / Termination of Employment The Corporation has entered into employment agreements with John B. Kelly, James Bursey, Jeffrey McMullen, Edward Capes and Declan Kelly each of which, except as noted below, contain substantially similar provisions. Each employment agreement provides that the executive shall devote his full time and attention to performing his duties for the Corporation. In the event of termination by the executive for good reason (a material change in his responsibilities, a failure to maintain his compensation and benefits, a material breach by the Corporation under the employment agreement, or the failure by the Corporation to have the employment agreement assumed by any successor to the Corporation), or by the Corporation for other than cause, death, disability or retirement, the Corporation will pay salary and vacation pay earned to the date of termination as well as a multiple of the executive's salary (the "Termination Payments"). Except as noted below, the Corporation will also continue all granted options according to their terms. If the Executive terminates their employment agreement on thirty (30) days notice within ninety (90) days of a change in control of the Corporation, the Corporation shall be obligated to make the Termination Payments. Additionally, all granted options shall become immediately exercisable upon a change of control of the Corporation. Each employment agreement provides that the executive maintain the confidentiality of the Corporation's confidential information indefinitely and further provides that the executive shall not compete with the Corporation nor solicit its employees for a certain period of time following termination (the "Non-compete Term"). Effective December 1, 1999 Mr. John B. Kelly's employment was terminated by the Corporation for other than cause, death or disability in accordance with the terms of his employment agreement. Mr. John B. Kelly's Termination Payments are equal to three times his then current salary and up to $30,000 for job relocation expenses. His Non-compete Term is for three years. All options will continue to vest and be exercisable for a period of three years after termination. The Termination Payments for each of Mr. Bursey, Mr. McMullen, Mr. Capes and Mr. Declan Kelly (the "Executives") are equal to one times their respective then current salary and up to $15,000 for job relocation expenses. Non-compete Term for each of the Executives is for one year. All options held by each of the Executives will continue to vest and be exercisable for a period of one year after termination by the Executive for good reason, or by the Corporation for other than cause, death, disability or retirement. Mr. Bursey has tendered his resignation from the Corporation to be effective July 31, 2000. In order to induce Mr. Bursey to remain with the Corporation until July 31, 2000, the Corporation has agreed to continue his current salary for a period of 18 months thereafter, provided that he will continue to be paid only one-half his salary in the event he obtains alternate employment during such time. The Corporation entered into an employment agreement with Mr. Gleed to outline the terms of his compensation and benefits in his role as the interim President and Chief Executive Officer of the Corporation. The Corporation agreed to pay Mr. Gleed $1,500 per day while he served as interim President and Chief Executive Officer and thereafter a monthly retainer of $7,500 for professional consulting services until April 30, 2002. All options granted to Mr. Gleed will vest and continue to be exercisable until expiry notwithstanding Mr. Gleed's retirement. Directors' And Officers' Liability Insurance The Corporation presently maintains directors' and officers' liability insurance in the aggregate principal amount of US$10.0 million. The annual premium payable for this insurance during the year ended April 30, 2000 was $185,500. The by-laws of the Corporation generally provide that the Corporation shall indemnify a director or officer of the Corporation and certain other bodies corporate against liability incurred in such capacity to the extent permitted or required by the Canada Business Corporations Act. To the extent the Corporation is required to indemnify the directors or officers pursuant to the by-laws, the insurance policy provides that the Corporation is liable for the initial US$100,000 in the aggregate for each loss with respect to the insuring agreement. Compensation Committee Interlocks and Insider Participation in Compensation Decisions At April 30, 2000, the members of the Compensation Committee were Messrs. Allum, Macmillan and Payne, all non-employee directors of the Company. Graham C. Macmillan, a director of the Company and a member of the Compensation Committee, is a Vice President and Director of RBC Dominion Securities Inc., a provider of investment banking and other services to the Company. The Committee has a mandate to: (a) monitor compliance with legislation applicable in respect of employment practices of the Company, (b) determine the appropriate allocation of options, (c) recommend Chief Executive Officer and senior officer compensation, (d) monitor compliance with statutory requirements for employment matters including remittances and legislation, and (e) review levels of compensation generally for the Company. The Committee met three times in fiscal 2000 and acted by way of resolution on other occasions. Report on Executive Compensation The philosophy of the Corporation in the determination of senior executive compensation is to encourage performance in order to expand the position of the Corporation in a highly competitive environment. For the year ended April 30, 2000, the process utilized by the Compensation Committee in determining executive officer compensation levels was based upon the Committee's judgment, taking into account both qualitative and quantitative factors. Among the factors considered by the Committee were the recommendations of the Chief Executive Officer with respect to the compensation of the Corporation's key executive officers. However, the Committee made the final compensation decisions concerning such officers. The Committee established the compensation payable for John B. Kelly and John Gleed, both of whom served as President and Chief Executive Officer. Mr. Kelly or Mr. Gleed, as applicable, then recommended, subject to the Committee's review and the Board's approval, the compensation payable to the other executive officers. The Committee's fundamental policy is to offer the Corporation's executive officers competitive compensation opportunities based upon overall Corporation performance, their individual contribution to the financial success of the Corporation, and their personal performance. It is the Committee's objective to have a substantial portion of each officer's compensation contingent upon the Corporation's performance, as well as upon his or her own level of performance. Accordingly, each executive officer's compensation package comprises three elements: (i) base salary, which is established primarily on the basis of individual performance and market considerations; (ii) annual variable incentive compensation awards payable in cash and tied to the Corporation's achievement of financial performance goals and the executive's contribution and, (iii) stock option grants at market price which strengthen the mutuality of interests between the executive officers and the shareholders. Under the terms of the stock option plan, options generally must be exercised within a period of four or five years from the date of the grant. All options granted terminate 30 days after termination of employment unless otherwise determined by the Chief Executive Officer, or as provided in an executive's employment agreement. Performance Graph The Common Shares of the Company began trading on the NASDAQ Small Cap Market System in April 1993. The following graph compares the yearly percentage return since April 30, 1994 on the Company's Common Shares, compared with the percentage change in the NASDAQ index of all US and foreign issues and the NASDAQ index of computer and data processing companies. 700% - A 676% 600% - 500% - 400% - A O 373% 300% - X X 200% - X A X A O O 100% - A O O O X 30% 0% -XOA X April 30, April 30, April 30, April 30, April 30, April 30, April 30, 1994 1995 1996 1997 1998 1999 2000 X = Common Shares of the Company O = NASDAQ index of US and Foreign Issues A = NASDAQ index of Computer and Data Processing Companies Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding beneficial ownership of the Company's Common Shares as of July 13, 2000: (i) by each person who is known by the Company to own beneficially more than five percent of the outstanding Common Shares, (ii) by each director and named executive officer of the Company and (iii) by all directors and executive officers of the Company as a group at any time during fiscal year ended April 30, 2000. There is no family relationship between any directors or executive officers of the Company. Number Percentage of Shares of Shares Beneficially Beneficially Beneficial Owner(1) Owned Owned Directors and Named Executive Officers Robert F. Allum(2).......................... 228,978 1.17% James Bursey(3) ............................ 83,780 * Edward Capes(4)............................. 18,374 * Kevin Francis............................... 17,450 * John Gleed(5)............................... 297,080 1.5% Eric R. Goodwin(6).......................... 24,668 * Thomas E. Hicks(7).......................... 204,628 1.04% Stephen A. Holinski (8)..................... 4,668 * John B. Kelly(10)........................... 283,367 1.42% Declan Kelly (9)............................ 14,934 * Graham C. Macmillan(11)..................... 26,668 * Dennis B. Maloney(12)....................... 29,668 * Jeffrey McMullen(13) ....................... 36,561 * John B. Millard(14)......................... 11,635 * Abraham E. Ostrovsky(15).................... 151,312 * Donald J. Payne(16)......................... 43,167 * Michael Rousseau (17)....................... 2,558,748 12.96% Murray Shaw (17)............................ 2,558,748 12.96% All directors and executive officers (18) 1,515,276 7.38% 5% Shareholders Moore Corporation Limited (19).............. 2,558,748 12.96% - ---------- * Less than 1% (1) A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from July 21, 2000, whether pursuant to the exercise of options, conversion of securities or otherwise. Each beneficial owner's percentage of ownership is determined by assuming that options or convertible preference shares that are held by such person (but not those held by any other person) and which are exercisable (or convertible) within 60 days of July 21, 2000 have been exercised. Unless otherwise noted in the footnotes below, the Corporation believes that all persons named in the table have sole voting power and investment power with respect to all common shares beneficially owned by them. Statements as to securities beneficially owned by directors, nominees for directors and executive officers, or as to securities over which they exercise control or direction, are based upon information obtained from such directors, nominees and executives and from records available to the Corporation. (2) Includes 129,976 common shares owned by Mr. Allum's spouse. Also includes 17,668 common shares subject to options. Mr. Allum disclaims any beneficial interest in shares owned by his spouse. (3) All common shares subject to options. (4) Includes 10,101 common shares subject to options (5) Includes 100,000 common shares owned by two holding companies controlled by Mr. Gleed for the benefit of his children. Also includes 5,000 common shares owned by Mr. Gleed's spouse. Also includes 120,433 common shares subject to options and 11,492 common shares subject to options held by Mr. Gleed's spouse. Mr. Gleed disclaims any beneficial interest in such common shares and options owned by his spouse. (6) All common shares subject to options. (7) Includes 82,268 common shares owned by Mr. Hicks' spouse. Also includes 47,000 common shares subject to options. Also includes 4,571 common shares subject to options owned by Mr. Hicks' spouse. Mr. Hicks disclaims any beneficial interest in such common shares and options owned by his spouse. (8) Includes 2,668 common shares subject to options. (9) Includes 10,189 common shares subject to options. (10) Includes 269,867 common shares subject to options. (11) Includes 24,668 common shares subject to options. (12) Includes 24,668 common shares subject to options. (13) Includes 35,853 common shares subject to options. (14) Includes 9,335 common shares subject to options. (15) Includes 35,000 common shares owned by two trusts (17,500 common shares each) of which Mr. Ostrovsky is the trustee, for the benefit of Mr. Ostrovsky's two children. Also includes 60,668 common shares subject to options. (16) Includes 38,668 common shares subject to options. (17) Includes 1,992,084 common shares, 450,448 convertible preference shares, which are convertible at any time into 450,448 common shares, subject to conditional provisions, and 116,216 common shares subject to options. All such shares are beneficially owned by Moore Corporation Limited and are deemed to be owned by Mr. Rousseau and Dr. Shaw by virtue of the fact that they are the director nominees of Moore Corporation Limited. (18) Includes common shares indirectly owned and 900,131 common shares that may be acquired upon exercise of options. Excludes the 2,558,748 common shares beneficially owned by Moore Corporation Limited, which are also deemed to be beneficially owned by Mr. Rousseau and Dr. Shaw by virtue of the fact that they are the director nominees of Moore Corporation Limited. The beneficial ownership of such common shares by Moore Corporation Limited is set forth above. (19) Includes 1,992,084 common shares, 450,448 convertible preference shares, which are convertible at any time into 450,448 common shares, subject to conditional provisions, and 116,216 common shares subject to options. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Corporation concluded an investment agreement with Moore Corporation Limited ("Moore") in August 1994 under which Moore acquired 2,263,782 convertible preference shares (the "preference shares") representing approximately 18.5% of the Corporation's common share equivalents then outstanding for net proceeds of approximately $24.8 million. Moore also acquired an option to purchase 178,750 common shares of the Corporation for a price of US$8.25 per share (the "Special Options") and a conditional option to acquire 7,726,375 common shares of the Corporation no later than December 30, 1999 at prices ranging from US$15.00 per share to US$20.00 per share, subject to certain anti-dilution provisions (the "Moore Options"). In accordance with these anti-dilution rights, during the year ended April 30, 1996, Moore also acquired an option to acquire 116,216 common shares of the Corporation at US$16.50 per share. In June 1996 the Corporation negotiated the repurchase of the Moore Options in order to eliminate the perceived dilutive effect of the Moore Options on the price of the Corporation's common shares. As a result, on June 27, 1996, the Corporation entered into an agreement with Moore under which a subsidiary of the Corporation repurchased the Moore Options for consideration of US$34.0 million ($46.3 million), paid for through the issuance by the Corporation to Moore of 1,813,334 common shares and incurred additional expenses associated with the transaction of $749,000. The consideration paid for the options was determined by arm's length negotiation between the parties. Subsequently, Moore sold to various third parties 1,813,334 of its preference shares, which were converted into an equal number of common shares, and Moore exercised the Special Options to acquire 178,750 common shares at US$8.25 per share. As a result of the foregoing, at April 30, 2000, Moore held 1,992,084 common shares, 450,448 preference shares and options to purchase 116,216 common shares or, approximately 12% of all outstanding common and preference shares on a fully diluted basis. The Corporation and Moore also entered into a long-term strategic alliance in August 1994, under which sales of the Corporation's products and services in certain vertical markets would be focused through Moore. Moore also committed to make certain minimum purchases from the Corporation of its products for resale. The Corporation and Moore amended the terms of the strategic alliance as of June 27, 1996, April 30, 1997 and April 30, 1998. Pursuant to the amended strategic alliance, effective January 1, 2000, Moore relinquished exclusive marketing rights in all vertical markets and non-exclusive marketing and distribution rights to all markets worldwide. The amended strategic alliance continues to provide for the promotion by Moore and the Corporation of each other's solutions. Under the amended strategic alliance, Moore is committed to make purchases of the Corporation's products for resale of US$1.0 million in each of calendar years 1998 through 2003. Certain other agreements entered into with Moore in August 1994 were also amended and restated as at June 27, 1996. As long as Moore beneficially owns at least 10% of the outstanding common and preference shares of the Corporation, Moore is entitled to nominate two directors to the Corporation's Board of Directors and as long as Moore beneficially owns at least 5% of the outstanding common and preference shares of the Corporation, Moore is entitled to nominate one director to the Corporation's Board of Directors. Notwithstanding Moore's ownership of more than 10% of the outstanding common and preference shares of the Corporation, Moore has agreed to nominate only one director to the Corporation's Board of Directors. For purposes of calculating Moore's beneficial ownership, any common shares issued after June 27, 1996 pursuant to the exercise of options or other rights granted after such date pursuant to employee stock plans are treated as not outstanding. Certain insiders have agreed to vote their shares in favour of Moore's nominees for election to the Corporation's Board of Directors. So long as Moore owns not less than 10% of the outstanding common and preference shares, Moore continues to be entitled to a pre-emptive right with respect to issuances by the Corporation of additional equity shares or shares convertible into equity shares, although the pre-emptive right does not apply to securities issued by the Corporation pursuant to employee stock purchase or stock option or other employee stock incentive plans. Prior to conversion, each preference share is entitled to one vote and is to vote with the common shares as a single class; provided that, if at any time Moore's beneficial ownership of common and preference shares is less than 15% of the outstanding common and preference shares, Moore has agreed to vote its preference shares as directed by the Corporation, with certain exceptions. The Corporation and Moore have also entered into a Registration Rights Agreement pursuant to which Moore may require the Corporation to register common shares issued upon conversion of the preference shares or exercise of the options (a "Demand Registration") under the Securities Act of 1933 (the "Act"), subject to certain limitations. Moore will be entitled to require up to three Demand Registrations at any time, one of which must be paid for by the Corporation, and participate in any other registration of the Corporation's securities under the Act, subject to certain limitations. Moore may publicly sell any common shares registered under the Act. During fiscal year 1999, the Corporation (or its subsidiaries) entered into certain agreements with Hugh Millikin ("Millikin"), a former Senior Vice President, and Indigo Pacific Pty Limited ("Indigo"), a company controlled by Millikin. In July 1999, JetForm Pacific Pty Limited transferred certain assets and liabilities to Indigo for a net purchase price of Cdn.$50,000 (after deducting the value of assumed liabilities from the total purchase price of Cdn.$229,952). Such assets included the assets used in the business of JetForm PTE Ltd., the Corporation's Singapore subsidiary. In August 1999, the Corporation entered into a distribution agreement with Indigo, permitting Indigo to distribute certain software of the Corporation and to resell support services throughout the Pacific Rim, exclusive of Japan and mainland China, and requiring Indigo to pay royalty fees to the Corporation equal to 50% of the net resale price of all software licenses and support services. On November 30, 1999, Millikin resigned from all of his offices, positions and directorships with the Corporation (and its subsidiaries and affiliates), but retained the title "Senior Vice President and General Manager" of Asia Pacific, for marketing purposes. In December 1999, the Corporation and Indigo entered into a management agreement. Millikin agreed to manage the business of JetForm Japan K.K. and the representative office in China, on a month-to-month basis, for a monthly fee of $15,000 (Australian dollars). Also in December 1999, the Corporation extended a secured, interest-free loan for $225,000 (Australian dollars) to Indigo. Millikin guaranteed repayment, which begins August 1, 2000 and ends May 1, 2002. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements The following Financial Statements are filed as part of this report under Item 8 "Financial Statements and Supplementary Data". Auditors' Report Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (a) 2. Financial Statement Schedule The following financial statement schedule is filed as part of this report: Schedule V Valuation and Qualifying Accounts All other schedules are omitted as they are not required or the required information is shown in the financial statements or notes thereto. (a) 3. Exhibits Exhibit Number Description 3.1(1) Certificate of Incorporation of Registrant, as amended 3.2(1) By-laws of Registrant, as amended 10.4.1(3) Investment Agreement dated June 10, 1994, between the Registrant and Moore Corporation Limited 10.4.2(6) Agreement to amend Investment Agreement dated June 27, 1996 between the Registrant and Moore Corporation Limited 10.5.1(3) Form of Option Agreement to be entered into between the Registrant and Moore Corporation Limited 10.5.2(6) Assignment of Option Agreement between Moore Corporation Limited and 3272303 Canada Inc., a wholly-owned subsidiary of the Registrant 10.6.1(5) Strategic Alliance Agreement dated August 11, 1994 between the Registrant and Moore Corporation Limited 10.6.2(8) Agreement to amend the Strategic Alliance Agreement dated June 27, 1996 between the Registrant and Moore Corporation Limited 10.6.3(8) Amendment to the Strategic Alliance Agreement dated April 30, 1998, between the Registrant and Moore Corporation Limited. 10.6.4(11) Amendment to the Strategic Alliance Agreement dated April 30, 1999, between the Registrant and Moore Corporation Limited. 10.8(5) Employment Agreement dated August 11,1994 between the Registrant and John Gleed 10.10(2) Lease dated as of February 1, 1993, between the Registrant and Arnon Development Corporation and Baix Developments Inc. for Ottawa, Canada facility 10.11(4) Form of Amendment to Lease to be entered into between Registrant and Arnon Development Corporation Limited and Baix Developments, Inc. 10.12(5) Letter Agreement dated June 1995 between Arnon Development Corporation and the Registrant 10.13(4) Lease dated April 24, 1991 between Arnon Development Corporation and Baix Developments, Inc. and CCC Cable Consumer Channel Inc (d/b/a Why Interactive) and amendment dated June 28, 1991. 10.14(4) Agency Agreement between the Registrant and Selling Shareholders of the Registrant and Richardson Greenshields of Canada Limited. 10.16(5) Employment Agreement dated August 1994 between the Registrant and Philip Weaver 10.17(5) Employment Agreement dated August 1994 between the Registrant and John Kelly 10.18(1) Registrant's 1990 Employee Stock Option Plan 10.19(l) Registrant's 1993 Employee Stock Option Plan 10.20(5) Registrant's 1995 Employee Stock Option Plan 10.21(7) Credit Facility dated October 25, 1996 between the Registrant and Royal Bank of Canada 10.21.1(11) Credit Facility dated October 14, 1997 between the Registrant and Royal Bank of Canada 10.21.2(12) Credit Facility dated April 7, 1999 between the Registrant and Royal Bank of Canada 10.21.3 Amendment dated October 27, 1999, to Loan Agreement (April 7, 1999) between the Royal Bank of Canada and the Registrant 10.22(7) Receivable Purchase Agreement and Amendment Agreement dated July 31, 1996, between the Registrant and Royal Bank Export Finance Co. Ltd. 10.23(9) Amendment to the Asset Purchase Agreement dated February 12, 1998 between the Registrant and Delrina Corporation 10.24(11) Registrant's 1997 Employee Stock Purchase Plan 10.25(10) Registrant's Shareholder Rights Plan Agreement dated June 25, 1998 10.26(11) Underwriting Agreement between the Registrant and RBC Dominion Securities Inc., Midland Walwyn Capital Inc., Goldman Sachs Canada and TD Securities Inc. dated April 2, 1998. 10.27(12) Amendment dated September 28, 1998 to the employment agreement dated August 11, 1994 between the Registrant and John Gleed 10.28(12) Amendment dated September 26, 1998 to the employment agreement dated August 11, 1994 between the Registrant and John Kelly 10.28.1 Termination Agreement dated December 1, 1999 between the Registrant and John B. Kelly 10.29(12) Amendment dated September 25, 1998 to the employment agreement dated August 11, 1994 between the Registrant and Phil Weaver 10.30(12) Employment Agreement dated September 22, 1998 between the Registrant and Carlos Fox 10.31(12) Employment Agreement dated September 22, 1998 between the Registrant and Ian Fraser 10.32(12) Employment Agreement dated September 22, 1998 between the Registrant and James Bursey 10.33(12) Employment Agreement dated September 22, 1998 between the Registrant and Hugh Millikin 10.34(12) Termination Agreement dated February 19, 1999 between the Registrant and Phil Weaver 10.35(12) Termination Agreement dated April 29, 1999 between the Registrant and Ian Fraser 10.36(12) Termination Agreement dated June 1, 1999 between the Registrant and Carlos Fox 10.37 Employment Agreement dated February 8, 2000 between the Registrant and James Bursey 10.37.1 Amendment dated February 8, 2000 to the employment agreement dated February 8, 2000 between the Registrant and James Bursey 10.37.2 Amendment dated July 17, 2000 to the employment agreement dated February 8, 2000 between the Registrant and James Bursey 10.38 Employment Agreement dated April 13, 2000 between the Registrant and A. Kevin Francis 10.39 Employment Agreement dated October 21, 1999 between the Registrant and Jeff McMullen 10.40 Employment Agreement dated October 21, 1999 between the Registrant and Edward Capes 10.41 Employment Agreement dated May 4, 2000 between the Registrant and Declan Kelly 10.42 Employment Agreement dated February 16, 2000 between the Registrant and John Gleed 10.43 Share Purchase Agreement, dated May 19, 1999 between Calian Technologies and the Registrant 10.44 Distribution Agreement, dated August 1, 1999 between Indigo Pacific and the Registrant 21.1 Subsidiaries of the Registrant 23.0 Consent of PricewaterhouseCoopers LLP (1) Incorporated by reference to the exhibits filed with the Registrant's Registration Statement on Form SB-2 (no. 33-47864-B) (previously filed on Form S-18) filed on May 12, 1992, and amended on March 5, 1993, and April 19, 1993, which Registration Statement became effective April 20, 1993. (2) Incorporated by reference to the exhibits filed with the Registrant's Report on Form 10-KSB for the fiscal year ended April 30, 1993. (3) Incorporated by reference to the exhibits filed with the Registrant's Report on Form 8-K dated June 10, 1994. (4) Incorporated by reference to the exhibits filed with the Registrant's Report on Form 10-KSB for the fiscal year ended April 30, 1994. (5) Incorporated by reference to the exhibits filed with the Registrant's Report on Form 10-KSB for the fiscal year ended April 30, 1995. (6) Incorporated by reference to the exhibits filed with the Registrant's Report on Form 10-K for the fiscal year ended April 30, 1996. (7) Incorporated by reference to the exhibits filed with the Registrant's Statement on Form S-1 (no. 333-6368) (originally filed on Form S-3) filed on April 30,1997, as amended on March 3, 1997 and March 17, 1997, which Registration Statement became effective on March 19, 1997. (8) Incorporated by reference to the exhibits filed with the Registrant's Report on Form 10-K for the fiscal year ended April 30, 1997. (9) Incorporated by reference to the exhibits filed with the Registrant's Report on Form 10-Q for the three months ended January 31, 1998. (10) Incorporated by reference to the exhibits filed with the Registrant's Report on Form 8-K, filed July 23, 1998. (11) Incorporated by reference to the exhibits filed with the Registrant's Report on Form 10-K for the fiscal year ended April 30, 1998. (12) Incorporated by reference to the exhibits filed with the Registrant's Report on Form 10-K for the fiscal year ended April 30, 1999. (b) Reports on Form 8-K There were no reports on Form 8-K during the year. PRICEWATERHOUSECOOPERS PricewaterhouseCoopers LLP Chartered Accountants 99 Bank Street Suite 800 Ottawa Ontario Canada K1P 1E4 Telephone +1 (613) 237 3702 Telephone +1 (613) 237 3936 Our report on the consolidated financial statements of JetForm Corporation as of April 30, 2000 and 1999 and for the years ended April 30, 2000, 1999 and 1998 is included in Item 8 of their Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule V listing in Item 14(a)2 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Chartered Accountants Ottawa, Ontario June 20, 2000 PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organization. JETFORM CORPORATION SCHEDULE V VALUATION AND QUALIFYING ACCOUNTS Balance as at April 30, 1997 $ 735 Bad debt expense for the year 1,045 Write-off/adjustments (381) ------- Balance as at April 30, 1998 1,399 Bad debt expense for the year 2,528 Write-off/adjustments (2,003) ------- Balance as at April 30, 1999 1,924 Bad debt expense for the year 6,056 Write-off/adjustments (5,556) ------- Balance as at April 30, 2000 $2,424 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JetForm Corporation Dated: July 24, 2000 /s/ A. Kevin Francis -------------------------------------------------- Kevin Francis President and Chief Executive Officer and Director (Principal ExecutiveOfficer) In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Abraham Ostrobsky /s/ Jeffrey McMullen - --------------------------------------- --------------------------------------- Abraham Ostrovsky Jeffrey McMullen Chairman and Director Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer) /s/ John Gleed /s/ Michael Rousseau - --------------------------------------- --------------------------------------- John Gleed Michael Rousseau Director Director /s/ Eric R. Goodwin /s/ Thomas E. Hicks - --------------------------------------- --------------------------------------- Eric R. Goodwin Thomas E. Hicks Director Director /s/ Robert F. Allum /s/ Deborah L. Weinstein - --------------------------------------- --------------------------------------- Robert F. Allum Deborah L. Weinstein Director Secretary /s/ Graham C. Macmillan /s/ Stephen A. Holinski - --------------------------------------- --------------------------------------- Graham C. Macmillan Stephen A. Holinski Director Director /s/ Donald J. Payne /s/ Dennis B. Maloney - --------------------------------------- --------------------------------------- Donald J. Payne Dennis B. Maloney Director Director /s/ Murray Shaw --------------------------------------- Murray Shaw Director EX-10.21.3 2 0002.txt AMENDMENT TO LOAN AGREEMENT EXHIBIT 10.21.3 October 27, 1999 JetForm Corporation 560 Rochester Street Ottawa, Ontario K1S 5K2 Attention: Mr. Jeff McMullen Chief Financial Officer Dear Sirs: Further to our recent discussions, we are pleased to offer the following amendments to the letter agreement dated April 7, 1999 between Royal Bank of Canada and JetForm Corporation (the "Agreement"): 7. Repayment: In sub-paragraph 1, each of the dates September 30, 1999 is amended to November 30, 1999. In sub-paragraph 4, the date of June 30, 2000 is amended to February 1, 2001. 8. Availability: Sub-paragraph 1 (a) (ii) is amended with the addition "where such insurance has been formally assigned to the bank". Sub-paragraph 4 (a) is deleted and replaced with the following: "Borrowings under this segment must not exceed 25% of the aggregate of (all on a consolidated basis): - Cash, net of any short term operating loans - Cash equivalents - Trade accounts receivable falling due within the next twelve months, but excluding amounts 90 days or more past due". Sub-paragraph 4 (e) is amended to read February 1, 2001. 20. Periodic Review The date is amended to November 30, 1999. An extension fee of .15% is payable with respect to Segment (4). The extension fee is non-refundable and will be deemed to have been earned by the Bank upon acceptance of this amendment to compensate for time, effort and expense incurred by the Bank in extending this facility. All other terms of the Agreement remain unchanged. This amendment expires if not accepted by November 19, 1999 unless extended in writing by the Bank. If this agreement is acceptable, kindly sign and return the attached copy to the attention of the writer. Yours truly, We acknowledge and accept the within terms and conditions. JETFORM CORPORATION Per: ______________________________________________ Per: ______________________________________________ Date: ______________________________________________ EX-10.28.1 3 0003.txt TERMINATION AGREEMENT EXHIBIT 10.28.1 TERMINATION AGREEMENT Agreement made as of the 1st day of December, 1999, by and between JetForm Corporation, 560 Rochester Street, Ottawa, Ontario, K1S 5K2 (the "Company") and John Kelly, 23 Hyde Park Way, Nepean, Ontario, K2G 5R7 ("Kelly"). WHEREAS Kelly has served as a senior executive of the Company since 1994 and Kelly and the Company have agreed to terminate Kelly's employment in the Company; AND WHEREAS Kelly and the Company have entered into an agreement dated August 11, 1994 which Agreement was amended on September 26, 1998 (the "Agreement") and wish to set out the parties' respective rights and obligations under the Agreement as a result of Kelly's termination of his employment with the Company. NOW THEREFORE for the reasons set forth above and in consideration of the mutual premises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, it is hereby agreed as follows: 1. Kelly's employment with the Company shall terminate on the date hereof. 2. Notwithstanding such termination, the Company will pay to Kelly (a) an annual amount of $455,000 for three years commencing on the date hereof, which will be payable in arrears by direct deposit to Kelly's bank account on the Company's regular mid-month and end of month pay date commencing with the first pay in December 1999. In addition, the Company will continue (i) all health benefits for the earlier of three years or until Kelly obtains full time employment (Kelly shall notify the Company upon such event); (ii) a car allowance of $1,000 per month for a period of three years; and (iii) stock options granted to and currently vested or unvested by Kelly shall continue to be held by Kelly as though Kelly had continued to have been employed by the Company. Kelly shall also be entitled to job relocation counseling services which shall include business and financial planning in an amount not to exceed $30,000. 3. Notwithstanding Kelly's termination, in the event the Company pays its Chief Executive Officer (i) incentive compensation on account of profit or customer satisfaction, or (ii) benefits allowance whether in the form of base salary or otherwise, for all or any portion of the three year period following the date hereof, Kelly shall be entitled to receive compensation in the same percentages earned of profit or customer satisfaction and/or benefits allowance, same terms and timing as the Company's Chief Executive Officer based on an aggregate annual incentive to Kelly of $185,000 (profit) and $10,000 (customer satisfaction) and $22,750 to Kelly based on a benefits allowance. Kelly's entitlement hereunder shall be payable as and when paid to the Company's Chief Executive Officer. 4. All amounts stated herein are before taxes. The Company shall withhold and remit all taxes and statutory withholdings and any other taxes based on Kelly's income as though Kelly was an employee during the Agreement. 5. Article IV of the Agreement as amended shall continue in full force and effect. 6. The validity, construction and enforce ability of this Agreement shall be governed in all respects by the laws of Ontario and the laws of Canada applicable therein. 7. Kelly acknowledges and agrees that it will be difficult to compute the amount of damage or loss to the Company if he violates this Agreement, that Company will not have an adequate legal remedy if Kelly violates the provisions of this Agreement and that any such violation will cause substantial irreparable injury and damage to the Company. Therefore, Kelly agrees that, in the event of any violation by him of this Agreement, the Company shall, in addition to damages, be entitled to specific performance, injunctive, or other equitable relief, of either a preliminary or permanent type. 8. Prior to any disclosure by the Company to the public, Kelly agrees to keep all terms of this Agreement confidential except for any disclosure to financial advisors. IN WITNESS WHEREOF, the Company and Kelly have executed this Termination Agreement as of the date first written above. JETFORM CORPORATION By: -------------------------------------- Title: ----------------------------------- - ---------------------------------- ----------------------------------------- Witness as to the signature of JOHN KELLY John Kelly EX-10.37 4 0004.txt EMPLOYMENT AGREEMENT EXHIBIT 10.37 February 8, 2000 James Bursey c/o JetForm Corporation Ottawa, Ontario K1S 5K2 Re: Employment Agreement We are pleased to confirm the terms and conditions of the employment of James Bursey ("you or the "Executive") with JetForm Corporation (the "Corporation"). The Corporation believes that it is reasonable and fair that you receive fair treatment in the event of the termination without cause or material adverse modification without cause of your employment. In consideration thereof and your employment with the Corporation (or continued employment, as the case may be) you and the Corporation agree to the following terms and conditions of employment. Article I - Preamble and Interpretation 1.0 The parties agree that the Executive's original date of employment with the Corporation for the purposes of this agreement is May 8, 1995. 1.1 The parties agree, and represent and warrant to each other, that the above preamble is true and accurate and is incorporated into the terms of this Agreement. 1.2 The headings of the Articles, sections, subsections and clauses herein are inserted for convenience of reference only and shall not affect the meaning or construction hereof. 1.3 For the purposes of this Agreement, the following terms shall have the following meanings, respectively: (a) "Annual Salary" means the annual base salary of the Executive, payable to the Executive by the Corporation at the notice of termination or resignation is given and if an annual base salary has not been established, it shall be calculated by multiplying the monthly salary of the Executive in effect for the month prior to the month in which the notice of termination or resignation is given by 12. Notwithstanding the generality of the foregoing, and for greater clarity, Annual Salary does not include any amounts paid or payable to the Executive or to any other employee of the Corporation on account of incentive compensation, bonus, profit sharing, stock options, loans, discounts, commissions, benefits allowances, or any other form of compensation or reward based on individual or Corporate performance. (b) "Change of Control" shall mean: the acquisition by a person or persons acting jointly of the Corporation's voting shares, such that the acquiror(s) would beneficially own shares equal to greater than 51% of the votes attaching to the Corporation's voting shares (c) "Date of Termination" shall mean the date the Executive's active employment ceases, as set out in a notice of termination or resignation and as provided for in Article III, regardless of whether the Executive continues to receive remuneration or benefits from the Corporation subsequent to that date, whether by the Executive or by the Corporation or by death of the Executive. (d) "Disability" shall mean the Executive's failure to substantially perform his duties on a full-time basis for a period of six months out of any 18-month period, where such failure is a result of physical or mental illness. Without limiting the generality of the foregoing, the Executive shall be irrevocably deemed to be disabled on the date which is 60 days after the date on which he is entitled to receive disability payments (i.e. 60 days after the date which is 120 days after the date of the disabling injury), provided the Executive is receiving or is entitled to receive long term disability payments under the applicable benefit plan on that 60th day. (e) "Good Reason" shall mean the occurrence of any of the following without the Executive's consent (except in connection with the termination of the employment of the Executive for Just Cause or Disability). (i) a material reduction by the Corporation of the Executive's salary, benefits or any other form of remuneration or any change in the basis upon which the Executive's salary, benefits or any other form of remuneration payable by the Corporation is determined other than a reduction or change which occurs after the Executive has received three months written notice of the reduction or change, or when the reduction or change is consistent with similar reductions or changes established by the Corporation which similarly affects the majority of the employees of the Corporation who are employed at a level similar to that of the Executive. (ii) any material breach by the Corporation of any provisions of this Agreement; or (iii)the failure by the Corporation to obtain, in a form satisfactory to the Executive acting reasonably, an effective assumption of its obligations hereunder by any successor to the Corporation, including a successor to a material portion of its business in which the Executive is employed; or (iv) the Corporation requiring the Executive to relocate to a place of work located greater than 100 kilometres from Executive's current place of work. For the purposes of this Article, where the Executive continues in the employ of the Corporation for a period of at least three (3) months following the occurrence of any of the events listed above without triggering a termination for Good Reason as provided for in Article 3.1 (d), the Executive shall be deemed to have irrevocably consented to the occurrence and cannot thereafter trigger a termination for Good Reason based upon that occurrence. (f) "Just Cause" shall include: (i) gross insubordination; (ii) the failure or refusal by the Executive to substantially perform his duties according to the terms of his employment, except where such acts or omissions by the Executive: (a) are caused by and follow an event defined herein as "Good Reason"; or (b) result from the Executive's Disability. (iii) dishonesty by the Executive affecting the Corporation; (iv) use by the Executive of drugs or of alcohol in a manner which materially affects his ability to perform his employment duties; (v) any improper act by the Executive that the Executive knows or should reasonably know is substantially inconsistent with his duties as an Executive; or (vi) any material breach by the Executive of any provisions of this Agreement. Article II - Duties and Compensation 2.1 The Executive shall serve the Corporation and any subsidiaries of the Corporation in such capacity or capacities and shall perform such duties and exercise such powers pertaining to the management and operation of the Corporation and any subsidiaries of the Corporation as may be determined from time to time by the board of directors of the Corporation consistent with the office of the Executive. The Executive shall: (a) devote his full time and attention and his best efforts to the business and affairs of the Corporation; (b) perform those duties that are assigned to the Executive and which are consistent with his position, diligently and faithfully to the best of the Executive's abilities and in the best interests of the Corporation; (c) faithfully observe and abide by all the rules, regulations and policies of the Corporation applicable to the Executive, (including without limitation the Corporation's policies respecting insider trading) from time to time in force which are brought to the attention of the Executive or of which he should reasonably be aware; and (d) use his best efforts to promote the interests and goodwill of the Corporation. 2.2 Subject to Article 3 hereof, the Annual Salary payable to the Executive shall be determined during the annual review process by the direct line reporting executive and approved where applicable by the Chief Executive Officer, the President, or the Compensation Committee of the Board of Directors. 2.3 The Executive shall also be entitled to receive the vacation and benefits set forth on a basis consistent with the Corporation's practice generally in effect for other executives of the Corporation which benefits may be amended from time to time by the Corporation but subject always to the provisions of Article 3 hereof. Article III - Termination of Employment 3.1 The Executive and the Corporation shall have the following obligations in the event that the Executive's employment is terminated: (a) Death or Disability. The Executive's employment shall be terminated by his death or Disability, without any obligation on the Corporation to provide notice or take any other action. The rights of the Executive or his survivors shall be as set out in the applicable benefit and insurance plans provided to the Executive by the Corporation during his employment. (b) Retirement or Resignation Other than for Good Reason. The Executive agrees to provide the Corporation with sixty (60) days notice in writing of his intention to retire or resign his employment other than for Good Reason. This notice is for the benefit of the Corporation and it has the right to waive all or any part of the notice, in which case the Executive's employment and the obligations of the Corporation shall cease on the date of such earlier termination as provided to the Executive by the Corporation, in writing. (c) Termination by the Corporation for Just Cause and Termination by the Executive Other Than for Good Reason. The Corporation has the right to terminate the Executive's employment for Just Cause and without notice or pay in lieu of notice. If the Executive's employment is terminated for Just Cause or if the Executive resigns other than for Good Reason, the Executive shall only be entitled to receive his base salary and unpaid vacation pay to the Date of Termination and he shall have no other or further claim against the Corporation. (d) Termination by the Corporation Other Than for Just Cause, Disability or Death and Termination by the Executive for Good Reason. The Corporation may terminate the Executive's employment other than for Just Cause and the Executive may terminate his employment for Good Reason by giving written notice of termination. Where the Corporation terminates the employment the period of notice shall be eighteen (18) months. At the Corporation's sole discretion it may provide the Executive with pay in lieu of notice in which event the Executive's active employment shall terminate when the Corporation advises the Executive that his continued services are not required. Pay in lieu of notice will be calculated based upon the Executive's Annual Salary as of the Date of Termination and as specified in Article 3.2. Where the Executive terminates his employment for Good Reason, the termination of his active employment shall become effective on the date such notice is provided to the Corporation and the Executive shall be entitled to receive from the Corporation an amount equal to the pay in lieu of notice which the Executive would have received had the Corporation terminated his employment without Just Cause pursuant to this Article. Notwithstanding that the Executive may have received a notice of termination or given notice of resignation, he shall remain entitled to any incentive compensation, bonus, profit sharing, or other similar compensatory plan applicable to him as at the date such notice is given. The amount of the Executive's entitlement to such compensation shall be pro-rated to the Date of Termination and shall be paid to the Executive on the date that other employees of the Corporation are paid such compensation. The Corporation shall take all necessary steps as required by the provisions of the Corporation's Stock Option Plans so that all options to acquire common shares of the Corporation held by the Executive on the Date of Termination shall continue to vest during the period of notice referred to in this Article and the Executive shall have thirty days from the end of that notice period to exercise all such vested options. On the 31st day, all unexercised options, vested or unvested, are cancelled. All loans from the Corporation or its subsidiaries to the Executive shall become due and payable on the Date of Termination, unless the written terms of the loan agreement(s) provide otherwise. The Corporation shall provide the Executive with the job relocation counselling services of a firm acceptable to the Corporation for an amount not to exceed $15,000. If, at the Date of Termination, there were any memberships in any clubs, social or athletic organizations paid for by the Corporation that were for the regular use of the Executive at the Date of Termination, the Corporation will not take any action to terminate such memberships but need not renew any such membership that expires. The Corporation shall pay to the Executive all outstanding and accrued vacation pay and salary to the Date of Termination. Upon compliance with the obligations set forth above, the Corporation shall have no further obligation to the Executive under this Agreement or otherwise and the Executive agrees that notwithstanding any other provision contained herein, the Executive shall not have any right to commence any action or make any claim related to the termination of his employment. (e) Change of Control. The parties agree that this Agreement will not automatically terminate upon any Change of Control of the Corporation. However, the Corporation shall have the right to terminate this Agreement within 90 days of the closing of a Change of Control, on 30 days prior notice to the Executive (prior to the expiry of the 90 day period). If the Executive's employment is so terminated the Corporation shall pay to the Executive the amounts as set forth in Article 3.1(d) and the Executive's Termination Date shall be the date which is 30 days after the date such notice is given. The Executive shall have the right to terminate this Agreement within 90 days of the closing of a Change of Control, on 30 days prior notice to the Corporation (prior to the expiry of the 90 day period) if there is any adverse material change in the position, duties, responsibilities or compensation of the Executive in the 90 day period following the Change of Control or if the person now in control of the corporation advises in writing that it does not intend to honour the terms of this Agreement. If the Executive so terminates his employment the Corporation shall pay to the Executive the amounts as set forth in Article 3.1(d) and the Executive's Termination Date shall be the date which is 30 days after the date such notice is given. 3.2 The benefits payable after the Termination Date under this Article III shall be paid as follows (a) with respect to the Annual Salary of the Executive referred to in Section 3.1 at the Corporation's regular pay periods commencing on the Termination Date and continuing until the Executive has secured Alternative Employment, at which time the Corporation shall pay to the Executive an amount equal to 50% of the total Annual Salary remaining payable to the Executive as provided in the said Article; and (b) the Corporation shall continue the health, life and disability benefits, to the extent permitted by the plans and policies of insurance from the Termination Date until the date the Executive secures Alternative Employment For the purposes of this Article "Alternative Employment" means employment or contracts which provide the Executive with compensation equal to at least 75% of the sum of the Annual Salary and 50% of the variable incentive of the Total Target Compensation he was receiving at the Termination date. Appendix `A' attached hereto sets out an illustration of the calculation and benefits payable on termination with respect to Articles 3.1(d) and 3.2. Article IV - Non-Competition, Confidentiality and Inventions and Patents 4.1 The Executive shall not while an Executive of the Corporation and for a period of 18 months following the Date of Termination, for any reason whatsoever, anywhere in North America, directly or indirectly, either individually or in partnership, or in conjunction with any other persons or corporations as principal, agent, shareholder, employee, advisor, lender, guarantor or in any other capacity whatsoever: (a) carry on or be engaged in or be connected with or interested in or receive royalties or other compensation from a segment of any business which is directly or indirectly competitive with the business of the Corporation or any of its subsidiaries for whom the Executive has provided services during the 18 months preceding the Termination Date; or (b) contact or solicit any designated customers of the Corporation or any of its subsidiaries for the purposes of selling to the designated customers any products or services which are the same as or are competitive with, the products or services sold by the Corporation or any of its subsidiaries during the term of this Agreement. For the purpose of this section, a designated customer means any person or entity that was a customer of the Corporation or any of its subsidiaries in the 18 months preceding the Termination Date. Upon request by the Executive, the Corporation shall provide in confidence a list of all such designated customers. Notwithstanding the foregoing, the Executive may hold up to five per cent of the issued and outstanding securities of any publicly traded company. For the purposes hereof, if a Change of Control occurs and the Executive's employment is terminated (whether by the Corporation or the Executive) within six months of the Change of Control, the business of the Corporation and its subsidiaries shall be deemed to be the business immediately prior to the Change of Control. 4.2 The Executive shall not while an Executive of the Corporation and for a period of 18 months thereafter, directly or indirectly, induce or solicit any employee of the Corporation to leave employment with the Corporation. 4.3 The Executive acknowledges and agrees that: (a) in the course of performing his duties and responsibilities as an officer of the Corporation, he has had and will continue in the future to have access to and has been and will be entrusted with detailed confidential information and trade secrets (printed or otherwise) concerning past, present, future and contemplated products, services, operations and marketing techniques and procedures of the Corporation and its subsidiaries, including, without limitation, information relating to past, present and prospective clients, customers, suppliers and employees of the Corporation and its subsidiaries (collectively "Trade Secrets"), the disclosure of any of which to competitors of the Corporation or to the general public, or the use of same by the Executive or any competitor of the Corporation or any of its subsidiaries, would be highly detrimental to the interests of the Corporation; (b) the Executive, while an officer and/or employee of the Corporation, owes fiduciary duties to the Corporation, including the duty to act in the best interests of the Corporation; and (c) the right to maintain the confidentiality of the Trade Secrets, the right to preserve the goodwill of the Corporation and the right to the benefit of any relationships that have developed between the Executive and the customers, clients and suppliers of the Corporation by virtue of the Executive's employment with the Corporation constitute proprietary rights of the Corporation, which the Corporation is entitled to protect. In acknowledgement of the matters described above, the Executive hereby agrees that he will not, during the term of this Agreement or any time thereafter following the termination of employment for any reason, directly or indirectly disclose to any person or in any way make use of (other than for the benefit of the Corporation), in any manner, any of the Trade Secrets, provided that such Trade Secrets shall be deemed not to include information that is or becomes generally available to the public other than as a result of disclosure by the Executive. 4.4 Any invention (whether patentable or otherwise), improvement, device, industrial design, copyright, know-how or other intellectual or industrial property developed, invented, created or improved by the Executive during the term of this Agreement or prior to the date hereof while the Executive was employed by the Corporation in respect of the Corporation's business (collectively, the "Intellectual Property") shall be the exclusive property of the Corporation. The Corporation shall have the exclusive right to file patent applications and to obtain patents, to register industrial designs and copyright in the name of the Corporation in connection with the Intellectual Property. The Executive shall execute, from time to time, upon request by the Corporation, assignments of the Executive's rights in the Intellectual Property to the Corporation, and shall provide all necessary assistance in the filing and prosecution of any applications to register the Intellectual Property. The Executive hereby waives his moral rights to the Intellectual Property at common law and under section 14.1 of the Copyright Act or successor provisions from time to time, which are acknowledged to include the right to the integrity of the Intellectual Property and the right, where reasonable in the circumstances, to be associated with the Intellectual Property or an author by name or under a pseudonym and the right to remain anonymous when any translation of the Intellectual Property is produced, performed or published. 4.5 The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of any of this Article 4 will result in the Corporation and its shareholders suffering irrevocable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may be entitled. 4.6 The provisions of this Article 4 comprise all of Executive's obligations following any termination of Executive's employment with the Corporation Article V - General 5.1 The Executive acknowledges that he has had an opportunity to obtain independent legal advice before signing this Agreement and agrees that either such advice has been obtained or that he does not wish to seek or obtain such independent legal advice. The Executive acknowledges that he has read this Agreement and fully understands the nature and effect of it and the terms contained herein and that the said terms are fair and reasonable and correctly set out the Executive's position in the event of termination. 5.2 The Executive agrees that after termination of his employment for whatever reason, he will tender his resignation from any position he may hold as an officer of the Corporation or as an officer or director of any of its affiliated or associated companies, provided that doing so will not reduce or increase the obligations of the Corporation described herein. 5.3 If any provision of this Agreement is determined to be void or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any other provision herein and each such provision is deemed to be separate, distinct and severable. 5.4 Any notice required or permitted to be given under this Agreement shall be in writing and shall be properly given if delivered by hand or mailed by prepaid registered mail addressed as follows: (a) in the case of the Corporation, to: JetForm Corporation 560 Rochester Street Ottawa, Ontario K1S 5K2 Attention: Chief Executive Officer (b) in the case of the Executive, to: James Bursey c/o JetForm Corporation or to such other address as the parties may from time to time specify by notice given in accordance herewith. Any notice so given shall be conclusively deemed to have been given or made on the day of delivery, if delivered, or if mailed by registered mail, upon the date shown on the postal return receipt as the date upon which the envelope containing such notice was actually received by the addressee provided in the event of mail disruption, delivery may only be made by hand. 5.5 This Agreement shall ensure to the benefit of and be binding upon the Executive and his heirs, executors and administrators and upon the Corporation and its successors and assigns. 5.6 Nothing herein derogates from any rights the Executive may have under any applicable statute, and in particular the parties agree that the rights, entitlements and benefits set out in this Agreement to be paid to the Executive shall in no event be less than the Executive's entitlement pursuant to the Employment Standards Act (Ontario) or any successor legislation from time to time. Any payments made hereunder are agreed to be inclusive of all payments required of the Corporation under the said legislation. 5.7 This Agreement may be amended only by an instrument in writing signed by both parties. 5.8 Neither party may waive or shall be deemed to have waived any right it has under this Agreement (including under this section) except to the extent that such waiver is in writing. ************ If you are in agreement with the foregoing terms and conditions, kindly execute below where indicated and return one fully executed copy of this Agreement to the attention of Human Resources, JetForm Corporation, 560 Rochester Street, Ottawa, Ontario K1S 5K2 Yours very truly, JETFORM CORPORATION Per: ------------------------ Authorized Officer Accepted and agreed this ________ day of _____________, 2000 ------------------------------ JAMES BURSEY APPENDIX 'A' ILLUSTRATION The following is an illustration of the application of the sums payable on termination pursuant to Article 3.1(d) and 3.2. Assume that the Executive receives the following compensation: (a) base salary of $52,000; (b) annual incentive of $48,000 payable on a fiscal year basis (i.e. May 1st to April 30th) paid to staff on August 15th following year end. (c) 100 stock options vest on June 1st of each calendar year. The Executive receives notice dated January 1st that his employment is terminated immediately. The Executive secures other employment on May 1st. The Termination Date is January 1st. The Executive will continue to receive his regular salary to May 1st, at which time he will be entitled to receive 50% of the balance otherwise payable (i.e. 50% of ($78,000 less the $17,333 paid) = $30,333.50). The Executive, having worked 8/12 of the fiscal year will be entitled to receive 8/12 of the annual incentive, or $32,000 paid on August 15th. The Executive will have until July 1st of the following year to exercise any stock options which vested from the date notice of termination was given to December31st in the second year following the notice (i.e. those which had vested at the date notice was given plus the 200 options which vested during the 18 month notice period). EX-10.31.1 5 0005.txt EMPLOYMENT AGREEMENT ADDENDUM EXHIBIT 10.37.1 February 8, 2000 James Bursey c/o JetForm Corporation Ottawa, Ontario K1S 5K2 Re: Employment Agreement Addendum We are pleased to confirm the special terms and conditions of the employment of James Bursey ("you or the "Executive") with JetForm Corporation (the "Corporation") which have been specifically designed to acknowledge your continuing contribution to the Corporation during this interim period while we search for a permanent Chief Executive Officer. Article I - Special Employment Terms 1.1 Notwithstanding any of the other terms and conditions of your contract of employment dated May 8, 1995 (the "Employment Agreement") it is agreed that you will continue your employment with the Corporation to October 31, 2000 (the "Interim Period"). 1.2 During the Interim Period you shall continue to perform your duties and responsibilities to the Corporation to the best of your abilities and shall devote your full time to these duties and responsibilities. 1.4 Provided you continue your employment with the Corporation to October 31, 2000 and in the Interim Period continue to perform your duties in a proper and workmanlike manner, your employment shall terminate effective October 31, 2000. Upon such termination, you shall be entitled to receive from the Corporation the notice, severance and other benefits as set out in the Employment Agreement as if the Corporation had provided you with notice of termination in accordance with Article 3.1(d) of the Employment Agreement. 1.5 "Annual Salary" as defined in Article 1.3(a) and as used in elsewhere in the Employment Agreement, and most particularly as used in Article 3.2, shall be deemed to include the $50,000 Annual Incentive referred to in your contract of employment dated April 11, 1995 which is paid to you in equal pro-rated amounts with each regular pay. 1.6 In all other respects, the terms and conditions of the Employment Agreement continue to be binding upon both you and the Corporation. ************ If you are in agreement with the foregoing terms and conditions, kindly execute below where indicated and return one fully executed copy of this Agreement to the attention of Human Resources, JetForm Corporation, 560 Rochester Street, Ottawa, Ontario K1S 5K2 Yours very truly, JETFORM CORPORATION Per: --------------------------- Authorized Officer Accepted and agreed this ________ day of _____________, 2000 ------------------------------ JAMES BURSEY EX-10.31.2 6 0006.txt AMENDMENT TO EMPLOYMENT AGREEMENT EXHIBIT 10.37.2 Personal & Confidential July 17, 2000 Mr. Jim Bursey c/o JetForm Corporation 560 Rochester Street Ottawa, Ontario K1S 5K2 Dear Jim: Further to the Employment Agreement and Employment Agreement Addendum dated February 8th, 2000, this letter confirms the mutual understanding by both parties that the end date of the agreement has been amended to July 31st, 2000 for all purposes from the original outlined end date of October 31st, 2000. As such, this letter serves to outline the agreed terms of the Employment Agreement based upon execution in accordance with Article 3.1 (d). Salary Continuance As stipulated in your Employment Agreement, JetForm will provide salary continuance for the period of eighteen (18) months commencing on August 1st, 2000 up to and including January 31st, 2002. The salary continuance will be paid in thirty (36) equal payments of $12,500, less statutory deductions, for the payroll deposits of the 15th and 30th of each month. The salary continuance for the period August 1st, 2000 up to and including January 31st, 2002 has been determined according to the following: o Base salary for the period August 1st, 2000 up to including January 31st, 2002 in the amount of $375,000 o Qualitative Incentive Guarantee paid in the amount of $75,000 Benefit Continuance You will be provided with continuation of your medical, dental and life insurance benefits until January 31st, 2002, or until otherwise employed full-time and eligible for benefits Vacation Accrual You will be provided with a lump sum payment of your unused annual vacation accrued up until your end date of July 31st, 2000 on the pay period of August 15th, 2000. Outplacement Services JetForm will provide payment to a third party outplacement service of up to $15,000, provided that Human Resources pre-approves the expense, we will consider payment for services and networking opportunities which are directly related to securing future employment. Any approved expenses would be processed though the JetForm expense reporting process (paper copies of expense reports would be provided for this purpose). Expenses Any outstanding expenses should be submitted by August 15th, 2000. JetForm Stock Option Plan As outlined in your Employment Agreement, article 3.1(d) all granted stock options will continue to vest during the period of notice, and you will be eligible to exercise options up to 31 days after the end period of January 31st, 2002. JetForm Property As discussed, you will be provided with the book value for both your current laptop and PC by the end of this week. Should you wish to purchase this equipment, a cheque should be made payable to JetForm Corporation. Confidentiality Agreement We remind you of the confidentiality agreement that you signed on joining the company. Your Signature is Required In order to provide you with the termination package as outlined in this letter, we will require your signature, acknowledging your understanding and agreement of the terms and a signed release in the form attached, and return to JetForm by July 17th, 2000. Please sign this copy and fax both this letter and release to myself directly. If you should have any questions with respect to this letter, please do not hesitate to let me know. Jim, thank you on behalf of JetForm for your contributions. Yours truly, Donna Morris Vice-President, Human Resources I agree and accept to the terms of this letter. Employee: Dated: ------------------------ ---------------- RELEASE AND DISCHARGE FROM: James Bursey TO: JetForm Corporation DATE: July 17, 2000 In consideration of the following paid to me: 1. compensation equivalent to payment for eighteen (18) months, equivalent to $450,000 less statutory deductions; 2. payment of outstanding vacation balance, less statutory deductions; 3. payment for outplacement services up to a limit of $15,000; I hereby release and forever discharge JetForm and its directors, officers, employees and agents of and from all manner of actions, causes of action, suits, debts, duties, accounts, contracts, claims and demands whatsoever which I now have, ever had or hereafter can, shall or may have for or by reason of any cause, matter or thing whatsoever existing to the present time and arising from my employment with JetForm or from the termination of such employment, including, without limiting the generality of the foregoing all claims and demands for or with respect to salary, remuneration, commission, advances on commission, fringe benefits, vacation pay, severance allowance, termination pay, severance pay, notice of termination, deferred profit sharing plan, employee stock option plan, bonus or any other employment benefit or fringe benefit of any kind whatsoever. The above-mentioned Consideration is inclusive of any and all obligations which JetForm has or might have in the future pursuant to the provisions of any legislation or rule of law pertaining to employment standards or other obligations of JetForm on my termination as an employee. I further agree not to make any claims (including without limitation any cross-claim, counter-claim, third party action or application) against any other person and/or entity which might claim contribution or indemnity against the persons and/or entities discharged by this release. The above-mentioned Consideration is inclusive of indemnity from the persons and/or entities discharged by this release. James Bursey - --------------------------- Signature EX-10.38 7 0007.txt EMPLOYMENT AGREEMENT EXHIBIT 10.38 April 13, 2000 Kevin Francis c/o JetForm Corporation Ottawa, Ontario K1S 5K2 Re: Employment Agreement We are pleased to confirm the terms and conditions of the employment of Kevin Francis ("you or the "Executive") as Chief Executive Officer with JetForm Corporation (the "Corporation"). The Corporation believes that it is reasonable and fair that you receive fair treatment in the event of the termination without cause or material adverse modification without cause of your employment. In consideration thereof and your employment with the Corporation (or continued employment, as the case may be) you and the Corporation agree to the following terms and conditions of employment. Article I - Preamble and Interpretation 1.0 The parties agree that the Executive's original date of employment with the Corporation for the purposes of this agreement is May 15, 2000. 1.1 The parties agree, and represent and warrant to each other, that the above preamble is true and accurate and is incorporated into the terms of this Agreement. 1.2 The headings of the Articles, sections, subsections and clauses herein are inserted for convenience of reference only and shall not affect the meaning or construction hereof. 1.3 For the purposes of this Agreement, the following terms shall have the following meanings, respectively: (a) "Annual Salary" means the annual base salary of the Executive, payable to the Executive by the Corporation at the notice of termination or resignation is given and if an annual base salary has not been established, it shall be calculated by multiplying the monthly salary of the Executive in effect for the month prior to the month in which the notice of termination or resignation is given by 12. Notwithstanding the generality of the foregoing, and for greater clarity, Annual Salary does not include any amounts paid or payable to the Executive or to any other employee of the Corporation on account of incentive compensation, bonus, profit sharing, stock options, loans, discounts, commissions, benefits allowances, or any other form of compensation or reward based on individual or Corporate performance. (b) "Change of Control" shall mean: the acquisition by a person or persons acting jointly of the Corporation's voting shares, such that the acquiror(s) would beneficially own shares equal to greater than 51% of the votes attaching to the Corporation's voting shares (c) "Date of Termination" shall mean the date the Executive's active employment ceases, as set out in a notice of termination or resignation and as provided for in Article III, regardless of whether the Executive continues to receive remuneration or benefits from the Corporation subsequent to that date, whether by the Executive or by the Corporation or by death of the Executive. (d) "Disability" shall mean the Executive's failure to substantially perform his duties on a full-time basis for a period of six months out of any 18-month period, where such failure is a result of physical or mental illness. Without limiting the generality of the foregoing, the Executive shall be irrevocably deemed to be disabled on the date which is 60 days after the date on which he is entitled to receive disability payments (i.e. 60 days after the date which is 120 days after the date of the disabling injury), provided the Executive is receiving or is entitled to receive long term disability payments under the applicable benefit plan on that 60th day. (e) "Good Reason" shall mean the occurrence of any of the following without the Executive's consent (except in connection with the termination of the employment of the Executive for Just Cause or Disability). (i) a material reduction by the Corporation of the Executive's salary, benefits or any other form of remuneration or any change in the basis upon which the Executive's salary, benefits or any other form of remuneration payable by the Corporation is determined other than a reduction or change which occurs after the Executive has received three months written notice of the reduction or change, or when the reduction or change is consistent with similar reductions or changes established by the Corporation which similarly affects the majority of the employees of the Corporation who are employed at a level similar to that of the Executive. (ii) any material breach by the Corporation of any provisions of this Agreement; or (iii)the failure by the Corporation to obtain, in a form satisfactory to the Executive acting reasonably, an effective assumption of its obligations hereunder by any successor to the Corporation, including a successor to a material portion of its business in which the Executive is employed; or (iv) the Corporation requiring the Executive to relocate to a place of work located greater than 100 kilometres from Executive's current place of work. For the purposes of this Article, where the Executive continues in the employ of the Corporation for a period of at least three (3) months following the occurrence of any of the events listed above without triggering a termination for Good Reason as provided for in Article 3.1 (d), the Executive shall be deemed to have irrevocably consented to the occurrence and cannot thereafter trigger a termination for Good Reason based upon that occurrence. (f) "Just Cause" shall include: (i) gross insubordination; (ii) the failure or refusal by the Executive to substantially perform his duties according to the terms of his employment, except where such acts or omissions by the Executive: (a) are caused by and follow an event defined herein as "Good Reason"; or (b) result from the Executive's Disability. (iii)dishonesty by the Executive affecting the Corporation; (iv) use by the Executive of drugs or of alcohol in a manner which materially affects his ability to perform his employment duties; (v) any improper act by the Executive that the Executive knows or should reasonably know is substantially inconsistent with his duties as an Executive; or (vi) any material breach by the Executive of any provisions of this Agreement. (g) "TTC" means the Total Target Compensation and equals Executive's Annual Salary plus the annual incentive payable if certain specified targets are met. Thje Executice's TTC shall be provided to him in writing prior to or upon execution of this agreement and shall be reviewd annually in accordance with Article 2.2 hereof. Article II - Duties and Compensation 2.2 The Executive shall serve the Corporation and any subsidiaries of the Corporation in such capacity or capacities and shall perform such duties and exercise such powers pertaining to the management and operation of the Corporation and any subsidiaries of the Corporation as may be determined from time to time by the board of directors of the Corporation consistent with the office of the Executive. The Executive shall: (a) devote his full time and attention and his best efforts to the business and affairs of the Corporation; (b) perform those duties that are assigned to the Executive and which are consistent with his position, diligently and faithfully to the best of the Executive's abilities and in the best interests of the Corporation; (c) faithfully observe and abide by all the rules, regulations and policies of the Corporation applicable to the Executive, (including without limitation the Corporation's policies respecting insider trading) from time to time in force which are brought to the attention of the Executive or of which he should reasonably be aware; and (d) use his best efforts to promote the interests and goodwill of the Corporation. 2.2 Subject to Article 3 hereof, the Annual Salary payable to the Executive shall be determined during the annual review process by the Compensation Committee of the Board of Directors and approved by the Board of Directors. 2.3 The Executive shall also be entitled to receive the vacation and benefits set forth on a basis consistent with the Corporation's practice generally in effect for other executives of the Corporation which benefits may be amended from time to time by the Corporation but subject always to the provisions of Article 3 hereof. Article III - Termination of Employment 3.1 The Executive and the Corporation shall have the following obligations in the event that the Executive's employment is terminated: (a) Death or Disability. The Executive's employment shall be terminated by his death or Disability, without any obligation on the Corporation to provide notice or take any other action. The rights of the Executive or his survivors shall be as set out in the applicable benefit and insurance plans provided to the Executive by the Corporation during his employment. All stock options held by the Executive on his death, vested and unvested, shall immediately vest and be transferred to his surviving spouse, or absent a surviving spouse, to the Executive's Estate. (b) Retirement or Resignation Other than for Good Reason. The Executive agrees to provide the Corporation with sixty (60) days notice in writing of his intention to retire or resign his employment other than for Good Reason. This notice is for the benefit of the Corporation and it has the right to waive all or any part of the notice, in which case the Executive's employment and the obligations of the Corporation shall cease on the date of such earlier termination as provided to the Executive by the Corporation, in writing. (c) Termination by the Corporation for Just Cause and Termination by the Executive Other Than for Good Reason. The Corporation has the right to terminate the Executive's employment for Just Cause and without notice or pay in lieu of notice. If the Executive's employment is terminated for Just Cause or if the Executive resigns other than for Good Reason, the Executive shall only be entitled to receive his base salary and unpaid vacation pay to the Date of Termination and he shall have no other or further claim against the Corporation. (d) Termination by the Corporation Other Than for Just Cause, Disability or Death and Termination by the Executive for Good Reason. The Corporation may terminate the Executive's employment other than for Just Cause and the Executive may terminate his employment for Good Reason by giving written notice of termination. Where the Corporation terminates the employment of the Executive other than for Just Cause, the Executive on termination shall be entitled to receive the following, in lieu of reasonable notice of termination: i. twenty-four (24) months TTC if the Executive's performance in each of the completed four quarters prior to the termination date is greater than or equal to 80% of the target incentive. ii. Otherwise twelve (12) months TTC Where the Executive terminates his employment for Good Reason, the termination of his active employment shall become effective on the date such notice is provided to the Corporation and the Executive shall be entitled to receive from the Corporation an amount equal to the pay in lieu of notice which the Executive would have received had the Corporation terminated his employment without Just Cause pursuant to this Article. Notwithstanding that the Executive may have received a notice of termination or given notice of resignation, he shall remain entitled to any incentive compensation, bonus, profit sharing, or other similar compensatory plan applicable to him as at the date such notice is given. The amount of the Executive's entitlement to such compensation shall be pro-rated to the Date of Termination and shall be paid to the Executive on the date that other employees of the Corporation are paid such compensation. The Corporation shall take all necessary steps as required by the provisions of the Corporation's Stock Option Plans so that all options to acquire common shares of the Corporation held by the Executive on the Date of Termination shall continue to vest during the period of notice referred to in this Article and the Executive shall have thirty days from the end of that notice period to exercise all such vested options. On the 31st day, all unexercised options, vested or unvested, are cancelled. All loans from the Corporation or its subsidiaries to the Executive shall become due and payable on the Date of Termination, unless the written terms of the loan agreement(s) provide otherwise. The Corporation shall provide the Executive with the job relocation counselling services of a firm acceptable to the Corporation for an amount not to exceed $15,000. If, at the Date of Termination, there were any memberships in any clubs, social or athletic organizations paid for by the Corporation that were for the regular use of the Executive at the Date of Termination, the Corporation will not take any action to terminate such memberships but need not renew any such membership that expires. The Corporation shall pay to the Executive all outstanding and accrued vacation pay and salary to the Date of Termination. Upon compliance with the obligations set forth above, the Corporation shall have no further obligation to the Executive under this Agreement or otherwise and the Executive agrees that notwithstanding any other provision contained herein, the Executive shall not have any right to commence any action or make any claim related to the termination of his employment. (e) Change of Control. The parties agree that the employment of the Executive shall be deemed to have been terminated for other than Just Cause upon any Change of Control of the Corporation. In addition to the compensation set forth in Article 3.1 (d) above, all stock options then granted to the Executive shall vest immediately upon the Change of Control. 3.3 The benefits payable after the Termination Date under this Article III shall be paid as follows (a) with respect to the Annual Salary of the Executive referred to in Section 3.1 at the Corporation's regular pay periods commencing on the Termination Date; and (b) the Corporation shall continue the health, life and disability benefits, to the extent permitted by the plans and policies of insurance from the Termination Date until the date the Executive secures Alternative Employment Article IV - Non-Competition, Confidentiality and Inventions and Patents 4.1 The Executive shall not while an Executive of the Corporation and for a period of 12 months following the Date of Termination, for any reason whatsoever, anywhere in North America, directly or indirectly, either individually or in partnership, or in conjunction with any other persons or corporations as principal, agent, shareholder, employee, advisor, lender, guarantor or in any other capacity whatsoever: (a) carry on or be engaged in or be connected with or interested in or receive royalties or other compensation from a segment of any business which is directly or indirectly competitive with the business of the Corporation or any of its subsidiaries for whom the Executive has provided services during the 12 months preceding the Termination Date; or (b) contact or solicit any designated customers of the Corporation or any of its subsidiaries for the purposes of selling to the designated customers any products or services which are the same as or are competitive with, the products or services sold by the Corporation or any of its subsidiaries during the term of this Agreement. For the purpose of this section, a designated customer means any person or entity that was a customer of the Corporation or any of its subsidiaries in the 12 months preceding the Termination Date. Upon request by the Executive, the Corporation shall provide in confidence a list of all such designated customers. Notwithstanding the foregoing, the Executive may hold up to five per cent of the issued and outstanding securities of any publicly traded company. For the purposes hereof, if a Change of Control occurs and the Executive's employment is terminated (whether by the Corporation or the Executive) within six months of the Change of Control, the business of the Corporation and its subsidiaries shall be deemed to be the business immediately prior to the Change of Control. 4.2 The Executive shall not while an Executive of the Corporation and for a period of 12 months thereafter, directly or indirectly, induce or solicit any employee of the Corporation to leave employment with the Corporation. 4.3 The Executive acknowledges and agrees that: (a) in the course of performing his duties and responsibilities as an officer of the Corporation, he has had and will continue in the future to have access to and has been and will be entrusted with detailed confidential information and trade secrets (printed or otherwise) concerning past, present, future and contemplated products, services, operations and marketing techniques and procedures of the Corporation and its subsidiaries, including, without limitation, information relating to past, present and prospective clients, customers, suppliers and employees of the Corporation and its subsidiaries (collectively "Trade Secrets"), the disclosure of any of which to competitors of the Corporation or to the general public, or the use of same by the Executive or any competitor of the Corporation or any of its subsidiaries, would be highly detrimental to the interests of the Corporation; (b) the Executive, while an officer and/or employee of the Corporation, owes fiduciary duties to the Corporation, including the duty to act in the best interests of the Corporation; and (c) the right to maintain the confidentiality of the Trade Secrets, the right to preserve the goodwill of the Corporation and the right to the benefit of any relationships that have developed between the Executive and the customers, clients and suppliers of the Corporation by virtue of the Executive's employment with the Corporation constitute proprietary rights of the Corporation, which the Corporation is entitled to protect. In acknowledgement of the matters described above, the Executive hereby agrees that he will not, during the term of this Agreement or any time thereafter following the termination of employment for any reason, directly or indirectly disclose to any person or in any way make use of (other than for the benefit of the Corporation), in any manner, any of the Trade Secrets, provided that such Trade Secrets shall be deemed not to include information that is or becomes generally available to the public other than as a result of disclosure by the Executive. 4.4 Any invention (whether patentable or otherwise), improvement, device, industrial design, copyright, know-how or other intellectual or industrial property developed, invented, created or improved by the Executive during the term of this Agreement or prior to the date hereof while the Executive was employed by the Corporation in respect of the Corporation's business (collectively, the "Intellectual Property") shall be the exclusive property of the Corporation. The Corporation shall have the exclusive right to file patent applications and to obtain patents, to register industrial designs and copyright in the name of the Corporation in connection with the Intellectual Property. The Executive shall execute, from time to time, upon request by the Corporation, assignments of the Executive's rights in the Intellectual Property to the Corporation, and shall provide all necessary assistance in the filing and prosecution of any applications to register the Intellectual Property. The Executive hereby waives his moral rights to the Intellectual Property at common law and under section 14.1 of the Copyright Act or successor provisions from time to time, which are acknowledged to include the right to the integrity of the Intellectual Property and the right, where reasonable in the circumstances, to be associated with the Intellectual Property or an author by name or under a pseudonym and the right to remain anonymous when any translation of the Intellectual Property is produced, performed or published. 4.5 The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of any of this Article 4 will result in the Corporation and its shareholders suffering irrevocable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may be entitled. 4.6 The provisions of this Article 4 comprise all of Executive's obligations following any termination of Executive's employment with the Corporation Article V - General 5.1 The Executive acknowledges that he has had an opportunity to obtain independent legal advice before signing this Agreement and agrees that either such advice has been obtained or that he does not wish to seek or obtain such independent legal advice. The Executive acknowledges that he has read this Agreement and fully understands the nature and effect of it and the terms contained herein and that the said terms are fair and reasonable and correctly set out the Executive's position in the event of termination. 5.2 The Executive agrees that after termination of his employment for whatever reason, he will tender his resignation from any position he may hold as an officer of the Corporation or as an officer or director of any of its affiliated or associated companies, provided that doing so will not reduce or increase the obligations of the Corporation described herein. 5.3 If any provision of this Agreement is determined to be void or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any other provision herein and each such provision is deemed to be separate, distinct and severable. 5.4 Any notice required or permitted to be given under this Agreement shall be in writing and shall be properly given if delivered by hand or mailed by prepaid registered mail addressed as follows: (a) in the case of the Corporation, to: JetForm Corporation 560 Rochester Street Ottawa, Ontario K1S 5K2 Attention: Chair of the Board of Directors (b) in the case of the Executive, to: Kevin Francis c/o JetForm Corporation or to such other address as the parties may from time to time specify by notice given in accordance herewith. Any notice so given shall be conclusively deemed to have been given or made on the day of delivery, if delivered, or if mailed by registered mail, upon the date shown on the postal return receipt as the date upon which the envelope containing such notice was actually received by the addressee provided in the event of mail disruption, delivery may only be made by hand. 5.5 This Agreement shall ensure to the benefit of and be binding upon the Executive and his heirs, executors and administrators and upon the Corporation and its successors and assigns. 5.6 Nothing herein derogates from any rights the Executive may have under any applicable statute, and in particular the parties agree that the rights, entitlements and benefits set out in this Agreement to be paid to the Executive shall in no event be less than the Executive's entitlement pursuant to the Employment Standards Act (Ontario) or any successor legislation from time to time. Any payments made hereunder are agreed to be inclusive of all payments required of the Corporation under the said legislation. 5.7 This Agreement may be amended only by an instrument in writing signed by both parties. 5.8 Neither party may waive or shall be deemed to have waived any right it has under this Agreement (including under this section) except to the extent that such waiver is in writing. ************ If you are in agreement with the foregoing terms and conditions, kindly execute below where indicated and return one fully executed copy of this Agreement to the attention of Human Resources, JetForm Corporation, 560 Rochester Street, Ottawa, Ontario K1S 5K2 Yours very truly, JETFORM CORPORATION Per: -------------------------- Authorized Officer Accepted and agreed this ________ day of April2000 ------------------------------ Kevin Francis EX-10.39 8 0008.txt EMPLOYMENT AGREEMENT EXHIBIT 10.39 October 21, 1999 Jeff McMullen c/o JetForm Corporation 560 Rochester Street Ottawa, Ontario K1S 5K2 Re: Employment Agreement We are pleased to confirm the terms and conditions of the employment of Jeff McMullen ("you" or the "Executive") with JetForm Corporation (the "Corporation"). The Corporation believes that it is reasonable and fair to the Corporation that you receive fair treatment in the event of the termination without cause or adverse modification without cause of your employment. In consideration thereof, and by your execution of this Agreement below, you wish to abide by various non-competition and confidentiality restrictions contained herein, your violation of which would be highly detrimental to the Corporation, and both you and the Corporation wish formally to agree as to the terms and conditions contained herein that will govern the termination or modification of your employment. Article I - Preamble and Interpretation 1.0 The parties agree that the Executive's original date of employment with the corporation for the purposes of this agreement is October 3, 1994. 1.1 The parties agree, and represent and warrant to each other, that the above preamble is true and accurate and is incorporated into the terms of this Agreement. 1.2 The headings of the Articles, sections, subsections and clauses herein are inserted for convenience of reference only and shall not affect the meaning or construction hereof. 1.3 For the purposes of this Agreement, the following terms shall have the following meanings, respectively: (a) "Annual Salary" means the sum of: (i) the annual salary of the Executive, payable to the Executive by the Corporation at the Date of Termination or as at the end of the month immediately preceding the month in which termination occurs (the "Prior Month"), whichever is greater, and if an annual salary has not been established, it shall be calculated by multiplying the monthly salary of the Executive in effect for the Prior Month by 12; and (ii) the aggregate amount of all remuneration, salaries, bonuses and benefits (including, without limitation, health, dental and disability coverage) not included in clause (i) above that the board of directors of the Corporation acting reasonably estimates would be payable to the Executive during the 12 month period following the termination of the Executive's employment by the Corporation assuming: (1) the employment of the Executive was not terminated during such period; and (2) the Executive benefited from and participated in such remuneration, salaries, bonuses and benefits on a basis consistent with practices in effect for senior executives of the Corporation immediately prior to the Date of Termination; (b) "Change of Control" shall mean: the acquisition by a person or persons acting jointly of the Corporation's voting shares, such that the acquiror(s) would beneficially own shares equal to greater than 50% of the votes attaching to the Corporation's voting shares. (c) "Date of Termination" shall mean the date of termination of the Executive's employment, whether by the Executive or by the Corporation or by death of the Executive; (d) "Disability" shall mean the Executive's failure to substantially perform his duties on a full-time basis for a period of six months out of any 18-month period, where such failure is a result of physical or mental illness; (e) "Good Reason" shall include, without limitation, the occurrence of any of the following without the Executive's written consent (except in connection with the termination of the employment of the Executive for Just Cause or Disability): (i) a material reduction by the Corporation of the Executive's salary, benefits or any other form of remuneration or any change in the basis upon which the Executive's salary, benefits or any other form of remuneration payable by the Corporation is determined other than a reduction or change in a manner which is consistent with industry practices generally in effect prior to such reduction or change; or (ii) any failure by the Corporation to continue in effect any substantive benefit, bonus, profit sharing, incentive, remuneration or compensation plan, pension plan or retirement plan in which the Executive was participating or entitled to participate immediately prior to such failure other than a failure to continue such benefits, bonuses or plans on a basis consistent with industry practices generally in effect prior to such failure, or the Corporation taking any action or failing to take any action, the failure of which would adversely affect the Executive's participation in or reduce his rights or benefits under or pursuant to any such plan other than an action or failure to take an action on a basis consistent with industry practices generally in effect prior to such action or failure, or the Corporation failing to increase or improve such rights or benefits on a basis consistent with industry practices generally in effect prior to such failure; or (iii) any material breach by the Corporation of any provision of this Agreement; or (iv) the failure by the Corporation to obtain, in a form satisfactory to the Executive acting reasonably, an effective assumption of its obligations hereunder by any successor to the Corporation, including a successor to a material portion of its business; or (iv) the Corporation requiring the Executive to relocate to a place of work located greater than 100 kilometres from Executive's current place of work; and (v) dishonesty or any improper act by the Chief Executive Officer or by a Senior Vice President of the Corporation materially affecting the consolidated financial statements and related disclosures of the Corporation or preventing the Executive from performing hix duties under this Agreement; and (f) "Just Cause" shall mean: (i) gross insubordination; (ii) the continued failure or refusal by the Executive to substantially perform his duties according to the terms of his employment, after the Corporation has given the Executive notice of such failure or refusal and a reasonable opportunity to correct it, except where such acts or omissions by the Executive: (A) follow an event defined herein as "Good Reason"; or (B) result from the Executive's Disability. (iii) dishonesty by the Executive affecting the Corporation; (iv) use by the Executive of drugs or of alcohol in a manner which materially affects his ability to perform his employment duties; (v) any improper act by the Executive that the Executive knows or should reasonably know is substantially inconsistent with his duties as an Executive; or (vi) any criminal act of dishonesty by the Executive resulting or intended to result directly or indirectly in personal gain of the Executive at the Corporation's expense. Article II - Duties and Compensation 2.1 The Executive shall serve the Corporation and any subsidiaries of the Corporation in such capacity or capacities and shall perform such duties and exercise such powers pertaining to the management and operation of the Corporation and any subsidiaries of the Corporation as may be determined from time to time by the board of directors of the Corporation consistent with the office of the Executive. The Executive shall: (a) devote his full time and attention and his reasonable best efforts during normal business hours to the business and affairs of the Corporation; (b) perform those duties that may reasonably be assigned to the Executive diligently and faithfully to the best of the Executive's abilities and in the best interests of the Corporation; (c) faithfully observe and abide by all the rules, regulations and policies of the Corporation applicable to the Executive, (including without limitation the Corporation's policies respecting insider trading) from time to time in force which are brought to the attention of the Executive or which he should reasonably be aware; and (d) use his reasonable best efforts to promote the interests and goodwill of the Corporation. 2.2 Subject to Article 3 hereof, the Annual Salary payable to the Executive shall be determined during the annual review process by the direct line reporting executive and approved where applicable by the Chief Operating Officer, the President, or the Compensation Committee of the Board of Directors. 2.3 The Executive shall also be entitled to receive the vacation and benefits set forth on a basis consistent with the company practice generally in effect for other executives of the corporation which benefits may be amended from time to time by the Corporation but subject always to the provisions of Article 3 hereof. Article III - Obligations of the Corporation upon Termination 3.1 The Corporation shall have the following obligations in the event that the Executive's employment is terminated: (a) Death, Disability or Retirement. If the Executive's employment is terminated by reason of the Executive's death, Disability or retirement, the Executive or the Executive's family, as the case may be, shall be entitled to receive benefits in a manner consistent with and at least equal in amount to those made available by the Corporation to senior executives or surviving families of the senior executives of the Corporation under such plans, programs and policies relating to (i) family death benefits, if any, as are in effect at the date of the Executive's death; or (ii) Disability or retirement, if any, as are in effect at the Date of Termination, as the case may be. (b) Termination by the Corporation for Just Cause and Termination by the Executive Other Than for Good Reason. If the Executive's employment is terminated by the Corporation for Just Cause, or is terminated by the Executive other than for Good Reason, the Corporation shall pay to the Executive, if not theretofore paid, the fraction of the Annual Salary and vacation pay, if any, earned by or payable to the Executive by the Corporation during the then current fiscal year of the Corporation for the period to and including the Date of Termination, and the Corporation shall not have any further obligations to the Executive under this Agreement or otherwise. (c) Termination by the Corporation Other Than for Just Cause, Disability or Death and Termination by the Executive for Good Reason. Either party must give 60 days written notice of such termination. If the Executive's employment is terminated by the Corporation other than for Just Cause, Disability, retirement or death or is terminated by the Executive for Good Reason: (i) the Corporation shall pay to or to the order of the Executive the aggregate of the following amounts (less any deductions required by law): (A) if not theretofore paid, the Executive's Annual Salary for the then current fiscal year of the Corporation for the period to and including the Date of Termination; and (B) an amount equal to the Annual Salary; (ii) subject to the provisions of Section 9 of the 1995 Stock Option Plan and Section 16 of the 1993 Stock Option Plan, the Corporation shall ensure that all options to acquire common shares of the Corporation held by the Executive on the Date of Termination shall continue to vest and be exercisable for the full period during which Executive is compensated by the Corporation as set forth in Section 3.2. As of the last day of such period, the executive shall have 30 days to exercise all vested options. On the 31st day, all unexercised options vested or unvested are cancelled. (iii) the Corporation shall not seek in any way to amend the terms of any loans from the Corporation or its subsidiaries to the Executive; (iv) the Corporation shall provide the Executive with the job relocation counselling services of the firm acceptable to the Corporation for an amount not to exceed $15,000; (v) if, at the Date of Termination, there were any memberships in any clubs, social or athletic organizations paid for by the Corporation that were for the regular use of the executive at the Date of Termination, the Corporation will not take any action to terminate such memberships but need not renew any such membership that expires; and (vi) the Corporation shall pay to the Executive all outstanding and accrued vacation pay to the Date of Termination. Upon compliance with clauses (c)(i) through (vi) above, the Corporation shall have no further obligations to the Executive under this Agreement or otherwise and the Executive agrees that notwithstanding any other provision contained herein, the Executive shall not have any right to commence any action for wrongful dismissal or termination. (d) Change of Control. The parties agree that this Agreement will not automatically terminate upon any Change of Control of the Corporation. However, the Corporation and the Executive acknowledge and agree that both the Corporation (or its successor) and the Executive shall have the right to terminate this Agreement within 90 days of the closing of a Change of Control, on 30 days prior notice to the other party (prior to the expiry of the 90 day period). If the Executive's employment is so terminated: (i) the Corporation shall pay to or to the order of the Executive the aggregate of the following amounts (less any deductions required by law): (A) if not theretofore paid, the Executive's Annual Salary for the then current fiscal year of the Corporation for the period to and including the Date of Termination; and (B) an amount equal to the Annual Salary (to the extent the termination is by the Corporation the portion of the Annual Salary referred to in Section 1.3 (a)(ii) shall be deemed to be the targeted incentive compensation); (ii) all options held by the Executive, whether then vested or not, shall immediately become exercisable (and shall remain exercisable as set forth in clause 3.1(c)(ii)) in the event that the Executive's employment is terminated by the Corporation (other than for Just Cause, Disability or Death) within one year following the completion of the transaction effecting the change of control of the Corporation as contemplated by this Section 3.1(d); (iii) the Corporation shall not seek in any way to amend the terms of any loans from the Corporation or its subsidiaries to the Executive; (iv) the Corporation shall provide the Executive with the job relocation counselling services of the firm acceptable to the Corporation for an amount not to exceed $15,000; (v) if, at the Date of Termination, there were any memberships in any clubs, social or athletic organizations paid for by the Corporation that were for the regular use of the Executive at the Date of Termination, the Corporation will not take any action to terminate such memberships but need not renew any such membership that expires; and (vi) the Corporation shall pay to the Executive all outstanding and accrued vacation pay to the Date of Termination. Upon compliance with clauses (d)(i) through (vi) above, the Corporation shall have no further obligations to the Executive under this Agreement or otherwise and the Executive agrees that notwithstanding any other provision contained herein, the Executive shall not have any right to commence any action for wrongful dismissal or termination. 3.2 The benefits payable under this Article III shall be paid as follows: (a) with respect to that portion of the Annual Salary relating to salary and related benefits of the Executive, at the Corporation's regular pay periods and (b) with respect to all other amounts, on a basis consistent with practices in effect immediately prior to the Date of Termination. If the Executive secures employment after the Date of Termination and prior to receiving all amounts owing hereunder, the Executive shall immediately inform the Corporation and the Corporation shall have the right to terminate all health, life and disability benefits being carried by the Corporation for the Executive. Article IV - Non-Competition, Confidentiality and Inventions and Patents 4.1 The Executive shall not while an Executive of the Corporation and for a period of 12 months following the Date of Termination, for any reason whatsoever, anywhere in North America, directly or indirectly, either individually or in partnership, or in conjunction with any other persons or corporations as principal, agent, shareholder, employee, advisor, lender, guarantor or in any other capacity whatsoever: (a) carry on or be engaged in or be connected with or interested in or receive royalties or other compensation from a segment of any business which is directly or indirectly competitive with the business of the Corporation or any of its subsidiaries; or (b) contact or solicit any designated customers of the Corporation or any of its subsidiaries for the purposes of selling to the designated customers any products or services which are the same as or are competitive with, the products or services sold by the Corporation or any of its subsidiaries during the term of this Agreement. For the purpose of this section, a designated customer means any person or entity who was a customer of the Corporation or any of its subsidiaries while the Executive was an Executive of the Corporation. Notwithstanding the foregoing, the Executive may hold up to five per cent of the issued and outstanding securities of any publicly traded company. For the purposes hereof, if a Change of Control occurs and the Executive's employment is terminated (whether by the Corporation or the Executive) within six months of the Change of Control, the business of the Corporation and its subsidiaries shall be deemed to be the business immediately prior to the Change of Control. 4.2 The Executive shall not while an Executive of the Corporation and for a period of 12 months thereafter, directly or indirectly, employ or retain as an independent contractor any employee of the Corporation or any of its subsidiaries or induce or solicit, or intend to induce, any such person to leave his/her employment. 4.3 The Executive acknowledges and agrees that: (a) in the course of performing his duties and responsibilities as an officer of the Corporation, he has had and will continue in the future to have access to and has been and will be entrusted with detailed confidential information and trade secrets (printed or otherwise) concerning past, present, future and contemplated products, services, operations and marketing techniques and procedures of the Corporation and its subsidiaries, including, without limitation, information relating to past, present and prospective clients, customers, suppliers and employees of the Corporation and its subsidiaries (collectively "Trade Secrets"), the disclosure of any of which to competitors of the Corporation or to the general public, or the use of same by the Executive or any competitor of the Corporation or any of its subsidiaries, would be highly detrimental to the interests of the Corporation; (b) the Executive, while an officer and/or employee of the Corporation, owes fiduciary duties to the Corporation, including the duty to act in the best interests of the Corporation; and (c) the right to maintain the confidentiality of the Trade Secrets, the right to preserve the goodwill of the Corporation and the right to the benefit of any relationships that have developed between the Executive and the customers, clients and suppliers of the Corporation by virtue of the Executive's employment with the Corporation constitute proprietary rights of the Corporation, which the Corporation is entitled to protect. In acknowledgement of the matters described above, the Executive hereby agrees that he will not, during the term of this Agreement or any time thereafter following the termination of employment for any reason, directly or indirectly disclose to any person or in any way make use of (other than for the benefit of the Corporation), in any manner, any of the Trade Secrets, provided that such Trade Secrets shall be deemed not to include information that is or becomes generally available to the public other than as a result of disclosure by the Executive. 4.4 Any invention (whether patentable or otherwise), improvement, device, industrial design, copyright, know-how or other intellectual or industrial property developed, invented, created or improved by the Executive during the term of this Agreement or prior to the date hereof while the Executive was employed by the Corporation in respect of the Corporation's business (collectively, the "Intellectual Property") shall be the exclusive property of the Corporation. The Corporation shall have the exclusive right to file patent applications and to obtain patents, to register industrial designs and copyright in the name of the Corporation in connection with the Intellectual Property. The Executive shall execute, from time to time, upon request by the Corporation, assignments of the Executive's rights in the Intellectual Property to the Corporation, shall co-operate with the Corporation in documenting the ownership of the Intellectual Property by the Corporation, and shall provide all necessary assistance in the filing and prosecution of any applications to register the Intellectual Property. The Executive hereby waives his moral rights to the Intellectual Property at common law and under section 14.1 of the Copyright Act or successor provisions from time to time, which are acknowledged to include the right to the integrity of the Intellectual Property and the right, where reasonable in the circumstances, to be associated with the Intellectual Property or an author by name or under a pseudonym and the right to remain anonymous when any translation of the Intellectual Property is produced, performed or published. 4.5 The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of any of this Article 4 will result in the Corporation and its shareholders suffering irrevocable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may be entitled. 4.6 The provisions of this Article 4 comprise all of Executive's obligations following any termination of Executive's employment with the Corporation. Article V- General 5.1 The Executive acknowledges that he has had an opportunity to obtain independent legal advice before signing this Agreement and agrees that either such advice has been obtained or that he does not wish to seek or obtain such independent legal advice. The Executive acknowledges that he has read this Agreement and fully understands the nature and effect of it and the terms contained herein and that the said terms are fair and reasonable and correctly set out the Executive's position in the event of termination. 5.2 The Executive agrees that after termination of his employment for whatever reason, he will tender his resignation from any position he may hold as an officer of the Corporation or as an officer or director of any of its affiliated or associated companies, provided that doing so will not reduce the obligations of the Corporation described herein. 5.3 If any provision of this Agreement is determined to be void or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any other provision herein and each such provision is deemed to be separate, distinct and severable. 5.4 Any notice required or permitted to be given under this Agreement shall be in writing and shall be properly given if delivered by hand or mailed by prepaid registered mail addressed as follows: (a) in the case of the Corporation, to: JetForm Corporation 560 Rochester Street Ottawa, Ontario K1S 5K2 Attention: Chief Executive Officer (b) in the case of the Executive, to: John Kelly c/o JetForm Corporation or to such other address as the parties may from time to time specify by notice given in accordance herewith. Any notice so given shall be conclusively deemed to have been given or made on the day of delivery, if delivered, or if mailed by registered mail, upon the date shown on the postal return receipt as the date upon which the envelope containing such notice was actually received by the addressee provided in the event of mail disruption, delivery may only be made by hand. 5.5 This Agreement shall enure to the benefit of and be binding upon the Executive and his heirs, executors and administrators and upon the Corporation and its successors and assigns. 5.6 Nothing herein derogates from any rights the Executive may have under applicable law, and in particular the parties agree that the rights, entitlements and benefits set out in this Agreement to be paid to the Executive shall in no event be less than the Executive's entitlement pursuant to the Employment Standards Act (Ontario) or any successor legislation from time to time. Any payments made hereunder are agreed to be inclusive of all payments required of the Corporation under the said legislation. 5.7 This Agreement may be amended only by an instrument in writing signed by both parties. 5.8 Neither party may waive or shall be deemed to have waived any right it has under this Agreement (including under this section) except to the extent that such waiver is in writing. 5.9 This agreement amends, restates and supercedes the employment agreement between the Executive and the Company dated March 23, 1999. ********* If you are in agreement with the foregoing terms and conditions, kindly execute below where indicated and return one fully executed copy of this Agreement to the attention of Vice President Human Resources, JetForm Corporation, 560 Rochester Street, Ottawa, Ontario K1S 5K2 Yours very truly, JETFORM CORPORATION Per: ----------------------------------- Authorized Officer Accepted and agreed this ____ day of ____________, 1999. --------------------------------------- JEFF MCMULLEN EX-10.40 9 0009.txt EMPLOYMENT AGREEMENT EXHIBIT 10.40 October 21, 1999 Ted Capes c/o JetForm Corporation 560 Rochester Street Ottawa, Ontario K1S 5K2 Re: Employment Agreement We are pleased to confirm the terms and conditions of the employment of Ted Capes ("you" or the "Executive") with JetForm Corporation (the "Corporation"). The Corporation believes that it is reasonable and fair to the Corporation that you receive fair treatment in the event of the termination without cause or adverse modification without cause of your employment. In consideration thereof, and by your execution of this Agreement below, you wish to abide by various non-competition and confidentiality restrictions contained herein, your violation of which would be highly detrimental to the Corporation, and both you and the Corporation wish formally to agree as to the terms and conditions contained herein that will govern the termination or modification of your employment. Article I - Preamble and Interpretation 1.0 The parties agree that the Executive's original date of employment with the corporation for the purposes of this agreement is January 1, 1999. 1.1 The parties agree, and represent and warrant to each other, that the above preamble is true and accurate and is incorporated into the terms of this Agreement. 1.2 The headings of the Articles, sections, subsections and clauses herein are inserted for convenience of reference only and shall not affect the meaning or construction hereof. 1.3 For the purposes of this Agreement, the following terms shall have the following meanings, respectively: (a) "Annual Salary" means the sum of: (i) the annual salary of the Executive, payable to the Executive by the Corporation at the Date of Termination or as at the end of the month immediately preceding the month in which termination occurs (the "Prior Month"), whichever is greater, and if an annual salary has not been established, it shall be calculated by multiplying the monthly salary of the Executive in effect for the Prior Month by 12; and (ii) the aggregate amount of all remuneration, salaries, bonuses and benefits (including, without limitation, health, dental and disability coverage) not included in clause (i) above that the board of directors of the Corporation acting reasonably estimates would be payable to the Executive during the 12 month period following the termination of the Executive's employment by the Corporation assuming: (1) the employment of the Executive was not terminated during such period; and (2) the Executive benefited from and participated in such remuneration, salaries, bonuses and benefits on a basis consistent with practices in effect for senior executives of the Corporation immediately prior to the Date of Termination; (b) "Change of Control" shall mean: the acquisition by a person or persons acting jointly of the Corporation's voting shares, such that the acquiror(s) would beneficially own shares equal to greater than 50% of the votes attaching to the Corporation's voting shares. (c) "Date of Termination" shall mean the date of termination of the Executive's employment, whether by the Executive or by the Corporation or by death of the Executive; (d) "Disability" shall mean the Executive's failure to substantially perform his duties on a full-time basis for a period of six months out of any 18-month period, where such failure is a result of physical or mental illness; (e) "Good Reason" shall include, without limitation, the occurrence of any of the following without the Executive's written consent (except in connection with the termination of the employment of the Executive for Just Cause or Disability): (i) a material reduction by the Corporation of the Executive's salary, benefits or any other form of remuneration or any change in the basis upon which the Executive's salary, benefits or any other form of remuneration payable by the Corporation is determined other than a reduction or change in a manner which is consistent with industry practices generally in effect prior to such reduction or change; or (ii) any failure by the Corporation to continue in effect any substantive benefit, bonus, profit sharing, incentive, remuneration or compensation plan, pension plan or retirement plan in which the Executive was participating or entitled to participate immediately prior to such failure other than a failure to continue such benefits, bonuses or plans on a basis consistent with industry practices generally in effect prior to such failure, or the Corporation taking any action or failing to take any action, the failure of which would adversely affect the Executive's participation in or reduce his rights or benefits under or pursuant to any such plan other than an action or failure to take an action on a basis consistent with industry practices generally in effect prior to such action or failure, or the Corporation failing to increase or improve such rights or benefits on a basis consistent with industry practices generally in effect prior to such failure; or (iii) any material breach by the Corporation of any provision of this Agreement; or (iv) the failure by the Corporation to obtain, in a form satisfactory to the Executive acting reasonably, an effective assumption of its obligations hereunder by any successor to the Corporation, including a successor to a material portion of its business; or (v) the Corporation requiring the Executive to relocate to a place of work located greater than 100 kilometres from Executive's current place of work; and (f) "Just Cause" shall mean: (i) gross insubordination; (ii) the continued failure or refusal by the Executive to substantially perform his duties according to the terms of his employment, after the Corporation has given the Executive notice of such failure or refusal and a reasonable opportunity to correct it, except where such acts or omissions by the Executive: (A) follow an event defined herein as "Good Reason"; or (B) result from the Executive's Disability. (iii) dishonesty by the Executive affecting the Corporation; (iv) use by the Executive of drugs or of alcohol in a manner which materially affects his ability to perform his employment duties; (v) any improper act by the Executive that the Executive knows or should reasonably know is substantially inconsistent with his duties as an Executive; or (vi) any criminal act of dishonesty by the Executive resulting or intended to result directly or indirectly in personal gain of the Executive at the Corporation's expense. Article II - Duties and Compensation 2.1 The Executive shall serve the Corporation and any subsidiaries of the Corporation in such capacity or capacities and shall perform such duties and exercise such powers pertaining to the management and operation of the Corporation and any subsidiaries of the Corporation as may be determined from time to time by the board of directors of the Corporation consistent with the office of the Executive. The Executive shall: (a) devote his full time and attention and his reasonable best efforts during normal business hours to the business and affairs of the Corporation; (b) perform those duties that may reasonably be assigned to the Executive diligently and faithfully to the best of the Executive's abilities and in the best interests of the Corporation; (c) faithfully observe and abide by all the rules, regulations and policies of the Corporation applicable to the Executive, (including without limitation the Corporation's policies respecting insider trading) from time to time in force which are brought to the attention of the Executive or which he should reasonably be aware; and (d) use his reasonable best efforts to promote the interests and goodwill of the Corporation. 2.2 Subject to Article 3 hereof, the Annual Salary payable to the Executive shall be determined during the annual review process by the direct line reporting executive and approved where applicable by the Chief Operating Officer, the President, or the Compensation Committee of the Board of Directors. 2.3 The Executive shall also be entitled to receive the vacation and benefits set forth on a basis consistent with the company practice generally in effect for other executives of the corporation which benefits may be amended from time to time by the Corporation but subject always to the provisions of Article 3 hereof. Article III - Obligations of the Corporation upon Termination 3.1 The Corporation shall have the following obligations in the event that the Executive's employment is terminated: (a) Death, Disability or Retirement. If the Executive's employment is terminated by reason of the Executive's death, Disability or retirement, the Executive or the Executive's family, as the case may be, shall be entitled to receive benefits in a manner consistent with and at least equal in amount to those made available by the Corporation to senior executives or surviving families of the senior executives of the Corporation under such plans, programs and policies relating to (i) family death benefits, if any, as are in effect at the date of the Executive's death; or (ii) Disability or retirement, if any, as are in effect at the Date of Termination, as the case may be. (b) Termination by the Corporation for Just Cause and Termination by the Executive Other Than for Good Reason. If the Executive's employment is terminated by the Corporation for Just Cause, or is terminated by the Executive other than for Good Reason, the Corporation shall pay to the Executive, if not theretofore paid, the fraction of the Annual Salary and vacation pay, if any, earned by or payable to the Executive by the Corporation during the then current fiscal year of the Corporation for the period to and including the Date of Termination, and the Corporation shall not have any further obligations to the Executive under this Agreement or otherwise. (c) Termination by the Corporation Other Than for Just Cause, Disability or Death and Termination by the Executive for Good Reason. Either party must give 60 days written notice of such termination. If the Executive's employment is terminated by the Corporation other than for Just Cause, Disability, retirement or death or is terminated by the Executive for Good Reason: (i) the Corporation shall pay to or to the order of the Executive the aggregate of the following amounts (less any deductions required by law): (A) if not theretofore paid, the Executive's Annual Salary for the then current fiscal year of the Corporation for the period to and including the Date of Termination; and (B) an amount equal to the Annual Salary; (ii) subject to the provisions of Section 9 of the 1995 Stock Option Plan and Section 16 of the 1993 Stock Option Plan, the Corporation shall ensure that all options to acquire common shares of the Corporation held by the Executive on the Date of Termination shall continue to vest and be exercisable for the full period during which Executive is compensated by the Corporation as set forth in Section 3.2. As of the last day of such period, the executive shall have 30 days to exercise all vested options. On the 31st day, all unexercised options vested or unvested are cancelled. (iii) the Corporation shall not seek in any way to amend the terms of any loans from the Corporation or its subsidiaries to the Executive; (iv) the Corporation shall provide the Executive with the job relocation counselling services of the firm acceptable to the Corporation for an amount not to exceed $15,000; (v) if, at the Date of Termination, there were any memberships in any clubs, social or athletic organizations paid for by the Corporation that were for the regular use of the executive at the Date of Termination, the Corporation will not take any action to terminate such memberships but need not renew any such membership that expires; and (vi) the Corporation shall pay to the Executive all outstanding and accrued vacation pay to the Date of Termination. Upon compliance with clauses (c)(i) through (vi) above, the Corporation shall have no further obligations to the Executive under this Agreement or otherwise and the Executive agrees that notwithstanding any other provision contained herein, the Executive shall not have any right to commence any action for wrongful dismissal or termination. (d) Change of Control. The parties agree that this Agreement will not automatically terminate upon any Change of Control of the Corporation. However, the Corporation and the Executive acknowledge and agree that both the Corporation (or its successor) and the Executive shall have the right to terminate this Agreement within 90 days of the closing of a Change of Control, on 30 days prior notice to the other party (prior to the expiry of the 90 day period). If the Executive's employment is so terminated: (i) the Corporation shall pay to or to the order of the Executive the aggregate of the following amounts (less any deductions required by law): (A) if not theretofore paid, the Executive's Annual Salary for the then current fiscal year of the Corporation for the period to and including the Date of Termination; and (B) an amount equal to the Annual Salary (to the extent the termination is by the Corporation the portion of the Annual Salary referred to in Section 1.3 (a)(ii) shall be deemed to be the targeted incentive compensation); (ii) all options held by the Executive, whether then vested or not, shall immediately become exercisable (and shall remain exercisable as set forth in clause 3.1(c)(ii)) in the event that the Executive's employment is terminated by the Corporation (other than for Just Cause, Disability or Death) within one year following the completion of the transaction effecting the change of control of the Corporation as contemplated by this Section 3.1(d); (iii) the Corporation shall not seek in any way to amend the terms of any loans from the Corporation or its subsidiaries to the Executive; (iv) the Corporation shall provide the Executive with the job relocation counselling services of the firm acceptable to the Corporation for an amount not to exceed $15,000; (v) if, at the Date of Termination, there were any memberships in any clubs, social or athletic organizations paid for by the Corporation that were for the regular use of the Executive at the Date of Termination, the Corporation will not take any action to terminate such memberships but need not renew any such membership that expires; and (vi) the Corporation shall pay to the Executive all outstanding and accrued vacation pay to the Date of Termination. Upon compliance with clauses (d)(i) through (vi) above, the Corporation shall have no further obligations to the Executive under this Agreement or otherwise and the Executive agrees that notwithstanding any other provision contained herein, the Executive shall not have any right to commence any action for wrongful dismissal or termination. 3.2 The benefits payable under this Article III shall be paid as follows: (a) with respect to that portion of the Annual Salary relating to salary and related benefits of the Executive, at the Corporation's regular pay periods and (b) with respect to all other amounts, on a basis consistent with practices in effect immediately prior to the Date of Termination. If the Executive secures employment after the Date of Termination and prior to receiving all amounts owing hereunder, the Executive shall immediately inform the Corporation and the Corporation shall have the right to terminate all health, life and disability benefits being carried by the Corporation for the Executive. Article IV - Non-Competition, Confidentiality and Inventions and Patents 4.1 The Executive shall not while an Executive of the Corporation and for a period of 12 months following the Date of Termination, for any reason whatsoever, anywhere in North America, directly or indirectly, either individually or in partnership, or in conjunction with any other persons or corporations as principal, agent, shareholder, employee, advisor, lender, guarantor or in any other capacity whatsoever: (a) carry on or be engaged in or be connected with or interested in or receive royalties or other compensation from a segment of any business which is directly or indirectly competitive with the business of the Corporation or any of its subsidiaries; or (b) contact or solicit any designated customers of the Corporation or any of its subsidiaries for the purposes of selling to the designated customers any products or services which are the same as or are competitive with, the products or services sold by the Corporation or any of its subsidiaries during the term of this Agreement. For the purpose of this section, a designated customer means any person or entity who was a customer of the Corporation or any of its subsidiaries while the Executive was an Executive of the Corporation. Notwithstanding the foregoing, the Executive may hold up to five per cent of the issued and outstanding securities of any publicly traded company. For the purposes hereof, if a Change of Control occurs and the Executive's employment is terminated (whether by the Corporation or the Executive) within six months of the Change of Control, the business of the Corporation and its subsidiaries shall be deemed to be the business immediately prior to the Change of Control. 4.2 The Executive shall not while an Executive of the Corporation and for a period of 12 months thereafter, directly or indirectly, employ or retain as an independent contractor any employee of the Corporation or any of its subsidiaries or induce or solicit, or intend to induce, any such person to leave his/her employment. 4.3 The Executive acknowledges and agrees that: (a) in the course of performing his duties and responsibilities as an officer of the Corporation, he has had and will continue in the future to have access to and has been and will be entrusted with detailed confidential information and trade secrets (printed or otherwise) concerning past, present, future and contemplated products, services, operations and marketing techniques and procedures of the Corporation and its subsidiaries, including, without limitation, information relating to past, present and prospective clients, customers, suppliers and employees of the Corporation and its subsidiaries (collectively "Trade Secrets"), the disclosure of any of which to competitors of the Corporation or to the general public, or the use of same by the Executive or any competitor of the Corporation or any of its subsidiaries, would be highly detrimental to the interests of the Corporation; (b) the Executive, while an officer and/or employee of the Corporation, owes fiduciary duties to the Corporation, including the duty to act in the best interests of the Corporation; and (c) the right to maintain the confidentiality of the Trade Secrets, the right to preserve the goodwill of the Corporation and the right to the benefit of any relationships that have developed between the Executive and the customers, clients and suppliers of the Corporation by virtue of the Executive's employment with the Corporation constitute proprietary rights of the Corporation, which the Corporation is entitled to protect. In acknowledgement of the matters described above, the Executive hereby agrees that he will not, during the term of this Agreement or any time thereafter following the termination of employment for any reason, directly or indirectly disclose to any person or in any way make use of (other than for the benefit of the Corporation), in any manner, any of the Trade Secrets, provided that such Trade Secrets shall be deemed not to include information that is or becomes generally available to the public other than as a result of disclosure by the Executive. 4.4 Any invention (whether patentable or otherwise), improvement, device, industrial design, copyright, know-how or other intellectual or industrial property developed, invented, created or improved by the Executive during the term of this Agreement or prior to the date hereof while the Executive was employed by the Corporation in respect of the Corporation's business (collectively, the "Intellectual Property") shall be the exclusive property of the Corporation. The Corporation shall have the exclusive right to file patent applications and to obtain patents, to register industrial designs and copyright in the name of the Corporation in connection with the Intellectual Property. The Executive shall execute, from time to time, upon request by the Corporation, assignments of the Executive's rights in the Intellectual Property to the Corporation, shall co-operate with the Corporation in documenting the ownership of the Intellectual Property by the Corporation, and shall provide all necessary assistance in the filing and prosecution of any applications to register the Intellectual Property. The Executive hereby waives his moral rights to the Intellectual Property at common law and under section 14.1 of the Copyright Act or successor provisions from time to time, which are acknowledged to include the right to the integrity of the Intellectual Property and the right, where reasonable in the circumstances, to be associated with the Intellectual Property or an author by name or under a pseudonym and the right to remain anonymous when any translation of the Intellectual Property is produced, performed or published. 4.7 The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of any of this Article 4 will result in the Corporation and its shareholders suffering irrevocable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may be entitled. 4.8 The provisions of this Article 4 comprise all of Executive's obligations following any termination of Executive's employment with the Corporation. Article V- General 5.1 The Executive acknowledges that he has had an opportunity to obtain independent legal advice before signing this Agreement and agrees that either such advice has been obtained or that he does not wish to seek or obtain such independent legal advice. The Executive acknowledges that he has read this Agreement and fully understands the nature and effect of it and the terms contained herein and that the said terms are fair and reasonable and correctly set out the Executive's position in the event of termination. 5.2 The Executive agrees that after termination of his employment for whatever reason, he will tender his resignation from any position he may hold as an officer of the Corporation or as an officer or director of any of its affiliated or associated companies, provided that doing so will not reduce the obligations of the Corporation described herein. 5.3 If any provision of this Agreement is determined to be void or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any other provision herein and each such provision is deemed to be separate, distinct and severable. 5.4 Any notice required or permitted to be given under this Agreement shall be in writing and shall be properly given if delivered by hand or mailed by prepaid registered mail addressed as follows: (a) in the case of the Corporation, to: JetForm Corporation 560 Rochester Street Ottawa, Ontario K1S 5K2 Attention: Chief Executive Officer (b) in the case of the Executive, to: John Kelly c/o JetForm Corporation or to such other address as the parties may from time to time specify by notice given in accordance herewith. Any notice so given shall be conclusively deemed to have been given or made on the day of delivery, if delivered, or if mailed by registered mail, upon the date shown on the postal return receipt as the date upon which the envelope containing such notice was actually received by the addressee provided in the event of mail disruption, delivery may only be made by hand. 5.5 This Agreement shall enure to the benefit of and be binding upon the Executive and his heirs, executors and administrators and upon the Corporation and its successors and assigns. 5.6 Nothing herein derogates from any rights the Executive may have under applicable law, and in particular the parties agree that the rights, entitlements and benefits set out in this Agreement to be paid to the Executive shall in no event be less than the Executive's entitlement pursuant to the Employment Standards Act (Ontario) or any successor legislation from time to time. Any payments made hereunder are agreed to be inclusive of all payments required of the Corporation under the said legislation. 5.7 This Agreement may be amended only by an instrument in writing signed by both parties. 5.10 Neither party may waive or shall be deemed to have waived any right it has under this Agreement (including under this section) except to the extent that such waiver is in writing. 5.11 This agreement amends, restates and supercedes the employment agreement between the Executive and the Company dated March 23, 1999. ********* If you are in agreement with the foregoing terms and conditions, kindly execute below where indicated and return one fully executed copy of this Agreement to the attention of Vice President Human Resources, JetForm Corporation, 560 Rochester Street, Ottawa, Ontario K1S 5K2 Yours very truly, JETFORM CORPORATION Per: ----------------------------------- Authorized Officer Accepted and agreed this ____ day of ____________, 1999. --------------------------------------- TED CAPES EX-10.41 10 0010.txt EMPLOYMENT AGREEMENT EXHIBIT 10.41 May 4, 2000 Declan Kelly c/o JetForm Corporation Ottawa, Ontario K1S 5K2 Re: Employment Agreement We are pleased to confirm the terms and conditions of the employment of Declan Kelly ("you or the "Executive") with JetForm Corporation (the "Corporation"). The Corporation believes that it is reasonable and fair that you receive fair treatment in the event of the termination without cause or material adverse modification without cause of your employment. In consideration thereof and your employment with the Corporation (or continued employment, as the case may be) you and the Corporation agree to the following terms and conditions of employment. Article I - Preamble and Interpretation 1.0 The parties agree that the Executive's original date of employment with the Corporation for the purposes of this agreement is February 2, 1998 1.1 The parties agree, and represent and warrant to each other, that the above preamble is true and accurate and is incorporated into the terms of this Agreement. 1.2 The headings of the Articles, sections, subsections and clauses herein are inserted for convenience of reference only and shall not affect the meaning or construction hereof. 1.3 For the purposes of this Agreement, the following terms shall have the following meanings, respectively: (a) "Annual Salary" means the annual base salary of the Executive, plus 25% of the targeted annual incentives payable to the Executive by the Corporation at the notice of termination or resignation is given and if an annual base salary and target annual incentive have not been established, it shall be calculated by multiplying the monthly salary of the Executive in effect for the month prior to the month in which the notice of termination or resignation is given by 12. Notwithstanding the generality of the foregoing, and for greater clarity, Annual Salary does not include any amounts paid or payable to the Executive or to any other employee of the Corporation on account of incentive compensation, bonus, profit sharing, stock options, loans, discounts, commissions, benefits allowances, or any other form of compensation or reward based on individual or Corporate performance. (b) "Change of Control" shall mean: the acquisition by a person or persons acting jointly of the Corporation's voting shares, such that the acquiror(s) would beneficially own shares equal to greater than 51% of the votes attaching to the Corporation's voting shares (c) "Date of Termination" shall mean the date the Executive's active employment ceases, as set out in a notice of termination or resignation and as provided for in Article III, regardless of whether the Executive continues to receive remuneration or benefits from the Corporation subsequent to that date, whether by the Executive or by the Corporation or by death of the Executive. (d) "Disability" shall mean the Executive's failure to substantially perform his duties on a full-time basis for a period of six months out of any 18-month period, where such failure is a result of physical or mental illness. Without limiting the generality of the foregoing, the Executive shall be irrevocably deemed to be disabled on the date which is 60 days after the date on which he is entitled to receive disability payments (i.e. 60 days after the date which is 120 days after the date of the disabling injury), provided the Executive is receiving or is entitled to receive long term disability payments under the applicable benefit plan on that 60th day. (e) "Good Reason" shall mean the occurrence of any of the following without the Executive's consent (except in connection with the termination of the employment of the Executive for Just Cause or Disability). (i) a material reduction by the Corporation of the Executive's salary, benefits or any other form of remuneration or any change in the basis upon which the Executive's salary, benefits or any other form of remuneration payable by the Corporation is determined other than a reduction or change which occurs after the Executive has received three months written notice of the reduction or change, or when the reduction or change is consistent with similar reductions or changes established by the Corporation which similarly affects the majority of the employees of the Corporation who are employed at a level similar to that of the Executive. (ii) any material breach by the Corporation of any provisions of this Agreement; or (iii) the failure by the Corporation to obtain, in a form satisfactory to the Executive acting reasonably, an effective assumption of its obligations hereunder by any successor to the Corporation, including a successor to a material portion of its business in which the Executive is employed; or (iv) the Corporation requiring the Executive to relocate to a place of work located greater than 100 kilometres from Executive's current place of work. For the purposes of this Article, where the Executive continues in the employ of the Corporation for a period of at least three (3) months following the occurrence of any of the events listed above without triggering a termination for Good Reason as provided for in Article 3.1 (d), the Executive shall be deemed to have irrevocably consented to the occurrence and cannot thereafter trigger a termination for Good Reason based upon that occurrence. (f) "Just Cause" shall include: (i) gross insubordination; (ii) the failure or refusal by the Executive to substantially perform his duties according to the terms of his employment, except where such acts or omissions by the Executive: (g) are caused by and follow an event defined herein as "Good Reason"; or (h) result from the Executive's Disability. (i) dishonesty by the Executive affecting the Corporation; (ii) use by the Executive of drugs or of alcohol in a manner which materially affects his ability to perform his employment duties; (iii) any improper act by the Executive that the Executive knows or should reasonably know is substantially inconsistent with his duties as an Executive; or (iv) any material breach by the Executive of any provisions of this Agreement. Article II - Duties and Compensation 2.1 The Executive shall serve the Corporation and any subsidiaries of the Corporation in such capacity or capacities and shall perform such duties and exercise such powers pertaining to the management and operation of the Corporation and any subsidiaries of the Corporation as may be determined from time to time by the board of directors of the Corporation consistent with the office of the Executive. The Executive shall: (a) devote his full time and attention and his best efforts to the business and affairs of the Corporation; (b) perform those duties that are assigned to the Executive and which are consistent with his position, diligently and faithfully to the best of the Executive's abilities and in the best interests of the Corporation; (c) faithfully observe and abide by all the rules, regulations and policies of the Corporation applicable to the Executive, (including without limitation the Corporation's policies respecting insider trading) from time to time in force which are brought to the attention of the Executive or of which he should reasonably be aware; and (d) use his best efforts to promote the interests and goodwill of the Corporation. 2.2 Subject to Article 3 hereof, the Annual Salary payable to the Executive shall be determined during the annual review process by the direct line reporting executive and approved where applicable by the Chief Executive Officer, the President, or the Compensation Committee of the Board of Directors. 2.3 The Executive shall also be entitled to receive the vacation and benefits set forth on a basis consistent with the Corporation's practice generally in effect for other executives of the Corporation which benefits may be amended from time to time by the Corporation but subject always to the provisions of Article 3 hereof. Article III - Termination of Employment 3.1 The Executive and the Corporation shall have the following obligations in the event that the Executive's employment is terminated: (a) Death or Disability. The Executive's employment shall be terminated by his death or Disability, without any obligation on the Corporation to provide notice or take any other action. The rights of the Executive or his survivors shall be as set out in the applicable benefit and insurance plans provided to the Executive by the Corporation during his employment. (b) Retirement or Resignation Other than for Good Reason. The Executive agrees to provide the Corporation with sixty (60) days notice in writing of his intention to retire or resign his employment other than for Good Reason. This notice is for the benefit of the Corporation and it has the right to waive all or any part of the notice, in which case the Executive's employment and the obligations of the Corporation shall cease on the date of such earlier termination as provided to the Executive by the Corporation, in writing. (c) Termination by the Corporation for Just Cause and Termination by the Executive Other Than for Good Reason. The Corporation has the right to terminate the Executive's employment for Just Cause and without notice or pay in lieu of notice. If the Executive's employment is terminated for Just Cause or if the Executive resigns other than for Good Reason, the Executive shall only be entitled to receive his base salary and unpaid vacation pay to the Date of Termination and he shall have no other or further claim against the Corporation. (d) Termination by the Corporation Other Than for Just Cause, Disability or Death and Termination by the Executive for Good Reason. The Corporation may terminate the Executive's employment other than for Just Cause and the Executive may terminate his employment for Good Reason by giving written notice of termination. Where the Corporation terminates the employment the period of notice shall be twelve (12) months. At the Corporation's sole discretion it may provide the Executive with pay in lieu of notice in which event the Executive's active employment shall terminate when the Corporation advises the Executive that his continued services are not required. Pay in lieu of notice will be calculated based upon the Executive's Annual Salary as of the Date of Termination and as specified in Article 3.2. Where the Executive terminates his employment for Good Reason, the termination of his active employment shall become effective on the date such notice is provided to the Corporation and the Executive shall be entitled to receive from the Corporation an amount equal to the pay in lieu of notice which the Executive would have received had the Corporation terminated his employment without Just Cause pursuant to this Article. Notwithstanding that the Executive may have received a notice of termination or given notice of resignation, he shall remain entitled to any incentive compensation, bonus, profit sharing, or other similar compensatory plan applicable to him as at the date such notice is given. The amount of the Executive's entitlement to such compensation shall be pro-rated to the Date of Termination and shall be paid to the Executive on the date that other employees of the Corporation are paid such compensation. The Corporation shall take all necessary steps as required by the provisions of the Corporation's Stock Option Plans so that all options to acquire common shares of the Corporation held by the Executive on the Date of Termination shall continue to vest during the period of notice referred to in this Article and the Executive shall have thirty days from the end of that notice period to exercise all such vested options. On the 31st day, all unexercised options, vested or unvested, are cancelled. All loans from the Corporation or its subsidiaries to the Executive shall become due and payable on the Date of Termination, unless the written terms of the loan agreement(s) provide otherwise. The Corporation shall provide the Executive with the job relocation counselling services of a firm acceptable to the Corporation for an amount not to exceed the equivalent of CDN$10,000. If, at the Date of Termination, there were any memberships in any clubs, social or athletic organizations paid for by the Corporation that were for the regular use of the Executive at the Date of Termination, the Corporation will not take any action to terminate such memberships but need not renew any such membership that expires. The Corporation shall pay to the Executive all outstanding and accrued vacation pay and salary to the Date of Termination. Upon compliance with the obligations set forth above, the Corporation shall have no further obligation to the Executive under this Agreement or otherwise and the Executive agrees that notwithstanding any other provision contained herein, the Executive shall not have any right to commence any action or make any claim related to the termination of his employment. (e) Change of Control. The parties agree that this Agreement will not automatically terminate upon any Change of Control of the Corporation. However, the Corporation shall have the right to terminate this Agreement within 90 days of the closing of a Change of Control, on 30 days prior notice to the Executive (prior to the expiry of the 90 day period). If the Executive's employment is so terminated the Corporation shall pay to the Executive the amounts as set forth in Article 3.1(d) and the Executive's Termination Date shall be the date which is 30 days after the date such notice is given. The Executive shall have the right to terminate this Agreement within 90 days of the closing of a Change of Control, on 30 days prior notice to the Corporation (prior to the expiry of the 90 day period) if there is any adverse material change in the position, duties, responsibilities or compensation of the Executive in the 90 day period following the Change of Control or if the person now in control of the corporation advises in writing that it does not intend to honour the terms of this Agreement. If the Executive so terminates his employment the Corporation shall pay to the Executive the amounts as set forth in Article 3.1(d) and the Executive's Termination Date shall be the date which is 30 days after the date such notice is given. 3.2 The benefits payable under this Article III shall be paid as follows: (a) with respect to that portion of the Annual Salary relating to salary and related benefits of the Executive, at the Corporation's regular pay periods and (b) with respect to all other amounts, on a basis consistent with practices in effect immediately prior to the Date of Termination. If the Executive secures employment after the Date of Termination and prior to receiving all amounts owing hereunder, the Executive shall immediately inform the Corporation and the Corporation shall have the right to terminate all health, life and disability benefits being carried by the Corporation for the Executive. Article IV - Non-Competition, Confidentiality and Inventions and Patents 4.1 The Executive shall not while an Executive of the Corporation and for a period of 12 months following the Date of Termination, for any reason whatsoever, anywhere in North America, directly or indirectly, either individually or in partnership, or in conjunction with any other persons or corporations as principal, agent, shareholder, employee, advisor, lender, guarantor or in any other capacity whatsoever: (a) carry on or be engaged in or be connected with or interested in or receive royalties or other compensation from a segment of any business which is directly or indirectly competitive with the business of the Corporation or any of its subsidiaries for whom the Executive has provided services during the 12 months preceding the Termination Date; or (b) contact or solicit any designated customers of the Corporation or any of its subsidiaries for the purposes of selling to the designated customers any products or services which are the same as or are competitive with, the products or services sold by the Corporation or any of its subsidiaries during the term of this Agreement. For the purpose of this section, a designated customer means any person or entity that was a customer of the Corporation or any of its subsidiaries in the 12 months preceding the Termination Date. Upon request by the Executive, the Corporation shall provide in confidence a list of all such designated customers. Notwithstanding the foregoing, the Executive may hold up to five per cent of the issued and outstanding securities of any publicly traded company. For the purposes hereof, if a Change of Control occurs and the Executive's employment is terminated (whether by the Corporation or the Executive) within six months of the Change of Control, the business of the Corporation and its subsidiaries shall be deemed to be the business immediately prior to the Change of Control. 4.2 The Executive shall not while an Executive of the Corporation and for a period of 12 months thereafter, directly or indirectly, induce or solicit any employee of the Corporation to leave employment with the Corporation. 4.3 The Executive acknowledges and agrees that: (a) in the course of performing his duties and responsibilities as an officer of the Corporation, he has had and will continue in the future to have access to and has been and will be entrusted with detailed confidential information and trade secrets (printed or otherwise) concerning past, present, future and contemplated products, services, operations and marketing techniques and procedures of the Corporation and its subsidiaries, including, without limitation, information relating to past, present and prospective clients, customers, suppliers and employees of the Corporation and its subsidiaries (collectively "Trade Secrets"), the disclosure of any of which to competitors of the Corporation or to the general public, or the use of same by the Executive or any competitor of the Corporation or any of its subsidiaries, would be highly detrimental to the interests of the Corporation; (b) the Executive, while an officer and/or employee of the Corporation, owes fiduciary duties to the Corporation, including the duty to act in the best interests of the Corporation; and (c) the right to maintain the confidentiality of the Trade Secrets, the right to preserve the goodwill of the Corporation and the right to the benefit of any relationships that have developed between the Executive and the customers, clients and suppliers of the Corporation by virtue of the Executive's employment with the Corporation constitute proprietary rights of the Corporation, which the Corporation is entitled to protect. In acknowledgement of the matters described above, the Executive hereby agrees that he will not, during the term of this Agreement or any time thereafter following the termination of employment for any reason, directly or indirectly disclose to any person or in any way make use of (other than for the benefit of the Corporation), in any manner, any of the Trade Secrets, provided that such Trade Secrets shall be deemed not to include information that is or becomes generally available to the public other than as a result of disclosure by the Executive. 4.4 Any invention (whether patentable or otherwise), improvement, device, industrial design, copyright, know-how or other intellectual or industrial property developed, invented, created or improved by the Executive during the term of this Agreement or prior to the date hereof while the Executive was employed by the Corporation in respect of the Corporation's business (collectively, the "Intellectual Property") shall be the exclusive property of the Corporation. The Corporation shall have the exclusive right to file patent applications and to obtain patents, to register industrial designs and copyright in the name of the Corporation in connection with the Intellectual Property. The Executive shall execute, from time to time, upon request by the Corporation, assignments of the Executive's rights in the Intellectual Property to the Corporation, and shall provide all necessary assistance in the filing and prosecution of any applications to register the Intellectual Property. The Executive hereby waives his moral rights to the Intellectual Property at common law and under section 14.1 of the Copyright Act or successor provisions from time to time, which are acknowledged to include the right to the integrity of the Intellectual Property and the right, where reasonable in the circumstances, to be associated with the Intellectual Property or an author by name or under a pseudonym and the right to remain anonymous when any translation of the Intellectual Property is produced, performed or published. 4.5 The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of any of this Article 4 will result in the Corporation and its shareholders suffering irrevocable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may be entitled. 4.6 The provisions of this Article 4 comprise all of Executive's obligations following any termination of Executive's employment with the Corporation Article V - General 5.1 The Executive acknowledges that he has had an opportunity to obtain independent legal advice before signing this Agreement and agrees that either such advice has been obtained or that he does not wish to seek or obtain such independent legal advice. The Executive acknowledges that he has read this Agreement and fully understands the nature and effect of it and the terms contained herein and that the said terms are fair and reasonable and correctly set out the Executive's position in the event of termination. 5.2 The Executive agrees that after termination of his employment for whatever reason, he will tender his resignation from any position he may hold as an officer of the Corporation or as an officer or director of any of its affiliated or associated companies, provided that doing so will not reduce or increase the obligations of the Corporation described herein. 5.3 If any provision of this Agreement is determined to be void or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any other provision herein and each such provision is deemed to be separate, distinct and severable. 5.4 Any notice required or permitted to be given under this Agreement shall be in writing and shall be properly given if delivered by hand or mailed by prepaid registered mail addressed as follows: (a) in the case of the Corporation, to: JetForm Corporation 560 Rochester Street Ottawa, Ontario K1S 5K2 Attention: Chief Executive Officer (b) in the case of the Executive, to: Declan Kelly c/o JetForm Corporation or to such other address as the parties may from time to time specify by notice given in accordance herewith. Any notice so given shall be conclusively deemed to have been given or made on the day of delivery, if delivered, or if mailed by registered mail, upon the date shown on the postal return receipt as the date upon which the envelope containing such notice was actually received by the addressee provided in the event of mail disruption, delivery may only be made by hand. 5.5 This Agreement shall ensure to the benefit of and be binding upon the Executive and his heirs, executors and administrators and upon the Corporation and its successors and assigns. 5.6 Nothing herein derogates from any rights the Executive may have under any applicable statute, and in particular the parties agree that the rights, entitlements and benefits set out in this Agreement to be paid to the Executive shall in no event be less than the Executive's entitlement pursuant to any successor legislation from time to time. Any payments made hereunder are agreed to be inclusive of all payments required of the Corporation under the said legislation. 5.7 This Agreement may be amended only by an instrument in writing signed by both parties. 5.8 Neither party may waive or shall be deemed to have waived any right it has under this Agreement (including under this section) except to the extent that such waiver is in writing. ************ If you are in agreement with the foregoing terms and conditions, kindly execute below where indicated and return one fully executed copy of this Agreement to the attention of Human Resources, JetForm Corporation, 560 Rochester Street, Ottawa, Ontario K1S 5K2 Yours very truly, JETFORM CORPORATION Per: ------------------------------------ Authorized Officer Accepted and agreed this ________ day of _____________, 2000 --------------------------------------- Declan Kelly APPENDIX 'A' ILLUSTRATION The following is an illustration of the application of the sums payable on termination pursuant to Article 3.1(d) and 3.2. Assume that the Executive receives the following compensation: (a) base salary of $52,000; (b) annual incentive of $48,000 payable on a fiscal year basis (i.e. May 1st to April 30th) paid to staff on August 15th following year end. (c) 100 stock options vest on June 1st of each calendar year. The Executive receives notice dated January 1st that his employment is terminated immediately. The Executive secures other employment on May 1st. The Termination Date is January 1st. The Executive will continue to receive his regular salary to May 1st, at which time he will be entitled to receive 50% of the balance otherwise payable (i.e. 50% of ($52,000 less the $17,333 paid) = $17,333.50). The Executive, having worked 8/12 of the fiscal year will be entitled to receive 8/12 of the annual incentive, or $32,000 paid on August 15th. The Executive will have until February 1st of the following year to exercise any stock options which vested from the date notice of termination was given to December 31st following the notice (i.e. those which had vested at the date notice was given plus the 100 options which vested during the 12 month notice period). EX-10.42 11 0011.txt CONTRACTUAL TERMS EXHIBIT 10.42 Memorandum To: John Gleed From: Graham MacMillan, Chairman, Compensation Committee Donna Morris, VP Human Resources Date: February 16, 2000 Re: Contractual Terms - Interim CEO, Professional Consulting Services - -------------------------------------------------------------------------------- John, further to our discussions we are pleased to outline the terms with respect to your compensation and benefits in the role of interim CEO, and in the provision of professional consulting services upon conclusion of your interim appointment. This document supercedes the previous agreement outlined in the memo dated June 16th 1999 prepared by John Kelly. I would ask that you review these terms and upon acceptance sign and date a copy of this letter for Corporate files. Compensation Effective December 1st 1999 you will compensated at a rate of $1,500 per day in recognition of your role as interim CEO. Upon completion of this interim role, as you have agreed to provide professional consulting services to JetForm Corporation for a period up to April 30th 2002, you will be paid a monthly retainer of $7,500 for up to five (5) days of professional services. Any additional time over the five (5) days will be billed at the rate of $1,500 per day. The contract manager for consulting services will be the CEO or their designate. Should you wish to extend consulting services beyond April 30th 2002 a separate agreement would be entered into. Stock Option Allocation In recognition of your role as interim CEO you have been granted options under the terms of the JetForm Employee Stock Option Program to purchase 35,000 common shares of JetForm Corporation. The anniversary date of the grant is December 1, 1999 and the exercise price of the stock options granted is US $4.75. The options granted to you become available for exercise over a three-year period and vest in sixths every six months, a detailed vesting schedule and Personnel Stock Option Status Report is attached for your reference. The vesting of all of your awarded stock options including this allocation, will continue for the natural life of the options. Extended Medical Insurance / Life Insurance As a founder of JetForm Corporation you and your eligible dependents will be provided with JetForm's medical, dental and life insurance benefits. In the event that JetForm Corporation decides to terminate this agreement, without just cause, prior to April 30th 2002, you will be entitled to compensation equivalent to the earnings you would have been eligible to receive under the terms of this agreement. John, once again we thank you for your continued efforts in support of JetForm's success! Graham MacMillan Chairman, Compensation Committee Donna Morris VP, Human Resources I have read and agree to the above noted terms. - ------------------------------ ------------------------- John Gleed Date EX-10.43 12 0012.txt SHARE PURCHASE AGREEMENT EXHIBIT 10.43 THIS SHARE PURCHASE AGREEMENT is dated as of the 19th day of May, 1999. BETWEEN: JETFORM CORPORATION (the "Vendor" or "JetForm") AND: CALIAN TECHNOLOGY LTD. (the "Purchaser" or "Calian") WHEREAS: A. The Vendor is the registered and beneficial owner of 1,000,000 common shares and 23,750 Class B Cumulative Redeemable Retractable Convertible Preference Shares (the "Purchased Shares") in the capital stock of Why Interactive Inc. (the "Company"), being all the issued and outstanding shares in the capital stock of the Company. B. The Vendor has agreed to sell to the Purchaser and the Purchaser has agreed to purchase from the Vendor the Purchased Shares in consideration of the Purchase Price as defined hereinafter, such purchase to be effective as of April 30, 1999 (the "Effective Date"). C. The Vendor, the Purchaser and the Company have entered into a certain term sheet as of April 30, 1999 as amended setting out the general terms in respect of the purchase and sale of the Purchased Shares (the "Term Sheet"), which general terms are fully defined pursuant to the herein Agreement. D. Contemporaneously with the execution of the Term Sheet, the Vendor, the Purchaser and LaBarge Weinstein (the "Escrow Agent") entered into a certain escrow agreement as of April 30, 1999 (the "Escrow Agreement") pursuant to which the Purchaser deposited the amount of $3,000,000 with the Escrow Agent, which amount shall be applied in respect of the Purchase Price as hereinafter defined. NOW THEREFORE THIS AGREEMENT WITNESSETH that for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows: 1. Purchase and Sale On the Closing (as hereinafter defined), subject to the terms hereof, the Vendor agrees to sell the Purchased Shares to the Purchaser and the Purchaser agrees to purchase from the Vendor the Purchased Shares. The sale of the Purchased Shares by the Vendor to the Purchaser shall be completed by the parties on the date set forth in Section 4 hereof, by delivery by the Vendor to the Purchaser of the documents set forth in Section 4 hereof against delivery by the Purchaser to the Vendor of the consideration specified in Section 2 hereof. 2. Purchase Price and Payment Subject to the adjustments as detailed below, if any, the aggregate consideration for the Purchased Shares shall be $6,359,000 (the "Purchase Price"). The Purchase Price shall be subject to adjustment by an increase in the amounts (the "Adjustment Amounts") of any cash payments received after the Effective Date by either the Purchaser or the Company in respect of amounts due to the Company: (a) from Viva Interactive Learning Inc. for events or services which were completed prior to the Effective Date; and/or (b) in respect of any research and development tax credits earned by the Company attributable to activities taking place prior to the Effective Date (the "ITCs"). On the Closing (as hereinafter defined), the Purchase Price shall be paid and satisfied as follows: (i) by the delivery by the Escrow Agent pursuant to the Escrow Agreement to the Vendor of a certified cheque or bank draft in the aggregate amount of $3,000,000 less $1,259,000 for liabilities payable by the Company to the Vendor (the "Intercompany Liability") as at the Effective Date (the "Closing Cash Payment"); (ii) by the delivery to the Vendor of a convertible debenture issued by the Purchaser substantially in the form attached hereto as Schedule A1 having a principal amount of $2,359,000 (the "Convertible Debenture"), which Convertible Debenture shall have a term of three (3) years from Closing, bear interest at a rate of five percent (5%) per annum payable quarterly in arrears and shall be convertible into five hundred and thirty-nine thousand, two hundred (539,200) common shares of the Purchaser (the "Consideration Shares") which shall be freely tradeable on the terms set out therein; and (iii) by the delivery to the Vendor of a debenture issued by the Purchaser substantially in the form attached hereto as Schedule A2 having a principal amount of $1,000,000 (the "Debenture") which Debenture shall be payable on April 15, 2000, bear interest at a rate of five percent (5%) per annum payable quarterly in arrears. Included in the Purchase Price, upon the Closing, the Purchaser shall cause the Escrow Agent to deliver to the Vendor a certified cheque or bank draft representing the Intercompany Liability. Subsequent to the Closing, and for an indefinite period thereafter, the Purchaser shall pay, or cause the Company to pay, amounts comprising the Adjustment Amounts to the Vendor within 30 days of the receipt of same, or in the case of any ITCs, within 30 days of Revenue Canada having issued its final notice of assessment, reassessment or confirmation, as the case may be. The Purchaser shall be liable to account to the Vendor in respect of the Adjustment Amounts upon request by the Vendor acting reasonably. Notwithstanding any provision herein to the contrary, the foregoing covenants shall survive the completion of the transactions contemplated hereby. The parties hereto acknowledge that the Vendor has operated the Company since the Effective Date on behalf of the Purchaser and shall prepare and submit to the Purchaser by June 15, 1999 the Company's financial statements for the month of May 1999. Upon agreement by the parties hereto as to the accuracy of such financial statements, to the extent of a surplus of cash for such month, the Vendor shall remit such surplus to the Purchaser and, to the extent of a cash deficit for such month, the Purchaser shall remit such deficit to the Vendor, in either case within fifteen (15) days of the parties hereto agreeing on the amount of such surplus or deficit, as the case may be. The foregoing is in addition to the Vendor's right to withdraw the cash and cash equivalents as of the Effective Date. Other Covenants (1) the Vendor shall have caused the Company to reduce the work in progress shown on its books of account as at the Effective Date, as it relates to its contract with Brooks Cole by $300,000; (2) within thirty (30) days of Closing, the Vendor shall enter into an agreement with the Company, on terms acceptable to the Purchaser acing reasonably, for a services solution worth a minimum of $200,000 to be delivered by the Company no later than September 30, 1999; (3) in the event that the total revenue of the Company for the five month period ending September 30, 1999, calculated using the percentage of completion method, falls short of $2,083,000, the Vendor shall contract with the Company for services equal to the amount of such shortfall to be billed at direct salary costs plus 400% of such costs, subject to an aggregate maximum of $500,000 provided that the Purchaser provides a written demand for such contract on or before December 31, 1999 and provided further that the Purchaser uses its commercial best efforts to realize on the value of the backlog and sales opportunities of the Company so as to reasonably maximize the revenue of the Company as referred to herein; and (4) the Vendor shall use its commercial best efforts to make available the services of Carolyn Hurst to the Company, or if Ms. Hurst ceases to be an employee of the Vendor or any of its affiliates, or for any other reason, the Vendor shall use its commercial best efforts to make available a similarly qualified individual having knowledge of the operations of the Company acceptable to the Purchaser acting reasonably, on a full-time basis, for a period of two months from the date of Closing, and the Vendor shall pay all salary and remuneration to Ms. Hurst, or such other individual as the case may be, during such period. 4. Closing (a) Time of the Essence. Time shall be of the essence of this Agreement. (b) Closing. The closing of this transaction (the "Closing") shall take place at 6:00 p.m. on May 19, 1999 at the offices of LaBarge Weinstein, 333 Preston St., 11th Floor, Ottawa, Ontario, K1S 5N4 or at such other place and at such other time as may be approved in writing by the parties hereto. (c) Closing Procedures. At or before Closing, the Vendor and the Purchaser shall take or cause to be taken all actions, steps and corporate proceedings necessary or desirable to validly and effectively approve or authorize the completion of the transactions herein provided for; and, upon fulfilment of all of the conditions set forth in Sections 5 and 6 which have not been waived in writing as therein provided, the Vendor shall deliver or cause to be delivered to the Purchaser all documents required to be delivered hereunder, including: (1) the certificates representing the Purchased Shares duly endorsed in blank for transfer; (2) a certificate representing the Purchased Shares duly registered in the name of the Purchaser; (3) the minute books, share certificate books and corporate seals of the Company; (4) the written resignation of all directors and officers of the Company and their release of all claims against the Company; (5) the written release of all claims against the Company executed by the Vendor; and (6) all such other assurances, consents, agreements, documents and instruments as may be reasonably required by the Purchaser to complete the transactions provided for in this Agreement; and upon fulfilment of the foregoing provisions of this Section 4 and upon fulfilment of all of the conditions set forth in Sections 5 and 6 which have not been waived in writing as therein provided, the Purchaser shall deliver the Purchase Price on the terms and conditions specified in Section 2 to the Vendor and a certified copy of the minutes of the meeting of the board of directors of the Purchaser which approved of the transactions contemplated by this Agreement, including the issuance of the Convertible Debenture, the Debenture and the reservation of the Consideration Shares. 5. Conditions for the Benefit of the Purchaser The Purchaser shall not be obliged to complete the purchase herein provided for unless, at or prior to the Closing, each of the following conditions shall have been satisfied, it being understood that the said conditions are included for the exclusive benefit of the Purchaser and may be waived in writing by the Purchaser at any time; and the Vendor covenants and agrees with the Purchaser to use his best efforts to ensure that such conditions are fulfilled at or prior to Closing: (a) Representations and Warranties. The representations and warranties set forth in Section 7 shall be true and correct in all respects at Closing. (b) Compliance. All of the terms, covenants and agreements set forth in this Agreement to be complied with or performed at or prior to closing shall have been complied with or performed at or prior to the Closing. (c) Due Diligence Investigation. The Purchaser shall have conducted and completed its investigation of the Company, and the Purchaser, in its sole discretion, shall have been satisfied in all respects with the results of such investigation, and, in its sole discretion, shall have determined to proceed with the transactions contemplated in this Agreement. (d) Material Adverse Change. During the period from the Effective Date to the Closing, there shall have been no material adverse change in the Company, the Purchased Shares or the business of the Company. (e) Good Title. The Vendor shall have good and marketable title to the Purchased Shares, free and clear of any and all liens, encumbrances and security interests of any nature and kind whatsoever (a "Lien"). (f) Consents and Approvals. All consents and approvals (the "Vendor Consents and Approvals") required to be obtained by the Vendor in connection with the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement shall have been obtained. (g) Notices. All notices (the "Vendor Notices") required to be given by the Vendor in connection with the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement shall have been obtained. (h) Deliveries. The Vendor shall have delivered to the Purchaser the documents contemplated in Section 4 and otherwise hereunder. In case any of the foregoing conditions shall not have been fulfilled at or prior to Closing, the Purchaser in its sole discretion may either: (a) terminate this Agreement by notice in writing to the Vendor, in which event the Purchaser shall be released from all obligations under this Agreement, and unless the Purchaser can show that the condition for which the Purchaser has terminated this Agreement could reasonably have been performed or complied with or caused to have been performed or complied with by the Vendor, then the Vendor shall also be released from all obligations hereunder; or (b) waive compliance with any such condition if it shall see fit to do so, without prejudice to its right of termination in the event of non-fulfilment of any other condition in whole or in part. 6. Conditions for the Benefit of the Vendor The Vendor shall not be obliged to complete the sale herein provided for unless, at or prior to Closing, each of the following conditions shall have been satisfied, it being understood that the said conditions are included for the exclusive benefit of the Vendor and may be waived in writing by the Vendor at any time; and the Purchaser covenants and agrees with the Vendor to use its best efforts to ensure that such conditions are fulfilled at or prior to Closing: (a) Representations and Warranties. The representations and warranties set forth in Section 8 shall be true and correct in all respects at Closing. (b) Compliance. All of the terms, covenants and agreements set forth in this Agreement to be complied with or performed by the Purchaser at or prior to Closing shall have been complied with or performed by the Purchaser at or prior to Closing. (c) Consents and Approvals. All consents and approvals required to be obtained by the Purchaser in connection with the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement shall have been obtained. (d) Notices. All notices required to be given by the Purchaser in connection with the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement shall have been obtained. (e) Deliveries. The Purchaser shall have delivered to the Vendor the Purchase Price on the terms and conditions specified in Section 2 and all such other documents as the Vendor considers reasonably necessary or desirable to complete the transactions contemplated hereby. In case any of the foregoing conditions shall not have been fulfilled at or prior to Closing, the Vendor in its sole discretion may either: (a) terminate this Agreement by notice in writing to the Purchaser, in which event the Vendor shall be released from all obligations under this Agreement, and unless the Vendor can show that the condition for which he terminated this Agreement could reasonably have been performed or complied with by the Purchaser, the Purchaser shall also be released from all obligations hereunder; or (b) waive compliance with any such condition if he shall see fit to do so, without prejudice to his right of termination in the event of non-fulfilment of any other condition in whole or in part. 7. Representations and Warranties of the Vendor. As a material inducement to the Purchaser's entering into this Agreement and completing the transactions contemplated by this Agreement and acknowledging that the Purchaser is entering into this Agreement in reliance upon the representations and warranties of the Vendor set out in this Section 7, the Vendor represents and warrants to the Purchaser as follows: (a) Incorporation of Vendor. The Vendor is a corporation incorporated and validly subsisting under the laws of the jurisdiction of its incorporation. The Vendor has the corporate power and authority and is qualified to own and dispose of the Purchased Shares. No act or proceeding has been taken by or against the Vendor in connection with the dissolution, liquidation, winding up, bankruptcy or reorganization of the Vendor. (b) Authorization by Vendor. The Vendor has the corporate power, authority and capacity to enter into this Agreement and all other agreements and instruments to be executed by it as contemplated by this Agreement and to carry out its obligations under this Agreement and such other agreements and instruments. The execution and delivery of this Agreement and such other agreements and instruments and the completion of the transactions contemplated by this Agreement and such other agreements and instruments have been duly authorized by all necessary corporate action on the part of the Vendor and its shareholders. (c) Enforceability of Vendor's Obligations. This Agreement constitutes a valid and binding obligation of the Vendor enforceable against the Vendor in accordance with its terms subject, however, to limitations on enforcement imposed by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of the rights of creditors and others and to the extent that equitable remedies such as specific performance and injunctions are only available in the discretion of the court from which they are sought. The Vendor is not an insolvent person within the meaning of the Bankruptcy and Insolvency Act (Canada) or similar laws of any other jurisdiction and will not become an insolvent person as a result of the Closing. (d) Residence of Vendor. The Vendor is not a non-resident of Canada within the meaning of Section 116 of the Income Tax Act (Canada). (e) Ownership of the Purchased Shares. The Vendor is, and at the Closing will be, the registered and beneficial owner of the Purchased Shares with good and marketable title thereto, free and clear of all Liens. No person other than the Purchaser has any agreement, option, right or privilege capable of becoming an agreement for the purchase from the Vendor of any of the Purchased Shares. (f) Consents and Approvals. All the Vendor Consents and Approvals are listed in Schedule D. Except for the Vendor Consents and Approvals, no consent or approval of any person is required in connection with the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement or to permit the Company to carry on the business of the Company after the Closing as the business is currently carried on by the Company. (g) Notices. All the Vendor Notices are listed in Schedule D. Except for the Vendor Notices, no notice is required to be delivered to any person in connection with the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement or to permit the Company to carry on the business of the Company after the Closing as the business is currently carried on by the Company. (h) Absence of Conflicting Agreements. The execution, delivery and performance of this Agreement by the Vendor and the completion (with any required Vendor Consents and Approvals and Vendor Notices) of the transactions contemplated by this Agreement do not and will not result in or constitute any of the following: (i) a default, breach or violation or an event that, with notice or lapse of time or both, would be a default, breach or violation of any of the terms, conditions or provisions of the articles or by-laws of the Vendor or the Company; (ii) an event which, pursuant to the terms of any contract, licence or permit, causes any right or interest of the Company to come to an end or be amended in any way that is detrimental to the business of the Company or entitles any other person to terminate or amend any such right or interest; (iii) the creation or imposition of any Lien on any asset of the Company; or (iv) the violation of any applicable law by the Vendor or the Company. (i) Organization of the Company. The Company is a corporation duly incorporated and validly subsisting under the laws of Ontario. Except as set out in Schedule D, the Company has no subsidiaries or agreements of any nature to acquire any subsidiary or to acquire or lease any business operation. The Company is licensed, registered and qualified to do business and is in good standing under the laws of the Province of Ontario, which jurisdictions is the only one in which the business of the Company is carried on, and neither the character nor the location of the properties owned by the Company or any subsidiary nor the nature of the business conducted by it requires licensing, registration or qualification under the laws of any other jurisdiction. The Company has full corporate power to carry on the business of the Company and to own and operate its assets, properties and business as now carried on and owned and operated. (j) Share Capital. The authorized capital of the Company including, without limitation, any consists of an unlimited number of common shares and an unlimited number of Class B Cumulative Redeemable Retractable Convertible Preferred Shares of which there are 1,000,000 common shares and 23,750 Class B Cumulative Redeemable Retractable Convertible Preferred Shares issued and outstanding as fully paid and non-assessable. The Company does not have a stock option plan and there are no outstanding securities convertible into or exchangeable for any shares of capital stock or any rights (either pre-emptive or other) to subscribe for or to purchase, or any options, rights or warrants for the purchase of, or any agreements providing for the issuance of, or any calls, commitments or claims of any character relating to the issuance of, any securities in the capital of the Company. (k) Dividends. Except as set out in Schedule D in relation to the common shares of the Company, the Company has not, since the date of its incorporation, declared or made any payment of any dividend or other distribution in respect of its common shares or its Class B Cumulative Redeemable Retractable Convertible Preferred Shares and has not redeemed, purchased or otherwise acquired any shares. (l) Corporate Records. The minute books of the Company contain true, correct and complete copies of its articles, its by-laws, the minutes of every meeting of its board of directors and every committee thereof and of its shareholders and every written resolution of its directors and shareholders since the acquisition of the Company by the Vendor in 1993. The share certificate book, register of shareholders, register of transfers and register of directors and officers of the Company are complete and accurate in all material respects. (m) Bankruptcy. The Company is not an insolvent person and has not committed an act of bankruptcy within the meaning of the Bankruptcy and Insolvency Act (Canada) or similar laws of any other jurisdiction and has not made an assignment in favour of its creditors nor made a proposal in bankruptcy to its creditors or any class thereof nor had any petition for a receiving order presented in respect of it. The Company has not initiated proceedings with respect to a compromise or arrangement with its creditors or for its winding up, liquidation or dissolution. No receiver has been appointed in respect of the Company or any of its assets or the Purchased Shares and no execution or distress has been levied upon any of such assets or the Purchased Shares. (n) Financial Statements. The Vendor has furnished the Purchaser with the management prepared unaudited financial statements of the Company for the fiscal year ended April 30, 1999 (collectively, the "Financial Statements"), true and complete copies of which are annexed to Schedule D. The Financial Statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). The balance sheets contained in such Financial Statements fairly present in all material respects the financial position of the Company as of their respective dates and the statements of earnings and retained earnings contained in the Financial Statements fairly present in all material respects the results of operations for the periods indicated, subject to the disallowance of any input tax credits claimed. Since April 30, 1999, the Company has carried on its business in the ordinary course and there has been no material adverse change in the business, financial condition, assets, results of operations of the Company. The fixed assets that form part of this transaction are made up of those listed in Schedule D and any and all other fixed assets of the Company will have been or shall be transferred to the Vendor on or prior to the Closing. The Vendor shall be entitled to withdraw the cash and cash equivalents of the Company as of the Effective Date, being $300,095. (o) Title to Assets. Except as disclosed in Schedule D, the Company has good and marketable title to all of its assets, free and clear of any and all Liens. Schedule D sets out a complete and accurate list of all locations where the assets of the Company are situated, including a brief description of the assets situated at each location. All machines, machinery, equipment, tools or other moveable or mechanical property forming part of the assets are in good operating condition and are in a state of good repair and maintenance, reasonable wear and tear excepted. There is no agreement, option or other right or privilege outstanding in favour of any person for the purchase from the Company and/or Vendor of the business of the Company or of any of the assets out of the ordinary course of business. Such assets are sufficient to permit the continued operation of the business of the Company in substantially the same manner as conducted in the year ended on the date of this Agreement. There is no agreement, option or other right or privilege outstanding in favour of any person for the purchase from the Company of its business or of any of its assets out of the ordinary course of its business. (p) Leased Premises. The Company leases the real property premises at 560 Rochester Street, Ottawa, Ontario, which lease will terminate as of June 15, 1999. (q) Material Contracts. Schedule D lists all the contracts that the Company is a party to which are material to the operation of the Business ("Material Contracts"). The Company is not in default under any Material Contract and there has not occurred any event which, with the lapse of time or giving of notice or both, would constitute a default under any Material Contract by the Company or any other party to the Material Contract. Each Material Contract is in full force and effect, unamended by written or oral agreement, and the Company is entitled to the full benefit and advantage of each Material Contract in accordance with its terms. Each Material Contract is in good standing and neither the Company nor the Vendor has received any notice of a default by any party under any Material Contract nor any dispute between the Company and any other party in respect of any Material Contract. (r) Intellectual Property. (i) Schedule D lists all of the Intellectual Property. The Intellectual Property, and all registrations of the Intellectual Property, are valid and subsisting. All of the registrations and applications for registration of the Intellectual Property are in good standing and are recorded in the name of the Company. No application for registration of any of the Intellectual Property has been rejected. (ii) To the Vendor's and the Company's knowledge, the Company is the first and only owner of the Intellectual Property and is entitled to the exclusive and uninterrupted use of the Intellectual Property without payment of any royalty or other fees. No person has any right, title or interest in any of the Intellectual Property and all such persons have waived their moral rights in any copyright works within the Intellectual Property. (iii) To the Vendor's and the Company's knowledge, there is no litigation relating to the Intellectual Property. (iv) The employees of the Company have agreed to maintain the confidentiality of confidential Intellectual Property. (v) All of the Company's permissions and licences to use the industrial or intellectual property of other Persons are disclosed in Schedule D. The Company has not permitted or licensed any person to use any of the Intellectual Property except as disclosed in Schedule D. Each licence referred to in Schedule D is in full force and effect and neither the Company nor the licensor is in default of its obligations thereunder. (vi) To the Vendor's and the Company's knowledge, no person has challenged the validity of any registrations for the Intellectual Property or the Company's rights to any of the Intellectual Property. (vii) To the Vendor's and the Company's knowledge, neither the use of the Intellectual Property nor the conduct of the business of the Company has infringed or currently infringes upon the industrial or intellectual property rights of any other person. (viii) To the Vendor's and the Company's knowledge, no other person has infringed the Company's rights to the Intellectual Property, except as set out in Schedule D. (ix) There is no governmental prohibition or restriction on the use of the Intellectual Property in the jurisdictions in which the Company currently carries on business. For the purposes of this Agreement, "Intellectual Property" means all rights to and interests in: (i) all business and trade names, corporate names, brand names and slogans related to the business of the Company; (ii) all inventions, patents, patent rights, patent applications (including all reissues, divisions, continuations, continuations-in-part and extensions of any patent or patent application), industrial designs and applications for registration of industrial designs related to the business of the Company; (iii) all copyrights and trade-marks (whether used with wares or services and including the goodwill attaching to such trade-marks), registrations and applications for trade-marks and copyrights (and all future income from such trade-marks and copyrights) related to the business; (iv) all rights and interests in and to processes, lab journals, notebooks, data, trade secrets, designs, know-how, product formulae and information, manufacturing, engineering and other drawings and manuals, technology, blue prints, research and development reports, agency agreements, technical information, technical assistance, engineering data, design and engineering specifications, and similar materials recording or evidencing expertise or information related to the business of the Company; (v) all of the intellectual property listed in Schedule D; (vi) all other intellectual and industrial property rights throughout the world related to the business of the Company; (vii) all licences of the intellectual property listed in items (i) to (vi) above; (viii) all future income and proceeds from any of the intellectual property listed in items (i) to (vi) above and the licences listed in item (vii) above; and (ix) all rights to damages and profits by reason of the infringement of any of the intellectual property listed in items (i) to (vii) above. (s) Undisclosed Liabilities. Except as disclosed in Schedule D, the Company does not have any liabilities, obligations, indebtedness or commitments, whether accrued, absolute, contingent or otherwise, which are not disclosed in the Financial Statements or referred to or disclosed herein, other than liabilities, obligations and indebtedness (i) incurred in the normal course of business; and (ii) which do not exceed in the aggregate $15,000. (t) Litigation. Except for the DREX Lawsuit (as defined herein), there is no action, suit, proceeding, claim, application, complaint or investigation in any court or before any arbitrator or before or by any regulatory body or governmental or non-governmental body pending or threatened by or against the Company and/or Vendor related to its business or affecting its business, operations or capital or the transactions contemplated by this Agreement, and there is no factual or legal basis which could give rise to any such action, suit, proceeding, claim, application, complaint or investigation. (u) Employee Matters. Schedule D lists all the employees of the Company as of the date of this Agreement and the age, position, status, length of service, compensation, vacation entitlement, remaining vacation for 1999 and all other benefits of each of them, respectively. The Purchaser has been provided with copies of all employment agreements. Except as set out in Schedule D, the Company is not a party to or bound by any contracts or requirements of applicable laws in respect of any of its employees or former employees, including: (i) any contracts for the employment or statutorily required re-employment of any employee; or (ii) any bonus, deferred compensation, profit sharing, stock option or purchase, pension, retirement, hospitalization insurance or other plans or arrangements providing employee benefits. There is no labour strike, dispute, slowdown or stoppage actually pending or involving or, to the knowledge of the Vendor or the Company, threatened against the Company with respect to the business of the Company. No union representation question exists respecting the employees in connection with the business of the Company and no collective bargaining agreement is in place or currently being negotiated by the Company. Except as set out in Schedule D, there are no wages, salaries or bonuses owing or promised to any of the employees other than wages accruing, and unpaid, in the normal course of business for the most recent pay period to the Closing and in respect of accrued vacation. No notice has been received by the Company or the Vendor of any complaint which has not been resolved, filed by any of its employees claiming that the Company has violated the Employment Standards Act (Ontario) or the Human Rights Code (Ontario) (or any applicable employee or human rights or similar legislation in the other jurisdictions in which the Company operates), or of any complaints or proceedings which have not been resolved of any kind involving the Company or, to the Vendor's or the Company's knowledge, after due inquiry, any of the employees before any labour relations board. There are no outstanding orders or charges against the Company under the Occupational Health and Safety Act (Ontario) (or any applicable health and safety legislation in the other jurisdictions in which the Company carries on business). All levies, assessments and penalties made against the Company pursuant to the workers' compensation legislation in the jurisdictions in which the Company carries on business have been paid by the Company and the Company has not been reassessed under any such legislation except such as have been resolved. (v) Bonuses. The Company has not paid any bonus, fee, distribution, remuneration or other compensation to any person (other than salaries, wages or bonuses paid or payable to employees in the ordinary course of business in accordance with current compensation levels and practices as set out in Schedule D and fees to professional advisors in the ordinary course of business). (w) Affiliated Transactions. Except as disclosed in Schedule D, the Company is not liable in respect of advances, loans, guarantees to or on behalf of any shareholder, officer, director, employee or subsidiary of the Company or any other person with whom the Company does not deal at arm's length. (x) Tax Filings. Except as disclosed in Schedule D, the Company has prepared and filed on time with all appropriate taxing authorities all returns, declarations, remittances, information returns, reports and other documents of every nature required to be filed by or on behalf of the Company in respect of any taxes or in respect of any other provision in any domestic or foreign federal, provincial, municipal, state, territorial or other taxing statute for all fiscal periods ending prior to the date hereof and will continue to do so in respect of any fiscal period ending on or before the Closing. All such returns, declarations, remittances, information returns, reports and other documents are correct and complete in all material respects, and no material fact has been omitted therefrom. No extension of time in which to file any such returns, declarations, remittances, information returns, reports or other documents is in effect. All taxes shown on all such returns, or on any assessments or reassessments in respect of any such returns have been paid in full. To the Vendor's and the Company's knowledge, no action, proceeding or investigation has been threatened by any governmental authority for the assessment or collection of any taxes for which the Company would be liable. (y) Taxes Paid. Except as disclosed in Schedule D, the Company has paid in full all taxes required to be paid on or prior to the date hereof and has made adequate provision in the Financial Statements in accordance with GAAP for the payment of all taxes in respect of all fiscal periods ending on or before the Closing. (z) Reassessments of Taxes. Except as disclosed in Schedule D, there are no reassessments of the Company's taxes that have been issued and are outstanding and there are no outstanding issues which have been raised and communicated to the Company by any governmental body for any taxation year in respect of which a tax return of the Company has been audited. No governmental body has challenged, disputed or questioned the Company in respect of taxes or of any returns, filings or other reports filed under any statute providing for taxes. The Company is not negotiating any draft assessment or reassessment with any governmental body. The Vendor is not aware of any contingent liabilities for taxes or any grounds for an assessment or reassessment of the Company, including, without limitation, unreported benefits conferred on any shareholder of the Company, aggressive treatment of income, expenses, credits or other claims for deduction under any return or notice other than as disclosed in the Financial Statements. Neither the Company nor the Vendor has received any indication from any governmental body that an assessment or reassessment of the Company is proposed in respect of any taxes, regardless of its merits. The Company has not executed or filed with any governmental body any agreement or waiver extending the period for assessment, reassessment or collection of any taxes. All taxation years up to and including the taxation year ended March 31, 1998 are considered closed by Canadian federal and provincial governmental bodies for the purposes of all taxes. (AA) Withholdings and Remittances. The Company has withheld from each payment made to any of its present or former employees, officers and directors, and to all persons who are non-residents of Canada for the purposes of the Income Tax Act (Canada) all amounts required by law to be withheld, and furthermore, has remitted such withheld amounts within the prescribed periods to the appropriate governmental body. The Company has remitted all Canada Pension Plan contributions, provincial pension plan contributions, employment insurance premiums, employer health taxes, workers compensation premiums and other taxes payable by it in respect of its employees and has remitted such amounts to the proper governmental body within the time required under the applicable legislation. The Company has charged, collected and remitted on a timely basis all taxes as required under applicable legislation on any sale, supply or delivery whatsoever, made by the Company. (BB) Absence of Certain Changes or Events. Except as disclosed in Schedule D, since the date to which the Financial Statements are made up, the Company has not: (i) suffered any material adverse change in the business of the Company, financial condition, assets or results of operations of the Company; (ii) amended its articles; (iii) declared or made any payment of any dividend or other distribution in respect of its shares and has not redeemed, purchased or otherwise acquired any shares; (iv) issued or sold any shares or other securities or issued, sold or granted any option, warranty or right to purchase any shares or other securities of the Company; (v) disposed of any of the assets reflected on the balance sheet forming part of the Financial Statements, except sales of assets in the normal course of business; (vi) changed any accounting or costing systems or methods in any material respect; (vii) suffered any extraordinary loss or cancelled or waived any debt, claim or other right; (viii) incurred or assumed any liabilities, obligations or indebtedness (whether accrued, absolute, contingent or otherwise), except unsecured current liabilities, obligations and indebtedness incurred in the normal course of business and not in excess of $5,000; (ix) made or granted any bonus, increased the compensation paid (other than for normal merit and cost of living increases) or made loans or advances to any director, officer or employee; (x) mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets, except in the normal course of business and in amounts which, individually and in the aggregate are not material to the financial condition of the Company or operation of its business; (xi) entered into any Material Contract or any other transaction that was not in the normal course of business; or (xii) terminated, cancelled or modified in any material respect or received notice or a request for termination, cancellation or modification in any material respect of any Material Contract. (CC) Full Disclosure. None of the foregoing representations and warranties and no document furnished by or on behalf of the Company and the Vendor to the Purchaser in connection with the negotiation of the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state any material fact necessary to make any such statement or representation not misleading. (DD) Use of Name. The Vendor shall, as immediately as practicable after the Closing Time, discontinue further use of the name "Why Interactive Inc." and not use names similar to that name. (EE) Personal Property. All personal property used by the Company for its business is in good operating condition, and repair, ordinary wear and tear excepted. (FF) Real Property. The Company has no real property. (GG) Personal Property Leases. Each personal property lease covering property used by the Company for its business is in full force and effect and has not been amended, and the Company is entitled to the full benefit and advantage of each personal property lease in accordance with its terms. Each personal property lease is in good standing and there has not been any default by any party under any personal property lease nor any dispute between the Company and any other party under any personal property lease. (HH) Insurance. The business, properties and assets of the Company are insured for the benefit of the Company in amounts deemed adequate by the Company's management against risk usually insured against by persons operating a business similar to the business of the Company in the localities where such properties are located. All policies are in full force and effect and the Company is not in material default, whether as to payment of premiums or otherwise, under the terms of such policies. (II) Receivables. The receivables as disclosed in the books of the Company at the Effective Date are valid obligations which arose in the ordinary course of business and are enforceable and fully collectable accounts in the ordinary course of business subject to the reasonable allowance for doubtful accounts as recorded on the books and records of the Company on or before the Effective Date and to the knowledge of the Vendor and the Company are not subject to any set off or counterclaim. None of the receivables are due from a person with whom the Company does not deal at arm's length. (JJ) Inventories. The inventories consist of items of a quality and quantity usable and saleable in the ordinary course of business. All items included in the inventories are owned by the Company. No items included in the inventories are held by the Company on consignment from others or have been pledged as collateral. (KK) Licences and Permits. Schedule D lists all the material licenses and permits required for the lawful operation of its business and identifies the ones that by their terms are not transferable. The Company holds the licences and permits, free and clear any and all liens or encumbrances. All the licences and permits are in good standing and in full force and effect, the Company is not in material violation of any term or provision or requirement of any such licences and permits, and no Person has threatened to revoke, amend or impose any condition in respect of, or commenced proceedings to revoke, amend or impose conditions in respect of, any licence or permit. (LL) Environmental Matters. The Business and the assets as carried on or used by The Company have been carried on and used and are currently carried on and used in compliance with all environmental laws. The Company is not, and has not been, subject to any proceedings alleging the violation by the Company or its employees, agents or others for whom it is responsible of any environmental law and in relation to the business or the assets of the Company. There are no proceedings nor, to the knowledge of the Vendor and the Company, any circumstances or material facts which could, if true, give rise to any proceedings, in which it is alleged that the Company is potentially responsible for a domestic or foreign federal, provincial, state, municipal or local clean-up or remediation of lands contaminated with hazardous substances or for any other remedial or corrective action under an environmental law. (MM) Customers. To the Vendor's and the Company's knowledge, the Company has not received notice of any intention on the part of any customer of the Company to cease doing business with the Company or to modify or change in any material manner any existing arrangement with the Company. To the Vendor's and the Company's knowledge, the relationships of the Company with each of its principal customers is satisfactory and there are no unresolved disputes with any such customers. (NN) Product Warranties. To the knowledge of the Vendor and the Company, there are no material claims against the Company greater than five thousand dollars ($5,000) in Canadian funds on account of product warranties or with respect to the production or sale of defective or inferior products. (OO) Brokerage Fees. Neither the Vendor nor the Company has entered into any agreement which would entitle any person to any valid claim against either the Company or the Purchaser for a broker's commission, finder's fee or any like payment in respect of the purchase and sale of the Purchased Shares or any other matters contemplated by this Agreement. 8. Purchaser's Representations and Warranties. As a material inducement to the Vendor's entering into this Agreement and completing the transactions contemplated by this Agreement and acknowledging that the Vendor is entering into this Agreement in reliance upon the representations and warranties of the Purchaser set out in this Section 8, the Purchaser represents and warrants to the Vendor as follows: (a) Incorporation of Purchaser. The Purchaser is a corporation incorporated and validly subsisting under the laws of the jurisdiction of its incorporation. The Purchaser has the corporate power and authority and is qualified to purchase the Purchased Shares. No act or proceeding has been taken by or against the Purchaser in connection with the dissolution, liquidation, winding up, bankruptcy or reorganization of the Vendor. (b) Authorization by Purchaser. The Purchaser has the corporate power, authority and capacity to enter into this Agreement and all other agreements and instruments to be executed by it as contemplated by this Agreement and to carry out its obligations under this Agreement and such other agreements and instruments. The execution and delivery of this Agreement and such other agreements and instruments and the completion of the transactions contemplated by this Agreement and such other agreements and instruments have been duly authorized by all necessary corporate action on the part of the Purchaser and its shareholders. Concurrently with the execution of this Agreement, the Purchaser shall deliver to the Vendor evidence that the transactions contemplated by this Agreement have been approved by the Purchaser's board of directors. (c) Enforceability of Purchaser's Obligations. This Agreement constitutes a valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms subject, however, to limitations on enforcement imposed by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of the rights of creditors and others and to the extent that equitable remedies such as specific performance and injunctions are only available in the discretion of the court from which they are sought. The Purchaser is not an insolvent person within the meaning of the Bankruptcy and Insolvency Act (Canada) and will not become an insolvent person as a result of the Closing. (d) Consents and Approvals. All consents and approvals required to be obtained by the Purchaser in connection with the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement have been obtained. (e) Notices. All notices required to be given by the Purchaser in connection with the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement have been obtained. (f) Absence of Conflicting Agreements. The execution, delivery and performance of this Agreement by the Purchaser and the completion (with any required Consents and Approvals and Notices) of the transactions contemplated by this Agreement do not and will not result in or constitute any of the following: (i) a default, breach or violation or an event that, with notice or lapse of time or both, would be a default, breach or violation of any of the terms, conditions or provisions of the articles or by-laws of the Purchaser; (ii) an event which, pursuant to the terms of any contract, licence or permit, causes any right or interest of the Purchaser to come to an end or be amended in any way that is detrimental to its business or entitles any other person to terminate or amend any such right or interest; (iii) the creation or imposition of any lien on any asset of the Purchaser; or (iv) the violation of any applicable law by the Purchaser. (g) Litigation. There is no action, suit, proceeding, claim, application, complaint or investigation in any court or before any arbitrator or before or by any regulatory body or governmental or non-governmental body pending or threatened by or against the Purchaser related to its business or affecting its business, operations or capital or the transactions contemplated by this Agreement, and there is no factual or legal basis which could give rise to any such action, suit, proceeding, claim, application, complaint or investigation. (h) Brokerage Fees. The Purchaser has not entered into any agreement which would entitle any person to any valid claim against the Vendor or the Purchaser for a broker's commission, finder's fee or any like payment in respect of the purchase and sale of the Purchased Shares or any other matters contemplated by this Agreement. (i) Purchaser Reports and Financial Statements. The Purchaser has previously furnished to the Vendor complete and accurate copies of its (a) Annual Report for the year ended September 30, 1998, as filed with the Canadian securities regulatory authorities, (b) Quarterly Report for the quarter ended December 31, 1998 as filed with the Canadian securities regulatory authorities and (c) Annual Information Form for the year ended September 30, 1998 as filed with the Canadian securities regulatory authorities (the "Purchaser Reports"). The Purchaser Reports did not contain any statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The financial statements of the Purchaser contained in the Purchaser Reports fairly present, in conformity with generally accepted accounting principles in Canada GAAP applied on a consistent basis throughout the periods covered thereby, in all material respects the financing condition of the Purchaser on a consolidated basis at the dates of said statements and the results of its operations and its cash flows for the periods covered thereby. The financial statements consisting in each case of a balance sheet and the accompanying statements of income retained earnings and changes in financial position for the period then ended and notes to the financial statements, together with the report of the auditors thereon are complete and accurate in all material respects. (j) Consideration Shares. The Consideration Shares will have been duly authorized, conditionally allotted, set aside and reserved for issuance pursuant to the conversion of the Convertible Debenture, and upon exercise of the Convertible Debenture the Consideration Shares will be issued and delivered by the Purchaser as fully paid and non-assessable shares in the capital of the Purchaser. (k) Timely Disclosure. All material facts and material changes, as such terms are defined in the Securities Act (Ontario), regarding the Purchaser or its securities, that have occurred since September 30, 1998, have been publicly disclosed in accordance with applicable law and the Purchaser has experienced no material changes that have not been so disclosed since that date. (l) Listing of Consideration Shares. The Purchaser shall have obtained at or prior to the Closing the necessary consents from The Toronto Stock Exchange (the "TSE") to the issue of the Consideration Shares, on such conditions as are prescribed by the TSE, and shall arrange for the listing and posting for trading of the Consideration Shares on the TSE upon their issue following the Closing. (m) Reporting Issuer Status. The Purchaser is a reporting issuer in good standing under the securities laws of any province of Canada in which it is a reporting issuer at the date hereof. (n) No Cease Trade Order. No securities commission or other regulatory authority has issued any order preventing or suspending the trading of the Purchaser's securities or prohibiting the sale of the Consideration Shares, and no proceedings for such purpose are pending or threatened, to the Purchaser's best knowledge. (o) Full Disclosure. None of the foregoing representations and warranties and no document furnished by or on behalf of the Purchaser to the Vendor in connection with the negotiation of the transactions contemplated by this Agreement contain any untrue statement of a material fact or misleading statement. 9. Survival of Representations and Warranties The representations, warranties and covenants of the parties contained in this Agreement shall survive the completion of the transaction contemplated in it and shall continue in full force and effect for the benefit of the Purchaser and the Vendor as the case may be for a period of two (2) years following the date of Closing, after which time the parties shall be released from all obligations in respect of such representations and warranties except with respect to any Claim (as defined herein) attested to by a party in writing before the expiration of such period, but there shall be no time limitation on the representations and warranties of the Vendor set out in Section 7 which relate to the incorporation of the Vendor and the Company, the due authorization of this Agreement by the Vendor, the enforceability of Vendor's obligations under this Agreement, tax matters which shall be time limited to the statutory expiration of claims thereon, environmental matters or to the title of any person to any property (whether real or personal, tangible or intangible), or no time limitation on the representations and warranties of the Purchaser set out in Section 8 which relate to the incorporation of the Purchaser, the due authorization of this Agreement by the Purchaser, and the enforceability of the Purchaser's obligations under this Agreement. 10. Indemnification 10.1 Indemnity. The Vendor (an "Indemnifying Party") shall indemnify and hold the Purchaser, its directors, officers, employees, agents, representatives and the Purchaser's affiliates and their respective directors, officers, employees, agents, representatives (an "Indemnified Party") harmless in respect of any claim, demand, action, cause of action, damage, loss, cost, liability or expense (hereinafter referred to as a "Claim") which may be made or brought against an Indemnified Party or which it may suffer or incur directly or indirectly as a result of, in respect of or arising out of: (a) any incorrectness in or breach of any representation or warranty of the Vendor contained in this Agreement or under any other agreement, certificate or instrument executed and delivered pursuant to this Agreement; or (b) any breach of or any non-fulfilment of any covenant or agreement on the part of the Vendor under this Agreement or under any other agreement, certificate or instrument executed and delivered pursuant to this Agreement. The Purchaser (an "Indemnifying Party") shall indemnify and hold the Vendor (an "Indemnified Party") harmless in respect of any claim, demand, action, cause of action, damage, loss, cost, liability or expense (hereinafter referred to as a "Claim") which may be made or brought against an Indemnified Party or which it may suffer or incur directly or indirectly as a result of, in respect of or arising out of: (a) any incorrectness in or breach of any representation or warranty of the Purchaser contained in this Agreement or under any other agreement, certificate or instrument executed and delivered pursuant to this Agreement; or (b) any breach of or any non-fulfilment of any covenant or agreement on the part of the Purchaser under this Agreement or under any other agreement, certificate or instrument executed and delivered pursuant to this Agreement. 10.2 Notice of Claim. If an Indemnified Party becomes aware of a Claim in respect of which indemnification is provided for pursuant to Section 10.1, the Indemnified Party shall promptly give written notice of the Claim to the Indemnifying Party. Such notice shall specify whether the Claim arises as a result of a claim by a person against the Indemnified Party (a "Third Party Claim") or whether the Claim does not so arise (a "Direct Claim"), and shall also specify with reasonable particularity (to the extent that the information is available): (a) the factual basis for the Claim; and (b) the amount of the Claim, if known. If, through the fault of the Indemnified Party, the Indemnifying Party does not receive notice of any Claim in time effectively to contest the determination of any liability susceptible of being contested, then the Liability of the Indemnifying Party to the Indemnified Party under this Article shall be reduced by the amount of any losses incurred by the Indemnifying Party resulting from the Indemnified Party's failure to give such notice on a timely basis. 10.3 Direct Claims. In the case of a Direct Claim, the Indemnifying Party shall have 30 days from receipt of notice of the Claim within which to make such investigation of the Claim as the Indemnifying Party considers necessary or desirable. For the purpose of such investigation, the Indemnified Party shall make available to the Indemnifying Party the information relied upon by the Indemnified Party to substantiate the Claim, together with all such other information as the Indemnifying Party may reasonably request. If both parties agree at or before the expiration of such 30 day period (or any mutually agreed upon extension thereof) to the validity and amount of such Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the full agreed upon amount of the Claim, failing which the matter shall be referred to binding arbitration in such manner as the parties may agree or shall be determined by a court of competent jurisdiction. 10.4 Third Party Claims. In the case of a Third Party Claim, the Indemnifying Party shall have the right, at its expense, to participate in or assume control of the negotiation, settlement or defence of the Claim. If the Indemnifying Party elects to assume such control, the Indemnifying Party shall reimburse the Indemnified Party for all of the Indemnified Party's out-of-pocket expenses incurred as a result of such participation or assumption. The Indemnified Party shall have the right to participate in the negotiation, settlement or defence of such Third Party Claim and to retain counsel to act on its behalf, provided that the fees and disbursements of such counsel shall be paid by the Indemnified Party unless the Indemnifying Party consents to the retention of such counsel at its expense or unless the named parties to any action or proceeding include both the Indemnifying Party and the Indemnified Party and a representation of both the Indemnifying Party and the Indemnified Party by the same counsel would be inappropriate due to the actual or potential differing interests between them (such as the availability of different defences). The Indemnified Party shall cooperate with the Indemnifying Party so as to permit the Indemnifying Party to conduct such negotiation, settlement and defence and for this purpose shall preserve all relevant documents in relation to the Third Party Claim, allow the Indemnifying Party access on reasonable notice to inspect and take copies of all such documents and require its personnel to provide such statements as the Indemnifying Party may reasonably require and to attend and give evidence at any trial or hearing in respect of the Third Party Claim. If, having elected to assume control of the negotiation, settlement or defence of the Third Party Claim, the Indemnifying Party thereafter fails to conduct such negotiation, settlement or defence with reasonable diligence, then the Indemnified Party shall be entitled to assume such control and the Indemnifying Party shall be bound by the results obtained by the Indemnified Party with respect to such Third Party Claim. If any Third Party Claim is of a nature such that (i) the Indemnified Party is required by applicable law or the order of any court, tribunal or regulatory body having jurisdiction, or (ii) it is necessary in the reasonable view of the Indemnified Party acting in good faith and in a manner consistent with reasonable commercial practices, in respect of (A) a Third Party Claim by a customer relating to products or services supplied by the Company or (B) a Third Party Claim relating to any Contract which is necessary to the ongoing operations of the Company or any material part thereof in order to avoid material damage to the relationship between the Indemnified Party and any of its major customers or to preserve the rights of the Indemnified Party under such an essential Contract, to make a payment to any person (a "Third Party") with respect to the Third Party Claim before the completion of settlement negotiations or related legal proceedings, as the case may be, then the Indemnified Party may make such payment and the Indemnifying Party shall, promptly after demand by the Indemnified Party, reimburse the Indemnified Party for such payment. If the amount of any liability of the Indemnified Party under the Third Party Claim in respect of which such a payment was made, as finally determined, is less than the amount which was paid by the Indemnifying Party to the Indemnified Party, the Indemnified Party shall, promptly after receipt of the difference from the Third Party, pay the amount of such difference to the Indemnifying Party. If such a payment, by resulting in settlement of the Third Party Claim, precludes a final determination of the merits of the Third Party Claim and the Indemnified Party and the Indemnifying Party are unable to agree whether such payment was unreasonable in the circumstances having regard to the amount and merits of the Third Party Claim, then such dispute shall be referred to and finally settled by binding arbitration from which there shall be no appeal. 10.5 Settlement of Third Party Claims. If the Indemnifying Party fails to assume control of the defence of any Third Party Claim, the Indemnified Party shall have the exclusive right to contest, settle or pay the amount claimed. Whether or not the Indemnifying Party assumes control of the negotiation, settlement or defence of any Third Party Claim, the Indemnifying Party shall not settle any Third Party Claim without the written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed; provided, however, that the liability of the Indemnifying Party shall be limited to the proposed settlement amount if any such consent is not obtained for any reason within a reasonable time after the request therefor. 10.6 Indemnification Limitations. Notwithstanding anything else contained in this Agreement: (a) the indemnification provided for in Section 10.1 or any other claim by an Indemnified Party in connection with this Agreement shall be subject to the limitation that no indemnification or other such claim shall be payable under Section 10.1 or otherwise under this Agreement unless the total of all claims exceeds $50,000 in the aggregate, whereupon the full amount of such claims exceeding $50,000 but subject to Section 10.6(b)) shall be recoverable in accordance with the terms hereof; and (b) the indemnification provided for in Sections 10.1 and any other claim brought by any Indemnified Party in connection with this Agreement shall be subject to the further limitation that any and all payments to an Indemnified Party by an Indemnifying Party, pursuant to Section 10.1 or pursuant to any other claim made by an Indemnified Party in connection with this Agreement shall not, in the aggregate, exceed the Purchase Price received pursuant to this Agreement. 10.7 Set-off. The Purchaser and Vendor shall be entitled to set-off the amount of any Claim submitted under Section 10.1 as damages or by way of indemnification against any other amounts payable by the Purchaser or the Company to the Vendor or payable by the Vendor to the Purchaser, whether under this Agreement or otherwise. 11. Other Covenants 11.1 DREX Lawsuit: The Purchaser acknowledges that the Company and the Vendor are currently defendants in a lawsuit ("DREX Lawsuit") between DREX Engineering Consultants Inc., as plaintiff and the Vendor and Company, as defendants, commenced in the Ontario Superior Court of Justice (Court File No. 98-CU-7164). The Vendor covenants to diligently defend and/or settle the DREX Lawsuit in such a manner as to not materially effect the Company or the Purchaser. The Vendor acknowledges that it is entirely responsibility for the DREX Lawsuit. For greater certainty, the Purchaser and the Company shall be under no obligation to assist the Vendor in the DREX Lawsuit except as provided for in this Section 11. The Vendor agrees that neither the Purchaser nor the Company shall in any way be responsible for any costs, damages or expenses related in any manner to the DREX Lawsuit and the Vendor further agrees, without limitation, to indemnify and hold harmless the Purchaser, the Company and all of their respective officers, directors, employees, agents and representatives from any claim, demand, damage, cost, expense or liability arising out of or related to the DREX Lawsuit. The Purchaser covenants and agrees to provide any and all reasonable access to the records and books of the Company and, at the Vendor's sole expense, to provide any and all reasonable assistance as may be requested by the Vendor in relation to the DREX Lawsuit. 11.2 Revenue Canada Appeal. The Purchaser acknowledges that the Company has filed notices of objection with Revenue Canada in respect of the Company's 1991, 1992, 1993 and 1994 corporate income tax returns ("Revenue Canada Appeals"), which have not been responded to by Revenue Canada. The Vendor covenants and agrees to take all steps that it deems necessary to complete the Revenue Canada Appeals, including but not limited to paying any and all costs, expenses, interest, penalties and damages in relation to such appeals, and to indemnify and hold harmless the Purchaser, the Company and all their respective officers, directors, heirs, agents and representatives for such costs, expenses, interest, penalties and damages arising out of or related to the Revenue Canada Appeals. The Purchaser covenants and agrees to provide any and all reasonable access to the records and books of the Company and, at the Vendor's sole expense, to provide any and all reasonable assistance as may be requested by the Vendor in relation to the Revenue Canada Appeals. 11.3 Tax Credits. The Vendor agrees to take all steps that it deems necessary to process and complete all filings necessary to claim ITCs on behalf of the Company for the period up to the Effective Date. The Vendor agrees that neither the Purchaser nor the Company shall in any way be responsible for any costs, damages or expenses related in any manner to the ITCs and the Vendor further agrees, without limitation, to indemnify and hold harmless the Purchaser, the Company and all of their respective officers, directors and employees from any claim, demand, damage, cost, expense or liability arising out of or related to the ITCs. The Purchaser covenants and agrees to provide any and all reasonable access to the records and books of the Company and, at the Vendor's sole expense, to provide any and all reasonable assistance as may be requested by the Vendor in relation to the ITCs. 12. General (a) This Agreement, together with the delivery by the Vendor of share certificates representing the Purchased Shares, shall constitute the actual conveyance of the Purchased Shares as of the Effective Date but each party agrees with the other to do, execute, acknowledge and deliver all such further documents, assignments, transfers, agreements and other assurances as may be reasonably necessary or desirable to give full effect to this Agreement; (b) The parties hereto acknowledge that they have had an opportunity to obtain independent financial and/or legal advice before signing this Agreement and agrees that either such advice has been obtained or that they do not wish to seek or obtain such independent advice. The parties hereto acknowledge that they have read this Agreement and fully understand the nature and effect of it and the terms contained herein and that the said terms are fair and reasonable and correctly set out the party's understanding and intention. (c) Each party shall be responsible for its own legal and other expenses incurred in connection with the negotiation, execution, delivery and performance of this Agreement and the transactions contemplated hereby. (d) This Agreement shall be governed by, construed and interpreted in accordance with the laws of the Province of Ontario. (e) This Agreement is for the benefit of the parties and shall be binding upon their respective heirs, executors, administrators, successors and assigns, as applicable. (f) Any notice, certificate, consent, determination or other communication required or permitted to be given or made under this Agreement shall be in writing and shall be effectively given and made if (i) delivered personally, (ii) sent by prepaid courier service or mail, or (iii) sent prepaid by fax or other similar means of electronic communication, in each case to the applicable address set out below: (i) if to the Vendor, to: JetForm Corporation 560 Rochester Street Ottawa, ON K1S 5K2 Attention: Carl Smith Telephone: 751-4800 Facsimile: 751-4802 with a copy to: LaBarge Weinstein 333 Preston Street, 11th Floor Ottawa, ON K1S 5N4 Attention: Deborah L. Weinstein Telephone: 231-3000 Facsimile: 231-3900 (ii) if to the Purchaser, to: Calian Technology Ltd. Calian Centre, 2 Beaverbrook Road Kanata, ON K2K 1L1 Attention: Shaun McEwan Telephone: (613) 599-8600, ext. 273 Facsimile: (613) 592-7771 Any such communication so given or made shall be deemed to have been given or made and to have been received on the day of delivery if delivered, or on the day of faxing or sending by other means of recorded electronic communication, provided that such day in either event is a business day and the communication is so delivered, faxed or sent before 4:30 p.m. on such day. Otherwise, such communication shall be deemed to have been given and made and to have been received on the next following business day. Any such communication sent by mail shall be deemed to have been given and made and to have been received on the fifth business day following the mailing thereof; provided however that no such communication shall be mailed during any actual or apprehended disruption of postal services. Any such communication given or made in any other manner shall be deemed to have been given or made and to have been received only upon actual receipt. Any party may from time to time change its address under this Section by notice to the other party given in the manner provided by this Section. (g) A waiver of any default, breach or non-compliance under this Agreement is not effective unless in writing and signed by the party to be bound by the waiver. No waiver shall be inferred from or implied by any failure to act or delay in acting by a party in respect of any default, breach or non-observance or by anything done or omitted to be done by the other party. The waiver by a party of any default, breach or non-compliance under this Agreement shall not operate as a waiver of that party's rights under this Agreement in respect of any continuing or subsequent default, breach or non-observance (whether of the same or any other nature). (h) Each party hereby agrees that all provisions of this Agreement, other than (a) the conditions in Sections 5 and 6 and (b) the representations and warranties contained in Sections 7 and 8 and the related indemnities in Section 10 hereof (which shall be subject to the special arrangements provided in such Sections) shall forever survive the execution, delivery and performance of this Agreement, Closing and the execution, delivery and performance of any and all documents delivered in connection with this Agreement. (i) This Agreement and the terms hereof shall constitute the entire agreement between the parties hereto with respect to all of the matters herein and its execution has not been induced by, nor do any of the parties hereto rely upon or regard as material, any representations or writings whatsoever not incorporated herein and made a part hereof. If any paragraph, section or portion thereof in this Agreement is determined to be unenforceable or invalid for any reason whatsoever, that unenforceability or invalidity shall not affect the enforceability or validity of the remaining portions of this Agreement and such unenforceable or invalid paragraph, section or portion thereof shall be deemed to be severed from the remainder of this Agreement. Upon execution of this Agreement, the Term Sheet, as amended by a letter agreement dated May 17, 1999 between the Purchaser and the Vendor, shall be terminated and cease to be of any force and effect. (j) Each Party shall promptly do, execute, deliver or cause to be done, executed and delivered all further acts, documents and things in connection with this Agreement that the other Party may reasonably require, for the purposes of giving effect to this Agreement. (k) This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable in that Province and shall be treated, in all respects, as an Ontario contract. (l) This Agreement shall enure to the benefit of, and be binding on, the Parties and their respective successors and permitted assigns. Neither party may assign or transfer, whether absolutely, by way of security or otherwise, all or any part of its respective rights or obligations under this Agreement without the prior written consent of the other party. (m) This Agreement may be signed by manual or facsimile signature in several counterparts of like form, each of which when so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart. IN WITNESS WHEREOF this Agreement has been executed by the parties hereto. CALIAN TECHNOLOGY LTD. Per: ----------------------------------- Authorized Officer JETFORM CORPORATION Per: ----------------------------------- Authorized Officer EX-10.44 13 0013.txt DISTRIBUTION AGREEMENT EXHIBIT 10.44 JetForm Streamlining Business Processes(TM) DISTRIBUTION AGREEMENT This Distribution Agreement, effective as of August 1st, 1999, is entered into between JetForm Corporation, a corporation incorporated under the laws of Canada ("JetForm") and Indigo Pacific Pty. Ltd., a corporation incorporated under the laws of New South Wales, Australia ("Distributor"). DEFINITIONS 1. For the purposes of this Agreement, the following terms have the meanings set out below: "Agreement" shall mean this Distribution Agreement. "Distributor Software" means software excluding all aspects of the JetForm Software. "Effective Date" means August 1, 1999. "End-user" means a person who enters into a license or sub-license to use the JetForm Software in accordance with JetForm's standard terms and conditions which are in effect from time to time for that person's internal business purposes and not for resale, relicensing or redistribution of any kind. "JTSP" means JetForm Technical Support Program services set out in Schedule A as in existence from time to time under which JetForm may offer maintenance and support in relation to certain JetForm Software upon JetForm's standard terms and conditions which are in effect from time to time for such services. "JetForm Services" means the JetForm services set out in Schedule A. "JetForm Software" means, unless otherwise specified in Schedule A, the JetForm proprietary software listed in JetForm's then current price list, including related user manuals distributed by JetForm with such software. "Remarketer" shall mean any person or legal entity who is, subject to JetForm's prior written consent which shall not be unreasonably withheld or delayed, licensed by Distributor to sublicense the JetForm Software and JTSP services to End-Users. "Territory" means those countries specified in Schedule B. GRANT OF LICENSE 2. Subject in all cases to Distributor's compliance with all terms and conditions contained within this Agreement, JetForm grants Distributor a restricted, non-exclusive, and non-transferable license during the term of this Agreement: (a) to market, promote and resell in the Territory licenses to the JetForm Software only to End-users or Remarketers; (b) to market, promote and resell in the Territory the JTSP services only to End-users or Remarketers; (c) to use the JetForm Software solely for the purposes of demonstration, user support and training, with the right to sublicense such right to Remarketers, provided all demonstration copies are removed by Distributor or Remarketer from the prospective End-user's site on the same day such copy was installed; (d) to deliver evaluation copies of the JetForm Software to a prospective End-user or Remarketer on a evaluation basis provided such prospect has entered into JetForm's Software Evaluation Agreement which is in effect from time to time, and provided further that all such evaluation copies are removed by Distributor upon completion of the evaluation period or forty-five (45) days from such delivery, whichever occurs first. Any evaluation copy of the JetForm Software not removed and returned to the Distributor at the end of such period is deemed to be licensed and license fees with respect thereto shall be due to JetForm; (e) notwithstanding the definition of "Territory" herein, to use the "JetForm" name and trademark only in Australia and Singapore for the purpose of carrying on its business as permitted under and in compliance with this Agreement. 3. Distributor shall not have the right to use, sublicense or distribute in any manner whatsoever the source code pertaining to the JetForm Software. Distributor shall have no rights in or to the JetForm Software except as specifically stated herein, and JetForm or its licensors reserves all rights not expressly granted to Distributor. 4. (a) Distributor shall take measures satisfactory to JetForm to require all End-users to comply with JetForm's standard terms and conditions which are in effect from time to time for the applicable JetForm Software and/or JTSP services. Distributor agrees to obtain from JetForm such standard terms and conditions on a regular basis. (b) Distributor shall take measures satisfactory to JetForm to require all Remarketers to comply with terms and conditions which are consistent with and at least as protective of JetForm as those contained within this Agreement and which acknowledge that Distributor shall assume sole responsibility and liability vis-a-vis the End-user and/or Remarketer. 5. Distributor shall not rent, lease, use, sublicense or distribute in any manner whatsoever the JetForm Software to anyone for any other purpose except as expressly set out herein, including without limitation, for use in connection with a third party outsourcing facility or service, service bureau arrangement, or permit direct manual or electronic access to anyone who infringes JetForm's rights therein. 6. Subject to JetForm's prior written consent, which may be withheld in the sole and absolute discretion of JetForm, Distributor shall not and shall not permit or assist others to adapt, modify, create derivative works, recast, translate, shorten, expand, reverse engineer, decompile or in any other manner whatsoever disassemble or modify the JetForm Software ("Modifications"). Distributor hereby acknowledges that all Modifications, whether or not authorized, shall be the sole and exclusive property of JetForm and Distributor shall deliver to JetForm, all such Modifications and an assignment of all copyright and all other intellectual property interest in or to such Modifications and waiver of any moral rights that the Distributor or any other person may have in same. Distributor will use its best efforts to prevent End-users, Remarketers, and any other persons or entities from renaming and subsequently redistributing the JetForm Software. 7. Subject to JetForm's rights to protect the JetForm Software, including without limitation those rights contained within this Agreement, if Distributor learns of any breach of a sublicense that could cause any damage or harm to JetForm or its third party licensors, Distributor shall take prompt, commercially reasonable corrective action at its expense to remedy the breach and obtain all other appropriate relief. In addition, Distributor shall immediately notify JetForm in writing of any breach and any corrective action taken. The execution of these duties by Distributor shall not preclude JetForm from also taking corrective action. In addition, Distributor shall, where called upon by JetForm and at JetForm's sole option, either (i) use its best efforts to obtain such equitable relief as is necessary under the circumstances as promptly as is reasonably possible or (ii) assign its rights under the license to JetForm to permit JetForm to seek such equitable relief as is necessary under the circumstances. MARKETING 8. (a) Distributor shall at all times during the term of this Agreement devote its best efforts to the marketing, promotion and sublicensing of the JetForm Software and the JTSP services consistent with good business ethics and reasonable industry standards and in a manner that will reflect favorably on JetForm and on the goodwill and reputation of JetForm. (b) Distributor shall comply with JetForm's current marketing guidelines, a copy of which Distributor acknowledges it has reviewed, as updated from time to time by JetForm. (c) Distributor shall: (i) provide pertinent information concerning the JetForm Software and the JTSP services to prospective End-users and/or Remarketers; (ii) notify JetForm of and explain the circumstances surrounding any complaints received by the Distributor concerning the JetForm Software and/or the JTSP services; (iii) remain informed, knowledgeable and current concerning the functions, specifications, details and advantages of the JetForm Software and the JTSP services; (iv) not make any misleading and/or deceptive representations with regard to JetForm and/or the JetForm Software and/or the JTSP services; (v) not knowingly publish or employ, or cooperate in the publication or employment of, any misleading and/or deceptive advertising material(s) with regard to JetForm and/or the JetForm Software and/or the JTSP services; and (vi) not make any representations, warranties or guarantees whatsoever to End-users and/or Remarketers (prospective or otherwise), and/or any third party with respect to the specifications, features and/or capabilities of the JetForm Software which are inconsistent in any manner whatsoever with the published literature or documentation distributed by JetForm with the JetForm Software. DELIVERY 9. JetForm will deliver to Distributor the JetForm Software as ordered by Distributor, subject to availability, within a reasonable period of time after receipt of orders. MAINTENANCE AND SUPPORT 10. (a) Distributor shall notify all End-users and/or Remarketers of the availability of the JTSP services and the JetForm Services. Notwithstanding the foregoing or anything else contained within this Agreement, Distributor shall provide and be solely responsible for all End-user and/or Remarketer first-line technical support including without limitation all technical support via telephone, facsimile, e-mail or any other mode of communication from an End-user and/or Remarketer respecting the JetForm Software. JetForm shall have no responsibility, obligation or liability whatsoever for any Distributor Software. Distributor shall reimburse JetForm for any travel, living or other reasonable out-of-pocket expenses incurred by JetForm in connection with provision of any technical support by JetForm. JetForm has the right to discontinue the manufacture of, and/or support for, the JetForm Software at any time in its sole discretion. (b) Distributor shall designate one (1) employee who will function as the technical support liaison to JetForm. JetForm shall have the right to require Distributor (and JetForm shall have the right to require Distributor to call upon any Remarketer) to obtain additional education and training if necessary in JetForm's reasonable judgment to enable Distributor (or Remarketer, as applicable) to properly discharge its duties under this Agreement. PAYMENTS 11. Distributor agrees to pay to JetForm the fees as set forth in Schedule B. Distributor shall pay any applicable costs of shipment of the JetForm Software from JetForm to Distributor. All amounts for fees are payable monthly in arrears within ninety (90) days of the end of each month in which sales occur, with the month commencing August 1, 1999. Any amounts not paid when due hereunder shall bear interest at the rate of 1.5% per month (which is equivalent to 18% per annum) or the highest legal rate applicable, whichever is lower, until the overdue amount, plus applicable interest is paid in full. Credit limits, if any, shall be at JetForm's sole discretion from time to time. 12. Distributor shall be responsible for the payment of all duties, taxes, or amounts due in lieu thereof, related in any way to performance under this Agreement, exclusive only of taxes based on JetForm's net income. In the event Distributor is required to withhold tax from any payments due to JetForm hereunder, Distributor shall gross up any payments to be made to JetForm to ensure that the full amount of fees due hereunder is received by JetForm. Distributor shall bear the cost and risk of shipping and handling from JetForm's location to the final destination, and Distributor shall reimburse JetForm for any such costs or risks incurred by JetForm. REPORTS AND AUDIT 13. Distributor agrees to maintain complete and accurate records (in accordance with generally accepted accounting principles applicable in the jurisdiction set out herein) relating to sublicensing by Distributor of the JetForm Software and the JTSP services and to submit quarterly forecasts within thirty (30) days prior to each quarter end as to the quantities of the JetForm Software and the JTSP services which Distributor reasonably anticipates will be sublicensed or otherwise provided by Distributor to End-users and Remarketers under this Agreement in the ensuing quarter. JetForm shall have the right, annually, to appoint an independent third party to examine and audit Distributor's premises to ensure compliance with the terms of this Agreement. Any such audit shall be at the expense of JetForm unless the audit reveals non-compliance by Distributor with the terms of this Agreement, in which case the audit shall be at the expense of Distributor. TRADEMARKS AND COPYRIGHT NOTICE 14. Distributor disclaims any rights or interest in JetForm's intellectual property, including without limitation the JetForm Software and JetForm trademarks. Distributor shall not remove any JetForm copyright notices or other designations that appear or may appear in or on the JetForm Software or any related documentation, software, advertising, displays, media or designations. All copies of the JetForm Software in whatever form must contain fully reproduced copyright notices, restrictive rights legends, proprietary notices and other notices as contained in the JetForm Software and as shown on the media and packaging. 15. JetForm hereby grants Distributor a restricted, non-exclusive, and non-transferable license during the term of this Agreement to reproduce the JetForm trade names and trademarks identified in Schedule C, to be used in accordance with the terms of this Agreement (which includes those contained in Schedule C), and with appropriate ownership attributions as set out in Schedule C. 16. Distributor agrees to obtain JetForm approval regarding the quality and standards of all use and materials on which a JetForm trademark or tradename or other designation is to be used, and JetForm may terminate this Agreement for failure to do so. Distributor will submit all such materials to JetForm for approval in advance. 17. Distributor may only market the JetForm Software under the name specified by JetForm. Distributor shall refer to JetForm and the JetForm Software in any advertising for Distributor Software. OWNERSHIP AND CONFIDENTIALITY 18. (a) Distributor hereby acknowledges and agrees that all right, title and interest in and to the JetForm Software, in whole or in part, in any form, and including all patent, copyright, trademark, trade secret and all other intellectual and industrial property rights in such JetForm Software and the structure, sequence and organization of same, shall belong to JetForm or its licensors and that Distributor's sole rights thereto shall be only those rights granted by JetForm pursuant to this Agreement. Distributor acknowledges that JetForm has and reserves the exclusive, worldwide right in perpetuity to protect the JetForm Software. (b) The JetForm Software includes English language and other language JetForm Software to the extent JetForm makes such JetForm Software commercially available. Distributor shall not translate or have translated the JetForm Software except with JetForm's prior written consent. JetForm shall have the right to review and to approve the quality and standard of such translated versions. The ownership provisions contained in this Agreement in respect of JetForm Software shall apply to the JetForm Software as translated. After receiving JetForm's prior written consent provided for above, Distributor will have the right to distribute such translated versions in accordance with this Agreement, and Distributor will be reimbursed in the event JetForm desires to distribute such translated versions. All copyright and any other proprietary notices in a translated version shall be approved by JetForm. 19. (a) All documentation and information which is designated as confidential or proprietary or that a reasonable person would consider from the nature of the information and circumstances of disclosure is confidential or proprietary which is or has been supplied by JetForm to Distributor in connection with this Agreement ("JetForm Confidential Information") is proprietary to JetForm and shall be held in trust and confidence for JetForm by Distributor, its employees, agents or contractors and shall not be disclosed by Distributor or used for any purpose other than as permitted under this Agreement, without JetForm's prior written consent. Distributor agrees to use a reasonable degree of care (which, in any case, will not be less than the degree of care it uses with respect to its own information of like nature) to prevent disclosure of the JetForm Confidential Information. JetForm Confidential Information will be returned or destroyed by Distributor upon request by JetForm at any time, and a senior officer of Distributor shall certify, by way of affidavit or statutory declaration, on behalf of Distributor that all such JetForm Confidential Information has been returned or destroyed, as applicable. This section does not apply to Confidential Information which: (i) is or becomes public other than through a breach of this Agreement; (ii) is known to Distributor prior to the date of this Agreement and with respect to which Distributor does not have any obligation of confidentiality; (iii) is independently developed by Distributor without any reference to JetForm Confidential Information; (iv) is disclosed, without obligation of confidentiality, to Distributor by a person or entity not party to this Agreement and who is entitled to disclose such information without breaching an obligation of confidentiality; or (v) is required to be disclosed by law, whether under an order of a court or government tribunal or other legal process. Distributor shall require each of its employees, contractors, agents, Remarketers, and End-users having access to JetForm Confidential Information to comply with the above terms. (b) In recognition of the unique and proprietary nature of the JetForm Confidential Information, it is agreed that JetForm's remedies for a breach by Distributor of its obligations under this section shall be inadequate and JetForm shall, in the event of such breach, be entitled to equitable relief, including without limitation, injunctive relief and specific performance, in addition to any other remedies provided hereunder or available at law or equity. WARRANTIES 20. JetForm provides to Distributor only the limited warranties provided in the JetForm End-user license for the applicable JetForm Software in effect from time to time. In exercising its rights under this Agreement, Distributor will not give nor make any warranties or representations on behalf of JetForm as to quality, merchantability, fitness for a particular use or purpose or any other features of the JetForm Software, except for the warranties set out in the preceding sentence. 21. EXCEPT AS EXPRESSLY STATED ABOVE, THERE ARE NO WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED, BY OPERATION OF LAW, STATUTE OR OTHERWISE, WITH RESPECT TO THE JETFORM SOFTWARE OR ANY OTHER PRODUCT OR SERVICE PROVIDED HEREUNDER. JETFORM DISCLAIMS ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NO REPRESENTATION OR OTHER AFFIRMATION OF FACT, INCLUDING BUT NOT LIMITED TO STATEMENTS REGARDING PERFORMANCE OF THE JETFORM SOFTWARE, WHICH IS NOT CONTAINED IN THIS AGREEMENT, SHALL BE BINDING ON JETFORM. SUBJECT TO THE LIMITED WARRANTIES PROVIDED IN THE JETFORM END-USER LICENSE FOR THE APPLICABLE JETFORM SOFTWARE IN EFFECT FROM TIME TO TIME, JETFORM WILL NOT BE LIABLE FOR ANY BUG, ERROR, OMISSION, DEFECT, DEFICIENCY, OR NONCONFORMITY IN ANY SOFTWARE INCLUDING THE JETFORM SOFTWARE. Distributor is solely responsible for the selection of the JETFORM Software, its ability to achieve the results intended, installation and maintenance and support of the JETFORM Software and the results obtained by Distributor, REMARKETERS AND any End-users from USE OF the JETFORM Software OR ANY OTHER PRODUCT OR SERVICE PROVIDED HEREUNDER. LIMITATION OF LIABILITY 22. IN THE EVENT OF ANY CLAIM CONCERNING PERFORMANCE OR NONPERFORMANCE OF JETFORM OR ANY CLAIM FOR BREACH OR DEFAULT BY JETFORM, DISTRIBUTOR'S EXCLUSIVE REMEDY SHALL BE THE RECOVERY OF ITS DIRECT DAMAGES, BUT ONLY TO THE LIMIT SET FORTH IN THIS AGREEMENT. THIS LIMITATION SHALL APPLY WHETHER OR NOT THE ALLEGED BREACH BY JETFORM IS A BREACH OF CONDITION, OR FUNDAMENTAL TERM, OR A FUNDAMENTAL BREACH. IN NO EVENT WILL JETFORM BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES WHATSOEVER RESULTING FROM LOSS OF USE, DATA OR PROFITS, DOWNTIME, GOODWILL, DAMAGE TO OR REPLACEMENT OF EQUIPMENT OR PROPERTY, ANY COSTS OF RECOVERING, REPROGRAMMING, OR REPRODUCING ANY PROGRAM OR DATA USED IN CONJUNCTION WITH JETFORM SOFTWARE, THE USE OR PERFORMANCE OF THE JETFORM SOFTWARE OR OTHER JETFORM PROVIDED SERVICES OR MATERIALS, WHETHER IN AN ACTION IN CONTRACT OR TORT (INCLUDING BUT NOT LIMITED TO NEGLIGENCE) OR OTHERWISE. THIS LIMITATION SHALL BE INTERPRETED TO APPLY TO JETFORM AND ITS LICENSORS. 23. JETFORM'S AGGREGATE LIABILITY IN ANY CONNECTION WITH THIS AGREEMENT WHETHER FOR NEGLIGENCE, BREACH OF CONTRACT, MISREPRESENTATION OR OTHERWISE SHALL IN NO CIRCUMSTANCES EXCEED THE AMOUNTS PAID BY DISTRIBUTOR TO JETFORM UNDER THIS AGREEMENT. NOTHING IN THIS AGREEMENT SHALL RESTRICT JETFORM'S LIABILITY IN a manner which is expressly prohibited by aPPLICABLE statute or regulation. 24. Distributor hereby represents, warrants and covenants to JetForm the following: (a) Distributor has full power and authority to enter into this Agreement and to perform each and every covenant and agreement herein contained; (b) this Agreement has been duly authorized, executed and delivered by Distributor and constitutes a valid, binding and legally enforceable agreement of Distributor; (c) the execution and delivery of this Agreement and the performance of the covenants and agreements herein contained are not, in any manner or to any extent, limited or restricted by, and are not in conflict with, any commercial arrangements, obligations, contract, agreement or other instrument to which Distributor is either bound or subject; and (d) the performance of this Agreement by Distributor shall not infringe, contravene, breach, interfere with, or harm, any rights of any other person or entity whatsoever, including without limitation any intellectual property, moral, confidentiality, copyright, trademark or patent rights of any nature. INDEMNIFICATION 25. Distributor agrees to indemnify and save JetForm harmless from and against any and all claims, demands, costs and liabilities (including without limitation reasonable legal fees) of any kind whatsoever, arising directly or indirectly out of the performance of software not supplied by JetForm, provision of services and/or maintenance and support by Distributor in relation to the JetForm Software or software not supplied by JetForm, Distributor's performance under this Agreement (including, without limitation, any breach of representations and warranties by Distributor to JetForm) or claims by Distributor's End-users, Remarketers or any other persons or entities whatsoever. Upon written notice of any action against JetForm alleging any of the indemnified matters outlined in this section, Distributor will defend that action at its expense and pay the costs (including without limitation reasonable legal fees) and damages and amounts awarded (or settled, as the case may be) against JetForm in the action, provided that Distributor shall consult with and allow JetForm to participate in any defense and settlement negotiations. 26. If notified promptly in writing of any action or claim (and all prior related claims) brought against Distributor alleging that Distributor's distribution of the JetForm Software under this Agreement infringes any registered U.S. or Canadian patent or copyright, JetForm will defend that action at its expense and will pay the costs (including without limitation reasonable legal fees) and damages awarded (or settled, as the case may be) against Distributor in the action, provided that: (i) JetForm shall have sole control of the defense of any such action and all negotiations for its settlement or compromise; (ii) Distributor cooperates fully with JetForm in its defense of the action; and (iii) JetForm shall have no liability whatsoever if the action results from the use of the JetForm Software for purposes or in an environment for which it was not designed, from modification of the JetForm Software by anyone other than JetForm, or from the use of the JetForm Software in combination with software or other products not supplied by JetForm. JetForm, at its own expense, may, instead of defending such action or claim, procure for Distributor the right to continue the distribution of the JetForm Software or replace or modify the JetForm Software so that it becomes non-infringing. TERM AND TERMINATION 27. This Agreement is in effect for five (5) years from the Effective Date, unless earlier terminated as permitted under this Agreement. 28. (I) This Agreement will terminate in the event of any of the following: (a) thirty (30) days after written notice by JetForm to Distributor if Distributor has not paid to JetForm the amount of the fees as specified in Schedule B in accordance with the terms of this Agreement; (b) on the thirtieth (30th) day after one party gives the other written notice of a breach by the other of any term or condition of this Agreement unless the breach is cured before that day; (c) except as otherwise provided for in section 36 hereof, an amalgamation, acquisition or merger of Distributor with any person or entity who is not a party to this Agreement or assignment of this Agreement by Distributor, unless consented to in writing by JetForm; (d) written notice of termination by one party after a receiver has been appointed in respect of the whole or a substantial part of the other's assets or a petition in bankruptcy or for liquidation is filed by or against that other, or (e) written notice of termination by JetForm if Distributor becomes owned or controlled by any government or state, or government or state agency; (f) written notice of termination by JetForm if currency repatriation provisions or other currency restrictions are imposed by any government body which prevent or unduly restrict the ability of Distributor to make any payments to JetForm required hereunder; (g) written notice of termination by JetForm if Distributor is convicted of any criminal or quasi-criminal offense; or (h) at JetForm's sole discretion, JetForm may terminate the Agreement sixty (60) days after written notice by JetForm to Distributor if Distributor fails to meet any of the annual revenue quotas as specified in Schedule B. (II) In addition, where, in JetForm's sole determination, Hugh Millikin is no longer actively and personally involved in the business operations of the Distributor as contemplated under this Agreement, then any and all discretionary and volume discounts available to a Vice-President of Sales as provided for in Exhibit B hereto shall terminate with immediate effect. (III) In addition, JetForm may terminate the license granted to Distributor under section 2(e) of this Agreement in the event of any of the following: (a) upon written notice by JetForm to Distributor if, in JetForm's sole determination, Hugh Millikin is no longer actively and personally involved in the business operations of the Distributor as contemplated under this Agreement; (b) sixty (60) days after written notice by JetForm to Distributor if Distributor fails to meet any of the annual revenue quotas as specified in Schedule B; or (c) ninety (90) days after written notice by JetForm to Distributor terminating for convenience, and where JetForm so terminates such license: (i) in the first or second year of this Agreement, JetForm shall pay to Distributor an amount equal to the greater of (A) $225,000.00; and (B) $100,00.00 plus the net annual revenue payable to JetForm under this Agreement during the one (1) year period immediately preceding the date of such written notice from JetForm multiplied by 1.2 less $1,500,000.00; (ii) in the third, fourth or fifth year of this Agreement, JetForm shall pay to Distributor an amount equal to $100,000.00 plus the net annual revenue payable to JetForm under this Agreement during the one (1) year period immediately preceding the date of such written notice from JetForm multiplied by 1.2 less $1,500,000.00; (iii) JetForm shall pay Distributor any such amount payable to Distributor under this subsection of the Agreement within ninety (90) days of the effective date of such termination by JetForm. 29. In the event of termination or expiration of this Agreement: (a) Distributor shall make all payments due hereunder within thirty (30) days of such termination or expiration; (b) All rights granted under this Agreement including without limitation those respecting use, marketing, promotion, sublicensing and distribution of the JetForm Software and the JTSP services, and use of the JetForm trademarks and trade names shall immediately cease. Distributor shall promptly return to JetForm or destroy all copies of the JetForm Software and JetForm Confidential Information in its possession or under its control and provide evidence satisfactory to JetForm that all such copies have been returned or destroyed; (c) Distributor shall refer all inquiries regarding JetForm or the JetForm Software to JetForm and give JetForm notice thereof; and (d) Distributor shall deliver a list of all End-users and/or Remarketers to JetForm within thirty (30) days of termination or expiration of this Agreement. 30. Termination hereunder shall be without prejudice to any other right or remedy to which either party may be entitled hereunder in law. Distributor acknowledges and agrees that it has no expectation that its business relationship with JetForm will continue for any minimum period of years, or that Distributor shall obtain any anticipated amount of profits by virtue of this Agreement. The parties agree that the termination provisions herein, in terms of both notice and default events are reasonable and agree not to contest same by way of wrongful termination proceedings or otherwise. JetForm shall not be liable, by reason of any termination of this Agreement, for compensation, reimbursement or damages on account of the loss of prospective profits on anticipated sales or on account of expenditures, investments, leases or commitments whatsoever in connection with the business or goodwill of Distributor. GENERAL 31. Neither party shall be liable for failure to fulfill obligations hereunder due to causes beyond that party's control. 32. Any notice hereunder shall be in writing, and shall be sent by return receipt requested registered mail, confirmed facsimile or confirmed personal delivery to recipient's address as set out below unless changed by notice under this section: If to JetForm: 560 Rochester Street Ottawa, ON K1S 5K2 Canada Attention: Vice President, Finance and Chief Financial Officer If to Distributor: Suite 1, Level 17 275 Alfred Street, North Sydney NSW 2060 Australia 33. Any provision of this Agreement found to be illegal or unenforceable shall be deemed severed, and the balance of this Agreement shall remain in full force. 34. The parties to this Agreement are independent contractors. No agency, partnership, joint venture or similar relationship is established hereby. Neither party has the authority to bind the other or incur any obligation on behalf of the other. JetForm is intended by the parties hereto to be a third party beneficiary of any and all sublicense agreements entered into according to this Agreement by Distributor or Remarketers. JetForm shall have, and such sublicense agreements shall likewise indicate, the right to enforce such sublicense agreements as if JetForm were a party thereto, including without limitation having powers of enforcement in respect of JetForm copyrights, trademarks and all other JetForm intellectual property and JetForm Confidential Information. 35. Neither party's right to require performance of the other party's obligations hereunder shall be affected by any previous waiver, forbearance or course of dealing, unless or only to the extent of any waiver given in writing. 36. Distributor shall not assign or transfer this Agreement without JetForm's prior written consent and any attempt to do so shall be void. Notwithstanding the foregoing, Distributor may assign this Agreement to SMS Consulting Group Limited without JetForm's prior written consent subject to all terms and conditions of this Agreement including without limitation those contained in sections 28(II) and 28(III)(a). This Agreement shall survive any change of control of JetForm whether by way of shares, merger or sale of all or substantially all of the assets of JetForm. This Agreement will enure to the benefit of the successors and permitted assigns of Distributor and JetForm. 37. The laws of Ontario, Canada shall apply without giving effect to the principles of conflicts of law, and excluding that body of law applicable to choice of law and excluding the United Nations Convention on contracts for the International Sale of Goods. Distributor irrevocably agrees that the courts of such jurisdiction constitute a convenient forum for any such litigation and attorns and submits to the exclusive jurisdiction of such courts. The parties waive trial by jury. 38. Distributor hereby agrees to comply with all applicable laws, regulations and government orders. Distributor warrants it will do all things necessary to comply with all applicable export laws and regulations as they apply to the subject matter of this Agreement. Distributor shall be responsible for any visas or permits necessary in order to allow JetForm personnel to enter the Territory or provide services to Distributor or its customers in the Territory, if requested by Distributor. 39. Distributor consents to publication of its name by JetForm as a distributor of the JetForm Software and JTSP services. The details of this Agreement shall not be disclosed by Distributor to any third party, other than employees and advisors of JetForm or Distributor on a need to know basis, without the prior written consent of JetForm unless required by law, and no announcement or publication concerning this transaction shall be made by Distributor without JetForm's prior written consent. 40. The parties agree that the provisions of Articles 3, 5, 6, 11, 12, 13, 14, 18(a), 19, 20, 21, 22, 23, 24, 25, 29 and following of this Agreement will survive the termination or expiration of this Agreement until the parties agree to a release of such obligations. 41. This Agreement and the attached schedules which are incorporated by reference constitute the entire agreement between the parties concerning the subject matter hereof and supersedes all oral or written prior statements, representations, discussions, negotiations and agreements. This Agreement may be amended only in writing signed by both parties. No terms and conditions or stipulations written on Distributor's purchase order(s) or similar document(s) will affect this Agreement even if such order(s) or document(s) is accepted by the receiving party. 42. This Agreement may be executed and delivered by facsimile and in counterparts, and shall be considered as original and whole if so executed and delivered. 43. In this Agreement words importing a singular number only shall include the plural and vice versa. The division of this Agreement into Articles and sections and the insertion of headings are for convenient reference only, and shall affect neither the construction nor the interpretation of this Agreement. The terms, "hereof", "hereunder" and similar expressions refer to this Agreement and not to any particular portion hereof and include any agreement supplemental hereto. 44. Unless otherwise stipulated, all dollar amounts are in Australian dollars. IN WITNESS whereof the parties have executed this Agreement. JetForm Corporation Indigo Pacific Pty. Ltd. By: By: ----------------------------------------- ----------------------------------------- name: name: --------------------------------------- --------------------------------------- title: title: -------------------------------------- -------------------------------------- date: date: --------------------------------------- ---------------------------------------
SCHEDULE A JetForm Services, JTSP services and Unauthorized Products JETFORM Services Business Analysis Workflow Planning Product Integration Application Development Forms Design Training (maybe delivered by third party) Customer Support JETFORM TECHNICAL SUPPORT PROGRAM (JTSP) Event-based Standard Premium Platinum Custom JETFORM PRODUCTS NOT AUTHORIZED TO SELL N/A SCHEDULE B Fees, Quota and Territory FEES: JetForm Software and JTSP services: Distributor shall pay JetForm a royalty fee equal to 50% of the net resale price for all JetForm Software and JTSP services sold to End-Users and Remarketers, subject to the discretionary and volume discounts available to a Vice-President of Sales, as published from time to time by JetForm. JetForm Services: Project specific - to be mutually agreed between the parties. ANNUAL Revenue Quota: Distributor shall achieve and pay to JetForm the following net annual revenue quotas: 1) $1,000,000.00 in the first year of the Agreement (August 1, 1999 to July 31, 2000); 2) $1,200,000.00 in the second year of the Agreement (August 1, 2000 to July 31, 2001); 3) $1,440,000.00 in the third year of the Agreement (August 1, 2001 to July 31, 2002); 4) $1,728,000.00 in the fourth year of the Agreement (August 1, 2002 to July 31, 2003); and 5) $2,070,000.00 in the fifth year of the Agreement (August 1, 2003 to July 31, 2004). TERRITORY: Country Australia Hong Kong India Indonesia Malaysia New Zealand Philippines Singapore South Korea Taiwan Thailand Vietnam All other countries in the Asia-Pacific region EXCLUDING Japan and Mainland China ("Other Countries"). JetForm shall have the right to remove from the definition of Territory any country falling within the definition of Other Countries upon ninety (90) days prior written notice to Distributor. SCHEDULE C JetForm Trademarks and Trade names A. JetForm is a registered trademark of JetForm Corporation. All JetForm product names and certain taglines are either registered trademarks or trademarks of JetForm Corporation. B. Distributor shall clearly acknowledge in its use or display of any of the JetForm trademarks that Distributor is a licensed user of the JetForm trademarks. C. Distributor shall prominently display the JetForm trademarks and/or trade names in relation to the JetForm Software and JTSP services on any advertising, marketing, promotional, technical or other materials prepared or distributed by Distributor subject to the following limitations: (i) Trademarks shall be clearly identified where they first appear as a trademark of JetForm Corporation by using the (TM) symbol in the case of trademarks, the (R) symbol in the case of registered trademarks, and by use of the following script: "JetForm is a registered trademark of JetForm Corporation.", or "[name of applicable JetForm registered trademark] is a registered trademark of JetForm Corporation.", or "JetForm [name of applicable JetForm trademark] is a trademark of JetForm Corporation.", as applicable. Distributor shall contact JetForm to obtain JetForm's trademark usage guidelines which contain a full list of JetForm registered trademarks and trademarks. Distributor may use JetForm's name and logo in its advertising, catalogs, exhibits, public relations materials and documents covering the JetForm Software and JTSP services, provided that all such uses shall be exact copies of JetForm's name and logo in colour, style and other details and will be subject to JetForm's right of prior review and approval. Distributor shall contact JetForm to obtain JetForm's trademark usage guidelines which contain JetForm's then current requirements related to the use of JetForm trademarks and logos. (ii) Distributor shall follow JetForm's instructions as given to Distributor from time to time as to the use of each JetForm trademark. (iii) Prior to any proposed use of any JetForm trademark, Distributor shall give JetForm written notice of exactly how Distributor proposes to use the trademark, including drawings of all advertising copy. Such written notice shall be delivered to JetForm at least thirty (30) days before public distribution, and Distributor shall make whatever changes JetForm requires in the use of the trademark before making any public distribution. (iv) JetForm retains the right to specify and approve the quality and standards of all materials and products on which the JetForm trademarks and/or trade names are displayed and to inspect from time to time samples of such materials, products and packaging used by Distributor or Remarketers. Failure of Distributor to adhere to such standards of quality shall be grounds for JetForm to terminate Distributor's rights to use such trademarks and/or trade names and/or the JetForm Software or to terminate this Agreement. (v) In any use of a JetForm trademark, such trademark shall not be combined with any other trademark, name, appellation, or marking unless JetForm specifically consents in writing to such combination. (vi) JetForm may discontinue the use of any JetForm trademark or trade name at any time and Distributor shall thereupon cease to use such trademark or trade name. (vii) Distributor agrees not to alter in any manner whatsoever any of the JetForm trademarks or trade names. (viii) Distributor shall use its best efforts to ensure compliance with these terms by all of its Remarketers. D. Distributor and its Remarketers shall display the JetForm trademarks and/or trade names on the JetForm Software and on all of its materials, promotions and dealings in connection therewith and clearly acknowledge that Distributor or its Remarketer, as applicable, is a licensed user of the JetForm trademarks and/or trade names. E. Distributor agrees to report to JetForm all infringement or improper or unauthorized use of any of the JetForm trademarks and/or trade names and to assist JetForm in protecting such items within the Territory, however Distributor acknowledges and agrees that only JetForm shall have the right to bring any action in connection with such infringement. F. Distributor further agrees to cooperate and execute all documents and further assurances as required by JetForm to register or protect JetForm's rights in such JetForm trademarks and/or trade names. G. Distributor acknowledges and agrees that: (a) JetForm retains all right, title and interest in and to the JetForm trademarks and/or trade names, and all use thereof by the Distributor or its Remarketers shall enure to the benefit of JetForm; and (b) neither Distributor nor End-users or Remarketers will acquire any ownership interest in any such JetForm trademarks and/or trade names by virtue of this Agreement, the distribution or sublicense of the JetForm Software and/or JTSP services or any relationship with JetForm. H. Distributor shall not at any time during or after the term of this Agreement assert any claim or interest in or to anything which may adversely affect the validity or enforceability of any JetForm trademark or trade name. Distributor shall not, and no End-user nor Remarketer shall, register, seek to register, or cause to be registered any of JetForm's trademarks or trade names without JetForm's prior written consent, which may be withheld by JetForm in its sole and absolute discretion. Distributor shall not display any of JetForm's trademarks or trade names without mentioning in the same display Distributor's trademark or trade name. EX-21.1 14 0014.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 Subsidiaries of JetForm Corporation JetForm Corporation (Canada) owns 100% of: JetForm Corporation (Delaware) JetForm Scandinavia AB (Sweden) JetForm Deutschland Gmbh (Germany) JetForm Technologies Limited (Ireland) JetForm UK Limited (England and Wales) JetForm Japan KK (Japan) JetForm Pacific Pty Ltd (Australia) JetForm PTE Ltd (Singapore) JetForm Corporation (Canada) owns 85% and JetForm UK Limited (England and Wales) owns 15% of: JetForm France SA (France) EX-23 15 0015.txt CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS As independent chartered accountants, we hereby consent to the incorporation by reference in the Registration Statement on Form S-8 of JetForm Corporation, dated March 30, 1994, of our report dated June 20, 2000 relating to the consolidated financial statements of JetForm Corporation which is included in the Annual Report on Form 10-K of JetForm Corporation for the year ended April 30, 2000. As independent chartered accountants, we hereby consent to the incorporation by reference in the Registration Statement on Form S-8 of JetForm Corporation, dated January 17, 1995, of our report dated June 20, 2000 relating to the consolidated financial statements of JetForm Corporation which is included in the Annual Report on Form 10-K of JetForm Corporation for the year ended April 30, 2000. As independent chartered accountants, we hereby consent to the incorporation by reference in the Registration Statement on Form S-3 of JetForm Corporation, dated June 30, 1995, and as subsequently amended, of our report dated June 20, 2000 relating to the consolidated financial statements of JetForm Corporation which is included in the Annual Report on Form 10-K of JetForm Corporation for the year ended April 30, 2000. As independent chartered accountants, we hereby consent to the incorporation by reference in the Registration Statement on Form S-8 of JetForm Corporation, dated December 11, 1995, for its 1990 Employee Stock Option Plan and 1993 Employee Stock Option Plan, of our report dated June 20, 2000 relating to the consolidated financial statements of JetForm Corporation which is included in the Annual Report on Form 10-K of JetForm Corporation for the year ended April 30, 2000. As independent chartered accountants, we hereby consent to the incorporation by reference in the Registration Statement on Form S-8 of JetForm Corporation, dated December 11, 1995, for its 1995 Employee Stock Option Plan, of our report dated June 20, 2000 relating to the consolidated financial statements of JetForm Corporation which is included in the Annual Report on Form 10-K of JetForm Corporation for the year ended April 30, 2000. As independent chartered accountants, we hereby consent to the incorporation by reference in the Registration Statement on Form S-3 of JetForm Corporation, dated December 20, 1996, of our report dated June 20, 2000 relating to the consolidated financial statements of JetForm Corporation which is included in the Annual Report on Form 10-K of JetForm Corporation for the year ended April 30, 2000. As independent chartered accountants, we hereby consent to the incorporation by reference in the Registration Statement on Form S-8 of JetForm Corporation, dated July 8, 1998, of our report dated June 20, 2000 relating to the consolidated financial statements of JetForm Corporation which is included in the Annual Report on Form 10-K of JetForm Corporation for the year ended April 30, 2000. /s/ PricewaterhouseCoopers LLP - ----------------------------------- Chartered Accountants Ottawa, Ontario July 26, 2000 PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organization. -----END PRIVACY-ENHANCED MESSAGE-----