Steve Maysonave, chief executive officer of Relativity Technologies, answered a series of questions from Local Tech Wire about the legal situation involving chairman and founder Vivek Wadhwa.
The first three questions were submitted to Maysonave last week, which he answered at that time. The remainder were submitted over the weekend. Maysonave submitted his answers on Monday.
Neither the questions nor the answers have been edited.
Any comment regarding the IBM acquisition?
Were executives in the company paid bonuses after the close on the last VC round and the loan from Silicon Valley Bank?
A few employees, not only “executives”, were paid bonuses for their exceptional contributions in 2003. Not all executives received bonuses. Some were paid pre-financing and some post-financing. This was in recognition of their contributions to the turnaround of the company from declining revenues in calendar years 2001 and 2002 to growth in 2003.
Was the company’s financial position as dire at times as stated in the (Wadhwa) document?
At times in the past, yes. Stable and growing now.
In your filing, you chose to include a considerable amount of financial information about Relativity. This is rare for a private company. Why did you choose to include so much detail?
Relativity is dealing only with facts in our legal action. As you are aware, corporate turnaround situations are a challenge. Allegations have been made about the financial status of Relativity in the past and present. The financial disclosures validate the valuations while demonstrating the turnaround of the company since I became CEO in February 2003. Specifically, revenues were cumulatively down over 50% from 2000 through 2001-02, while revenues increased by 19% in 2003.
Has this legal action detracted from your focus and that of senior management on the business at hand – selling and closing deals? You have noted that you are traveling extensively. Are you in pursuit of other deals?
The legal action has consumed some of my time which I compensate for by working longer hours. Outside of our General Counsel, senior management has been minimally impacted. Everyone is focused on building our business and being the leader in Enterprise Application Modernization. I travel extensively to meet with executives at our current accounts and Partners while supporting sales efforts at new accounts. We closed 6 new accounts in Q1 and 8 new accounts in Q2 while expanding our business with current customers.
Would you still prefer to settle this matter out of court?
Out of court settlements are generally preferable. Relativity will do whatever is appropriate and necessary to protect the interests of our customers, employees, and shareholders.
Have you been talking with your investors – Wachovia, Intel, Noro-Moseley, Wakefield – throughout this process, or are you handling this within authority of CEO? Please explain.
I have a responsibility and a personal strict policy of keeping major investors appropriately informed about any significant Relativity-related business development whether it be new partnerships, revenue, competition, or in this case, legal action.
How will this legal action affect Vivek Wadhwa’s role as chairman and member of the board?
Vivek is still Chairman of Relativity.
Regarding repayment of the money to Wadhwa, what does the documentation as filed and handled by Relativity include regarding requirements for repayment with interest and in a lump sum?
In May 2004, Relativity issued checks to Vivek and other employees for the salaries that they voluntarily deferred while Vivek was CEO. Regarding Vivek’s Note to Relativity, the lump sum repayment requirements are defined in multiple documents. The requirements have not been met or Relativity would have already paid Vivek. Relativity has voluntarily made offers to Vivek directly and through his legal counsel to initiate repayment of the Note on a monthly basis until conditions are met to repay in full. Vivek has declined these offers.
As CEO, do you make it clear to employees that you are the person designated to speak on behalf of the firm and anyone seeking to talk to the press must do so with your opinion? If so, please explain.
We have multiple individuals who are authorized to speak on behalf of Relativity depending on the topic. My opinion is irrelevant, every authorized Relativity spokesperson has a charter to deal in facts.
You told (LTW) that business is strong, revenues are increasing, and sales are producing new customers. What marketplace forces are driving the increase? Companies more willing to spend on IT? Is the IBM relationship opening doors as expected?
Relativity’s success and growth is being fueled by multiple factors:
IT spending is slightly up, but the fast ROI of Relativity’s SW solutions for Enterprise Application Modernization (EAM) and application outsourcing are the compelling factors in our growth.
The addition of new web-based products to the Modernization Workbench(tm) in 2003 has enabled Relativity to expand our positioning as the leader in Enterprise Application Modernization (EAM). This is a hot and rapidly accelerating market. We enable global 1000 companies to demystify their old applications and cost-effectively modernize them so organizations can be more productive and competitive while responding quickly to market changes.
The IBM relationship and Partnerships with organizations like Capgemini, Cognizant, US Technologies, CSC, Deloitte, NGIT, and EDS are all yielding new business and a plethora of opportunities in financial services, healthcare, outsourcing, and the public sector. We have expanded our sales and consulting services in the US and Europe to drive and support these new business opportunities.