<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended June 30, 1999
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 1-14342
------------------------------
NOVA CORPORATION
(Exact name of registrant as specified in its charter)
GEORGIA 58-2209575
------- ----------
(State or Other Jurisdiction of (I.R.S.Employer
Incorporation or Organization) Identification Number)
ONE CONCOURSE PARKWAY,
SUITE 300
ATLANTA, GEORGIA 30328
(Address of Principal Executive Offices) (Zip Code)
(770) 396-1456
(Registrant's telephone number, including area code)
-------------------
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
-------------------
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Shares Outstanding as of August 11, 1999
----- ----------------------------------------
Common Stock, $.01 par value 73,286,724 shares
================================================================================
<PAGE>
FORM 10-Q
QUARTER ENDED JUNE 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1999, (unaudited) and December 31, 1998................ 3
Condensed Consolidated Statements of Operations (unaudited)
Three months and six months ended June 30, 1999, and 1998....... 4
Condensed Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30, 1999, and 1998........................ 5
Notes to Condensed Consolidated Financial Statements.............. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................... 16
Item 4. Submission of Matters to a Vote of Security Holders................. 16
Item 6. Exhibits and Reports on From 8-K.................................... 16
Signatures.......................................................... 17
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
NOVA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ------------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents...................................................... $ 55,329 $ 51,131
Trade receivables, less allowance for doubtful accounts of $16,611
and $8,466 at June 30, 1999, and December 31, 1998, respectively............. 108,310 85,245
Current portion of net investment in finance leases............................ 13,869 11,775
Inventory...................................................................... 12,226 8,460
Deferred income taxes.......................................................... 20,290 31,884
Other current assets........................................................... 19,905 22,638
---------- ------------
Total current assets..................................................... 229,929 211,133
Merchant and customer contracts................................................ 283,431 263,992
Long-term portion of net investment in finance leases.......................... 38,645 33,910
Property and equipment, net.................................................... 72,290 65,732
Excess cost of businesses acquired............................................. 12,063 14,707
Long-term note receivable...................................................... 13,781 13,781
Other non-current assets....................................................... 20,683 19,278
---------- ------------
$ 670,822 $ 622,533
========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable............................................................... $ 33,830 $ 30,365
Accounts payable to affiliate.................................................. 925 827
Settlement obligations......................................................... 9,043 9,263
Accrued liabilities............................................................ 28,840 20,046
Credit and fraud loss reserve.................................................. 14,018 12,777
Accrued merger and consolidation charges....................................... 15,519 45,724
Long-term debt obligations due within one year................................. 34,095 31,534
---------- ------------
Total current liabilities................................................ 136,270 150,536
Long-term debt................................................................. 58,359 23,025
Minority interest in subsidiaries.............................................. 10,274 7,754
Shareholders' Equity
Common stock, $.01 par value, 200,000,000 shares authorized,
73,118,847 and 72,597,045 shares outstanding at June 30, 1999,
and December 31, 1998, respectively.......................................... 731 726
Additional paid in capital..................................................... 428,860 422,499
Accumulated retained earnings.................................................. 52,190 17,993
Treasury stock, at cost; 653,500 shares at June 30, 1999, and 0 shares
at December 31, 1998......................................................... (15,862) -
---------- ------------
Total shareholders' equity............................................... 465,919 441,218
---------- ------------
$ 670,822 $ 622,533
========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
NOVA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
--------------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues...................................... $379,344 $275,186 $691,109 $515,728
Operating expenses:
Cost of service............................ 291,295 210,579 529,737 393,892
Conversion costs........................... 8,131 2,025 15,652 4,612
Selling, general and administrative........ 28,410 26,844 56,158 51,460
Depreciation and amortization.............. 14,660 10,518 27,709 20,256
Merger and consolidation expenses.......... -- 1,590 -- 4,049
--------- -------- -------- --------
Total operating expenses................ 342,496 251,556 629,256 474,269
--------- -------- -------- --------
Operating income.............................. 36,848 23,630 61,853 41,459
Other income (expense):
Interest income............................... 1,007 2,044 1,545 3,284
Interest expense.............................. (510) (1,545) (1,502) (3,419)
Minority interest in income of subsidiaries... (4,498) (3,529) (6,774) (4,466)
--------- -------- -------- --------
(4,001) (3,030) (6,731) (4,601)
--------- -------- -------- --------
Income before provision for income taxes...... 32,847 20,600 55,122 36,858
Provision for income taxes.................... 12,323 7,649 20,580 13,220
--------- -------- -------- --------
Net income.................................... $ 20,524 $ 12,951 $ 34,542 $ 23,638
========= ======== ======== ========
Per share amounts:
Basic earnings per share...................... $ 0.28 $ 0.18 $ 0.47 $ 0.35
Diluted earnings per share.................... $ 0.28 $ 0.18 $ 0.46 $ 0.34
Shares used in per share calculations:
Weighted average shares - basic............... 72,995 70,531 72,870 68,344
Weighted average shares - diluted............. 74,397 72,690 74,441 70,365
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
NOVA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the six months
ended June 30,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................................................... $ 34,542 $ 23,638
Subsidiary fiscal year conversion................................................................... 2,547 -
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................................................... 27,709 20,256
Deferred income taxes........................................................................... 13,735 1,207
Minority interest............................................................................... 2,520 1,685
Interest on debt obligations.................................................................... 1,178 -
Changes in assets and liabilities, net of the effects of business acquisitions:
Trade receivables............................................................................. (12,950) (11,305)
Inventory..................................................................................... (3,656) (2,406)
Other assets.................................................................................. (5,730) (2,799)
Accounts payable.............................................................................. 5,367 5,975
Accrued liabilities........................................................................... (22,953) (25)
-------- ---------
Net cash provided by operating activities................................................... 42,309 36,226
-------- ---------
Cash flows from investing activities:
Purchase of merchant portfolios and customer contracts.......................................... (35,523) (37,260)
Amounts placed in escrow related to business purchase
transactions.................................................................................. (8,700) -
Purchase of property and equipment.............................................................. (14,161) (24,181)
Purchase of equipment for leasing............................................................... (14,680) (12,700)
Proceeds from sale of investments............................................................... - 25,443
Amounts received on leases...................................................................... 9,015 7,336
-------- ---------
Net cash used in investing activities....................................................... (64,049) (41,362)
-------- ---------
Cash flows from financing activities:
Proceeds from short-term borrowings and long-term debt, net..................................... 35,785 31,309
Payments on long-term debt and capital leases................................................... (329) (67,717)
Proceeds from public offerings, net of offering expenses........................................ - 142,589
Proceeds from stock options exercised........................................................... 6,344 2,167
Issuance of note receivable..................................................................... - (1,303)
Distributions of Subchapter S Corporations...................................................... - (2,713)
Purchase of treasury stock...................................................................... (15,862) -
Other........................................................................................... - (2)
-------- ---------
Net cash provided by financing activities................................................... 25,938 104,330
-------- ---------
Net increase in cash and cash equivalents........................................................... 4,198 99,194
-------- ---------
Cash and cash equivalents, beginning of period...................................................... 51,131 31,643
-------- ---------
Cash and cash equivalents, end of period............................................................ $ 55,329 $ 130,837
======== =========
Supplementary information:
Income taxes paid................................................................................... $ 17,196 $ 8,065
Interest paid....................................................................................... $ 1,385 $ 1,674
Notes payable issued in connection with business acquisition........................................ $ - $ 33,758
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
NOVA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the consolidated financial
statements reflect all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position and results of
operations of NOVA Corporation ("NOVA" or "the Company") as of the end of and
for the periods indicated.
COMBINED FINANCIAL RESULTS. On September 24, 1998, NOVA completed a merger
transaction with PMT Services, Inc. ("PMT"), pursuant to which PMT became a
wholly-owned subsidiary of NOVA (the "Merger"). Prior to the Merger, PMT
completed various mergers intended to qualify as tax-free reorganizations and
were accounted for as poolings of interests. Accordingly, the consolidated
historical financial statements for all periods presented combined the financial
results of NOVA and PMT. Although prior to the Merger, PMT reported on a fiscal
year ended July 31 basis, PMT changed its year end to October 31 in 1998.
Conforming PMT to a calendar year fiscal year was not practicable for 1998 due
to the timing and cost associated with establishing and auditing the beginning
of year balances as of January 1, 1998. Beginning in 1999, PMT's fiscal year was
changed to conform to a calendar year.
The NOVA balance sheet as of December 31, 1998, has been combined with the
PMT balance sheet as of October 31, 1998. The NOVA statements of operations for
the three months and six months ended June 30, 1998, have been combined with the
PMT statements of operations the three months and six months ended April 30,
1998. The NOVA statement of cash flows for the six months ended June 30, 1998,
has been combined with the PMT statement of cash flows for the six months ended
April 30, 1998. The results of operations of PMT for the period November 1,
through December 31, 1998, was a net loss of $345,000 and was reported as a
decrease in shareholders' equity during the three months ended March 31, 1999.
Revenues for this interim period were $90.8 million and expenses, including
income tax benefits, were $91.1 million.
There were no transactions between NOVA and PMT prior to the combination,
and immaterial adjustments were recorded to conform PMT's accounting policies.
Certain reclassifications were made to the PMT financial statements to conform
to NOVA's presentations.
Results of interim periods are not necessarily indicative of results to be
expected for the year as a whole. The effect of seasonal business fluctuations
and the occurrence of costs and expenses in annual cycles require certain
estimations in the determination of interim results.
These interim financial statements should be read in conjunction with
NOVA's audited financial statements included in the Annual Report on Form 10-K
and Form 10-K/A No. 1, for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
NOTE 2 - BUSINESS ACQUISITIONS
On February 15, 1999, NOVA acquired the assets of American National Bancard
Company ("ANC"), an independent sales organization ("ISO"), through its wholly-
owned subsidiary, PMT. The acquisition was accounted for as a purchase
transaction, and the net assets and results of operations are included in the
condensed consolidated financial statements from the date of acquisition. Cash
disbursed to the seller at the time of the transaction totaled approximately
$11.1 million and was allocated to "Merchant and customer contracts" based on
the estimated fair market value of the assets acquired. Additional consideration
of $8.7 million has been placed in escrow with a third party until
6
<PAGE>
NOVA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 2 - BUSINESS ACQUISITIONS (Continued)
January 31, 2000. This amount may be released subject to ANC's achieving certain
performance thresholds as set forth in the purchase agreement. This amount was
recorded as an "Other current assets" for financial statement purposes.
During January 1999, NOVA paid additional consideration of $6.0 million to
Key Bank, N.A. based on satisfying certain contingency thresholds established in
connection with the Key Merchant Services, LLC transaction in January 1998.
Additional merchant portfolio purchase activity through June 30, 1999, of $15.3
million relates to numerous individually insignificant merchant portfolio
purchases.
Effective May 1, 1999, Elan Merchants Services, LLC ("Elan"), a joint
venture between NOVA Information Systems, Inc., a wholly-owned subsidiary of
NOVA, and Firstar Bank U.S.A., N.A ("Firstar"), acquired the merchant processing
portfolio of Star Banc through a contribution of merchant processing rights from
Firstar. NOVA contributed $3.1 million in cash to complete the transaction.
NOTE 3 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (in thousands, except per share data):
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
-------------------- ------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted net income per share-income
available to common shareholders........................................ $20,524 $12,951 $34,542 $23,638
Denominator:
Denominator for basic net income per share-weighted-average shares.......... 72,995 70,531 72,870 68,344
Effect of diluted securities:
Stock options.............................................................. 1,402 2,159 1,571 2,021
------- ------- ------- -------
Dilutive potential common shares:
Denominator for diluted net income per share-adjusted weighted-average
shares and assumed conversions.......................................... 74,397 72,690 74,441 70,365
======= ======= ======= =======
Basic earnings per share............................................ $ 0.28 $ 0.18 $ 0.47 $ 0.35
======= ======= ======= =======
Diluted earnings per share.......................................... $ 0.28 $ 0.18 $ 0.46 $ 0.34
======= ======= ======= =======
</TABLE>
NOTE 4 - MERGER AND CONSOLIDATION EXPENSES
As a result of the Merger and other merger transactions completed by PMT
during 1998, the Company recorded a $90.7 million charge in 1998. This charge
was related primarily to direct merger transaction costs, charges associated
with the consolidation and closure of PMT's corporate headquarters and certain
operating subsidiaries, contract termination costs related to unfavorable third-
party processing contracts, and the decision to exit certain of PMT's sales
distribution channels.
Direct merger transaction costs are primarily investment banking
commissions, professional fees, and regulatory filing expenses. The primary
costs associated with the consolidation and closure of facilities include
employee and executive severance, estimated unrecoverable future lease
obligations on vacated facilities, and the write-down of capital assets to their
net realizable value. The consolidation and closure actions are a result of the
elimination of overlapping functions, primarily customer service, accounting,
and administrative areas. The total number of employees terminated was
approximately 275, with 210 having
7
<PAGE>
NOVA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4 - MERGER AND CONSOLIDATION EXPENSES (Continued)
received severance packages as of December 31, 1998. Of these employees, certain
executives' severance will be paid out over two years. NOVA began the process of
consolidating PMT's corporate headquarters from Nashville, Tennessee to other
locations in December 1998, and completed this process in the first quarter of
1999.
Consistent with past practice, management developed a plan in 1998 to
convert the front-end and back-end transaction processing of PMT's merchants to
the Company's proprietary telecommunications platform (the "NOVA Network"). In
1998, NOVA negotiated the termination of long-term processing contracts with
third parties that resulted in early termination fees. The majority of these
terminations were finalized and the fees paid in 1998. The Company expects to
complete the negotiation and payment of the termination fees during 1999.
Capital asset write-downs are substantially attributable to computer
software and equipment, including PMT's management information and financial
reporting systems. Additional assets written down include telephone systems, and
office furniture and equipment that will not be redeployed for use at another
NOVA facility.
In 1998, management formulated plans to exit unique distribution channels
based upon the type of merchant business generated through these channels.
Specifically, servicing and maintaining the type of merchant generated through
these channels is not compatible with NOVA's operating philosophy and not
strategically aligned with NOVA's plan of business. The charge related to
exiting these distribution channels includes a contract termination fee and the
write-down of certain related intangible assets resulting from an analysis of
discounted future cash flows generated from the subject merchants. The majority
of these merger related costs were paid in the fourth quarter of 1998 and the
remaining costs are expected to be paid during 1999.
A summary of the merger related charges are as follows (in thousands):
<TABLE>
<CAPTION>
Reserve 2nd Quarter Reserve
Cash/ Balance 1999 Balance
Description Non-cash Charge Activity at 3/31/99 Activity at 6/30/99
----------- -------- ------ -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Direct transaction costs................. Cash $15,515 $(15,515) $ - $ - $ -
Severance packages....................... Cash 14,050 (5,873) 8,177 (52) 8,125
Lease abandonment........................ Cash 4,658 (411) 4,247 (299) 3,948
Contract termination charges............. Cash 35,506 (32,721) 2,785 (243) 2,542
Asset write-down......................... Non-cash 7,121 (7,121) - - -
Costs to exit a distribution channel..... Non-cash 11,370 (11,370) - - -
Costs to exit a distribution channel..... Cash 2,500 - 2,500 (1,596) 904
------- -------- ------- ------- -------
TOTAL................................. $90,720 $(73,011) $17,709 $(2,190) $15,519
======= ======== ======= ======= =======
</TABLE>
NOTE 5 - SHAREHOLDERS' EQUITY
COMMON SHARE REPURCHASE PROGRAM. In June 1999, the Board of Directors
authorized a share repurchase program approving share purchases of up to $250.0
million from time to time on the open market, or pursuant to private negotiated
transactions, at price levels the Company deems attractive. The shares may be
used to meet funding requirements for benefit plans and other business purposes.
As of June 30, 1999, NOVA had acquired 653,500 shares at an aggregate cost of
$15.9 million. The purchase of the shares was funded primarily through the draw
down of funds from the existing credit facility.
8
<PAGE>
NOVA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 5 - SHAREHOLDERS' EQUITY (Continued)
RIGHTS AGREEMENT. On June 8, 1999, the Board of Directors approved the
adoption of a share Rights Agreement which provides for a dividend distribution
to shareholders of record on June 8, 1999, of one Right for each outstanding
share of common stock. The Rights are attached to the common stock, do not have
voting or dividend rights, and until they become exercisable, they can have no
dilutive effect on earning. Each Right, when exercisable, entitles the holder to
purchase ten shares of common stock (subject to adjustment based upon a
predetermined formula) at a purchase price per share of 20% of market value,
measured as of the date that an announcement is made that a person has acquired
sufficient shares to become an Acquiring Person (any person who acquires, after
July 9, 1999, 10% of the outstanding shares of the Company) multiplied by the
number of shares of common stock to be received upon exercise. The distribution
date will occur upon the earlier of (i) ten days following a public announcement
that a person or group of affiliated or associated persons has acquired
beneficial ownership of 10% or more of the outstanding shares, or (ii) ten days
following the commencement of a tender offer or an exchange offer that would
result in a person or group beneficially owning 10% or more of such outstanding
shares of common stock. The Rights are not exercisable until the distribution
date and will expire at the close of business on July 9, 2009, unless earlier
redeemed by the Company.
In the event that, after the Rights become exercisable, (i) the Company is
acquired in a merger or other business combination in which the Company is not
the surviving corporation, (ii) all of its shares are acquired in a share
exchange or the Company engages in a merger or consolidation in which all or
part of its outstanding shares are changed or exchanged for stock, other
securities or assets of any other person or (iii) 50% or more of the Company's
assets or earning power is sold or transferred, each Right holder shall have the
right to receive, upon exercise, a number of shares of common stock of the
acquiring company equal to the calculated conversion exchange ratio.
Unless the terms of an offer for all shares are first approved by the Board
and the Rights Agreement amended to permit the transaction or the Rights are
redeemed by the Company, the Rights will cause substantial dilution, if they
become exercisable.
In general, the Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right, at any time before a person becomes a beneficial
owner of 10% or more of the outstanding common stock of NOVA. Immediately upon
the action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders will be to receive the
$.01 redemption price.
NOTE 6 - RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 2000. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.
9
<PAGE>
NOVA CORPORATION
FORWARD-LOOKING STATEMENTS. In addition to historical information, this
report on Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 (the "Securities Act"), as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). When used in this report, the words "may," "could," "should,"
"would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and
similar expressions or statements regarding future periods are intended to
identify forward-looking statements. All forward-looking statements are
inherently uncertain as they are based on various expectations and assumptions
concerning future events, which by their nature involve substantial risks and
uncertainties beyond NOVA's control. Forward-looking statements may also be made
in NOVA's other reports filed under the Exchange Act, press releases, and other
documents; as well as by NOVA management in oral statements. NOVA undertakes no
obligation to update or revise any forward-looking statements for events or
circumstances after the date on which such statement is made. New factors emerge
from time to time, and it is not possible for NOVA to predict all of such
factors. Further, NOVA cannot assess the impact of each such factor on its
business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any forward-looking
statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's opinion as of the date of this report.
NOVA refers readers to the information set forth under the caption "Item 1.
Business--Certain Risks Associated with the Business of the Company", as well as
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a more complete discussion of certain risk factors contained
in the Annual Report on Form 10-K for the year ended December 31, 1998, filed
with the Securities and Exchange Commission.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS. The following table presents, for the periods
indicated, the percentage of revenues represented by certain line items in
NOVA's condensed consolidated statements of operations, as well as the
percentage increase/(decrease) of such items from period to period:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- Increase/ -------------------- Increase/
1999 1998 Decrease 1999 1998 Decrease
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................... 100.0 % 100.0 % 37.9 % 100.0 % 100.0 % 34.0 %
Cost of service............................ 76.8 76.5 38.3 76.7 76.4 34.5
Conversion costs........................... 2.1 0.7 301.5 2.3 0.9 239.4
Selling, general and administrative........ 7.5 9.8 5.8 8.1 10.0 9.1
Depreciation and amortization.............. 3.9 3.8 39.4 4.0 3.9 36.8
Merger expenses............................ 0.0 0.6 (100.0) 0.0 0.8 (100.0)
Operating expenses......................... 90.3 91.4 36.2 91.1 92.0 32.7
Operating income........................... 9.7 8.6 55.9 8.9 8.0 49.2
Interest income............................ 0.3 0.7 (50.7) 0.2 0.6 (53.0)
Interest expense........................... (0.1) (0.6) (67.0) (0.2) (0.7) (56.1)
Minority interest.......................... (1.2) (1.3) 27.5 (0.9) (0.9) 51.7
------- ------- ------ ------
Income before provision for income taxes... 8.7 7.5 59.5 8.0 7.1 49.6
Provision for income taxes................. 3.3 2.8 61.1 3.0 2.6 55.7
------- ------- ------ ------
Net income................................. 5.4 % 4.7 % 58.5 % 5.0 % 4.6 % 46.1 %
======= ======= ====== ======
</TABLE>
GENERAL. NOVA is a provider of integrated point-of-sale transaction
processing services, related software application products, and value-added
services. The Company provides transaction processing support for all major
credit and charge cards and also provides access to debit card processing and
check verification services.
REVENUES. NOVA's revenues increased 37.9% to $379.3 million for the quarter
ended June 30, 1999, compared to $275.2 million for the quarter ended June 30,
1998. The increase resulted primarily from a 29.5% increase in merchant sales
volume processed to approximately $14.7 billion compared to $11.3 billion for
the same period in 1998. The principal contributors to the increase are internal
growth and the incremental effect of the increased discount related to the pass
through of higher interchange rates from credit card associations, which was
effective April 10, 1999. Additionally, the CoreStates Bank (purchased in
October 1998) and ANC portfolio purchases account for increases in revenues of
approximately $27.7 million and merchant sales volume processed of approximately
$1.0 billion. For the six months ended June 30, 1999, revenues increased $175.4
million to $691.1 million from $515.7 million for the same period in 1998. The
revenue increase corresponds to a $6.0 billion increase in merchant sales volume
processed to $27.5 billion. Of this growth, approximately $43.2 million in
revenues and $1.8 billion in volume are attributable to the CoreStates and ANC
portfolio purchases.
COST OF SERVICE. Cost of service increased 38.3% to $291.3 million for the
quarter ended June 30, 1999, compared to $210.6 million for the quarter ended
June 30, 1998. For the six months ended June 30, 1999, the cost of service
increased 34.5% to $529.7 million from the $393.9 million during the same period
in 1998. The increase resulted from the interchange, assessment fees and other
direct operating costs associated with the higher merchant sales volume
processed. Additional cost increases related primarily to the sales volume
associated with portfolio purchases made in the later part of 1998 that have not
yet been converted to NOVA's operating platform; as such the sales volume was
processed by third party vendors at a higher cost. Another significant factor
was increased VISA and MasterCard interchange rates that went into effect on
April 10, 1999.
11
<PAGE>
CONVERSION COSTS. Conversion costs increased to $8.1 million for the
quarter ended June 30, 1999, compared to $2.0 million for the quarter ended June
30, 1998. The increase relates to the magnitude of the conversion efforts
currently underway for the PMT merchants and for the CoreStates merchant
portfolio purchased in the fourth quarter of 1998. For the six months ended June
30, 1999, conversion costs increased to $15.7 million, or 239.4%, from $4.6
million during the same period in 1998.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased 5.8% to $28.4 million for the quarter ended June 30, 1999,
compared to $26.8 million for the same period in 1998. These increases are
attributable primarily to the additional personnel, primarily customer service
and support, and facilities costs in connection with transitioning all
operational functions for the PMT merchant portfolios begun in October 1998.
Selling, general and administrative expenses for the six months ended June 30,
1999 were $56.2 million, an increase of 9.1% from the $51.5 million reported
for the six months ended June 30, 1998. Despite the overall cost increase,
expenses as a percentage of revenues declined to 7.5% for the three months
ending June 30, 1999, compared to 9.8% for the three months ending June 30,
1998. Expenses as a percentage of revenues for the six months ended June 30,
1999, dropped to 8.1% from 10.0% during the first six months of June 30, 1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
39.4% to $14.7 million for the quarter ended June 30, 1999, compared to $10.5
million for the quarter ended June 30, 1998. This is due primarily to
amortization expense associated with the portfolio purchases made in the latter
part of 1998. Additional depreciation expense increases are attributable to the
increase in fixed assets held as of June 30, 1999, compared to June 30, 1998,
mainly for facilities and technology infrastructures. Depreciation and
amortization expense for the six months ended June 30, 1999, of $27.7 million
increased 36.8% from the $20.3 million during the first half of 1998.
MERGER AND CONSOLIDATION EXPENSES. There were no merger and consolidation
expenses in the quarter ended June 30, 1999, or the six months ended June 30,
1999. This is compared to $1.6 million for the quarter ended June 30, 1998, and
$4.0 million for the six months ended June 30, 19998. The charges in 1998 relate
primarily to costs to terminate an unfavorable third-party contract and expenses
incurred by PMT prior to the Merger.
OPERATING INCOME. For the foregoing reasons, operating income for the
quarter ended June 30, 1999, increased $13.2 million, or 55.9%, to $36.8 million
from the second quarter of 1998 results of $23.6 million. Operating margins
improved to 9.7% for the three months ended June 30, 1999, compared to 8.6%
for the same period in 1998. Operating income for the six months ended June
30, 1999, of $61.9 million increased $20.4 million, or 49.2%, from the same
period in 1998. Operating margins improved to 8.9% for the six months ended June
30, 1999, compared to 8.0% for the same period in 1998.
INTEREST INCOME. Interest income decreased approximately $1.0 million, or
50.7%, to $1.0 million for the quarter ended June 30, 1999, compared to $2.0
million for the quarter ended June 30, 1998. For the six months ended June 30,
1999, interest income declined 53.0% to $1.5 million from $3.3 million during
the same period in 1998. The most significant factor relates to the income
earned during 1998 from the investment in debt securities. Upon maturity of
these debt securities during fiscal 1998, the Company used the proceeds
primarily to fund merchant portfolio purchases and other operating requirements.
NOVA utilized other cash balances available to fund portfolio purchases and
purchases of property and equipment. Accordingly, such balances were unavailable
for investment purposes.
12
<PAGE>
INTEREST EXPENSE. Interest expense decreased approximately $1.0 million,
or 67.0%, for the quarter ended June 30, 1999, to $510,000, compared to $1.5
million in the quarter ended June 30, 1998. The primary component of this
decrease was the pay down of approximately $53.0 million in debt obligations in
April 1998 from a portion of the proceeds received from the public offering of
shares of NOVA common stock. Offsetting this decrease were increased borrowings
to fund merchant portfolio acquisitions, capital asset investments and treasury
share purchase transactions.
INCOME TAXES. Income tax expense of $12.3 million for the quarter ended
June 30, 1999, increased 61.1%, or $4.7 million, compared to $7.6 million for
the same period in 1998. The effective tax rate of 37.5% in the second quarter
of 1999 increased from 37.1% for the second quarter of 1998. This is
attributable to the increase in taxable income related to NOVA's increased
presence in California compared to the same period in 1998, and also the pre-
Merger acquisitions made by PMT of Subchapter S corporation whose income is
included in earnings, but not subject to income taxes in 1998. For the six
months ended June 30, 1999, income tax expense of $20.6 million increased $7.4
million, or 55.7%, from the $13.2 million for the same period in 1998. The
effective tax rate of 37.3% for the first half of 1999 compares to 35.9% for the
first half of 1998. This increase is attributable to the aforementioned reasons.
NET INCOME. Due to the factors discussed above, net income rose 58.5%
to $20.5 million, for the quarter ended June 30, 1999, compared to $13.0 million
for the quarter ended June 30, 1998. This increase was also accompanied by
improvement in net operating margins in the second quarter of 1999 of 5.4%
compared to 4.7% in the second quarter of 1998. Net income increased 46.1% in
the six months ended June 30, 1999 to $34.5 million from $23.6 million during
the first six months of 1998. Net margins also improved to 5.0% in 1999 from
4.6% in the first six months of 1998.
NOVA reported earnings per diluted common share of $0.28 and $0.46 per
share for the second quarter and six months ended June 30, 1999, respectively.
This represents a per share increase for the second quarter 1999 of $0.10, or
55.6%, from the $0.18 reported in the second quarter of 1998, and an increase of
$0.12, or 35.2%, from the $0.34 reported in the first half of 1998.
OTHER MATTERS. As discussed in Note 1 to the condensed consolidated
financial statements, PMT incurred a net loss of $345,000 during the two months
ended December 31, 1998. These results include approximately $4.1 million of
costs associated with the Merger that were not accrued during fiscal 1998, and
conversion related costs of approximately $850,000. Additional factors adversely
affecting this period include operating under unfavorable third party processing
contracts that were not renewed in anticipation of conversion to the NOVA
Network and redundant operations that occurred during the consolidation and
integration phase.
LIQUIDITY AND CAPITAL RESOURCES. The Company's primary uses of its capital
resources include purchases of merchant portfolios, capital expenditures,
equipment for leasing, and working capital. Net cash provided by operating
activities was $42.3 million for the six months ended June 30, 1999, as compared
to $36.2 million for the six months ended June 30, 1998. Primary uses of
operating cash were for accounts receivable and the settlement of liabilities.
During the first half of 1999, $30.2 million was used to satisfy certain
liabilities related to the $90.7 million in merger related charges recognized in
1998. The Company used its operating cash resources to support operating
requirements and reinvest in existing business and technology platforms.
Net cash used in investing activities was $64.0 million for the six months
ended June 30, 1999, as compared to $41.4 million for the six months ended June
30, 1998. Increases in the cash needed to fund the purchases of merchant
portfolios include the use of approximately $19.8 million to acquire ANC and
establish contractual escrow balances. Historically, NOVA has required
considerable cash outlay to consummate portfolio purchases and this requirement
is expected to continue for the 1999 fiscal year. Capital equipment purchases
decreased approximately $10.0 million to $14.7 million during the six months
ended June 30, 1999, compared to the same period in 1998. Significant
expenditures in 1998 included the development of internal merchant processing
systems and the
13
<PAGE>
refurbishment and expansion of facilities in Knoxville, Tennessee. Major
expenditures during the first six months of 1999 include the enhancement and
improvement of technology platforms. NOVA's cash requirement for capital
expenditures is projected to be approximately $30.0 million during 1999.
Net cash flow from financing activities was $25.9 million during the six
months ended June 30, 1999, compared to $104.3 million for the same period in
1998. Proceeds from short-term borrowings and other borrowings of $35.8 million
were used primarily to fund acquisition activity and merchant portfolio
purchases, and $15.9 million was used to support the share repurchase program.
Proceeds from stock options exercises of $6.3 million partially offset the cash
outlays. Proceeds from the draw down of available credit facilities in the first
quarter of 1998 were used primarily to fund merchant portfolio purchases and
capital expenditures. In April 1998, the Company completed a public offering of
its common shares for $142.6 million, net of expenses. Subsequent to the public
offering, NOVA used $53.1 million of the net proceeds to repay amounts
outstanding under its bank credit facilities.
In June 1999, NOVA announced that its Board of Directors had authorized the
repurchase of up to $250.0 million of its common shares on the open market or
through privately negotiated transactions. The Company expects to fund the share
repurchases through operating cash flows and funds from credit facilities
available. As of July 23, 1999, NOVA had repurchased approximately 1.6 million
shares under this program for a total of $41.3 million.
Effective June 17, 1999, NOVA amended its existing credit facilities
agreement to, among other things, allow for the repurchase of NOVA shares.
Additionally, an agreement to expand the revolving loan commitment amount from
$80.0 million to $100.0 million was entered into in June 1999.
The Company typically has relatively low working capital requirements
because discount fees charged to merchants are generally collected in an average
of twenty days, while normal payables are paid in an average of thirty days or
longer. Because of the seasonality of NOVA's business, capital requirements may
be greater in certain months than others. In addition, increasing acquisition
activity may cause variations in working capital due to conversion-period
operating costs and the transition in the payment of expenses and the collection
of receivables from the former processor, as is the case with the consolidation
of PMT, a subsidiary of the Company.
At June 30, 1999, the Company had cash and cash equivalents of $55.3
million. NOVA believes its existing cash and cash equivalents, cash generated
from operations, and available credit facilities are sufficient to fund
merchant portfolio purchases, capital asset investments, share repurchases and
to meet working capital requirements for the foreseeable future.
14
<PAGE>
YEAR 2000 COMPLIANCE
The Year 2000 Issue is the result of date sensitive computer software
programs being written using two digits rather than four digits to define the
applicable year. Consequently, unless corrected, computer software programs will
be unable to read and accurately process date information on or after the year
2000. NOVA has critical reliance on technology systems, telecommunications
systems, facilities infrastructure and embedded systems, such as heating and
ventilation systems, in conducting its business. NOVA also has business
relationships with third party providers, such as telecommunication vendors,
financial institutions, and data processors, who are highly reliant on
information technology and other systems to conduct their business.
Due to the significance of technology systems and other support systems, in
1997 NOVA launched its Year 2000 compliance efforts with a comprehensive
evaluation of its critical systems, applications, computing platforms, and
merchant terminals to ensure potential risks are identified and non-compliant
information systems upgraded or replaced. The initial phase of the project was
the identification of all technology systems and determining which were at risk.
After completion of this phase, steps were taken to remediate and test those
systems initially determined to be non-compliant.
In June 1997, VISA U.S.A. and Mastercard International certified NOVA as
capable of processing transactions for cards issued with expiration dates of
2000 and beyond. Also completed in 1997 was the validation and correction of
merchant terminals for Year 2000 functionality. In 1998, NOVA substantially
completed the review and correction of its identified systems. As an added
measure of validation, an independent review and evaluation was initiated for
the following: building infrastructure, client/server platforms, NOVA Network,
software applications, principal and strategic vendors' products or services,
and telecommunication platforms and equipment. NOVA believes that its Year 2000
project is substantially complete.
Through 1998, NOVA has replaced or upgraded personal computers,
client/server applications, and certain computer software programs to be Year
2000 compliant. The nature of NOVA's business requires continuous development of
its technologies and systems, extensively utilizing internal resources in this
effort. Accordingly, it is difficult to determine with certainty the costs that
have been incurred to date.
Despite NOVA's efforts, there cannot be absolute assurance that NOVA will
be completely successful in eliminating all business and operations risk. The
risks associated with the Year 2000 Issue include the possibility of a failure
of the information and non-information technology systems. System malfunction
or failure could result in incomplete or inaccurate transaction processing.
Additionally, NOVA may be adversely affected by a system malfunction or failure
of third parties that hold a business, financial or operational relationship
with NOVA; such as processing banks, telecommunication providers, and utilities.
If these third parties fail to adequately address Year 2000 issues, NOVA could
experience a negative impact on its business operations, such as business
interruption or shutdown. The consequences of interruption could cause NOVA to
suffer a material adverse impact on its financial condition and results of
operations.
NOVA has begun to develop contingency and recovery plans as a precautionary
measure targeted at ensuring the continuation and continuity of critical
business functions before and after December 31, 1999. Such plans are scheduled
to be complete by October 1, 1999. NOVA will continue to identify aspects of its
business and that of its third-party providers and take necessary corrective
action, primarily the expedient replacement of any critical vendor who does not
provide proof of compliance. Currently, the core vendors that NOVA relies upon
have provided documentation that they are year 2000 compliant. The contingency
efforts described above are expected to minimize the business risk connected to
the Year 2000 Issue.
15
<PAGE>
PART II.--OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company has been involved from time to time in litigation in the normal
course of its business. While management is aware of and dealing with certain
pending or threatened litigation, management does not believe that such matters,
individually or in the aggregate, will have a material adverse affect on the
financial condition of the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on May 26, 1999. Two
matters were voted upon and approved at the meeting.
Proposal 1 Election of Directors
- ----------
The results of the voting were as follows:
<TABLE>
<CAPTION>
For Withheld
---------- --------
<S> <C> <C>
James M. Bahin 63,124,391 639,348
Charles T. Cannada 63,123,787 639,952
Gregory S. Daily 63,124,391 639,348
Edward Grzedzinski 63,124,391 639,348
Stephen D. Kane 63,124,391 639,348
Dr. Henry Kressell 63,124,391 639,348
George M. Miller III 63,123,787 639,952
Richardson M. Roberts 63,124,391 639,348
Stephen E. Wall 63,123,787 639,953
Proposal 2 Ratification of the selection of Ernst & Young LLP as independent
- ----------
auditors of the Company for 1999.
The results of the vote were as follows:
For - 63,759,118 Against - 2,724 Abstain - 1,897
</TABLE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
No. Description of Exhibit
------- ----------------------
*2.1(i) Rights Agreement, dated as of July 9, 1999,
between the Company and First Union National Bank.
*3(i) Articles of Amendment to the Articles of Incorporation of NOVA
Corporation, dated June 8, 1999.
*10.47 Employment Agreement, effective June 16, 1999, between the
Registrant and Edward Grzedzinski.
*10.48 Employment Agreement, effective June 8, 1999, between the
Registrant and Philip J. Mazzilli.
*10.49 Separation Agreement, effective June 23, 1999, between the
Registrant and James M. Bahin.
*10.50 Stock Option Grant between the Registrant and Edward Grzedzinski.
*10.51 Second Amendment to Credit Agreement, dated June 17, 1999,
among NOVA Corporation and NOVA Information Systems, the Lenders
named therein, First Union National Bank as Documentation Agent,
and Bank of America National Trust and Savings Associations.
*27 Financial Data Schedule
- --------------------
* Filed herewith
(b) Reports on Form 8-K
The Company did not file any Current Report (s) on Form 8-K during the quarter
ended June 30, 1999.
16
<PAGE>
FORM 10-Q
NOVA CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOVA CORPORATION
(Registrant)
By: /s/ Edward Grzedzinski
------------------------
Edward Grzedzinski
Date: August 16, 1999 Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
Date: August 16, 1999 By: /s/ Philip J. Mazzilli
-----------------------
Philip J. Mazzilli
Chief Financial Officer
(Principal Accounting Officer)
17
<PAGE>
Exhibit 2.1
NOVA CORPORATION
AND
FIRST UNION NATIONAL BANK,
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF JULY 9, 1999
Page 6 of 63
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 8
Section 3. Issue of Rights Certificates 8
Section 4. Form of Rights Certificates 10
Section 5. Countersignature and Registration 11
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates 12
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Right 13
Section 8. Cancellation and Destruction of Rights Certificates 15
Section 9. Reservation and Availability of Capital Stock 16
Section 10. Common Stock Record Date 17
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights 18
Section 12. Certificate of Adjusted Number of Shares 24
Section 13. Consolidation, Merger, Share Exchange or Sale or Transfer of Assets
or Earning Power 25
Section 14. Fractional Rights and Fractional Shares 28
Section 15. Rights of Action 29
Section 16. Agreement of Rights Holders 29
Section 17. Rights Certificate Holder Not Deemed a Stockholder 30
Section 18. Concerning the Rights Agent 31
Section 19. Merger or Consolidation or Change of Name of Rights Agent 31
Section 20. Duties of Rights Agent 32
Section 21. Change of Rights Agent 34
Section 22. Issuance of New Rights Certificates 35
Section 23. Redemption and Termination 35
Section 24. Exchange 36
Section 25. Notice of Certain Events 37
Section 26. Notices 38
Section 27. Supplements and Amendments 39
Section 28. Successors 40
Section 29. Determinations and Actions by the Board of Directors, etc 40
Section 30. Benefits of this Agreement 40
Section 31. Severability 41
Section 32. Governing Law 41
Section 33. Counterparts 41
Section 34. Descriptive Headings 42
</TABLE>
Exhibits:
- --------
Exhibit A Form of Rights Certificate
Exhibit B Summary of Rights to Purchase Common Stock
Page 7 of 63
<PAGE>
THIS RIGHTS AGREEMENT, dated as of July 9, 1999 (this "Agreement"), between NOVA
CORPORATION, a Georgia corporation (the "Company"), and FIRST UNION NATIONAL
BANK, a national banking association, (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, on June 8, 1999 ("the Rights Dividend Declaration Date"), the Board of
Directors of the Company authorized and declared a dividend distribution of one
Right for each share of Common Stock, (as hereinafter defined) of the Company
outstanding at the Close of Business on June 8, 1999 (the "Record Date"), and
has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(m) hereof) for each share of
Common Stock of the Company issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the Distribution Date (as
hereinafter defined), each right initially representing the right to purchase
ten shares of Common Stock of the Company upon the terms and subject to the
conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions.
For purposes of this Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
----------------
with all Affiliates and Associates of such Person, shall, after the Rights
Dividend Declaration Date, become the Beneficial Owner of 10% or more of the
shares of Common Stock then outstanding, but shall not include the Company, any
Subsidiary of the Company, or any Person who or which, together with all
Affiliates and Associates of such Person, is the Beneficial Owner of 10% or more
of the shares of Common Stock of the Company as of the date of the Company's
public announcement of the existence of this Agreement (July 9, 1999), any
employee benefit plan of the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan; provided, however, any Person who or
which, together with all Affiliates and Associates of such Person, is the
Beneficial Owner of 10% or more of the shares of Common Stock as of the date of
the Company's public announcement of the existence of this Agreement (July 9,
1999) and who or which, together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of an additional 5% or more of the shares
of Common Stock then outstanding shall be deemed an Acquiring Person.
Notwithstanding the foregoing, no Person shall become an Acquiring Person as the
result of an acquisition of shares of Common Stock by the Company or a
recapitalization which, by reducing the number of shares of Common Stock
outstanding, increases the proportionate number of shares Beneficially Owned by
such Person to 10% or more of the shares of Common Stock of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of 10% or more of the shares of Common Stock of the Company by reason of
share purchases or a recapitalization by the Company and shall, after such share
purchases or recapitalization by the
Page 8 of 63
<PAGE>
Company, become the Beneficial Owner of any additional shares of Common Stock of
the Company (other than as a result of a subsequent occurrence of a Triggering
Event, a stock dividend or a subdivision of the Company Stock into a larger
number of shares or a similar transaction), then such Person shall be deemed to
be an Acquiring Person; and, further provided, that if a Person who or which was
the Beneficial Owner of 10% or more of the shares of Common Stock of the Company
as of the date of the Company's public announcement of the existence of this
Agreement (July 9, 1999) and who or which, together with all Affiliates and
Associates of such Person, shall become the Beneficial Owner of an additional
5% or more of the shares of Common Stock of the Company then outstanding by
reason of share purchases or a recapitalization by the Company and shall, after
such share purchases or recapitalization by the Company, become the Beneficial
Owner of any additional shares of Common Stock of the Company (other than as a
result of a subsequent occurrence of a Triggering Event, a stock dividend or a
subdivision of the Common Stock into a larger number of shares or a similar
transaction), then such Person shall be deemed to be an Acquiring Person.
Notwithstanding the foregoing, if a majority of the Continuing Directors
(as defined below) or, if there are then no Continuing Directors, a majority of
the Board of Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this Section 1(a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Stock so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this Section 1(a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement. The
determination of whether such Person's becoming an Acquiring Person shall have
been inadvertent and the determination of whether the divestment of sufficient
shares shall have been made as promptly as practicable shall be made by a
majority of the Continuing Directors or, if there are then no Continuing
Directors, a majority of the Board of Directors of the Company.
(b) "Act" shall mean the Securities Act of 1933, as amended.
---
(c) "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
---------
of the General Rules and Regulations under the Exchange Act in effect on the
date of this Agreement.
(d) "Associate" shall mean:
---------
(i) any corporation or organization, or parent or subsidiary of such
corporation or organization, of which a Person is an officer, director or
partner or is, directly or indirectly, the Beneficial Owner of 10% or more
of any class of equity securities;
(ii) any trust or other estate in which a Person has a beneficial
interest of 10% or more or as to which such Person serves as trustee or in
a similar fiduciary capacity; and
(iii) any parent, brother or sister (whether by whole or half blood),
ancestor, lineal descendant or spouse of a Person, or any such relative of
such spouse.
Page 9 of 63
<PAGE>
(e) A Person shall be deemed the "Beneficial Owner" of, and shall be
----------------
deemed to "Beneficially Own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to acquire
(whether such right or obligation is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "Beneficially Own":
(A) securities acquired by participation in good faith in a
firm commitment underwriting by a Person engaged in business as an
underwriter of securities until the expiration of 40 days after the
date of such acquisition; or
(B) securities tendered pursuant to a tender or exchange offer
made by such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange;
or
(C) securities issuable upon exercise of Rights at any time
prior to the time a Person becomes an Acquiring Person (as defined in
this section); or
(D) securities issuable upon exercise of Rights from and after
the time a Person becomes an Acquiring Person which Rights were
acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date (as hereinafter defined in
Section 3(a)) or pursuant to Section 3(a) or Section 22 hereof (the
"Original Rights") or pursuant to Section 11(f) hereof in connection
with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has direct or indirect "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether
or not in writing; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "Beneficially Own," any security under this
subparagraph (ii) as a result of an agreement, arrangement or understanding
to vote such security if such agreement, arrangement or understanding:
(A) arises solely from a revocable proxy given in response to a
public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and
Page 10 of 63
<PAGE>
(B) is not also then reportable by such Person on Schedule 13D
under the Exchange Act (or any comparable or successor report); or
(iii) which are Beneficially Owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (e)) or
disposing of any voting securities of the Company.
(f) "Business Day" shall mean any day other than a Saturday, Sunday or a
------------
day on which banking institutions in the State of Georgia are authorized or
obligated by law or executive order to close.
(g) "Close of Business" on any given date shall mean 5:00 p.m., Atlanta
-----------------
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 p.m., Atlanta time, on the next succeeding Business Day.
(h) "Common Stock" shall mean the common stock, par value $.01 per share,
------------
of the Company, except that "Common Stock" when used with reference to any
Person other than the Company shall mean the capital stock of such Person with
the greatest voting power, or the equity securities or other equity interest
having power to control or direct the management, of such Person.
(i) "Common Stock Equivalents" shall have the meaning set forth in Section
------------------------
11(b)(ii)(C) hereof.
(j) "Continuing Director" means (i) any member of the Board of Directors
-------------------
of the Company, while such Person is a member of the Board of Directors of the
Company, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person or a representative, designee or nominee of an Acquiring Person
or of any such Affiliate or Associate, and who was a member of the Board of
Directors of the Company on the date of this Agreement, and (ii) any Person who
becomes a member of the Board of Directors of the Company after the date of this
Agreement, while such Person is a member of the Board of Directors of the
Company, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative, designee or nominee of an Acquiring
Person or of any such Affiliate or Associate, if such Person's nomination for
election, or election, to the Board of Directors of the Company is recommended
or approved by a majority of the Continuing Directors.
(k) "Current Market Price" per share of Common Stock on any date shall
--------------------
mean the average of the daily closing prices per share of such Common Stock for
the 30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date, and for purposes of computations made pursuant
to Section 11(a) hereof, the Current Market Price per
Page 11 of 63
<PAGE>
share of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the ten consecutive Trading
Days immediately following such date; provided, however, that in the event that
the Current Market Price per share of the Common Stock is determined during a
period following the announcement by the issuer of such Common Stock of:
(i) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such
Common Stock (other than the Rights); or
(ii) any subdivision, combination or reclassification of such Common
Stock,
and prior to the expiration of the requisite 30 Trading Day or ten Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Market Price shall be
properly adjusted to take into account ex-dividend trading. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Common Stock are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common Stock
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") or
such other system then in use, or, if on any such date the shares of Common
Stock are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Common Stock selected by the Board of Directors of the Company. If on any
such date no market maker is making a market in the Common Stock, the fair value
of such shares on such date as determined in good faith by the Board of
Directors of the Company shall be used. The term "Trading Day" shall mean a day
on which the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted to trading
on any national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, Current Market Price per share shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(l) "Distribution Date" shall have the meaning set forth in Section 3(a)
-----------------
hereof.
Page 12 of 63
<PAGE>
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(n) "Exempt Person" shall mean the Company, any Subsidiary (as such term
-------------
is hereinafter defined) of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any entity or trustee holding Common
Stock for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of the
Company or of any Subsidiary of the Company.
(o) "Expiration Date" shall mean the earlier of the time at which the
---------------
Rights are redeemed as provided in Section 23 hereof or the "Final Expiration
Date" (as hereinafter defined in this section).
(p) "Final Expiration Date" shall mean the Close of Business on July 9,
---------------------
2009.
(q) "Person" shall mean any individual, firm, corporation, partnership,
------
limited partnership, joint venture, trust, limited liability company, or other
entity, organization or association, and shall include any "group" as that term
is used in Rule 13d-5(b) under the Exchange Act.
(r) "Preferred Stock" shall mean the presently authorized but unissued
---------------
preferred shares of the Company, having the rights and preferences to be
determined by the Board of Directors, as set forth in Article IV of the Articles
of Incorporation of the Company.
(s) "Principal Party" shall mean
---------------
(i) in the case of any transaction described in clauses (i) or (ii)
of Section 13(a), the Person that is the issuer of any securities into
which shares of Common Stock of the Company are converted in such merger,
consolidation, or share exchange and if no securities are so issued, the
Person that is the other party to such merger, consolidation, or share
exchange, or, if there is more than one such Person, the Person the shares
of Common Stock of which have the greatest aggregate market value of shares
outstanding, or if the Person that is the other party to the merger does
not survive the merger, the Person that does survive the merger (including
the Company if it survives) or the Person resulting from the consolidation;
and
(ii) in the case of any transaction described in clause (iii) of
Section 13(a), the Person that is the party receiving the greatest portion
of the assets or earning power transferred pursuant to such transaction or
transactions, or if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power so
transferred or if the Person receiving the greatest portion of the assets
or earning power cannot be determined, whichever of such persons that is
the issuer of Common Stock having the greatest aggregate market value of
shares outstanding; provided, however, that in any such case,
Page 13 of 63
<PAGE>
(A) if the Common Stock of such Person is not at such time and
has not been continuously over the preceding 12 month period
registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common Stock of
which is and has been so registered, "Principal Party" shall refer to
such other Person; and
(B) in case such Person is a Subsidiary, directly or indirectly,
of more than one Person, the Common Stocks of two or more of which are
and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value of shares outstanding; and
(C) if such Person is owned, directly or indirectly, by a joint
venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in clauses (A) and
(B) above shall apply to each of the owners having an interest in the
venture as if the Person owned by the joint venture was a subsidiary
of both or all of such joint venturers, and the Principal Party in
each case shall bear the obligation set forth in Section 13 in the
same ratio as its interest in such Person bears to the total of such
interests.
(t) "Purchase Price" shall have the meaning set forth in Section 11(a)(ii)
--------------
hereof.
(u) "Redemption Price" shall have the meaning set forth in Section 23(a)
----------------
hereof.
(v) "Rights Certificates" shall have the meaning set forth in Section 3(a)
-------------------
hereof.
(w) "Section 11(a)(ii) Event" shall be deemed to have occurred upon any
-----------------------
Person becoming an Acquiring Person.
(x) "Section 13 Event" shall mean any event described in clauses (i), (ii)
----------------
or (iii) of Section 13(a) hereof,
(y) "Spread" shall have the meaning set forth in Section 11(b)(i) hereof.
------
(z) "Stock Acquisition Date" shall mean the earlier of the first date of
----------------------
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
(aa) "Subsidiary" shall mean, with reference to any Person, any
----------
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such
Page 14 of 63
<PAGE>
corporation is Beneficially Owned, directly or indirectly, by such Person, or
otherwise controlled by such Person.
(bb) "Summary of Rights" shall have the meaning set forth in Section 3(b)
-----------------
hereof.
(cc) "Substitution Period" shall have the meaning set forth in Section
-------------------
11(b) hereof.
(dd) "Trading Day" shall have the meaning set forth in Section 1(k)
-----------
hereof.
(ee) "Triggering Event" shall mean any Section 11(a)(ii) Event, or any
----------------
Section 13 Event.
Section 2. Appointment of Rights Agent.
The Company hereby appoints the Rights Agent to act as agent for the Company and
the holders of the Rights (who, in accordance with Section 3 hereof, shall prior
to the Distribution Date also be the holders of the Common Stock) in accordance
with the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of:
(i) the Close of Business on the tenth day after the Stock
Acquisition Date (or, if the tenth day after the Stock Acquisition Date
occurs before the Record Date, the Close of Business on the Record Date),
or
(ii) the Close of Business on the tenth Business Day after the date
that a tender or exchange offer by any Person (other than an Exempt Person)
is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would be the Beneficial Owner of 10% or
more of the shares of Common Stock then outstanding (the earliest of (i)
and (ii) being herein referred to as the "Distribution Date"),
(A) the Rights will be evidenced (subject to the provisions of
paragraph (b) of this Section 3) by the certificates for the Common
Stock registered in the names of the holders of the Common Stock
(which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and
(B) the Rights will be transferable only in connection with
the transfer of the underlying shares of Common Stock (including a
transfer to the Company).
Page 15 of 63
<PAGE>
A majority of the Continuing Directors or, if there are then no Continuing
Directors, a majority of the Board of Directors of the Company may defer the
date set forth in clause (ii) of the preceding sentence to a specified later
date or to an unspecified later date to be determined by a subsequent action or
event. As soon as practicable after the Distribution Date, the Rights Agent will
send by first-class, insured, postage prepaid mail, to each record holder of the
Common Stock as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit A hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(f) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company will
send a copy of a Summary of Rights, in substantially the form attached hereto as
Exhibit B (the "Summary of Rights"), by first-class, postage prepaid mail, to
each record holder of the Common Stock as of the Close of Business on the Record
Date, at the address of such holder shown on the records of the Company. With
respect to certificates for the Common Stock outstanding as of the Record Date,
until the Distribution Date, the Rights will be evidenced by such certificates
for the Common Stock and the registered holders of the Common Stock shall also
be the registered holders of the associated Rights. Until the earlier of the
Distribution Date or the Expiration Date (as such term is defined in Section
1(o) hereof), the transfer of any certificates representing shares of Common
Stock in respect of which Rights have been issued shall also constitute the
transfer of the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock which
are issued after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date. Certificates representing such shares of Common
Stock shall also be deemed to be certificates for Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between NOVA Corporation (the
"Company") and First Union National Bank (the "Rights Agent") dated as of
July 9, 1999 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal offices of the Company. Under certain circumstances, as set forth
in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing, without charge promptly
Page 16 of 63
<PAGE>
after receipt of a written request therefor. Under certain circumstances
set forth in the Rights Agreement, Rights issued to, or held by, any Person
who is, was or becomes an Acquiring Person, or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent holder,
may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of:
(i) the Distribution Date or
(ii) the Expiration Date,
the Rights associated with the Common Stock represented by such certificates
shall be evidenced by such certificates alone and registered holders of Common
Stock shall also be the registered holders of the associated Rights, and the
transfer of any of such certificates shall also constitute the transfer of the
Rights associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof) shall each be substantially
in the form set forth in Exhibit A hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or of Nasdaq or other system then in use, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date and on
their face shall entitle the holders thereof to purchase such number of shares
of Common Stock as shall be set forth therein at the price determined in
accordance with Section 11(a)(ii) hereof (the "Purchase Price"), but the amount
and type of securities purchasable upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights Beneficially Owned by any Person known to be:
(i) an Acquiring Person or any Associate or Affiliate of an
Acquiring Person;
(ii) a transferee of an Acquiring Person (or of any such Associate
or Affiliate) who becomes a transferee after the Acquiring Person becomes
such; or
Page 17 of 63
<PAGE>
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either:
(A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the
transferred Rights; or
(B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has
as a primary purpose or effect avoidance of Section 7(e) hereof,
and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof
upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent feasible)
the following legend, modified as applicable to such Person:
The Rights represented by this Rights Certificate are or were Beneficially
Owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights represented
hereby may become null and void in the circumstances specified in Section
7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof which shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile signature.
The Rights Certificates shall be manually countersigned by the Rights Agent and
shall not be valid for any purpose unless so countersigned. In case any officer
of the Company who shall have signed any of the Rights Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the Person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any Person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such Person was not such an
officer.
Page 18 of 63
<PAGE>
(b) Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office or offices designated as the appropriate
place for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Page 19 of 63
<PAGE>
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section
14 hereof, at any time after the Close of Business on the Distribution Date, and
at or prior to the Close of Business on the Expiration Date, any Rights
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Rights Certificate or Certificates, entitling the registered holder
to purchase a like number of shares of Common Stock (or, following a Triggering
Event, other securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled such holder (or former
holder in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Certificates to be transferred, split up,
combined or exchanged at the principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the Certificate contained in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and
Section 14 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Page 20 of 63
<PAGE>
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(b) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of shares (or other securities, cash or other assets, as the
case may be) as to which such surrendered Rights are then exercisable, at or
prior to the Expiration Date.
(b) The Purchase Price for each share of Common Stock pursuant to the
exercise of a Right shall be determined in the manner provided in Section
11(a)(ii) and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per share of Common Stock (or other shares, securities, cash or other
assets, as the case may be) to be purchased as set forth below and an amount
equal to any applicable transfer tax, the Rights Agent shall, subject to Section
20(j) hereof, thereupon promptly
(i) (A) requisition from any transfer agent of the shares
of Common Stock (or make available, if the Rights Agent is
the transfer agent for such shares) certificates for the
total number of shares of Common Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests, or
(B) if the Company shall have elected to deposit the
total number of shares of Common Stock issuable upon
exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts
representing such number of shares of Common Stock as are to
be purchased (in which case certificates for the shares of
Common Stock represented by such receipts shall be deposited
by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such
request,
(ii) [Reserved.]
(iii) requisition from the Company the amount of other securities,
cash or assets to be paid in lieu of shares of Common Stock pursuant to an
adjustment required under Section 11(b) hereof,
Page 21 of 63
<PAGE>
(iv) after receipt of such certificates, depositary receipts,
other securities, cash or assets, cause the same to be delivered to, or
upon the order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder, and
(v) after receipt thereof, deliver such cash, if any, to, or
upon the order of, the registered holder of such Rights Certificate.
The payment of the Purchase Price (as such amount may be reduced pursuant to
Section 11(b) hereof) shall be made in cash or by certified bank check, bank
draft or money order payable to the order of the Company. In the event that the
Company is obligated to issue other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11(b) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 6 and Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Triggering Event, any Rights Beneficially Owned
by:
(i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person;
(ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such; or
(iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant
to either:
(A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the
transferred Rights; or
(B) a transfer which the Board of Directors of the Company
has determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect the avoidance of this Section 7(e),
Page 22 of 63
<PAGE>
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, and
(ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Page 23 of 63
<PAGE>
Section 9. Reservation and Availability of Capital Stock.
(a) To the extent required by applicable law, the Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued shares of Common Stock (and, following the occurrence of
a Triggering Event, out of its other securities or out of its authorized and
issued shares held in its treasury), the number of shares of Common Stock (and,
following the occurrence of a Triggering Event, other securities) that, as
provided in this Agreement including Section 11(b) hereof, will be sufficient to
permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Common Stock (and, following the occurrence
of a Triggering Event, other securities) issuable and deliverable upon the
exercise of the Rights may be listed on any national securities exchange or
Nasdaq or other system then in use, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable, all securities
reserved for such issuance to be listed on such exchange or Nasdaq or other
system then in use upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to:
(i) file, as soon as practicable following the earliest date
after the first occurrence of a Section 11(a)(ii) Event on which the
consideration to be delivered by the Company upon exercise of the Rights
has been determined in accordance with Section 11(b) hereof, or as soon as
is required by law following the Distribution Date, as the case may be, a
registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as
soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with
a prospectus at all times meeting the requirements of the Act) until the
earlier of:
(A) the date as of which the Rights are no longer
exercisable for such securities, and
(B) the date of the expiration of the Rights.
The Company will also take such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" laws of the various states in
connection with the exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed 120 days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become effective. Upon any such suspension, the Company shall issue a public
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announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained and, if
necessary, until a registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Common Stock (and, following the
occurrence of a Triggering Event, other securities) delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares (or
other securities) (subject to payment of the Purchase Price), be duly and
validly authorized and issued.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of shares of Common Stock (or other securities, as
the case may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of shares of Common Stock (or other securities, as the case
may be) in respect of a name other than that of, the registered holder of the
Rights Certificates evidencing Rights surrendered for exercise or to issue or
deliver any certificates for a number of shares of Common Stock (or any other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Common Stock Record Date.
Each Person in whose name any certificate for a number of shares of Common Stock
(or other securities, as the case may be) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of such
shares of Common Stock (or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and all applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the Common
Stock (or other securities, as the case may be) transfer books of the Company
are closed, such Person shall be deemed to have become the record holder of such
shares (fractional or otherwise) on, and such certificate shall be dated, the
next succeeding Business Day on which the Common Stock (or other securities, as
the case may be) transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other
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distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights.
The Purchase Price, the number and kind of shares covered by each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event that, at any time after the Close of Business
on the Distribution Date and prior to the Close of Business on the
Expiration Date, the Company shall:
(A) declare or pay a dividend on the Common Stock payable
in shares of Common Stock,
(B) subdivide the outstanding shares of Common Stock,
(C) combine the outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
(D) issue any shares of its capital stock in a
reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and Section 7(e) hereof,
then and in such event, the number of shares of Common Stock, the number
and kind of shares of Preferred Stock, other securities or property, as the
case may be, issuable upon the exercise of a Right on such date shall be
proportionately adjusted so that the holder of any Right exercised on or
after such date shall be entitled to receive, upon the exercise thereof and
payment of the Exercise Price, the aggregate number of shares of Common
Stock, the number and kind of shares of Preferred Stock, other securities
or property, as the case may be, that, if such Right had been exercised
immediately prior to such date and at a time when such Right was
exercisable and the transfer books of the Company were open, such holder
would have owned upon such exercise and would have been entitled to receive
by virtue of such dividend, subdivision, combination or reclassification.
If an event occurs which would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for
in this Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii) hereof.
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(ii) In the event that any Person (other than the Company, any
Subsidiary of the Company, any Person who or which, together with all
Affiliates and Associates of such Person, is the Beneficial Owner of 10% or
more of the shares of Common Stock of the Company as of the Rights Dividend
Declaration Date, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan),
alone or together with its Affiliates and Associates, shall, at any time
after the Rights Dividend Declaration Date, become an Acquiring Person,
then, promptly following the occurrence of each such Section 11(a)(ii)
event, proper provision shall be made so that each holder of a Right
(except as provided below and in Section 7(e) hereof) shall thereafter have
the right to receive, upon exercise thereof, a number of shares of Common
Stock equal to ten shares of Common Stock multiplied by a fraction, the
numerator of which is the number of shares of Common Stock outstanding on
the Stock Acquisition Date, and the denominator of which is the number of
Rights outstanding on the Stock Acquisition Date that are not Beneficially
Owned by the Acquiring Person or its Affiliates or Associates. The price
(which following such first occurrence, shall thereafter be referred to as
the "Purchase Price") for the exercise of each Right shall be equal to the
product of (x) 20% of the then Current Market Price per share of the Common
Stock (determined pursuant to Section 1(k) on the Stock Acquisition Date),
multiplied by (y) the number of shares of Common Stock to be received upon
exercise, as set out in this subparagraph.
(b) In the event that the number of shares of Common Stock which are
authorized by the Company's articles of incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit the exercise in full of the Rights in accordance with
Section 11(a)(ii), the Company shall:
(i) determine the excess of
(A) the Current Market Price of the Shares of Common Stock
issuable upon the exercise of a Right over
(B) the Purchase Price (such excess, the "Spread"), and
(ii) with respect to each Right (other than Rights which have
become void pursuant to Section 7(e) hereof), make adequate provision to
substitute for the Shares, upon payment of the applicable Purchase Price,
(A) cash,
(B) a reduction in the Purchase Price,
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(C) Preferred Stock or other equity securities of the
Company (including, without limitation, shares, or units of shares, of
preferred stock which the Board of Directors of the Company has deemed
to have substantially the same value as shares of Common Stock (such
shares of preferred stock to be referred to as "Common Stock
Equivalents")),
(D) debt securities of the Company,
(E) other assets, or
(F) any combination of the foregoing,
having an aggregate value, when added to the value of the shares of Common
Stock actually issued upon exercise of such right, equal to the Current
Market Price (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board of Directors of
the Company based upon the advice of a recognized investment banking firm
selected by the Board of Directors of the Company; provided, however, if
the Company shall not have made adequate provision to deliver value
pursuant to clause (ii) above within 30 days following the Section
11(a)(ii) Event, then the Company shall be obligated to deliver, to the
extent permitted by applicable law and any material agreements in effect to
which the Company is a party, upon the surrender for exercise of a Right
and without requiring payment of the Purchase Price, shares of Common Stock
(to the extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the Board of Directors
of the Company shall determine that it is likely that sufficient additional
shares of Common Stock could be authorized for issuance upon exercise in
full of the Rights, the 30 day period set forth above may be extended to
the extent necessary, but not more than 90 days after the Section 11(a)(ii)
Event, in order that the Company may seek stockholder approval for the
authorization of such additional shares (such period, as it may be
extended, the "Substitution Period"). To the extent that the Company
determines that some action need be taken pursuant to the first and/or
second sentences of this Section 11(b)(ii), the Company (x) shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly to
all outstanding Rights, and (y) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine
the value thereof. In the event of any such suspension, the Company shall
issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. For purposes of this Section
11(b)(ii), the value of the shares of Common Stock shall be the Current
Market Price (as determined pursuant to Section 1(k) hereof) per share of
the Common Stock on the date of the Section 11(a)(ii) Event and the value
per share or fractional value of any Common Stock Equivalent shall be
deemed to have the same value as the Common Stock
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on such date. The Board of Directors of the Company may, but shall not be
required to, establish procedures to allocate the right to receive shares
of Common Stock upon the exercise of the Rights among the holders of the
Rights pursuant to this Section 11(b)(ii).
(c) Anything herein to the contrary notwithstanding, no adjustment in the
number of shares of Common Stock purchasable upon exercise of a Right pursuant
to Section 11(a)(ii) hereof or in the Purchase Price or Spread pursuant to
Section 11(b) hereof shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the aggregate number of
shares or in the Spread or Purchase Price; provided, however, that any
adjustments which by reason of this Section 11(c) are not required to be made
shall be carried forward and taken into account in any subsequent adjustments.
All calculations under this Section 11 shall be made to the nearest cent or to
the nearest one-hundredth of a share of Common Stock. Notwithstanding the first
sentence of this Section 11(c), any adjustment required by this Section 11 shall
be made no later than the earlier of
(i) three (3) years from the date of the transaction which mandates
such adjustment or
(ii) the Expiration Date.
(d) If as a result of an adjustment made pursuant to Section 11(b) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Sections 11(a), (b),
(c), (e), (f), (i) and (j), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Common Stock shall apply on like terms to any such
other shares.
(e) All Rights originally issued by the Company subsequent to any
adjustment made to the number of shares of Common Stock purchasable upon
exercise of a Right pursuant to Section 11(a)(ii) hereof shall evidence the
right to purchase the number of shares of Common Stock purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(f) The Company may elect on or after the date of any adjustment of the
number of shares of Common Stock purchasable upon exercise of a Right pursuant
to Section 11(a)(ii) hereof to adjust the number of Rights, in lieu of any
adjustment in the number of shares of Common Stock purchasable upon the exercise
of a Right. The aggregate of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of shares of Common Stock
for which the aggregate of the Rights was exercisable immediately prior to such
adjustment. Adjustments in Rights shall be calculated to the nearest one-
hundredth of a Right. The Company shall make a public announcement of its
election to adjust the number
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of Rights, indicating the record date for the adjustment , and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the number of shares of Common Stock purchasable upon exercise is
adjusted or any day thereafter, but if the Rights Certificates have been issued
the record date shall be at least ten days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(f), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates to be so distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted number of shares of Common Stock purchasable upon
exercise of a Right) and shall be registered in the names of the holders of
record of Rights Certificates on the record date specified in the public
announcement.
(g) Irrespective of any adjustment or change in the number of shares of
Common Stock issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the number of shares
which were expressed in the initial Rights Certificates issued hereunder.
(h) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the Common Stock or other
shares of Common Stock Equivalents issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock or Common Stock Equivalents
at such adjusted Purchase Price. In the event that it appears that the issuance
of shares of Common Stock at the Purchase Price called for herein would result
in issuance of shares of Common Stock that were not validly issued fully paid
and nonassessable shares of Common Stock, the Company may issue Common Stock
Equivalents in the manner provided in Section 11(b)(ii)(C) hereof.
(i) In any case in which this Section 11 shall require that an adjustment
in the number of shares of Common Stock or other capital stock or securities of
the Company, if any, issuable upon exercise of the Rights shall be made
effective as of a record date for a specified event, the Company may elect to
defer until the occurrence of such event the issuance to the holder of any Right
exercised after such record date the number of shares of Common Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of shares of Common Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the number of shares of Common Stock purchasable upon exercise of a Right in
effect prior to such adjustment; provided,
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however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(j) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such adjustments in the Purchase Price or
number of shares of Common Stock purchasable upon exercise of a Right, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their judgment the Board of Directors of the Company shall
determine to be advisable in order that any
(i) consolidation or subdivision of the Common Stock,
(ii) issuance wholly for cash of any shares of Common Stock at
less than the Current Market Price,
(iii) issuance wholly for cash of shares of preferred stock or
other securities which by their terms are convertible into or exchangeable
for shares of Common Stock,
(iv) stock dividends or
(v) issuance of rights, options or warrants referred to in this
Section 11,
hereafter made by the Company to holders of its Common Stock shall not be
taxable to such stockholders.
(k) The Company covenants and agrees that it shall not, at any time after
the Distribution Date,
(i) consolidate with any other Person,
(ii) merge with or into any other Person,
(iii) engage in a share exchange with any other Person, or
(iv) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets
or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person
or Persons, if
(A) at the time of or immediately after such consolidation,
merger, share exchange, sale or transfer, there are any rights,
warrants or other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or
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(B) prior to, simultaneously with or immediately after such
consolidation, merger, share exchange, sale or transfer, the
stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have
received a distribution of Rights previously owned by such Person or
any of its Affiliates and Associates.
(l) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 27 hereof, take (or
permit any Subsidiary to take) any action if at any time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(m) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date
(i) declare or pay any dividend on the outstanding shares of
Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock, or
(iii) combine the outstanding shares of Common Stock into a
smaller number of shares,
then in any such case the number of Rights associated with each share of Common
Stock then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall remain unchanged, so that the value of the rights
remaining shall represent the same proportion of the value of the Company as
before. Rights associated with shares eliminated by any combination of
outstanding shares of Common Stock shall be canceled by operation of such
combination.
Section 12. Certificate of Adjusted Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall promptly
(a) prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment,
(b) file with the Rights Agent, and with each transfer agent for the
Common Stock, a copy of such certificate, and
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(c) mail a brief summary thereof to each holder of a Rights Certificate
(or, if prior to the Distribution Date, to each holder of a certificate
representing shares of Common Stock) in accordance with Section 26 hereof.
The Rights Agent shall be fully protected in relying on any such certificate and
on any adjustment therein contained and shall not be deemed to have knowledge of
any adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger, Share Exchange or Sale or Transfer of Assets
or Earning Power.
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly,
(i) the Company shall consolidate with, or merge with and
into, any other Person and the Company shall not be the continuing or
surviving corporation of such consolidation or merger,
(ii) any Person shall consolidate with, or merge with or
into, the Company, or engage in a share exchange with the Company, and the
Company shall be the continuing or surviving corporation of such
consolidation, merger or share exchange and, in connection with such
consolidation, merger or share exchange, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or
other securities of any other Person (or of the Company) or cash or any
other property, or
(iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any Person or Persons,
then, and in each such case, promptly following the occurrence of each such
Section 13 Event, proper provision shall be made so that:
(iv) each holder of a Right, except as provided in Section
7(e) hereof, shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price, based on the Current Market
Price of the Common Stock of the Company as of the last Business Day prior
to the first public announcement of such Section 13 Event, in accordance
with the terms of this Agreement, such number of validly authorized and
issued, fully paid, non-assessable and freely tradeable shares of Common
Stock of the Principal Party, not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the
product of ten times the result obtained by dividing the Current Market
Price of a share of Common Stock by the Current Market Price of a share of
Common Stock of the Principal Party multiplied by a fraction the numerator
of which is the number of shares of Common Stock outstanding on the Stock
Acquisition Date, and the denominator of which is the number of Rights
outstanding on the Stock
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Acquisition Date that are not Beneficially Owned by the Acquiring Person or
its Affiliates or Associates, provided, however, that the Purchase price
and the number of shares of Common Stock of such Principal Party issuable
upon the exercise of each Right shall be further adjusted as provided in
Section 11(d) of this Agreement to reflect any events occurring in respect
of such Principal Party after the date of such Section 13 Event;
(v) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations and
duties of the Company pursuant to this Agreement;
(vi) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the
first occurrence of a Section 13 Event;
(vii) such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of shares of its
Common Stock in accordance with Section 9 hereof) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable
upon the exercise of the Rights, provided that, upon the subsequent
occurrence of any merger, consolidation, share exchange, sale or transfer
of assets or other extraordinary transaction in respect of such Principal
Party, each holder of a Right shall thereupon be entitled to receive, upon
Exercise of a Right and payment of the Purchase Price as provided in this
Section 13(a), such cash, shares, rights, dividends, warrants and other
property which such holder would have been entitled to receive had such
holder, at the time of such transaction, owned the Common Stock of the
Principal Party receivable upon the exercise of a Right pursuant to this
Section 13(a); and
(viii) the provisions of Section 11(a)(ii) hereof shall be of no
effect following the first occurrence of any Section 13 Event, except as
they apply to determination of the Purchase Price.
(b) The Company shall not consummate any such consolidation, merger, share
exchange, sale or transfer unless prior thereto the Company and the Principal
Party shall have exercised and delivered to the Rights Agent an agreement
confirming that the requirements of Sections 13(a) and (b) hereof shall promptly
be performed in accordance with their terms, that the Principal Party has a
sufficient number of authorized shares of its Common Stock which have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraph (a) of
this Section 13 and further providing that, as soon as
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practicable after the date of any consolidation, merger, share exchange or sale
of assets mentioned in paragraph (a) of this Section 13, the Principal Party
will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to
(A) become effective as soon as practicable after such
filing and
(B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the blue sky
laws of such jurisdictions as may be necessary or appropriate;
(iii) use its best efforts, if the Common Stock of the Principal
Party shall be listed or admitted to trading on any national securities
exchange or Nasdaq, to list or admit to trading (or continue the listing
of) the Rights and the securities purchasable upon exercise of the Rights
on such securities exchange or Nasdaq, of, if the Common Stock of the
Principal Party shall not be listed or admitted to trading on any such
national securities exchange or Nasdaq, to cause the Rights and the
securities receivable upon exercise of the Rights to be reported by such
other system then in use;
(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act; and
(v) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Stock of the Principal Party subject to
purchase upon exercise of outstanding Rights.
(c) The provisions of this Section 13 shall similarly apply to successive
mergers, consolidations, share exchanges or sales or other transfers. In the
event that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
(d) In case the Principal Party has provision in any of its authorized
securities or in its certificate or articles of incorporation or bylaws or other
instrument governing its corporate affairs, which provision would have the
effect of
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(i) causing such Principal Party to issue (other than to holders of
Rights pursuant to this Section 13), in connection with, or as a
consequence of, the consummation of a transaction referred to in this
Section 13, shares of Common Stock of such Principal Party at less than the
then Current Market Price per share thereof (determined pursuant to Section
1(k) hereof) or securities exercisable for, or convertible into, Common
Stock of such Principal Party at less than such then Current Market Price,
or
(ii) providing for any special payment, tax or similar provision in
connection with the issuance of the Common Stock of such Principal Party
pursuant to the provisions of Section 13,
then, in such event, the Company hereby agrees with each holder of Rights that
it shall not consummate any such transaction unless prior thereto the Company
and such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time after
a Person first becomes an Acquiring Person, enter into any transaction of the
type contemplated by (i) - (iii) of Section 13(a) hereof if (x) at the time of
or immediately after such consolidation, merger, share exchange, sale, transfer
or other transaction there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights, (y) prior to, simultaneously with or immediately after such
consolidation, merger, share exchange, sale, transfer or other transaction, the
stockholders of the Person who constitutes, or would constitute, the Principal
Party for purposes of Section 13(a) hereof shall have received a distribution of
Rights previously owned by such Person or any of its Affiliates or Associates or
(z) the form or nature of organization of the Principal Party would preclude or
limit the exercisability of the Rights.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as
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reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading, or if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by Nasdaq or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one share of
Common Stock. For purposes of this Section 14(b), the current market value of
one share of Common Stock shall be the closing price of one share of Common
Stock (as determined pursuant to Section 1(k) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action.
All rights of action in respect of this Agreement, other than rights of action
given to the Rights Agent pursuant to Section 18 hereof, are vested in the
respective registered holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of the Common Stock); and any
registered holder of any Rights Certificate (or, prior to the Distribution Date,
of the Common Stock), without the consent of the Rights Agent or of the holder
of any other Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), in his own behalf and for his own benefit, may enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate (or, prior to the Distribution Date, such
Common Stock) in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
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Section 16. Agreement of Rights Holders.
Every holder of a Right by accepting the same consents and agrees with the
Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office or
agency of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the Person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to Section 7(e) hereof, shall be
required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of shares of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Rights or
Rights
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evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay in a timely manner to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent, its directors,
officers, employees and agents for, and to hold each of them harmless against,
any losses, expenses, claims, damages or liabilities, incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent or
such other indemnified party, for anything done or omitted by the Rights Agent
or such other indemnified party in connection with the acceptance and
administration of this Agreement and performance hereunder, including, without
limitation, the costs and expenses of defending against any claim of liability
arising therefrom, directly or indirectly, and will promptly reimburse the
Rights Agent or such other indemnified party for any legal or other expenses
reasonably incurred in investigating or defending any such loss, expense, claim,
damage or liability.
(b) The Rights Agent shall be protected by the indemnity provided by this
Section 18 and shall incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with its administration of this
Agreement in reliance upon any Rights Certificate or certificate for Common
Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons or otherwise upon the advice of
counsel as set forth in Section 20 of this Agreement.
(c) The indemnity provided in this Section 18 shall survive the expiration
of the Rights and the termination of the Agreement.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights
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Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
The Rights Agent undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, by all of which the Company and the
holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such advice
or opinion .
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Market Price) be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by any
Person reasonably believed by the Rights Agent to be any one of the Chairman of
the Board, the President, the Chief Executive Officer, any Vice President, the
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for a loss which is a result of or caused by its own gross
negligence, bad faith or willful misconduct.
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(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals maintained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity or legality of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or legality or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Rights Certificates after receipt of the
certificate described in Section 12 hereof setting forth any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock will, when so issued, be validly authorized and
issued, fully paid and non-assessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
Person reasonably believed by the Rights Agent to be one of the Chairman of the
Board, the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer or Controller of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable to the Company or the holder of any Rights
Certificate or any stockholder of the Company for any action taken or suffered
to be taken by it in good faith in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions. Any
application by the Rights Agent for written instructions from the Company may,
at the option of the Rights Agent set forth in writing any action proposed to be
taken or omitted by the Rights Agent under this Agreement and the date on and/or
after which such action shall be taken or such omission shall be effective. The
Rights Agent shall not be liable in accordance with a proposal included in such
application on or after the date specified in such application (which date shall
not be less than five Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking any such action (or the
effective date in case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be
taken or omitted.
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(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not the Rights Agent under
this Agreement. Nothing herein shall preclude the Rights Agent from acting in
any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, the Rights Agent was not grossly
negligent in the selection and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed to certify or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first consulting with the
Company.
(k) The Rights Agent undertakes only the express duties and obligations
imposed on it by this Agreement and no implied duties or obligations shall be
read into this Agreement against the Rights Agent.
(l) Anything in this Agreement to the contrary notwithstanding, in no
event shall the Rights Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits).
(m) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
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Section 21. Change of Rights Agent.
The Rights Agent or any successor Rights Agent may resign and be discharged from
its duties under this Agreement upon 30 days' notice in writing mailed to the
Company, and to each transfer agent of the Common Stock, by registered or
certified mail, and, following the Distribution Date, to the holders of the
Rights Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights agent, as the case may be, and to each transfer
agent of the Common Stock, by registered or certified mail, and, following the
Distribution Date, to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then any registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a corporation organized and
doing business under the laws of the United States or of any state, in good
standing, which is authorized under such laws to exercise corporate trust powers
and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or (b) an affiliate of a corporation described
in clause (a) of this sentence. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock, and, following the Distribution Date, mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price or the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in
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connection with the issuance or sale of shares of Common Stock following the
Distribution Date and prior to the earlier of the redemption or expiration of
the Rights, the Company:
(a) may, with respect to shares of Common Stock so issued or sold pursuant
to the exercise of stock options or under any employee plan or arrangement, or
upon the exercise, conversion or exchange of securities hereinafter issued by
the Company, or upon a contractual obligation of the Company in each case
existing prior to the Distribution Date, and
(b) may, in any other case, if deemed necessary or appropriate by the
Board of Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that
(i) no such Rights Certificate shall be issued if, and to the extent
that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and
(ii) no such Rights Certificate shall be issued if, and to the extent
that, appropriate adjustments shall otherwise have been made in lieu of the
issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at any time
prior to the time any Person first becomes an Acquiring Person, redeem all but
not less than all of the then outstanding Rights at a redemption price of $.01
per Right (the "Redemption Price"), as such amount may be appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to Paragraph (a) of this Section
23 (or at such later time as the Board of Directors may establish for the
effectiveness of such redemption), evidence of which shall have been filed with
the Rights Agent and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Transfer Agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. The failure to give,
or any defect in, any such notice shall not affect the validity of such
redemption.
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Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any time
after any person first becomes an Acquiring Person, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for shares
of Common Stock at an exchange ratio of one share of Common Stock per Right
(such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Not
withstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after (i) any Person (other than an Exempt
Person), together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of shares of Common Stock aggregating 50% or more of the shares
of Common Stock then outstanding or (ii) the occurrence of an event specified in
Section 13(a) hereof.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further notice, the right to exercise such Rights shall
terminate and the only right thereafter a holder of such Rights shall have shall
be to receive that number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company shall promptly mail a notice of any such exchange to
all of the holders of the Rights so exchanged at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange of the shares of Common Stock for Rights will be effected and, in
the event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, or that any
regulatory actions or approvals are necessary in connection therewith, the
Company may, in its discretion, take such actions or seek such approvals as may
be necessary to authorize additional shares of Common stock for issuance upon
exchange of the Rights. In the event that the Company shall, after good faith
effort, be unable to take such actions or obtain such approvals as may be
necessary to authorize such additional shares of Common Stock, the Company shall
substitute, to the extent of such insufficiency, for each share of Common Stock
that would otherwise be issuable upon exchange of a Right, a number of units of
Common Stock Equivalents as defined in Section 11(b)(ii) hereof, cash or other
assets of the Company equal to the Current Market Price of one share of Common
Stock (determined pursuant to Section 1(k) hereof) as of the date of issuance of
such Common Stock Equivalents or fractions thereof.
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(d) The Company shall not, in connection with any exchange pursuant to
this Section 24, be required to issue fractions of shares of Common Stock or to
distribute certificates which evidence fractional shares of Common Stock. In
lieu of such fractional shares of Common Stock, the Company shall pay to the
registered holders of the Rights Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this paragraph (d), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 1(k) hereof) for
the Trading Day immediately prior to the date of exchange pursuant to this
Section 24 .
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the Distribution
Date,
(i) to pay any dividend payable in stock of any class to the holders
of the Common Stock, or
(ii) to offer to the holders of Common Stock rights or warrants to
subscribe for or to purchase any additional shares of Common Stock or
shares of stock of any class or any other securities, rights or options, or
(iii) to effect any reclassification of its Common Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Common Stock), or
(iv) to effect any liquidation, dissolution or winding up of the
Company,
then, in each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 26 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants,
reclassification or the date on which such liquidation, dissolution or winding
up is to take place and the date of participation therein by the holders of the
shares of Common Stock, if any such date is to be fixed, and such notice shall
be so given in the case of any action covered by clause (i) or (ii) above at
least 20 days prior to the record date for determining holders of the shares of
Common Stock for purposes of such action, and in the case of any such other
action, at least twenty (20) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
shares of Common Stock, whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) or Section 13
hereof shall occur, then, in any such case, the Company shall, as soon as
practicable thereafter, give to each holder of a Rights Certificate (or if
occurring prior to the Distribution Date, the holders of the
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Common Stock), to the extent feasible and in accordance with Section 26 hereof,
a notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Sections 11(a)(ii) and 13
hereof.
Section 26. Notices.
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
NOVA Corporation
One Concourse Parkway
Suite 300
Atlanta, Georgia 30328
Attention: General Counsel
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
First Union National Bank
1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153
Attention: Shareholder Services Group
_____________________________________ ____________________
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company, in the case of Rights
represented by certificates for Common Stock, and on the registry books of the
Rights Agent, in the case of Rights represented by Rights Certificates.
Section 27. Supplements and Amendments.
Subject to the penultimate sentence of this Section 27, for so long as the
Rights are then redeemable, the Company may in its sole and absolute discretion,
and the Rights Agent shall if the Company so directs, supplement or amend any
provision of this Agreement in any respect without the approval of the holders
of the Rights. At any time when the Rights are no longer redeemable, and subject
to the penultimate sentence of this Section 27, the Company and the
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Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of Rights Certificates in
order
(a) to cure any ambiguity,
(b) to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein,
(c) to shorten or lengthen any time period hereunder, or
(d) to change or supplement the provisions hereunder in any manner which
the Company may deem necessary or desirable and which shall not adversely affect
the interests of the holders of Rights Certificates (other than an Acquiring
Person, or an Affiliate or Associate of any such Acquiring Person); provided,
this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (c) of this sentence,
(i) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable, or
(ii) any other time period unless such lengthening is for the purpose
of protecting, enhancing or clarifying the rights of, and/or the benefits
to, the holders of the Rights.
Upon the delivery of a certificate that is signed by an appropriate officer of
the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, and no supplement or amendment that changes the
rights and duties of the Rights Agent under this Agreement shall be effective
without the consent of the Rights Agent.
Section 28. Successors.
All the covenants and provisions of this Agreement by or for the benefit of the
Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General
Page 48 of 63
<PAGE>
Rules and Regulations under the Exchange Act. The Board of Directors of the
Company (or, where specifically provided for herein, certain specified members
thereof) shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to
(a) interpret the provisions of this Agreement, and
(b) make all determinations deemed necessary or advisable for the
administration of this Agreement (including, but not limited to, a determination
to redeem or not redeem the Rights or to amend the Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (c) below, all omissions with respect to the foregoing)
which are done or made by the Board (or, where specifically provided for herein,
by certain specified members thereof) in good faith, shall
(c) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and
(d) not subject the Board or such specified members thereof to any
liability to the holders of the Rights.
Section 30. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any Person other than
the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered holders of the
Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, registered holders of the Common Stock).
Section 31. Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the Close
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<PAGE>
of Business of the twentieth day following the date of such determination by the
Board of Directors.
Section 32. Governing Law.
This Agreement, each Right and each Rights Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Georgia and for all
purposes shall be governed by and construed in accordance with the laws of such
State applicable to contracts to be made and to be performed entirely within
such State.
Section 33. Counterparts.
This Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.
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<PAGE>
Section 34. Descriptive Headings.
Descriptive headings of the several Sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the date and year first above written.
Attest: NOVA CORPORATION
By: /s/ Cherie M. Fuzzell By: /s/ Edward Grzedzinski
------------------------------ ------------------------------------
Cherie M. Fuzzell Edward Grzedzinski
Senior Vice President, General Chairman of the Board, President and
Counsel and Secretary Chief Executive Officer
Attest: FIRST UNION NATIONAL BANK
By: /s/ Holly Drummond By: /s/ Kristin N. Knapp
------------------------------- ------------------------------------
Name: Holly Drummond Name: Kristin N. Knapp
----------------------------- ----------------------------------
Title: Corporate Trust Officer Title: Assistant Vice President
---------------------------- ---------------------------------
Page 51 of 63
<PAGE>
Exhibit A
[Form of Rights Certificate]
Certificate No. ____ _____ Rights
NOT EXERCISABLE AFTER JULY 9, 2009 OR EARLIER IF REDEEMED BY THE COMPANY. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]*
Rights Certificate
NOVA Corporation
This certifies that ________________________________, or registered assigns, is
the registered owner of the number of Rights set forth set forth above, each of
which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of July 9, 1999 (the "Rights
Agreement"), between NOVA Corporation, a Georgia corporation (the "Company"),
and First Union National Bank, a national banking association (the "Rights
Agent"), to purchase from the Company at any time prior to 5:00 P.M. (Atlanta,
Georgia time) on July 9, 2009 at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, a number of
shares of Common Stock (the "Common Stock") of the Company equal to ten shares
of Common Stock multiplied by a fraction, the numerator of which is the number
of shares of Common Stock outstanding on the Stock Acquisition Date, and the
denominator of which is the number of Rights outstanding on the Stock
Acquisition Date that are not beneficially owned by an Acquiring Person or its
Affiliates or Associates, at a purchase price per share equal to twenty percent
(20%) of the Current Market Price on the Stock Acquisition Date (the "Purchase
Price"), as those terms are defined in Section 1 of the Rights Agreement, upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The Purchase Price may be
paid in cash or by certified bank check or money order payable to the Company.
The number of Rights evidenced by this Rights Certificate (and the number of
shares which may be purchased upon exercise thereof) set forth
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<PAGE>
above, and the Purchase Price per share set forth above, are the number and
Purchase Price as of __________________________, based upon the Common Stock as
constituted at such date.
These rights shall only become exercisable upon the occurrence of a Section
11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights
evidenced by this Certificate are beneficially owned by a person other than (i)
an Acquiring Person or an Affiliate or Associate of any such Person (as such
terms are defined in the Rights Agreement), (ii) a transferee of any such
Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances
specified in the Rights agreement, a transferee of a person who, after such
transfer, became an Acquiring Person, an Affiliate or Associate of any such
Person. If the Rights are beneficially owned by any of the Persons specified in
clauses (i), (ii) or (iii) of the preceding sentence, such Rights shall become
null and void and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and kind
of shares of Common Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by this reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $.01 per Right at any time prior to the earlier of the close of business on
(i) the time any Person first becomes an Acquiring Person, and (ii) the Final
Expiration Date.
Page 53 of 63
<PAGE>
above, and the Purchase Price per share set forth above, are the number and
Purchase Price as of __________________________, based upon the Common Stock as
constituted at such date.
These rights shall only become exercisable upon the occurrence of a Section
11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights
evidenced by this Certificate are beneficially owned by a person other than (i)
an Acquiring Person or an Affiliate or Associate of any such Person (as such
terms are defined in the Rights Agreement), (ii) a transferee of any such
Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances
specified in the Rights agreement, a transferee of a person who, after such
transfer, became an Acquiring Person, an Affiliate or Associate of any such
Person. If the Rights are beneficially owned by any of the Persons specified in
clauses (i), (ii) or (iii) of the preceding sentence, such Rights shall become
null and void and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and kind
of shares of Common Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by this reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $.01 per Right at any time prior to the earlier of the close of business on
(i) the time any Person first becomes an Acquiring Person, and (ii) the Final
Expiration Date.
Page 54 of 63
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Rights Certificate)
FOR VALUE RECEIVED, ___________________________________________ hereby sells,
assigns and transfers unto _________________________________________________
(Please print name and address of transferee)
___________________________________________________________ this Rights
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint _________________________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ______________________
___________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, an
Affiliate or Associate of any such Person (as such terms are defined pursuant to
the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person, an Affiliate or
Associate of any such Person.
Dated: ______________________ ___________________________
Signature
Signature Guaranteed:
Page 55 of 63
<PAGE>
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights Represented by the Rights
Certificate)
To: NOVA CORPORATION
The undersigned hereby irrevocably elects to exercise _____ Rights
represented by this Rights Certificate to purchase the shares of Common Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other Person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
Please insert social security
or other identifying number: ____________________________
______________________________________________________________
(Please print name and address)
______________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
__________________________
Please insert social security
or other identifying number: ________________________________
______________________________________________________________
(Please print name and address)
______________________________________________________________
Dated: _________________
________________________________
Signature
Page 56 of 63
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person, an Affiliate or Associate of any such Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person, an Affiliate or Associate of any such Person.
Dated: ________________ ___________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
* * The portion of the legend in brackets shall be inserted only if
applicable, shall be modified to apply to an Acquiring Person as
applicable, and shall replace the preceding sentence.
page 57 of 63
<PAGE>
Exhibit B
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On June 8, 1999, the Board of Directors of NOVA Corporation (the "Company")
declared a dividend distribution of one Right for each outstanding share of
Company Common Stock (the "Common Stock") to shareholders of record at the close
of business on June 8, 1999. Each Right initially entitles the registered holder
to purchase from the Company a number of shares of Common Stock equal to ten
shares of Common Stock multiplied by a fraction, the numerator of which is the
number of shares of Common Stock outstanding on the Stock Acquisition Date, and
the denominator of which is the number of Rights outstanding on the Stock
Acquisition Date that are not beneficially owned by an Acquiring Person or its
Affiliates or Associates, at a Purchase Price per share of 20% of Current Market
Value, measured as of the date that an announcement is made that a person has
acquired sufficient shares to become an Acquiring Person (10%). The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and First Union National Bank, as Rights Agent.
Initially, the Rights will be attached to all Common Stock Certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or a group of affiliated or associated persons has
acquired beneficial ownership of 10% or more of the outstanding shares of Common
Stock of the Company (an "Acquiring Person") or (ii) 10 days following the
commencement of a tender offer or an exchange offer that would result in a
person or group beneficially owning 10% or more of such outstanding shares of
Common Stock. In certain circumstances, the Distribution Date may be deferred by
the Board of Directors. Certain inadvertent acquisitions will not result in a
person becoming an Acquiring Person if the person promptly divests itself of
sufficient Common Stock.
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred only with such Common Stock
certificates, (ii) new Common Stock Certificates will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Common Stock will also constitute the transfer
of the Rights associated with the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on July 9, 2009, unless earlier redeemed by the Company
as described below.
Page 58 of 63
<PAGE>
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
If at any time following the Distribution Date a Person becomes the owner
of more than 10% of the then outstanding shares of Common Stock, each holder of
a Right will thereafter have the right to receive, upon exercise, a number of
shares of Common Stock equal to ten shares of Common Stock multiplied by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding on the Stock Acquisition Date, and the denominator of which is the
number of Rights outstanding on the Stock Acquisition Date that are not
Beneficially Owned by the Acquiring Person or its Affiliates or Associates. The
price for the exercise of each Right shall be equal to the product of (x) 20% of
the then Current Market Price of the Common Stock on the Stock Acquisition Date,
multiplied by (y) the number of shares of Common Stock to be received upon
exercise. For example, if the Current Market Value of a share of Common Stock
were $5.00 at the Stock Acquisition Date, and if the Acquiring Person owned 50%
of the then outstanding Common Stock when the Rights became exercisable, the
exercise price would be $20.00, and the number of shares purchasable with each
right would be 20.
Notwithstanding any of the foregoing, following the occurrence of any of
the events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of the events set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination in which the
Company is not the surviving corporation, or (ii) all of its shares are acquired
in a share exchange or the Company engages in a merger or consolidation in which
all or part of its outstanding shares of Common Stock are changed into or
exchanged for stock, other securities or assets of any other person or (iii) 50%
or more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided as set forth
above) shall thereafter have the right to receive, upon exercise, a number of
shares of common stock of the acquiring company equal to the product of ten
times the result obtained by dividing the current market price of the Company's
Common Stock by the current market price of the common stock of the acquiring
corporation or, if such stock is not traded in public markets, of its parent
corporation. The purchase price will be calculated on the same basis as if the
Right holder were exercising a Right to purchase Common Stock of the Company at
that time.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Rights will be issued, and, in lieu thereof, an adjustment
in cash will be made based on the market price of the
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<PAGE>
Rights on the last trading date prior to the date of adjustment. No fractional
shares will be issued upon exercise of the Rights, and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Common Stock on
the last trading date prior to the date of exercise.
In general, the Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right, at any time before a Person becomes an Acquiring
Person. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or the Company, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
The provisions of the Rights Agreement may be amended by the Board of
Directors prior to the time a Person becomes an Acquiring Person. After such
date, the provisions of the Rights Agreement may be amended by the Board in
order to cure any ambiguity, to make changes which do not adversely affect the
interests of holders of Rights, or to shorten or lengthen any time period under
the Rights Agreement; provided, however, that no amendment to adjust the time
period governing redemption shall be made at such time as the Rights are not
redeemable.
As of the close of business on _______, 1999 there were _________ shares of
Common Stock of the Company outstanding, and _______ shares of Common Stock of
the Company in the treasury. As of ________, 1999, options to purchase
_________ shares of Common Stock were outstanding.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in a manner which causes the Rights to become exercisable, unless the terms of
an offer for all shares are first approved by the Board and the Rights Agreement
amended to permit the transaction or the Rights redeemed by the Company. The
Rights, however, should not affect any prospective offeror willing to make an
offer at a fair price and otherwise in the best interests of the Company and its
shareholders, as determined by the Board, or willing to negotiate with the
Board. The Rights should not interfere with any merger or other business
combination approved by the Board since the Board may, at its option, before the
merger or business combination, amend the Rights Agreement to permit the
transaction or redeem all, but not less than all, of the then-outstanding Rights
at the redemption price.
In addition, certain provisions of the Company's Articles of Incorporation,
as amended (the "Articles of Incorporation"), and Bylaws (the "Bylaws") may have
anti-takeover effects. For example, Article Four of the Articles of
Incorporation grants authority to the Board of Directors
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<PAGE>
of the Company to issue preferred stock and to fix the designation, powers,
preferences and any special rights of any series of such preferred stock, and
the qualifications, limitations and restrictions of that series. Article II of
the Bylaws provides that shareholders must give timely notice of any matter that
the shareholders intend to raise at any annual or special shareholder meeting.
To be timely, a shareholder's notice must be received by the Company's Secretary
at least 120 calendar days before the first anniversary of the date that the
Company's proxy statement was released to shareholders in connection with the
previous year's annual meeting of shareholders or within 120 calendar days prior
to the date of a special meeting.
Certain provisions of the Georgia Business Corporation Code (the "Georgia
Code"), to which the Company is subject, also may have the effect of preventing
a change in control of the Company or in making changes in management more
difficult. The Fair Price provisions of the Georgia Code (Sections 14-2-1110 to
14-2-1113), for example, are designed to protect shareholders of the Company
against the inequities of certain tactics that have been utilized in a hostile
takeover attempt. In so called "two-tier" transactions, the acquiring party
acquires a majority of the outstanding shares at a premium over the market
price. After acquiring the initial interest in the Company, the acquiring party
would then acquire total ownership of the corporation by effecting a "freeze-
out" merger that forces minority shareholders to receive cash or other
consideration for their common stock in the acquired corporation. The result is
that minority shareholders who do not participate in the initial tender may
receive a lower price or less desirable form of consideration than the
shareholders who tendered in the initial tier of the transaction received. The
Fair Price provisions are designed to discourage this type of transaction by
requiring that the transaction satisfy certain conditions.
Additionally, the Business Combination provisions of the Georgia Code
(Sections 14-2-1131 to 14-2-1133) are designed to encourage any person, before
acquiring 10% of the outstanding voting stock of the Company, to seek approval
of the terms of any contemplated business combination from the Company's Board
of Directors. The provisions would also prohibit any person who acquires 10% or
more of the voting stock of the Company from thereafter engaging in any business
combination with the Company for a period of 5 years from the date that person
acquired a 10% interest, unless that person obtains approval of the transaction.
The Fair Price and Business Combination provisions effectively require any
party attempting to acquire more than a 10% interest in the Company, and thereby
implement a business combination or change of control, to negotiate with the
current Board of Directors. While accomplishing such transactions is still
possible without Director approval, the provisions make doing so considerably
more difficult, and very likely more expensive, for a potential acquirer.
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<PAGE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
NOVA CORPORATION
I.
CORPORATE NAME
The name of the corporation is NOVA Corporation.
II.
AMENDMENT
The Articles of Incorporation of NOVA Corporation are amended to add the
following sentence at the end of Article I., Section A.:
"Upon acquisition by the Corporation of any outstanding shares of Common
Stock, such shares shall become treasury shares."
All other provisions of the Articles of Incorporation remain unchanged.
III.
ADOPTION OF AMENDMENT
This Amendment to the Articles of Incorporation was duly adopted on June 8,
1999, at a meeting of the Corporation's Board of Directors. Shareholder action
was not required pursuant to Section 14-2-631(d) of the Georgia Business
Corporation Code.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to the Articles of Incorporation to be duly executed by its authorized officer
as of the 18th day of June, 1999.
/s/ Cherie M. Fuzzell
---------------------
Cherie M. Fuzzell
Secretary
OFFICER'S CERTIFICATE
The undersigned, Cherie M. Fuzzell, Secretary of NOVA Corporation (the
"Corporation"), hereby certifies that the foregoing Articles of Amendment to the
Articles of Incorporation of NOVA Corporation were duly adopted on June 8, 1999
at a meeting of the Corporation's Board of Directors.
/s/ Cherie M. Fuzzell
---------------------
Cherie M. Fuzzell
<PAGE>
EXHIBIT 10.47
EDWARD GRZEDZINSKI
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective this 16th
day of June, 1999 (the "Effective Date") by and between Edward Grzedzinski
(hereinafter referred to as "Employee") and NOVA Corporation, a Georgia
corporation ("NOVA").
W I T N E S S E T H :
-------------------
WHEREAS, NOVA, through its direct and indirect subsidiaries, is in the
business of providing credit card and debit card transaction processing services
and settlement services (including the related products and services of
automated teller machines and check guarantee services) to merchants, financial
institutions, independent sales organizations ("ISOs"), and other similar
customers (collectively, the "Business") throughout the United States;
WHEREAS, Employee currently serves as Chairman of the Board of Directors,
President and Chief Executive Officer of NOVA pursuant to an Employment
Agreement between Employee and NOVA dated October 27, 1995 (the "1995
Agreement");
WHEREAS, NOVA, or its assigns, will continue to engage in the Business
throughout the United States (the "Territory");
WHEREAS, NOVA and Employee desire to terminate the 1995 Agreement, which
termination shall be contemporaneous with the effectiveness of this Agreement;
WHEREAS, NOVA and Employee mutually desire that Employee continue to work
for NOVA, and Employee desires to continue said employment, all as contemplated
herein;
NOW, THEREFORE, for and in consideration of his continued employment by
NOVA pursuant to this Agreement, the NOVA Confidential Information and Trade
Secrets (as hereafter defined) furnished to Employee by NOVA in order that he
may continue to perform his duties under this Agreement, the mutual covenants
and agreements herein contained, and other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Employment of Employee. NOVA hereby employs Employee for a period
beginning as of the Effective Date and ending three (3) years thereafter (the
"Initial Term"), unless Employee's employment by NOVA is sooner terminated or
automatically renewed pursuant to the terms of this Agreement (Employee's
employment by NOVA pursuant to the terms of this Agreement shall hereinafter be
referred to as "Employment").
(a) Employee agrees to such Employment on the terms and conditions
herein set forth and agrees to devote his reasonable best efforts to his
duties under this Agreement and to perform such duties diligently and
efficiently and in accordance with the directions of NOVA's Board of
Directors.
<PAGE>
(b) During the term of Employee's Employment, Employee shall serve as
Chairman of the Board of Directors, and be employed as President and Chief
Executive Officer of NOVA. Employee shall be responsible primarily for
such duties as are assigned to him from time to time by NOVA's Board of
Directors, which in any event shall be such duties as are customary for an
officer in those positions.
(c) Employee shall devote substantially all of his business time,
attention, and energies to NOVA's Business, shall act at all times in the
best interests of NOVA, and shall not during the term of his Employment be
engaged in any other business activity, whether or not such business is
pursued for gain, profit, or other pecuniary advantage, or permit such
personal interests as he may have to interfere with the performance of his
duties hereunder. Notwithstanding the foregoing, Employee may participate
in industry, civic and charitable activities so long as such activities do
not materially interfere with the performance of his duties hereunder.
Further, Employee may engage in passive investments so long as the same are
passive, are not inconsistent with Employee's duties hereunder and do not
involve the development, ownership, management or provision of credit and
debit card processing and settlement services, including the related
products and services of automatic teller machines and check guarantee
services. Employee's rights to make certain investments hereunder are in
addition to and not in degradation of investments of less than 5% in a
corporation as described in Section 12(a).
2. Compensation. During the term of Employee's Employment and in
accordance with the terms hereof, NOVA shall pay or otherwise provide to
Employee the following compensation:
(a) Employee's annual salary during the term of his Employment shall be
Five Hundred Forty Thousand and No/100 Dollars ($540,000) ("Base Salary"),
with such increases (each, a "Merit Increase") as may from time to time be
deemed appropriate by the Compensation Committee of NOVA's Board of
Directors (the "Compensation Committee"); provided, however, that so long
as this Agreement remains in effect, Employee's Base Salary shall be
reviewed annually by the Compensation Committee at the beginning of each
fiscal year. The Base Salary shall be paid by NOVA monthly in arrears or
in accordance with NOVA's regular payroll practice. As used herein, the
term "Base Salary" shall be deemed to include any Merit Increases granted
to Employee.
(b) In addition to the Base Salary, Employee shall be eligible to
receive annual bonus compensation pursuant to the schedule set forth as
Exhibit A ("Bonus Compensation"). Upon written request and subject to the
---------
terms and conditions set forth in this Section 2(b), Employee shall be
entitled to elect to receive all or part of any Bonus Compensation payable
to Employee in shares of NOVA common stock, par value $.01 per share ("NOVA
Stock"), valued on the basis of the closing price of NOVA Stock on the New
York Stock Exchange on the date of Employee's request (or if such date is
not a trading day, on the immediately preceding trading day), and any such
grant shall be granted as restricted stock under the 1996 Plan (or any
successor plan) without restriction; provided, however, that NOVA shall
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not be obligated to comply with Employee's request if (i) NOVA does not
have shares of NOVA Stock available for issuance or (ii) the issuance of
NOVA Stock to Employee would be impracticable or impede, in any respect,
NOVA's ongoing business operations.
(c) Employee shall be eligible annually to receive restricted stock
awards of shares of NOVA Common Stock or stock options under the NOVA
Corporation 1996 Employees Stock Incentive Plan (the "1996 Plan") or any
successor plan. The amount of shares of restricted stock or options to be
granted each year shall be determined by the Compensation Committee.
2
<PAGE>
(d) NOVA may withhold from any benefits payable under this Agreement
all federal, state, city or other taxes as shall be required pursuant to
any law or governmental regulation or ruling.
3. Benefits. During the term of Employee's employment, and for such time
thereafter as may be required by Section 8 hereof, NOVA shall provide to
Employee the following benefits:
(a) Medical Insurance. Employee and his dependents shall be entitled
-----------------
to participate in such medical, dental, vision, prescription drug,
wellness, or other health care or medical coverage plans as may be
established, offered or adopted from time to time by NOVA for the benefit
of its employees and/or executive officers, pursuant to the terms set forth
in such plans.
(b) Life Insurance. Employee shall be entitled to participate in any
--------------
life insurance plans established, offered, or adopted from time to time by
NOVA for the benefit of its employees and/or executive officers.
(c) Disability Insurance. Employee shall be entitled to participate in
--------------------
any disability insurance plans established, offered, or adopted from time
to time by NOVA for the benefit of its employees and/or executive officers.
(d) Vacations, Holidays. Employee shall be entitled to at least four
-------------------
(4) weeks of paid vacation each year and all holidays observed by NOVA.
(e) Stock Option Plans. Employee shall be eligible for participation in
------------------
any stock option plan or restricted stock plan adopted by NOVA's Board of
Directors or the Compensation Committee.
(f) Other Benefits. In addition to and not in any way in limitation of
--------------
the benefits set forth in this Section 3, Employee shall be eligible to
participate in all additional employee benefits provided by NOVA
(including, without limitation, all tax-qualified retirement plans, non-
qualified retirement and/or deferred compensation plans, incentive plans,
other stock option or purchase plans, and fringe benefits) on terms at
least as favorable as the terms of any benefits that are afforded to other
executive officers of NOVA during the term of this Agreement.
(g) Terms and Provisions of Plans. NOVA agrees that it shall not take
-----------------------------
action (during the term of this Agreement or the "Election Period," as
defined in Section 8(a)) to modify the terms and provisions of any such
plan or arrangement so as to exclude only Employee and/or his dependents,
either by excluding Employee and/or his dependents explicitly by name or by
modifying provisions generally applicable to all employees and dependents
so that only Employee and/or his dependents would ever possibly be
affected.
(h) Vesting of Rights Upon Change In Control. Upon the occurrence of a
----------------------------------------
"Change in Control" (as defined in Section 8(h)) during the term of this
Agreement, and regardless of whether Employee terminates this Agreement
following such Change in Control, and notwithstanding any provision to the
contrary in any other agreement or document (including NOVA's applicable
plan documents), all stock options, restricted stock, and other similar
rights that have been granted to Employee and are not vested on the date of
such Change in Control shall become vested and exercisable immediately
(collectively, the "Vested Rights") and as provided under the applicable
plan or agreement, Employee shall have the continuing right to exercise any
or all of the Vested Rights until such rights expire in accordance with
their original terms (without regard to any provision thereof requiring
earlier expiration upon termination of employment).
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<PAGE>
4. Personnel Policies. Employee shall conduct himself at all times in a
businesslike and professional manner as appropriate for a person in his
position and shall represent NOVA in all respects as complies with good
business and ethical practices. In addition, Employee shall be subject to
and abide by the good faith policies and procedures of NOVA applicable
generally to personnel of NOVA, as adopted from time to time.
5. Reimbursement for Business Expenses. Employee shall be reimbursed, on
a no less frequently than monthly basis, for all out-of-pocket business
expenses incurred by him in the performance of his duties hereunder,
provided that Employee shall first document and substantiate said business
expenses in the manner generally required by NOVA under its policies and
procedures.
6. Service on the Board of Directors. During the term of Employee's
Employment, Employee shall serve as Chairman of NOVA's Board of Directors.
7. Term and Termination of Employment.
(a) This Agreement shall be effective as of the Effective Date.
(b) Employee's Employment shall terminate immediately upon the
discharge of Employee by NOVA for "Cause." For the purposes of this
Agreement, the term "Cause," when used with respect to termination by NOVA
of Employee's Employment hereunder, shall mean termination as a result of:
(i) Employee's material violation of the covenants set forth in Section 11
or 12, (ii) Employee's willful, intentional, or grossly negligent failure
to perform his duties under this Agreement diligently and in accordance
with the directions of NOVA; (iii) Employee's willful, intentional, or
grossly negligent failure to comply with the good faith decisions or
policies of NOVA; or (iv) final conviction of Employee of a felony
materially adversely affecting NOVA; provided, however, that in the event
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NOVA desires to terminate Employee's Employment pursuant to subsections
(i), (ii), or (iii) of this Section 7(b), NOVA shall first give Employee
written notice of such intent, detailed and specific description of the
reasons and basis therefor, and thirty (30) days to remedy or cure such
perceived breach or deficiency (the "Cure Period"); provided, however, that
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with respect only to a breach that it is not possible to cure within such
thirty (30) day period, so long as Employee is diligently using his best
efforts to cure such breach or deficiency within such period and
thereafter, the Cure Period shall be automatically extended for an
additional period of time (not to exceed sixty (60) additional days) to
enable Employee to cure such breach or deficiency, provided, further, that
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Employee continues to diligently use his best efforts to cure such breach
or deficiency. If Employee does not cure the perceived breach or
deficiency within the Cure Period, NOVA may discharge Employee immediately
upon written notice to Employee. If NOVA desires to terminate Employee's
Employment pursuant to subsection (iv) of this Section 7(b), NOVA shall
first give Employee three (3) days prior written notice of such intent.
(c) Employee's Employment shall terminate immediately upon the death of
Employee.
(d) Employee's Employment shall terminate immediately upon ninety (90)
days prior written notice to Employee if Employee shall at any time be
incapacitated by reason of physical or mental illness or otherwise become
incapable of performing the duties under this Agreement for a continuous
period of one hundred eighty (180) consecutive days; provided, however, to
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the extent NOVA could, with reasonable accommodation and without undue
hardship, continue to employ Employee in some other capacity after such one
hundred eighty (180) day period, NOVA shall, to
4
<PAGE>
the extent required by the Americans With Disabilities Act, offer to do so,
and, if such offer is accepted by Employee, Employee shall be compensated
accordingly.
(e) Employee may terminate this Agreement, upon thirty (30) days prior
written notice to NOVA (the "Notice Period"), in the event (i) there is a
material diminution in Employee's duties and responsibilities, or such
duties and responsibilities are otherwise diminished such that they no
longer reflect duties and responsibilities customary for a Chairman,
President and Chief Executive Officer of a publicly-traded company; (ii)
Employee is required to relocate to an office that is more than thirty-five
(35) miles from Employee's current office located at One Concourse Parkway,
Suite 300, Atlanta, Georgia 30328; (iii) there is a reduction in Employee's
Base Salary payable under Section 2, a materially adverse change in the
terms of Exhibit A attached hereto or a material reduction in benefits
---------
provided to Employee under Section 3 (whether occurring at once or over a
period of time); or (iv) NOVA materially breaches this Agreement, (each of
(i), (ii), (iii) and (iv) being referred to as a "Responsibilities
Breach"), and NOVA fails to cure said Responsibilities Breach within the
Notice Period; provided, however, that with respect only to breaches that
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it is not possible to cure within the Notice Period, so long as NOVA is
diligently using its best efforts to cure such breaches within such Notice
Period, the Notice Period shall be automatically extended for an additional
period of time (not to exceed sixty (60) additional days) to enable NOVA to
cure such breaches, provided, further, that NOVA continues to diligently
-------- -------
use its best efforts to cure such breaches. Notwithstanding anything to
the contrary in this Section 7(e), the Notice Period for failure to pay
compensation shall be five (5) days.
(f) This Agreement shall automatically renew for successive three (3)
year terms (each a "Renewal Term") unless either party hereto gives the
other party hereto written notice of its or his intent not to renew this
Agreement no later than ninety (90) days prior to the date the Initial
Term, or the then-current Renewal Term, is scheduled to expire. Employee's
Employment shall terminate upon termination or expiration of this
Agreement.
(g) NOVA may terminate this Agreement at any time, without cause, upon
ninety (90) days prior written notice to Employee.
(h) Employee may terminate this Agreement at any time, without cause,
upon ninety (90) days prior written notice to NOVA.
(i) Other than as specifically provided in and in strict compliance
with this Section 7, this Agreement and/or Employee's Employment may not be
terminated.
8. Termination Payments.
(a) Upon (1) the termination of Employee's Employment by Employer
pursuant to Section 7(g) or (2) the termination or expiration of this
Agreement, for whatever reason, provided that in the case of this
--------
subsection (2), the earlier of (x) such termination or expiration or (y)
notice of such termination or non-renewal occurs within three years after a
Change in Control (the effective date of such termination or expiration
being referred to as the "Termination Date"), Employee shall receive the
payments and benefits set forth below.
(i) NOVA shall pay Employee accrued but unpaid Base Salary through
the Termination Date, Bonus Compensation due and owing to Employee (as
further set forth in Section 8(d)) and any other benefits required to
be provided to Employee and his dependents under contract and
applicable law.
5
<PAGE>
(ii) NOVA shall pay Employee in cash an amount equal to his "Annual
Compensation" (as defined in Section 8(h)(ii)) multiplied by three (3),
which amount will be paid in one lump sum within fifteen (15) days of
the Termination Date.
(iii) All stock options, restricted stock, and other similar rights
that have been granted to Employee shall become vested and exercisable
immediately, and as provided under the applicable plan or agreement,
Employee shall have the continuing right to exercise such rights until
such rights expire in accordance with their original terms (without
regard to any provision thereof requiring earlier expiration upon
termination of employment).
(iv) Until the earlier to occur of: (x) the date which is three (3)
years after the Termination Date, or (y) Employee's accepting
employment with another employer or otherwise obtaining coverage (the
"Election Period"), NOVA shall use commercially reasonable efforts to
provide to Employee and his dependents the coverage for the benefits
described in Sections 3(a), (b) and (c).
(v) To the extent required, NOVA shall pay to Employee the "Gross-Up
Payment" as set forth in Section 8(g).
(b) Upon termination of Employee's Employment or the termination or
expiration of this Agreement, which termination or expiration occurs: (1)
as a result of Employee terminating this Agreement pursuant to Section
7(e), (2) this Agreement being terminated pursuant to Section 7(c) or 7(d),
or (3) this Agreement not being renewed by NOVA, and which termination or
---
expiration is not covered by Section 8(a) hereof (the effective date of
such termination or expiration being referred to herein as the "Termination
Date"), Employee shall receive the payments and benefits set forth below.
(i) NOVA shall pay Employee accrued but unpaid Base Salary through
the Termination Date, Bonus Compensation due and owing to Employee (as
further set forth in Section 8(d)) and any other benefits required to
be provided to Employee and his dependents under contract and
applicable law.
(ii) NOVA shall pay Employee in cash an amount equal to his Annual
Compensation multiplied by three (3), which amount will be paid in
twenty-four (24) equal monthly installments beginning on the first day
of the calendar month following the calendar month in which the
Termination Date occurs.
(iii) All stock options, restricted stock, and other similar rights
that have been granted to Employee shall become vested and exercisable
immediately, and as provided under the applicable plan or agreement,
Employee shall have the continuing right to exercise such rights until
such rights expire in accordance with their original terms (without
regard to any provision thereof requiring earlier expiration upon
termination of employment).
(iv) For the duration of the Election Period, NOVA shall use
commercially reasonable efforts to provide to Employee and his
dependents the coverage for the benefits described in Sections 3(a),
(b) and (c).
(c) Upon termination of Employee's Employment or the termination or
expiration of this Agreement, which termination or expiration occurs: (1)
as a result of NOVA terminating this
6
<PAGE>
Agreement pursuant to Section 7(b), (2) as a result of this Agreement not
being renewed by Employee, or (3) as a result of Employee terminating this
Agreement pursuant to Section 7(h), and which termination or expiration is
---
not covered by Sections 8(a) or 8(b)(the effective date of such
termination or expiration being referred to herein as the "Termination
Date"), Employee shall receive the payments and benefits set forth below.
(i) NOVA shall pay Employee accrued but unpaid Base Salary through
the Termination Date, Bonus Compensation due and owing to Employee (as
further set forth in Section 8(d)) and any other benefits required to
be provided to Employee and his dependents under contract and
applicable law.
(ii) NOVA shall pay Employee in cash an amount equal to his
"Termination Base Salary" (as defined herein) in twelve (12) equal
monthly installments beginning on the first day of the calendar month
following the calendar month in which the Termination Date occurs.
"Termination Base Salary" shall be the greater of the Employee's Base
Salary in effect on the Termination Date or the greatest Base Salary in
effect during the calendar year immediately prior to the calendar year
in which the Termination Date occurs.
(iii) To the extent that Employee and/or any of his dependents is
eligible to, and timely elects to, receive continuation coverage under
any group health plan providing medical, dental, vision, prescription
drug, wellness or other health care or medical coverage which is
subject to the provisions of part 6 of Title I of ERISA ("COBRA"), NOVA
shall timely pay any premiums required for such coverage. This payment
of premiums by NOVA is not intended to alter in any way the provisions
of any group health plan of NOVA, and all time limits, effects of
subsequent coverage and all other relevant provisions of any such plan
remain unchanged and shall control Employee's (and his dependents')
entitlement to coverage or benefits under such plan.
(d) For purposes of payments to be made under this Section 8:
(i) Any accrued but unpaid Base Salary shall be paid to Employee
within five (5) business days of the Termination Date.
(ii) For purposes of calculating Bonus Compensation due and owing to
Employee:
(A) Regardless of the reason for termination or expiration of
this Agreement, in the event that Bonus Compensation for the
calendar year preceding the calendar year in which the Termination
---------
Date occurs has not been paid by the Termination Date, such Bonus
Compensation shall be paid to Employee concurrently with NOVA's
payment of Bonus Compensation generally for such calendar year.
(B) In the case of a termination or expiration of this Agreement
governed by Sections 8(a) or 8(b) hereof, Employee shall receive an
amount of Bonus Compensation for the calendar year in which the
Termination Date occurs equal to (x) the amount of Bonus
Compensation which Employee would have been entitled to receive had
termination or expiration not occurred in such calendar year
---
multiplied by (y) a fraction, the numerator of which is the number
of days beginning on January 1st of the calendar year in which the
Termination Date occurs and ending on the Termination Date, and the
denominator of which is 365. This payment shall be paid to Employee
concurrently with NOVA's payment of Bonus Compensation generally for
such calendar year.
7
<PAGE>
(C) In the case of a termination or expiration of this Agreement
governed by Section 8(c) hereof, Employee shall not receive any
Bonus Compensation for the calendar year in which the Termination
Date occurs.
(iii) For purposes of calculating the amount of payments made using
the Annual Compensation formula, NOVA shall initially compute the
Annual Compensation under Section 8(h)(ii)(B) using the Prior Bonus
Amount. However, in the event the Current Bonus Amount, when awarded,
exceeds the Prior Bonus Amount, then NOVA will pay the difference to
Employee, either in equal amounts over the remainder of the term over
which such payments are to be made, or in one lump sum, as the case may
be.
(e) Following the termination or expiration of this Agreement, Employee
shall be bound by the covenants not to solicit or compete set forth in
Section 12 hereof as set forth below.
(i) In the event of a termination or expiration of this Agreement
which is governed by Sections 8(a) or 8(b) hereof, Employee shall
comply with the covenants not to solicit or compete set forth in
Section 12 hereof for a period of two (2) years immediately following
the Termination Date.
(ii) In the event of a termination or expiration of this Agreement
which is governed by Section 8(c) hereof, Employee shall comply with
the covenants not to solicit or compete set forth in Section 12 hereof
for a period of one (1) year immediately following the Termination
Date; provided, however, that if within ninety (90) days after the
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Termination Date, NOVA provides Employee with written notice of such
election (the "Extension Notice"), Employee shall comply with the
covenants not to solicit or compete set forth in Section 12 below for a
period of two (2) years immediately following the Termination Date. In
the event that NOVA provides Employee with the Extension Notice in the
time provided, and in addition to the payment to be made pursuant to
Section 8(c)(ii) hereof, NOVA shall pay Employee in cash an amount
equal to his Annual Compensation, which shall be paid in twelve (12)
equal monthly installments beginning on the first day of the calendar
month following the calendar month of the final payment to be made
pursuant to Section 8(c)(ii), above.
(f) In the event of the death of Employee, all benefits and
compensation hereunder shall, unless otherwise specified by Employee,
be payable to, or exercisable by, Employee's estate.
8
<PAGE>
(g) Gross-Up Payment.
----------------
(i) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by or
on behalf of NOVA to or for the benefit of Employee as a result of a
"Change in Control" or as otherwise payable under Sections 3(h) or 8(a)
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 8(g) (a
"Payment")) would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), or any
interest or penalties are incurred by Employee with respect to such
excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Employee shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that, after payment by
Employee of all taxes upon the Gross-Up Payment (such taxes including,
without limitation, any income taxes and Excise Tax imposed upon the
Gross-Up Payment, and any interest or penalties imposed with respect to
such taxes), Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payment.
(ii) Subject to the provisions of Section 8(g)(iii), all
determinations required to be made under this Section 8, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm
or law firm selected by Employee and reasonably acceptable to NOVA (the
"Tax Firm"); provided, however, that the Tax Firm shall not determine
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that no Excise Tax is payable by Employee unless it delivers to
Employee a written opinion (the "Accounting Opinion") that failure to
pay the Excise Tax and to report the Excise Tax and the payments
potentially subject thereto on or with Employee's applicable federal
income tax return will not result in the imposition of an accuracy-
related or other penalty on Employee. All fees and expenses of the Tax
Firm shall be borne solely by NOVA. Within 15 business days of the
receipt of notice from Employee that there has been a Payment, the Tax
Firm shall make all determinations required under this Section 8, shall
provide to NOVA and Employee a written report setting forth such
determinations, together with detailed supporting calculations, and, if
the Tax Firm determines that no Excise Tax is payable, shall deliver
the Accounting Opinion to Employee. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid by NOVA to
Employee within fifteen days of the receipt of the Tax Firm's
determination. Subject to the remainder of this Section, any
determination by the Tax Firm shall be binding upon NOVA and Employee;
provided, however, that Employee shall only be bound to the extent that
the determinations of the Tax Firm hereunder, including the
determinations made in the Accounting Opinion, are reasonable and
reasonably supported by applicable law. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the
initial determination by the Tax Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by NOVA should have
been made ("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that it is ultimately determined in
accordance with the procedures set forth in Section 8(g)(iii) that
Employee is required to make a payment of any Excise Tax, the Tax Firm
shall reasonably determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by NOVA to or
for the benefit of Employee. In determining the reasonableness of Tax
Firm's determinations hereunder, and the effect thereof, NOVA and
Employee shall be provided a reasonable opportunity to review such
determinations with Tax Firm and their respective tax counsel, if
separate from the Tax Firm. Tax Firm's determinations hereunder, and
the
9
<PAGE>
Accounting Opinion, shall not be deemed reasonable until Employee's
reasonable objections and comments thereto have been satisfactorily
accommodated by Tax Firm.
(iii) Employee shall notify NOVA in writing of any claims by the
Internal Revenue Service that, if successful, would require the payment
by NOVA of the Gross-Up Payment. Such notification shall be given as
soon as practicable, but no later than 30 calendar days after Employee
actually receives notice in writing of such claim, and shall apprise
NOVA of the nature of such claim and the date on which such claim is
requested to be paid; provided, however, that the failure of Employee
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to notify NOVA of such claim (or to provide any required information
with respect thereto) shall not affect any rights granted to Employee
under this Section except to the extent that NOVA is materially
prejudiced in the defense of such claim as a direct result of such
failure. Employee shall not pay such claim prior to the expiration of
the thirty (30) day period following the date on which he gives such
notice to NOVA (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If NOVA notifies
Employee in writing prior to the expiration of such period that it
desires to contest such claim, Employee shall do all of the following:
(A) give NOVA any information reasonably requested by NOVA
relating to such claim;
(B) take such action in connection with contesting such claim as
NOVA shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney selected by NOVA
and reasonably acceptable to Employee;
(C) cooperate with NOVA in good faith in order effectively to
contest such claim;
(D) if NOVA elects not to assume and control the defense of such
claim, permit NOVA to participate in any proceedings relating
to such claim; provided, however, that NOVA shall bear and
pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of this
Section 8, NOVA shall have the right, at its sole option, to
assume the defense of and control all proceedings in
connection with such contest, in which case it may pursue or
forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect
of such claim and may either direct Employee to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as NOVA shall determine; provided,
--------
however, that if NOVA directs Employee to pay such claim and
-------
sue for a refund, NOVA shall advance the amount of such
payment to Employee, on an interest-free basis and shall
indemnify and hold Employee harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the
statute of limitations relating to
10
<PAGE>
payment of taxes for the taxable year of Employee with
respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore,
NOVA's right to assume the defense of and control the contest
shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Employee shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other
taxing authority.
(iv) If, after the receipt by Employee of an amount advanced by
NOVA pursuant to this Section 8(g), Employee becomes entitled to
receive any refund with respect to such claim, Employee shall
(subject to NOVA's complying with the requirements of Section
8(g)(iii)) promptly pay to NOVA the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by Employee of an amount advanced
by NOVA pursuant to Section 8(g)(iii), a determination is made that
Employee is not entitled to a refund with respect to such claim and
NOVA does not notify Employee in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall, to the extent of such
denial, be forgiven and shall not be required to be repaid and the
amount of forgiven advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
(h) For purposes of this Agreement, the following terms shall be
defined as follows:
(i) "Change in Control" shall mean:
(A) The acquisition (other than from NOVA) by any person,
entity or "group", within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act") (excluding, for this purpose, any
employee benefit plan of NOVA or its subsidiaries which
acquires beneficial ownership of voting securities of
NOVA) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 25% or more
of either the then outstanding shares of NOVA Stock or
the combined voting power of NOVA's then outstanding
voting securities entitled to vote generally in the
election of directors; or
(B) The consummation by NOVA of a reorganization, merger,
consolidation, in each case, with respect to which the
shares of NOVA voting stock outstanding immediately prior
to such reorganization, merger or consolidation do not
constitute or become exchanged for or converted into more
than 50% of the combined voting power entitled to vote
generally in the election of directors of the
reorganized, merged or consolidated company's then
outstanding voting securities, or a liquidation or
dissolution of NOVA or the sale of all or substantially
all of the assets of NOVA; or
(C) The failure for any reason of individuals who constitute
the Incumbent Board to continue to constitute at least a
majority of the Board of Directors of NOVA.
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(ii) "Annual Compensation" means the sum of the following
amounts:
(A) the greater of Employee's Base Salary in effect on the
Termination Date, or the greatest Base Salary in effect
during the calendar year immediately prior to the
calendar year in which the Termination Date occurs; and
(B) the greater of the Bonus Compensation which Employee
would have received for the calendar year in which the
Termination Date occurs had Employee's Employment not
been terminated (the "Current Bonus Amount"), or such
Bonus Compensation for the calendar year immediately
prior to the calendar year in which the Termination Date
occurs (the "Prior Bonus Amount"). For purposes of
calculating Employee's Annual Compensation only, (x)
Employee shall be deemed to have met all conditions,
including employment conditions, necessary for the
receipt of the Current Bonus Amount, and (y) regardless
of the amount of Bonus Compensation actually paid to
Employee for the 1998 calendar year, Employee's Bonus
Compensation for the 1998 calendar year shall be deemed
to be Four Hundred Twenty Thousand and No/100 Dollars
($420,000).
(iii) "Incumbent Board" shall mean the members of the Board of
Directors of NOVA as of the date hereof and any person
becoming a member of the Board of Directors of NOVA
hereafter whose election, or nomination for election by
NOVA's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an
actual or threatened election contest relating to the
election of the directors of NOVA, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act).
9. Products, Notes, Records and Software. Employee acknowledges and
agrees that all memoranda, notes, records and other documents and computer
software created, developed, compiled, or used by Employee or made
available to him during the term of his Employment concerning or relative
to the Business, including, without limitation, all customer data, billing
information, service data, and other technical material of NOVA is and
shall be NOVA's property. Employee agrees to deliver all such materials to
NOVA thirty (30) days after Employee receives a written request therefor
from NOVA. Employee further agrees not to use such materials for any
reason after said termination.
10. Arbitration.
(a) NOVA and Employee acknowledge and agree (except as specifically
set forth in Section 10(d)) that any claim or controversy arising out of or
relating to this Agreement shall be settled by binding arbitration in
Atlanta, Georgia, in accordance with the National Rules of the American
Arbitration Association for the Resolution of Employment Disputes in effect
on the date of the event giving rise to the claim or controversy. NOVA
and Employee further acknowledge and agree that either party must request
arbitration of any claim or controversy within one (1) year of the date of
the event giving rise to the claim or controversy by giving written notice
of the party's
12
<PAGE>
request for arbitration. Failure to give notice of any claim or controversy
within one (1) year of the event giving rise to the claim or controversy
shall constitute waiver of the claim or controversy.
(b) All claims or controversies subject to arbitration pursuant to
Section 10(a) above shall be submitted to arbitration within six (6) months
from the date that a written notice of request for arbitration is
effective. All claims or controversies shall be resolved by a panel of
three arbitrators who are licensed to practice law in the State of Georgia
and who are experienced in the arbitration of labor and employment
disputes. These arbitrators shall be selected in accordance with the
National Rules of the American Arbitration Association for the Resolution
of Employment Disputes in effect at the time the claim or controversy
arises. Either party may request that the arbitration proceeding be
stenographically recorded by a Certified Shorthand Reporter. The
arbitrators shall issue a written decision with respect to all claims or
controversies within thirty (30) days from the date the claims or
controversies are submitted to arbitration. The parties shall be entitled
to be represented by legal counsel at any arbitration proceedings.
(c) NOVA and Employee acknowledge and agree that the arbitration
provisions in this Agreement may be specifically enforced by either party,
and that submission to arbitration proceedings may be compelled by any
court of competent jurisdiction. NOVA and Employee further acknowledge and
agree that the decision of the arbitrators may be specifically enforced by
either party in any court of competent jurisdiction.
(d) Notwithstanding the arbitration provisions set forth herein,
Employee and NOVA acknowledge and agree that nothing in this Agreement
shall be construed to require the arbitration of any claim or controversy
arising under Sections 11 and 12 of this Agreement, nor shall such
provisions prevent NOVA from seeking equitable relief from a court of
competent jurisdiction for violations of Sections 11 and 12 of this
Agreement. These provisions shall be enforceable by any court of competent
jurisdiction and shall not be subject to arbitration except by mutual
written consent of the parties signed after the dispute arises, any such
consent, and the terms and conditions thereof, then becoming binding on the
parties. Employee and NOVA further acknowledge and agree that nothing in
this Agreement shall be construed to require arbitration of any claim for
workers' compensation or unemployment compensation.
11. Nondisclosure.
(e) NOVA Confidential Information. Employee acknowledges and agrees
-----------------------------
that because of his Employment, he will have access to proprietary
information of NOVA concerning or relative to the Business (collectively,
"NOVA Confidential Information") which includes, without limitation,
technical material of NOVA, sales and marketing information, customer
account records, billing information, training and operations information,
materials and memoranda, personnel records, pricing and financial
information relating to the business, accounts, customers, prospective
customers, employees and affairs of NOVA, and any information marked
"Confidential" by NOVA. Employee acknowledges and agrees that NOVA
Confidential Information is and shall be NOVA's property. Employee agrees
that during the term of his Employment, Employee shall keep NOVA
Confidential Information confidential, and Employee shall not use NOVA
Confidential Information for any reason other than on behalf of NOVA
pursuant to, and in strict compliance with, the terms of this Agreement.
Provided that NOVA complies with its obligations set forth in Section 8,
Employee further agrees that, for a period beginning on the Termination
Date and ending two (2) years thereafter, Employee shall continue to keep
NOVA Confidential Information confidential, and Employee shall not use NOVA
Confidential Information for any reason or in any manner.
13
<PAGE>
(f) Notwithstanding the foregoing, Employee shall not be subject to the
restrictions set forth in subsection (a) of this Section 11 with respect to
information which:
(i) becomes generally available to the public other than as a result
of disclosure by Employee or the breach of Employee's obligations under
this Agreement;
(ii) becomes available to Employee from a source which is unrelated
to his Employment or the exercise of his duties under this Agreement,
provided that such source lawfully obtained such information and is not
bound by a confidentiality agreement with NOVA; or
(iii) is required by law to be disclosed.
(g) Trade Secrets. Employee acknowledges and agrees that because of
-------------
his Employment, he will have access to "trade secrets" (as defined in the
Uniform Trade Secrets Act, O.C.G.A. (S) 10-1-760, et seq. (the "Uniform
-- ---
Trade Secrets Act")) of NOVA ("Trade Secrets"). Nothing in this Agreement
is intended to alter the applicable law and remedies with respect to
information meeting the definition of "trade secrets" under the Uniform
Trade Secrets Act, which law and remedies shall be in addition to the
obligations and rights of the parties hereunder.
12. Covenants Not to Solicit or Compete. Employee acknowledges and agrees
that, because of his Employment, he does and will continue to have access to
confidential or proprietary information concerning merchants, associate banks
and ISOs of NOVA and shall have established relationships with such merchants,
associate banks and ISOs as well as with the vendors, consultants, and suppliers
used to service such merchants, associate banks and ISOs. Employee agrees that
during the term of his Employment and continuing thereafter for the period
specified in Section 8(e) (provided NOVA complies with its obligations set forth
in Section 8 hereof), except as permitted or contemplated by this Agreement,
Employee shall not, directly or indirectly, either individually, in partnership,
jointly, or in conjunction with, or on behalf of, any person, firm, partnership,
corporation, or unincorporated association or entity of any kind:
(h) obtain any interest (except as a shareholder holding less than
five percent (5%) interest in a corporation) in any person, firm,
partnership, corporation, or unincorporated association of any kind which
provides credit card or debit card transaction processing services within
the Territory;
(i) provide managerial, executive, advisory, consulting, sales or
marketing services relating to credit card or debit card transaction
processing to any person, firm, partnership, corporation, or unincorporated
association of any kind which provides credit card or debit card
transaction processing services within the Territory;
(j) solicit or contact, for the purpose of providing products or
services competing with those provided by NOVA in connection with the
Business, any person or entity that during the term of Employee's
Employment was a merchant, associate bank, ISO or customer (including any
actively-sought prospective merchant, associate bank, ISO or customer) of
NOVA and with whom Employee had material contact or about whom Employee
learned material confidential information during the last twelve (12)
months of his Employment;
(k) persuade or attempt to persuade any merchant, associate bank, ISO,
customer, or supplier of NOVA to terminate or modify such merchant's,
associate bank's, ISO's, customer's, or supplier's relationship with NOVA
if Employee had material contact with or learned material confidential
14
<PAGE>
information about such merchant, associate bank, ISO, customer or supplier
during the last twelve (12) months of his Employment; or
(l) persuade or attempt to persuade any person who (aa) was employed
by NOVA as of the date of the termination of Employee's Employment and (bb)
is in a sales or management position with NOVA at the time of such contact,
to terminate or modify his employment relationship, whether or not pursuant
to a written agreement, with NOVA, as the case may be.
13. New Developments. Any discovery, invention, process or improvement
made or discovered by Employee during the term of his Employment in connection
with or in any way affecting or relating to the Business (as then carried on or
under active consideration) shall forthwith be disclosed to NOVA and shall
belong to and be the absolute property of NOVA; provided, however, that this
provision does not apply to an invention for which no equipment, supplies,
facility, trade secret information of NOVA was used and which was developed
entirely on Employee's own time, unless (a) the invention relates (i) directly
to the Business or (ii) to NOVA's actual or demonstrably anticipated research or
development; or (b) the invention results from any work performed by Employee
for NOVA.
14. Remedy for Breach. Employee acknowledges and agrees that his breach
of any of the covenants contained in Sections 9, 11, 12 and 13 of this Agreement
would cause irreparable injury to NOVA and that remedies at law of NOVA for any
actual or threatened breach by Employee of such covenants would be inadequate
and that NOVA shall be entitled to specific performance of the covenants in such
sections or injunctive relief against activities in violation of such sections,
or both, by temporary or permanent injunction or other appropriate judicial
remedy, writ or order, without the necessity of proving actual damages. This
provision with respect to injunctive relief shall not diminish the right of NOVA
to claim and recover damages against Employee for any breach of this Agreement
in addition to injunctive relief. Employee acknowledges and agrees that,
subject to NOVA's compliance with the provisions of Section 8 hereof, the
covenants contained in Sections 9, 11, 12 and 13 of this Agreement shall be
construed as agreements independent of any other provision of this or any other
contract between the parties hereto, and that the existence of any claim or
cause of action by Employee against NOVA, whether predicated upon this or any
other contract, shall not constitute a defense to the enforcement by NOVA of
said covenants.
15. Reasonableness. Employee has carefully considered the nature and
extent of the restrictions upon him and the rights and remedies conferred on
NOVA under this Agreement, and Employee hereby acknowledges and agrees that:
(m) the restrictions and covenants contained herein, and the rights and
remedies conferred upon NOVA, are necessary to protect the goodwill and
other value of the Business;
(n) the restrictions placed upon Employee hereunder are narrowly drawn,
are fair and reasonable in time and territory, will not prevent him from
earning a livelihood, and place no greater restraint upon Employee than is
reasonably necessary to secure the Business and goodwill of NOVA;
(o) NOVA is relying upon the restrictions and covenants contained
herein in continuing to make available to Employee information concerning
the Business; and
(p) Employee's Employment places him in a position of confidence and
trust with NOVA and its employees, merchants, associate banks, ISOs,
customers, vendors and suppliers.
15
<PAGE>
16. Invalidity of Any Provision. It is the intention of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies of each state and
jurisdiction in which such enforcement is sought, but that the unenforceability
(or the modification to conform with such laws or public policies) of any
provision hereof shall not render unenforceable or impair the remainder of this
Agreement which shall be deemed amended to delete or modify, as necessary, the
invalid or unenforceable provisions. The parties further agree to alter the
balance of this Agreement in order to render the same valid and enforceable.
The terms of the non-competition provisions of this Agreement shall be deemed
modified to the extent necessary to be enforceable and, specifically, without
limiting the foregoing, if the term of the non-competition is too long to be
enforceable, it shall be modified to encompass the longest term which is
enforceable and, if the scope of the geographic area of non-competition is too
great to be enforceable, it shall be modified to encompass the greatest area
that is enforceable. The parties further agree to submit any issues regarding
such modification to a court of competent jurisdiction if they are unable to
agree and further agree that if said court declines to so amend or modify this
Agreement, the parties will submit the issue of amendment or modification of the
non-competition covenants in this Agreement to binding arbitration in accordance
with Section 10 hereof.
17. Full Settlement and Legal Expenses. NOVA's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counter-claim, recoupment,
defense or other claim, right or action which NOVA may have, or claim to have,
against the Employee or others. In no event shall the Employee be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Employee under any of the provisions of this Agreement.
NOVA agrees to pay, to the full extent permitted by law, all legal fees and
expenses which the Employee may incur as a result of Employee's instituting
legal action to enforce his rights hereunder, or as a result of any contest
(regardless of the outcome thereof) by NOVA or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any dispute by the
Employee concerning the amount of any payment pursuant to Section 8 of this
Agreement), plus in each case interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.
18. Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Georgia.
19. Waiver of Breach. The waiver by NOVA of a breach of any provision of
this Agreement by Employee shall not operate or be construed as a waiver of any
subsequent breach by Employee.
20. Successors and Assigns. This Agreement shall inure to the benefit of
NOVA, its subsidiaries and affiliates, and their respective successors and
assigns. This Agreement is not assignable by Employee or by NOVA, except that
NOVA may assign its rights (but not its obligations) under this Agreement to any
affiliated or subsidiary corporation, and NOVA may assign this Agreement to any
successor to NOVA in any reorganization, merger or consolidation, or transfer of
all or substantially all of NOVA's business or properties.
21. Notices. All notices, demands and other communications hereunder
shall be in writing and shall be delivered in person or deposited in the United
States mail, certified or registered, with return receipt requested, as follows:
(i) If to Employee, to:
Edward Grzedzinski
Chief Executive Officer
16
<PAGE>
NOVA Corporation
One Concourse Parkway, Suite 300
Atlanta, Georgia 30328
With a copy (which shall not constitute notice) to:
Edward Grzedzinski
695 Peace Creek Trace
Alpharetta, Georgia 30005
And a copy (which shall not constitute notice) to:
Troutman Sanders LLP
5200 NationsBank Plaza
600 Peachtree Street
Atlanta, Georgia 30308
Attention: James L. Smith, III, Esq.
(ii) If to NOVA, to:
NOVA Corporation
One Concourse Parkway
Suite 300
Atlanta, Georgia 30328
Attention: Cherie Fuzzell
General Counsel
With a copy (which shall not constitute notice) to:
Long Aldridge & Norman LLP
SunTrust Plaza
303 Peachtree Street
Suite 5300
Atlanta, Georgia 30308
Attention: David M. Ivey, Esq.
22. Entire Agreement. This Agreement contains the entire agreement of the
parties, and supersedes all other prior negotiations, commitments, agreements
and understandings (written or oral) between the parties with respect to the
subject matter hereof, including but not limited to the 1995 Agreement, which is
hereby terminated. It may not be changed orally but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
23. Indemnification. At all times during and after Employee's Employment
and the effectiveness of this Agreement, NOVA shall indemnify Employee (as a
director, officer, employee and otherwise) to the fullest extent permitted by
law and shall at all times maintain appropriate provisions in its Articles of
Incorporation and Bylaws which mandate that NOVA provide such indemnification.
24. Survival. The provisions of Sections 8, 9, 10, 11, 12, 13, 14, 15,
16, 17, 18, 21 and 23 shall survive termination of Employee's Employment and
termination of this Agreement.
17
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25. Withholding; No Offset. All payments required to be made by NOVA
under this Agreement will be subject to the withholding of such amounts, if any,
relating to federal, state and local taxes as may be required by law. No
payment under this Agreement will be subject to offset or reduction attributable
to any amount Employee may owe to NOVA or any other person, as permitted by law.
Nothing in this Section shall be construed to reduce Employee's right to the
payments described in Section 8(g).
(Signatures Begin on Next Page)
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above shown.
"EMPLOYEE":
By: /s/ Edward Grzedzinski
----------------------
Edward Grzedzinski
"NOVA":
NOVA Corporation
By: /s/ Philip J. Mazzilli
---------------------
Name: Philip J. Mazzilli
-------------------
Title: Chief Financial Officer
------------------------------------
[corporate seal]
19
<PAGE>
EXHIBIT A
---------
Annual Incentive Compensation Schedule
. The "Target Amount" for each calendar year's Bonus Compensation shall be
equal to Employee's Base Salary for such calendar year.
. The amount of Bonus Compensation paid to Employee for any calendar year
shall range from 50% - 150% of the "Target Amount," based upon NOVA's
achievement of specific net income objectives and other financial and non-
financial objectives mutually agreed upon by Employee and the Compensation
Committee with respect to such calendar year; provided, however, that if
-------- -------
NOVA's performance in such calendar year is extraordinarily above
expectations, the Compensation Committee may award more than 150% of the
Target Amount for such calendar year; similarly, if NOVA's performance in
such year is extraordinarily below expectations, the Compensation
Committee may award less than 50% of the Target Amount for such calendar
year.
E-1
<PAGE>
EXHIBIT 10.48
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective this 8th day
of June, 1999 (the "Effective Date") by and between Philip J. Mazzilli
(hereinafter referred to as "Employee") and NOVA Corporation, a Georgia
corporation ("NOVA").
W I T N E S S E T H :
-------------------
WHEREAS, NOVA, through its direct and indirect subsidiaries, is in the
business of providing credit card and debit card transaction processing services
and settlement services (including the related products and services of
automated teller machines and check guarantee services) to merchants, financial
institutions, independent sales organizations ("ISOs"), and other similar
customers (collectively, the "Business") throughout the United States;
WHEREAS, NOVA, or its assigns, will continue to engage in the Business
throughout the United States (the "Territory");
WHEREAS, NOVA desires that Employee work for NOVA, and Employee desires to
accept said employment, all as contemplated herein;
NOW, THEREFORE, for and in consideration of his employment by NOVA pursuant
to this Agreement, the NOVA Confidential Information and Trade Secrets (as
hereafter defined) furnished to Employee by NOVA in order that he may perform
his duties under this Agreement, the mutual covenants and agreements herein
contained, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Employment of Employee. NOVA hereby employs Employee for a period
beginning as of the Effective Date and ending two (2) years thereafter (the
"Initial Term"), unless Employee's employment by NOVA is sooner terminated or
automatically renewed pursuant to the terms of this Agreement (Employee's
employment by NOVA pursuant to the terms of this Agreement shall hereinafter be
referred to as "Employment").
(a) Employee agrees to such Employment on the terms and conditions
herein set forth and agrees to devote his reasonable best efforts to his
duties under this Agreement and to perform such duties diligently and
efficiently and in accordance with the directions of NOVA's Chief Executive
Officer.
(b) During the term of Employee's Employment, Employee shall serve as
Chief Financial Officer of NOVA. Employee shall be responsible primarily
for such duties as are assigned to him, from time to time, by NOVA's Chief
Executive Officer, which in any event shall be such duties as are customary
for an officer in those positions.
(c) Employee shall devote substantially all of his business time,
attention, and energies to NOVA's Business, shall act at all times in the
best interests of NOVA, and shall not during the term of his Employment be
engaged in any other business activity, whether or not such business is
pursued for gain, profit, or other pecuniary advantage, or permit such
personal
<PAGE>
interests as he may have to interfere with the performance of his duties
hereunder. Notwithstanding the foregoing, Employee may participate in
industry, civic and charitable activities so long as such activities do not
materially interfere with the performance of his duties hereunder.
2. Compensation. During the term of Employee's Employment and in
accordance with the terms hereof, NOVA shall pay or otherwise provide to
Employee the following compensation:
(a) Employee's annual salary during the term of his Employment shall be
Two Hundred Seventy-Five Thousand and No/100 Dollars ($275,000) ("Base
Salary"), with such increases (each, a "Merit Increase") as may from time
to time be deemed appropriate by NOVA's Chief Executive Officer; provided,
however, that so long as this Agreement remains in effect, Employee's Base
Salary shall be reviewed annually by NOVA's Chief Executive Officer in each
fiscal year, within a reasonable time following the availability of NOVA's
financial statements for the preceding fiscal year. The Base Salary shall
be paid by NOVA in accordance with NOVA's regular payroll practice. As used
herein, the term "Base Salary" shall be deemed to include any Merit
Increases granted to Employee.
(b) In addition to the Base Salary, Employee shall be eligible to
receive annual bonus compensation ("Bonus Compensation") in the amount, and
on the terms and conditions described in the Annual Incentive Compensation
Schedule attached as Exhibit A (the "Incentive Compensation Plan"). Upon
---------
written request and subject to the terms and conditions set forth in this
Section 2(b), Employee shall be entitled to elect to receive all or part of
any Bonus Compensation payable to Employee under the Incentive Compensation
Plan in shares of NOVA common stock, par value $.01 per share ("NOVA
Stock"), valued on the basis of the closing price of NOVA Stock on the New
York Stock Exchange on the date of Employee's request (or if such date is
not a trading day, on the immediately preceding trading day); provided,
however, that NOVA shall not be obligated to comply with Employee's request
if (i) NOVA does not have shares of NOVA Stock available for issuance or
(ii) the issuance of NOVA Stock to Employee would be impracticable or
impede, in any respect, NOVA's ongoing business operations.
(c) NOVA may withhold from any benefits payable under this Agreement
all federal, state, city or other taxes as shall be required pursuant to
any law or governmental regulation or ruling.
3. Benefits. During the term of Employee's employment, and for such time
thereafter as may be required by Section 7 hereof, NOVA shall provide to
Employee the following benefits:
(a) Medical Insurance. Employee and his dependents shall be entitled to
-----------------
participate in such medical, dental, vision, prescription drug, wellness,
or other health care or medical coverage plans as may be established,
offered or adopted from time to time by NOVA for the benefit of its
employees and/or executive officers, pursuant to the terms set forth in
such plans.
(b) Life Insurance. Employee shall be entitled to participate in any
--------------
life insurance plans established, offered, or adopted from time to time by
NOVA for the benefit of its employees and/or executive officers.
2
<PAGE>
(c) Disability Insurance. Employee shall be entitled to participate in
--------------------
any disability insurance plans established, offered, or adopted from time
to time by NOVA for the benefit of its employees and/or executive officers.
(d) Vacations, Holidays. Employee shall be entitled to at least four
-------------------
(4) weeks of paid vacation each year and all holidays observed by NOVA.
(e) Stock Option Plans. Employee shall be eligible for participation in
------------------
any stock option plan or restricted stock plan adopted by NOVA's Board of
Directors or the Compensation Committee.
(f) Other Benefits. In addition to and not in any way in limitation of
--------------
the benefits set forth in this Section 3, Employee shall be eligible to
participate in all additional employee benefits provided by NOVA
(including, without limitation, all tax-qualified retirement plans, non-
qualified retirement and/or deferred compensation plans, incentive plans,
other stock option or purchase plans, and fringe benefits) on the same
basis as such are afforded to other executive officers of NOVA during the
term of this Agreement.
(g) Terms and Provisions of Plans. NOVA agrees that it shall not take
-----------------------------
action (during the term of this Agreement or the "Continuation Period," as
defined in Section 7(a)) to modify the terms and provisions of any such
plan or arrangement so as to exclude only Employee and/or his dependents,
either by excluding Employee and/or his dependents explicitly by name or by
modifying provisions generally applicable to all employees and dependents
so that only Employee and/or his dependents would be affected.
(h) Vesting of Rights. Upon the occurrence of the events set forth in
-----------------
Sections 7(e)(i)(A), 7(e)(i)(B) or 7(e)(i)(C) during the term of this
Agreement, and regardless of whether Employee terminates this Agreement
following such occurrence, and notwithstanding any provision to the
contrary in any other agreement or document (including NOVA's applicable
plan documents), all stock options, restricted stock, and other similar
rights that have been granted to Employee and are not vested on the date of
occurrence of such event shall become vested and exercisable immediately
(collectively, the "Vested Rights") and as provided under the applicable
plan or agreement, Employee shall have the continuing right to exercise any
or all of the Vested Rights.
4. Personnel Policies. Employee shall conduct himself at all times in a
businesslike and professional manner as appropriate for a person in his position
and shall represent NOVA in all respects with good business and ethical
practices. In addition, Employee shall be subject to and abide by the policies
and procedures of NOVA applicable generally to personnel of NOVA, as adopted
from time to time.
5. Reimbursement for Business Expenses. Employee shall be reimbursed, on
no less frequently than a monthly basis, for all out-of-pocket business expenses
incurred by him in the performance of his duties hereunder, provided that
Employee shall first document and substantiate said business expenses in the
manner generally required by NOVA under its policies and procedures.
3
<PAGE>
6. Term and Termination of Employment.
(a) This Agreement shall be effective as of the Effective Date.
(b) Employee's Employment shall terminate immediately upon the
discharge of Employee by NOVA for "Cause." For the purposes of this
Agreement, the term "Cause," when used with respect to termination by NOVA
of Employee's Employment hereunder, shall mean termination as a result of:
(i) Employee's violation of the covenants set forth in Section 10 or 11;
(ii) Employee's willful, intentional, or grossly negligent failure to
perform his duties under this Agreement diligently and in accordance with
the directions of NOVA; (iii) Employee's willful, intentional, or grossly
negligent failure to comply with the decisions or policies of NOVA; or (iv)
final conviction of Employee of a felony; provided, however, that in the
-------- -------
event NOVA desires to terminate Employee's Employment pursuant to
subsections (i), (ii), or (iii) of this Section 6(b), NOVA shall first give
Employee written notice of such intent, detailed and specific description
of the reasons and basis therefor, and thirty (30) days to remedy or cure
such perceived breaches or deficiencies (the "Cure Period"); provided,
--------
however, that with respect only to breaches that it is not possible to cure
-------
within such thirty (30) day period, so long as Employee is diligently using
his best efforts to cure such breaches or deficiencies within such period
and thereafter, the Cure Period shall be automatically extended for an
additional period of time (not to exceed sixty (60) days) to enable
Employee to cure such breaches or deficiencies, provided, further, that
-------- -------
Employee continues to diligently use his best efforts to cure such breaches
or deficiencies. If Employee does not cure the perceived breaches or
deficiencies within the Cure Period, NOVA may discharge Employee
immediately upon written notice to Employee. If NOVA desires to terminate
Employee's Employment pursuant to subsection (iv) of this Section 6(b),
NOVA shall first give Employee three (3) days prior written notice of such
intent.
(c) Employee's Employment shall terminate immediately upon the death of
Employee.
(d) Employee's Employment shall terminate immediately upon thirty (30)
days prior written notice to Employee if Employee shall at any time be
incapacitated by reason of physical or mental illness or otherwise become
incapable of performing the duties under this Agreement for a continuous
period of one hundred eighty (180) consecutive days; provided, however, to
-------- -------
the extent NOVA could, with reasonable accommodation and without undue
hardship, continue to employ Employee in some other capacity after such one
hundred eighty (180) day period, NOVA shall, to the extent required by the
Americans With Disabilities Act, offer to do so, and, if such offer is
accepted by Employee, Employee shall be compensated accordingly.
(e) Employee may terminate this Agreement, upon thirty (30) days prior
written notice to NOVA (the "Notice Period"), in the event (i) there is a
material diminution in Employee's duties and responsibilities such that
they no longer reflect duties and responsibilities customary for an
executive officer of a publicly-traded company; provided, however, that
-------- -------
NOVA's change to a privately-held company (for example, as a result of
acquisition) and the corresponding change in Employee's duties and
responsibilities shall not, by itself, be sufficient to qualify as a
"Responsibilities Breach"; (ii) Employee is required to relocate to an
office that is
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more than thirty-five (35) miles from Employee's current office located at
One Concourse Parkway, Suite 300, Atlanta, Georgia 30328; (iii) there is a
reduction in Employee's Base Salary payable under Section 2, an adverse
change in the terms of the Incentive Compensation Plan, or a material
reduction in benefits provided to Employee under Section 3 (whether
occurring at once or over a period of time); or (iv) NOVA materially
breaches this Agreement, (each of (i), (ii), (iii) and (iv) being referred
to as a "Responsibilities Breach"), and NOVA fails to cure said
Responsibilities Breach within the Notice Period; provided, however, that
-------- -------
with respect only to breaches that it is not possible to cure within the
Notice Period, so long as NOVA is diligently using its best efforts to cure
such breaches within such Notice Period, the Notice Period shall be
automatically extended for an additional period of time (not to exceed
sixty (60) days) to enable NOVA to cure such breaches, provided, further,
-------- -------
that NOVA continues to diligently use its best efforts to cure such
breaches. Notwithstanding anything to the contrary in this Section 6(e),
the Notice Period for any breach arising from the failure to pay
compensation shall be five (5) days.
(f) Employee may terminate this Agreement at any time, without cause,
upon thirty (30) days prior written notice to NOVA.
(g) NOVA may terminate this Agreement at any time, without cause, upon
written notice to Employee.
(h) This Agreement shall automatically renew for successive one (1)
year terms (each a "Renewal Term") unless either party hereto gives the
other party hereto written notice of its or his intent not to renew this
Agreement no later than one hundred eighty (180) days prior to the date the
Initial Term, or the then-current Renewal Term, is scheduled to expire.
Employee's Employment shall terminate upon termination or expiration of
this Agreement.
7. Termination Payments.
(a) Upon termination of Employee's Employment, for whatever reason
(other than termination for "Cause" pursuant to Section 6(b), termination
----- ----
by Employee pursuant to Section 6(f), expiration of this Agreement
following notice of non-renewal by Employee pursuant to Section 6(h), or
termination because Employee otherwise "quits" or voluntarily terminates
his employment other than pursuant to Section 6(e) (each, a "Termination
Exclusion") (the effective date of such termination or expiration being
referred to as the "Termination Date"), in addition to any amounts payable
to Employee hereunder (including but not limited to accrued but unpaid Base
Salary or accrued but unpaid Bonus Compensation), and any other benefits
required to be provided to Employee and his dependents under contract and
applicable law:
(i) NOVA shall pay Employee in cash an amount equal to his "Annual
Base Compensation" (as defined in Section 7(e)) multiplied by two (2)
(the "Severance Payment"). The Severance Payment shall be paid in
twenty-four (24) equal monthly payments, the first of which shall be
made on the first day of the calendar month following the calendar
month in which the Termination Date occurs; provided, however, that if
Employee's Employment is terminated (other than by reason of a
Termination Exclusion) within two (2) years after a Change in Control
of NOVA, NOVA shall pay
5
<PAGE>
Employee the Severance Payment in one lump sum within thirty (30) days
of the Termination Date.
(ii) NOVA shall pay Employee an amount (the "Supplemental
Payment") equal to (x) the amount of Bonus Compensation payable to
Employee for the calendar year immediately preceding the year in which
the Termination Date occurs (the "Prior Bonus Amount") multiplied by
(y) a fraction, the numerator of which is the number of days beginning
on January 1st of the calendar year in which the Termination Date
occurs and ending on the Termination Date, and the denominator of
which is 365. The Supplemental Payment shall be paid to Employee
concurrently with the payment of the Prior Bonus Amount; provided,
however, that if the Prior Bonus Amount has already been paid to
Employee, the Supplemental Payment shall be paid within 30 days of the
Termination Date. In the event the Termination Date occurs in the
first calendar year of Employee's employment, then the Supplemental
Payment shall equal the pro rata percentage (determined using the
fraction above) of the Bonus Compensation Employee would have received
for the calendar year in which the Termination Date occurred had
Employee remained employed for the entire calendar year in which the
Termination Date occurred, and the Supplemental Payment shall be paid
to Employee concurrently with NOVA's payment of Bonus Compensation
generally for such calendar year.
(iii) Notwithstanding any provision to the contrary in any other
agreement or document (including but not limited to NOVA's applicable
plan documents), all stock options, restricted stock and other similar
rights that, as of the Termination Date, have been granted to Employee
shall become vested and exercisable immediately upon notice of such
termination and, as provided under the applicable plan or agreement,
Employee shall have the continuing right to exercise any or all of
such rights.
(iv) Until the earlier to occur of (x) the expiration of the
Severance Period or (y) Employee becomes an employee of another
company providing Employee and his dependents with medical, life and
disability insurance (the period from the Termination Date until such
event being referred to herein as the "Continuation Period"), NOVA
shall provide to Employee and his dependents the coverage for the
benefits described in Sections 3(a), (b) and (c); provided, however,
such coverage shall not be provided to the extent that such coverage
is generally provided through an insurance contract with a licensed
insurance company and such insurance company will not agree to insure
for such coverage.
During the two (2) year period following the Termination Date (the
"Severance Period"), Employee shall comply with the non-disclosure
obligations and covenants not to solicit or compete set forth in Sections
10 and 11 below.
For purposes of this Section 7(a), any accrued but unpaid Bonus
Compensation shall be paid to Employee on the date that Bonus Compensation
would have been payable under the Incentive Compensation Plan had
termination of Employee's Employment not occurred.
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<PAGE>
(b) In the event Employee's Employment is terminated as a result of
the Termination Exclusions identified in Section 7(a), Employee shall be
paid his accrued but unpaid Base Salary and/or accrued but unpaid Bonus
Compensation through the Termination Date, and any other benefits required
to be provided to Employee and his dependents under contract and applicable
law. In the event that Employee is entitled to receive Bonus Compensation
under this Section 7(b), such Bonus Compensation shall be paid on the date
that Bonus Compensation would have been payable under the Incentive
Compensation Plan if termination of Employee's Employment had not occurred.
(c) In the event Employee's Employment is terminated as a result of one
of the Termination Exclusions identified in Section 7(a), NOVA, at its sole
option and its sole discretion and at any time within thirty (30) days of
the Termination Date, may cause Employee to be obligated to comply with the
non-disclosure obligations and covenants not to solicit or compete set
forth in Sections 10 and 11 below for a period of one (1) or two (2) years
following the Termination Date, as set forth below:
(i) By giving notice to Employee at any time within thirty (30)
days of the Termination Date of its intent to exercise the "One Year
Option" herein described, NOVA may cause Employee to be obligated to
comply with the non-disclosure obligations and covenants not to
solicit or compete set forth in Sections 10 and 11 below for a period
of one (1) year following the Termination Date; provided, however,
that NOVA shall pay Employee an aggregate amount in cash equal to
Employee's then Base Salary in effect immediately prior to the
Termination Date multiplied by one (1) (the "One Year Payment"). The
One Year Payment shall be paid by NOVA to Employee in twelve (12)
equal monthly payments, the first of which shall be made on the first
day of the calendar month following the calendar month in which the
Termination Date occurs. In the event NOVA exercises the One Year
Option, the one (1) year period following the Termination Date shall
be deemed the "Exclusion Period";
(ii) By giving notice to Employee any time within thirty (30)
days of the Termination Date of its intent to exercise the "Two Year
Option" herein described, NOVA may cause Employee to be obligated to
comply with the non-disclosure obligations and covenants not to
solicit or compete set forth in Sections 10 and 11 below for a period
of two (2) years following the Termination Date; provided, however,
that NOVA shall pay Employee an aggregate amount in cash equal to
Employee's Base Salary in effect immediately prior to the Termination
Date multiplied by two (2) (the "Two Year Payment"). The Two Year
Payment shall be paid by NOVA to Employee in twenty-four (24) equal
monthly payments, the first of which shall be made on the first day of
the calendar month following the calendar month in which the
Termination Date occurs. In the event NOVA exercises the Two Year
Option, the two (2) year period following the Termination Date shall
be deemed the "Exclusion Period".
(d) In the event of the death of Employee, all benefits and
compensation hereunder shall, unless otherwise specified by Employee, be
payable to, or exercisable by, Employee's estate.
(e) For purposes of this Agreement, the following terms shall be
defined as follows:
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<PAGE>
(i) "Change in Control" shall mean:
(A) The acquisition (other than from NOVA) by any person,
entity or "group", within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act") (excluding, for this purpose,
any employee benefit plan of NOVA or its subsidiaries
which acquires beneficial ownership of voting
securities of NOVA) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) of 25% or more of either the then outstanding
shares of NOVA Stock or the combined voting power of
NOVA's then outstanding voting securities entitled to
vote generally in the election of directors; or
(B) The consummation by NOVA of a reorganization, merger,
consolidation, in each case, with respect to which the
shares of NOVA voting stock outstanding immediately
prior to such reorganization, merger or consolidation
do not constitute or become exchanged for or converted
into more than 50% of the combined voting power
entitled to vote generally in the election of directors
of the reorganized, merged or consolidated company's
then outstanding voting securities, or a liquidation or
dissolution of NOVA or of the sale of all or
substantially all of the assets of NOVA; and
(C) The failure for any reason of individuals who
constitute the Incumbent Board to continue to
constitute at least a majority of the Board of
Directors of NOVA.
(i.e., either (A) and (C) or (B) and (C) must occur in order
to constitute a Change in Control for purposes of this
definition).
(ii) "Annual Base Compensation" means the greater of (x)
Employee's Base Salary in effect on the Termination Date, or (y) the
greatest Base Salary in effect during the calendar year immediately
prior to the calendar year in which the Termination Date occurs.
(iii) "Incumbent Board" shall mean the members of the Board of
Directors of NOVA as of the Effective Date hereof and any person
becoming a member of the Board of Directors of NOVA hereafter whose
election, or nomination for election by NOVA's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election
of the directors of NOVA, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act).
8
<PAGE>
8. Products, Notes, Records and Software. Employee acknowledges and
agrees that all memoranda, notes, records and other documents and computer
software created, developed, compiled, or used by Employee or made available to
him during the term of his Employment concerning or relative to the Business,
including, without limitation, all customer data, billing information, service
data, and other technical material of NOVA is and shall be NOVA's property.
Employee agrees to deliver without demand all such materials to NOVA within
three (3) days after the termination of Employee's Employment. Employee further
agrees not to use such materials for any reason after said termination.
9. Arbitration.
(a) NOVA and Employee acknowledge and agree that (except as
specifically set forth in Section 9(d)) any claim or controversy arising
out of or relating to Section 7 of this Agreement shall be settled by
binding arbitration in Atlanta, Georgia, in accordance with the National
Rules of the American Arbitration Association for the Resolution of
Employment Disputes in effect on the date of the event giving rise to the
claim or controversy. NOVA and Employee further acknowledge and agree
that either party must request arbitration of any claim or controversy
within one (1) year of the date of the event giving rise to the claim or
controversy by giving written notice of the party's request for
arbitration. Failure to give notice of any claim or controversy within one
(1) year of the event giving rise to the claim or controversy shall
constitute waiver of the claim or controversy.
(b) All claims or controversies subject to arbitration pursuant to
Section 9(a) above shall be submitted to arbitration within six (6) months
from the date that a written notice of request for arbitration is
effective. All claims or controversies shall be resolved by a panel of
three arbitrators who are licensed to practice law in the State of Georgia
and who are experienced in the arbitration of labor and employment
disputes. These arbitrators shall be selected in accordance with the
National Rules of the American Arbitration Association for the Resolution
of Employment Disputes in effect at the time the claim or controversy
arises. Either party may request that the arbitration proceeding be
stenographically recorded by a Certified Shorthand Reporter. The
arbitrators shall issue a written decision with respect to all claims or
controversies within thirty (30) days from the date the claims or
controversies are submitted to arbitration. The parties shall be entitled
to be represented by legal counsel at any arbitration proceedings.
(c) NOVA and Employee acknowledge and agree that the arbitration
provisions in this Agreement may be specifically enforced by either party,
and that submission to arbitration proceedings may be compelled by any
court of competent jurisdiction. NOVA and Employee further acknowledge and
agree that the decision of the arbitrators may be specifically enforced by
either party in any court of competent jurisdiction.
(d) Notwithstanding the arbitration provisions set forth herein,
Employee and NOVA acknowledge and agree that nothing in this Agreement
shall be construed to require the arbitration of any claim or controversy
arising under Sections 10 and 11 of this Agreement nor shall such
provisions prevent NOVA from seeking equitable relief from a court of
competent jurisdiction for violations of Sections 10 and 11 of this
Agreement. These provisions shall be enforceable by any court of competent
jurisdiction and shall not be subject to arbitration except by mutual
written consent of the parties signed after the dispute arises, any such
consent, and the terms and conditions thereof, then becoming binding on the
parties. Employee and NOVA
9
<PAGE>
further acknowledge and agree that nothing in this Agreement shall be
construed to require arbitration of any claim for workers' compensation or
unemployment compensation.
10. Nondisclosure.
(a) NOVA Confidential Information. Employee acknowledges and agrees
-----------------------------
that because of his Employment, he will have access to proprietary
information of NOVA concerning or relative to the Business (collectively,
"NOVA Confidential Information") which includes, without limitation,
technical material of NOVA, sales and marketing information, customer
account records, billing information, training and operations information,
materials and memoranda, personnel records, pricing and financial
information relating to the business, accounts, customers, prospective
customers, employees and affairs of NOVA, and any information marked
"Confidential" by NOVA. Employee acknowledges and agrees that NOVA
Confidential Information is and shall be NOVA's property. Employee agrees
that during the term of his Employment, Employee shall keep NOVA
Confidential Information confidential, and Employee shall not use NOVA
Confidential Information for any reason other than on behalf of NOVA
pursuant to, and in strict compliance with, the terms of this Agreement.
Employee further agrees that during the Severance Period or the Exclusion
Period, as applicable, Employee shall continue to keep NOVA Confidential
Information confidential, and Employee shall not use NOVA Confidential
Information for any reason or in any manner.
(b) Notwithstanding the foregoing, Employee shall not be subject to
the restrictions set forth in subsection (a) of this Section 10 with
respect to information which:
(i) becomes generally available to the public other than as a
result of disclosure by Employee or the breach of Employee's
obligations under this Agreement;
(ii) becomes available to Employee from a source which is
unrelated to his Employment or the exercise of his duties under this
Agreement, provided that such source lawfully obtained such
information and is not bound by a confidentiality agreement with NOVA;
or
(iii) is required by law to be disclosed.
(c) Trade Secrets. Employee acknowledges and agrees that because of
-------------
his Employment, he will have access to "trade secrets" (as defined in the
Uniform Trade Secrets Act, O.C.G.A. (S) 10-1-760, et seq. (the "Uniform
-- ---
Trade Secrets Act") of NOVA ("Trade Secrets"). Nothing in this Agreement is
intended to alter the applicable law and remedies with respect to
information meeting the definition of "trade secrets" under the Uniform
Trade Secrets Act, which law and remedies shall be in addition to the
obligations and rights of the parties hereunder.
11. Covenants Not to Solicit or Compete.
Employee acknowledges and agrees that, because of his Employment, he does
and will continue to have access to confidential or proprietary information
concerning merchants, associate banks and ISOs of NOVA and shall have
established relationships with such merchants, associate banks and ISOs as well
as with the vendors, consultants, and suppliers used to service such merchants,
associate banks and ISOs.
10
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Employee agrees that during the term of his Employment and continuing throughout
the Severance Period or the Exclusion Period, as applicable, Employee shall not,
directly or indirectly, either individually, in partnership, jointly, or in
conjunction with, or on behalf of, any person, firm, partnership, corporation,
or unincorporated association or entity of any kind:
(a) compete with NOVA in providing credit card and debit card
transaction processing services within the Territory or (ii) otherwise
associate with, obtain any interest in (except as a shareholder holding
less than five percent (5%) interest in a corporation traded on a national
exchange or over-the-counter), advise, consult, lend money to, guarantee
the debts or obligations of, or perform services in either a supervisory or
managerial capacity or as an advisor, consultant or independent contractor
for, or otherwise participate in the ownership, management, or control of,
any person, firm, partnership, corporation, or unincorporated association
of any kind which is providing credit card and debit card transaction
processing services within the Territory;
(b) solicit or contact, for the purpose of providing products or
services the same as or substantially similar to those provided by NOVA in
connection with the Business, any person or entity that during the term of
Employee's Employment was a merchant, associate bank, ISO or customer
(including any actively-sought prospective merchant, associate bank, ISO or
customer) of NOVA and with whom Employee had material contact or about whom
Employee learned material information during the last twelve (12) months of
his Employment;
(c) persuade or attempt to persuade any merchant, associate bank, ISO,
customer, or supplier of NOVA to terminate or modify such merchant's,
associate bank's, ISO's, customer's, or supplier's relationship with NOVA
if Employee had material contact with or learned material information about
such merchant, associate bank, ISO, customer or supplier during the last
twelve (12) months of his Employment; or
(d) persuade or attempt to persuade any person who (i) was employed by
NOVA as of the date of the termination of Employee's Employment and (ii) is
in a sales or management position with NOVA at the time of such contact, to
terminate or modify his employment relationship, whether or not pursuant to
a written agreement, with NOVA, as the case may be.
12. New Developments. Any discovery, invention, process or improvement
made or discovered by Employee during the term of his Employment in connection
with or in any way affecting or relating to the Business (as then carried on or
under active consideration) shall forthwith be disclosed to NOVA and shall
belong to and be the absolute property of NOVA; provided, however, that this
provision does not apply to an invention for which no equipment, supplies,
facility, trade secret information of NOVA was used and which was developed
entirely on Employee's own time, unless (a) the invention relates (i) directly
to the Business or (ii) to NOVA's actual or demonstrably anticipated research or
development; or (b) the invention results from any work performed by Employee
for NOVA.
13. Remedy for Breach. Employee acknowledges and agrees that his breach
of any of the covenants contained in Sections 8, 10, 11 and 12 of this Agreement
would cause irreparable injury to NOVA and that remedies at law of NOVA for any
actual or threatened breach by Employee of such covenants would be inadequate
and that NOVA shall be entitled to specific performance of the covenants in such
sections or injunctive relief against activities in violation of such sections,
or both, by temporary
11
<PAGE>
or permanent injunction or other appropriate judicial remedy, writ or order,
without the necessity of proving actual damages. This provision with respect to
injunctive relief shall not diminish the right of NOVA to claim and recover
damages against Employee for any breach of this Agreement in addition to
injunctive relief. Employee acknowledges and agrees that the covenants contained
in Sections 8, 10, 11 and 12 of this Agreement shall be construed as agreements
independent of any other provision of this or any other contract between the
parties hereto, and that the existence of any claim or cause of action by
Employee against NOVA, whether predicated upon this or any other contract, shall
not constitute a defense to the enforcement by NOVA of said covenants.
14. Reasonableness. Employee has carefully considered the nature and
extent of the restrictions upon her and the rights and remedies conferred on
NOVA under this Agreement, and Employee hereby acknowledges and agrees that:
(a) the restrictions and covenants contained herein, and the rights
and remedies conferred upon NOVA, are necessary to protect the goodwill and
other value of the Business;
(b) the restrictions placed upon Employee hereunder are narrowly
drawn, are fair and reasonable in time and territory, will not prevent him
from earning a livelihood, and place no greater restraint upon Employee
than is reasonably necessary to secure the Business and goodwill of NOVA;
(c) NOVA is relying upon the restrictions and covenants contained
herein in continuing to make available to Employee information concerning
the Business; and
(d) Employee's Employment places him in a position of confidence and
trust with NOVA and its employees, merchants, associate banks, ISOs,
customers, vendors and suppliers.
15. Invalidity of Any Provision. It is the intention of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies of each state and
jurisdiction in which such enforcement is sought, but that the unenforceability
(or the modification to conform with such laws or public policies) of any
provision hereof shall not render unenforceable or impair the remainder of this
Agreement which shall be deemed amended to delete or modify, as necessary, the
invalid or unenforceable provisions. The parties further agree to alter the
balance of this Agreement in order to render the same valid and enforceable.
The terms of the non-competition provisions of this Agreement shall be deemed
modified to the extent necessary to be enforceable and, specifically, without
limiting the foregoing, if the term of the non-competition is too long to be
enforceable, it shall be modified to encompass the longest term which is
enforceable and, if the scope of the geographic area of non-competition is too
great to be enforceable, it shall be modified to encompass the greatest area
that is enforceable. The parties further agree to submit any issues regarding
such modification to a court of competent jurisdiction if they are unable to
agree and further agree that if said court declines to so amend or modify this
Agreement, the parties will submit the issue of amendment or modification of the
non-competition covenants in this Agreement to binding arbitration in accordance
with the commercial arbitration rules then in effect of the American Arbitration
Association. Any such arbitration hearing will be held in Atlanta, Georgia, and
this Agreement shall be construed and enforced in accordance with the laws of
the State of Georgia, including this arbitration provision.
12
<PAGE>
16. Full Settlement and Legal Expenses. NOVA's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counter-claim, recoupment,
defense or other claim, right or action which NOVA may have against the Employee
or others. In no event shall the Employee be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Employee under any of the provisions of this Agreement. NOVA agrees to pay, to
the full extent permitted by law, all legal fees and expenses which the Employee
may reasonably incur as a result of any contest (regardless of the outcome
thereof) by NOVA or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Employee about the amount of any
payment pursuant to Section 7 of this Agreement), plus in each case interest at
the applicable federal rate provided for in Section 7872(f)(2) of the Code.
17. Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Georgia.
18. Waiver of Breach. The waiver by NOVA of a breach of any provision of
this Agreement by Employee shall not operate or be construed as a waiver of any
subsequent breach by Employee.
19. Successors and Assigns. This Agreement shall inure to the benefit of
NOVA, its subsidiaries and affiliates, and their respective successors and
assigns. This Agreement is not assignable by Employee but shall be freely
assignable by NOVA.
20. Notices. All notices, demands and other communications hereunder
shall be in writing and shall be delivered in person or deposited in the United
States mail, certified or registered, with return receipt requested, as follows:
(i) If to Employee, to:
Philip J. Mazzilli
11850 Mountain Laurel Drive
Roswell, Georgia 30075
(ii) If to NOVA, to:
NOVA Corporation
One Concourse Parkway
Suite 300
Atlanta, Georgia 30328
Attention: Edward Grzedzinski
Chief Executive Officer
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With a copy (which shall not constitute notice) to:
NOVA Corporation
One Concourse Parkway
Suite 300
Atlanta, Georgia 30328
Attention: Cherie M. Fuzzell
General Counsel
21. Entire Agreement. This Agreement contains the entire agreement of the
parties, and supersedes all other prior negotiations, commitments, agreements
and understandings (written or oral) between the parties with respect to the
subject matter hereof. It may not be changed orally but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
22. Indemnification. At all times during and after Employee's Employment
and the effectiveness of this Agreement, NOVA shall indemnify Employee (as a
director, officer, employee and otherwise) to the fullest extent permitted by
law and shall at all times maintain appropriate provisions in its Articles of
Incorporation and Bylaws which mandate that NOVA provide such indemnification.
23. Survival. The provisions of Sections 7, 8, 9, 10, 11, 12, 13, 14, 15,
16, 17, 20, 22 and 24 shall survive termination of Employee's Employment and
termination of this Agreement.
24. Withholding. All payments required to be made by NOVA under this
Agreement will be subject to the withholding of such amounts, if any, relating
to federal, state and local taxes as may be required by law.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above shown.
"EMPLOYEE":
By: /S/ Philip J. Mazzilli
------------------------
Philip J. Mazzilli
"NOVA":
NOVA Corporation
By: /S/ Edward Grzedzinksi
-----------------------------
Edward Grzedzinski
Chairman, CEO and President
15
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EXHIBIT 10.49
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YOU ARE STRONGLY ENCOURAGED TO READ THIS DOCUMENT CAREFULLY AND TO CONSULT WITH
AN ATTORNEY BEFORE EXECUTING THIS DOCUMENT.
- --------------------------------------------------------------------------------
SEPARATION AGREEMENT
This Separation Agreement (this "Agreement"), dated as of the 23rd day of
June, 1999, is entered into by and between James M. Bahin ("Employee") and NOVA
Corporation, a Georgia corporation ("NOVA"), on behalf of itself and its
affiliated and related entities, directors, officers and employees,
representatives, agents, attorneys, accountants, employee benefit plans, and
employee welfare plans.
W I T N E S S E T H:
WHEREAS, Employee is employed by NOVA as its Chief Financial Officer
pursuant to an Employment Agreement (the "Employment Agreement"), dated October
27, 1995, by and between Employee and NOVA Information Systems, Inc., a Georgia
corporation and wholly-owned subsidiary of NOVA ("NIS") and serves as a Vice
Chairman of the NOVA Board of Directors; and
WHEREAS, Employee and NOVA have mutually agreed to the terms and conditions
by which Employee's employment with NOVA will terminate and Employee shall
retire, and wish to set out those terms and conditions specifically in writing;
and
WHEREAS, the parties intend that this Agreement shall supersede and render
null and void the Employment Agreement;
NOW, THEREFORE, for the consideration outlined herein and other agreements
contained herein, Employee and NOVA agree as follows:
I.
Definitions
As used in this Agreement, the following definitions shall be applicable:
A. The term "Continuation Period" shall mean the two (2) year period
immediately following the Employment Termination Date.
<PAGE>
B. The phrase "Employee's related entities and persons" shall mean and
include the heirs, executors, administrators, beneficiaries, assigns, agents,
representatives, and successors of Employee, and any other persons acting or
purporting to act on behalf of, or in the name of, or asserting claims by, on
behalf of, or through, Employee, and the successors and assigns of such persons,
and the successors and assigns of Employee.
C. The term "Employer" shall mean NOVA and NIS, collectively.
D. The phrase "Employer's related employers" shall mean and include any
parent, subsidiaries and related corporations or entities, predecessors,
successors and assigns of Employer.
E. The phrase "Employer's related entities and persons" shall mean and
include the agents, employees, directors, servants, independent contractors,
attorneys, representatives, actuaries, accountants, officers, and trustees of
(1) Employer and/or any one or more of Employer's related employers and (2)
every person (whether natural or artificial), firm, or entity now or previously
affiliated with Employer and/or any one or more of Employer's related employers
in any manner whatsoever, and every such person, firm or entity with which
Employer and/or any one or more of Employer's related employers may affiliate in
any manner whatsoever in the future.
F. The phrase "Employment Termination Date" shall mean June 8, 1999.
G. The phrase "General Release and Covenant Not to Sue Agreement" shall
mean the document, the form of which is attached hereto as Exhibit B, which must
be effectively and irrevocably executed by Employee in order to receive the
remuneration set forth in Article III hereof.
H. The term "Plan(s)" shall mean, when referenced as Plan(s) of a
particular entity, individual or other person, all employee benefit plans
(within the meaning ERISA (S)3(3)) sponsored by, contributed to, or maintained
by such entity, individual or other person.
I. The phrase "Plan's (Plans') related entities and persons," when
referencing one or more Plans, shall mean and include (1) the agents, employees,
servants, independent contractors, attorneys, representatives, actuaries,
accountants, fiduciaries, administrators, administrative committee(s) or other
committee(s), and trustees of, (2) every other person (whether natural or
artificial), firm or entity now or previously affiliated in any manner
whatsoever with, and (3) every such other person, firm or entity which in the
future may affiliate in any manner whatsoever with, the one or more Plan(s) so
referenced.
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II.
Termination of Employee's Employment
Employee and Employer agree and acknowledge that Employee's employment with
Employer will be voluntarily terminated as of the Employment Termination Date,
and, accordingly, that such Employment Termination Date shall be used to
determine Employee's entitlement to any benefits generally available to
employees of Employer under a Plan of Employer, as well as the amount thereof,
subject to Article III hereof. Employee agrees to resign from Employer's Board
of Directors effective as of the Employment Termination Date. Employer and
Employee agree that the Employment Agreement will become null and void as of the
Employment Termination Date, and will be of no further force and effect, and
will be superseded entirely by this Agreement.
III.
Payments to Employee and Continuation of Benefits
Payments and Continuation of Benefits. In addition to the general
compensation and benefits to which Employee would be entitled based upon his
employment with Employer through the Employment Termination Date, Employee and
Employer hereby agree that Employee shall receive the following remuneration
only if Employee complies with his agreement in Article V below to execute a
General Release and Covenant Not to Sue Agreement within thirty (30) days
following his Employment Termination Date and such agreement becomes valid,
irrevocable, enforceable and binding:
Monthly Cash Payments. Employee shall receive twenty-four (24)
monthly cash payments, each in the amount of $30,000.00, with each monthly
payment to Employee in the form of a check drawn on an account of Employer
and sent to Employee by first class mail, postage prepaid or, at Employee's
election, by direct deposit to Employee's bank account in accordance with
Employer's policies applicable generally to direct deposit of employee
salaries. Such monthly payments shall be made on the first day of each
month beginning with the calendar month following the calendar month during
which the Employment Termination Date occurs and continuing on the first
day of each following month for a twenty-four (24) month period. In the
event that Employee elects to receive monthly cash payments by direct
deposit, Employer may make such payments in each month concurrently with
Employer's regular direct deposit of employee payroll.
Vesting of Stock Options. The outstanding and unvested options for
the purchase of common stock of Employer held by Employee listed on the
attached Exhibit A shall become vested and exercisable as of the Employment
Termination Date. All options listed on the attached Exhibit A shall
expire on the date which is one (1) year after the
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Employment Termination Date, and any options granted (or contemplated to be
granted) to Employee other than the options listed on the attached Exhibit
A shall expire as of the Employment Termination Date. Employer shall take
such action as is necessary under the terms and provisions of such options
and any applicable plans under which such options were issued to ensure the
vesting, continuance and expiration of such options in accordance with the
preceding sentence.
Payment of COBRA Continuation Coverage Premiums. To the extent that
Employee and/or any of his dependents is eligible to, and timely elects to,
receive continuation coverage under any Plan of Employer which is a group
health plan subject to the provisions of part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended and/or Section 4980B of
the Internal Revenue Code of 1986, as amended, Employer shall timely pay
any premiums required for such coverage for the duration of the
Continuation Period. This payment of premiums by Employer is not intended
to alter in any way the provisions of any Plan of Employer, and all time
limits, effects of subsequent coverage and all other relevant provisions of
any such Plan remain unchanged and shall control Employee's (and his
dependents') entitlement to coverage or benefits under any such Plan.
Life and Disability Insurance. For the duration of the Continuation
Period, Employer shall provide the Employee with life insurance and
disability insurance which is substantially similar to that available to
Employee under the Plans of Employer providing such coverage to Employee
immediately prior to the Employment Termination Date; provided, however,
such insurance coverage shall not be provided to the extent that such
coverage is generally provided by Plans of Employer through an insurance
contract with a licensed insurance company and such insurance company will
not agree to insure for such coverage. This provision of insurance
coverage by Employer is not intended to alter in any way the provisions of
any Plan of Employer, and all time limits, effects of subsequent coverage
and all other relevant provisions of any such Plan remain unchanged and
shall control Employee's (and his dependents') entitlement to coverage or
benefits under any such Plan.
The parties agree that the above additional remuneration shall be subject to any
applicable federal, state and/or local income tax withholding, FICA tax, or
other tax requirements, and is completely and entirely contingent upon the
execution of a valid, enforceable, binding and irrevocable General Release and
Covenant Not to Sue Agreement in accordance with Article V herein. Furthermore,
notwithstanding any provision above, none of the above additional remuneration
shall be paid until the date (the "GRCNSA Effective Date") on which there is a
valid, enforceable, binding and irrevocable General Release and Covenant Not to
Sue Agreement executed by Employee, and to the extent that any of the above
additional remuneration would
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be payable prior to such GRCNSA Effective Date, it shall instead be paid on or
before the fifth (5th) day after the GRCNSA Effective Date.
IV.
Restrictive Covenants
Products, Notes, Records and Software. Employee acknowledges and agrees
that all memoranda, notes, records and other documents and computer software
created, developed, compiled or used by Employee or made available during the
term of his service with Employer concerning or relative to Employer's business
of providing credit and debit card transaction processing and settlement
services (including the related products and services of automated teller
machines and check guarantee services) to merchants, financial institutions,
independent sales organizations and other similar customers (the "Employer
Business"), including without limitation, all customer data, billing
information, service data, and other technical material of Employer and
Employer's related employers (collectively, the "Employer Entities") is and
shall be the property of the appropriate Employer Entities. Employee agrees to
deliver without demand all such materials to the appropriate Employer Entities
within thirty (30) days after the termination of Employee's service with
Employer as a member of its Board of Directors. Employee further agrees not to
such use materials for any reason after said termination; provided, however,
that Employee shall be entitled to use materials which are generally available
to the public other than as a result of (a) disclosure by Employee, (b) the
breach of Employee's obligations under this Agreement, or (c) the breach by any
person or entity (other than Employee) of any confidentiality, non-disclosure or
similar obligation (but only to the extent that Employee has knowledge of such
breach).
Nondisclosure. (a) Employee acknowledges and agrees that because of his
employment and service with Employer, he has had, and will continue to have,
access to proprietary information of the Employer Entities concerning or
relative to the Employer Business (collectively, "Confidential Information")
which includes, without limitation, technical material of the Employer Entities,
sales and marketing information, customer account records, billing information,
training and operations information, materials and memoranda, personnel records,
pricing and financial information relating to the business, accounts, customers,
prospective customers, employees and affairs of the Employer Entities, and any
information marked "Confidential" by the Employer Entities. Employee
acknowledges and agrees that the Confidential Information is and shall be the
property of the appropriate Employer Entities. Provided that Employer complies
with its obligations set forth in Article III, Employee agrees during
Continuation Period, Employee shall not use Confidential Information for any
reason other than on behalf of the Employer Entities.
(b) Notwithstanding the foregoing, Employee shall not be subject to the
restrictions set forth in subsection (a) immediately above with respect to
information which:
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(i) becomes generally available to the public other than as a result
of disclosure by Employee or the breach of Employee's obligations under
this Agreement;
(ii) becomes available to Employee from a source which is unrelated to
his employment or service with Employer, provided such source lawfully
obtained such information and is not bound by a confidentiality agreement
with any of the Employer Entities; or
(iii) is required by law to be disclosed.
(c) Employee acknowledges and agrees that because of his employment with
Employer, he has had and will have access to "trade secrets," as defined in the
Uniform Trade Secrets Act, O.C.G.A. (S) 10-1-769, et seq. (the "Uniform Trade
Secrets Act") of the Employer Entities. Nothing in this Agreement is intended
to alter the applicable law and remedies with respect to information meeting the
definition of "trade secrets" under the Uniform Trade Secrets Act, which law and
remedies shall be in addition to the obligations and rights of the parties
hereunder.
Covenants Not to Solicit or Compete. Employee acknowledges and agrees
that, because of his employment with Employer, he has and will continue to have
access to confidential or proprietary information concerning merchants,
associate banks and independent sales organizations ("ISO") of the Employer
Entities and establish relationships with such merchants, associate banks and
ISOs as well as with the vendors, consultants and suppliers used to service such
merchants, associate banks and ISOs within the United States. In consideration
for the benefits and compensation Employee is receiving hereunder, and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Employee agrees that during the 2-year period immediately
following the Employment Termination Date, he shall not directly or indirectly,
either individually, in partnership, jointly, or in conjunction with, or on
behalf of, any person, firm, partnership, corporation or unincorporated
association or entity of any kind:
(a) (i) compete with any of the Employer Entities in providing credit card
and debit card transaction processing services within the United States, or (ii)
otherwise obtain any interest in (except as a stockholder holding less than five
percent (5%) interest in a corporation which is traded on a national exchange or
over-the-counter), lend money to, guarantee the debts or obligations of, or
perform services in either a supervisory or managerial capacity or as an
advisor, consultant or independent contractor for, or otherwise participate in
the ownership, management or control of, any person, firm, partnership,
corporation, or unincorporated association of any kind which is providing credit
card and debit card transaction processing services within the United States;
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<PAGE>
(b) solicit or contact, for the purpose of providing products or services
the same as or substantially similar to those provided by any of the Employer
Entities in connection with the Employer Entities' Business, any person or
entity that during the term of Employee's employment with Employer was a
merchant, associate bank, ISO or customer (including any actively-sought
prospective merchant, associate bank, ISO or customer) of any of the Employer
Entities and with whom Employee had material contact or about which Employee
learned material information during the twelve (12) months immediately preceding
the Employment Termination Date;
(c) persuade or attempt to persuade any merchant, associate bank, ISO,
customer, or supplier of any of the Employer Entities to terminate or modify
such merchant's, associate bank's, ISO's, customer's, or supplier's relationship
with any of the Employer Entities if Employee had material contact with or
learned material information about such merchant, associate bank, ISO, customer,
or supplier during the twelve (12) months immediately preceding the Employment
Termination Date; or
(d) persuade or attempt to persuade any person who (i) was employed by any
of the Employer Entities as of the date of the Employment Termination Date, and
(ii) is in a sales or management position with any of the Employer Entities at
the time of such termination, to terminate or modify his employment
relationship, whether or not pursuant to a written agreement, with any of the
Employer Entities, as the case may be.
New Developments. Any discovery, invention, process or improvement made or
discovered by Employee during the term of his employment in connection with or
any way affecting or relating to the Employer Business (as then carried on or
under active consideration) shall forthwith be disclosed to Employer and shall
belong to and be the absolute property of the appropriate Employer Entity;
provided, however, that this provision does not apply to an invention for which
no equipment, supplies, facility, trade secret information of the Employer
Entities was used and which was developed entirely on Employee's own time,
unless (a) the invention relates (i) directly to the Employer Business or (ii)
to the actual or demonstrably anticipated research or development of any of the
Employer Entities; or (b) the invention results from any work performed by
Employee for any of the Employer Entities.
Reasonableness. Employee has carefully considered the nature and extent of
the restrictions upon him and the rights and remedies conferred on Employer
under this Agreement, and Employee hereby acknowledges and agrees that:
(a) the restrictions and covenants contained herein, and the rights and
remedies conferred upon Employer, are necessary to protect the goodwill and
other value of the Employer Business;
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<PAGE>
(b) the restrictions placed upon Employee hereunder are fair and reasonable
in time and territory, will not prevent him from earning a livelihood, and place
no greater restraint upon Employee than is reasonably necessary to secure the
Employer Business and goodwill of Employer;
(c) Employer is relying upon the restrictions and covenants contained
herein in continuing to make available to Employee information concerning the
Employer Business; and
(d) Employee's employment hereunder places him in a position of confidence
and trust with Employer and its employees, merchants, associate banks, ISOs,
customers, vendors and suppliers.
Remedy for Breach. Employee acknowledges and agrees that a breach of any
of the covenants contained in this Article of this Agreement would cause
irreparable injury to Employer and that remedies at law available to Employer
for any actual or threatened breach of such covenants will be inadequate and
that Employer shall be entitled to specific performance of the covenants in this
Article or injunctive relief against activities in violation of this Article by
temporary or permanent injunction or other appropriate judicial remedy, writ or
order, without the necessity or proving actual damages. This provision with
respect to injunctive relief shall not diminish the right of Employer to claim
and recover monetary damages against Employee for any breach of this Agreement,
in addition to injunctive relief. Employee acknowledges and agrees that he will
be responsible for all legal expenses, including attorney's fees, which Employer
incurs in pursuing remedies, whether legal or equitable, for any actual or
threatened breach of this Agreement. Employee acknowledges and agrees that the
covenants contained in this Article shall be construed as agreements independent
of any other provision of this or any other contract between the parties hereto,
and that the existence of any claim or cause of action by Employee against
Employer, whether predicated upon this or any other contract, shall not
constitute a defense to the enforcement by Employer of said covenants.
V.
General Release by Employee and Covenant Not to Sue
In order to receive the additional remuneration set forth in Article III of
this Agreement, Employee acknowledges and understands that he must execute an
irrevocable, enforceable, valid and binding General Release and Covenant Not to
Sue Agreement in substantially the form as shown in the attached Exhibit B
within thirty (30) days following his Employment Termination Date.
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<PAGE>
VI.
Limitation of Release by Employee
Notwithstanding the previous Article, it is understood and agreed that the
release of benefits and claims, and covenants not to sue, under the General
Release and Covenant Not to Sue Agreement will not include a release of the
right to the payment of benefits to which Employee may be entitled under the
terms and provisions of Article III of this Agreement, will not include a
release of the right to payment of any benefits accrued as of the Employment
Termination Date to which Employee may be entitled under the terms and
provisions of any Plan of Employer, and will not include a release of claims
based on events occurring after execution and delivery of the General Release
and Covenant Not to Sue Agreement. Employee hereby acknowledges that he is only
entitled to the additional remuneration set forth in Article III of this
Agreement contingent upon his execution of a valid, irrevocable, binding and
enforceable General Release and Covenant Not to Sue Agreement in accordance with
Article V above, and that under such agreement, all other claims for any other
benefits or compensation will be waived, except those expressly stated in the
preceding sentence.
VII.
Knowing and Voluntary Waiver of Rights by Employee
Employee agrees and acknowledges that he has carefully reviewed, studied
and thought over the terms of this Agreement, and that all questions concerning
this Agreement have been answered to his satisfaction. Employee does further
acknowledge and agree that he has had the opportunity to consider and reflect
upon the terms of this Agreement before signing it, that he knowingly and
voluntarily entered into and signed this Agreement after deliberate
consideration and review of all of its terms and provisions, that he was not
coerced, pressured or forced in any way by Employer or anyone else to accept the
terms of this Agreement, that the decision to accept the terms of this Agreement
was entirely his own, that he was advised in writing to consult with an attorney
prior to executing this Agreement, and that he had the opportunity to consult
with an attorney throughout the negotiations concerning this Agreement, during
which time proposals and counter proposals were or could have been presented,
discussed and, in some instances, made a part of the final version of this
Agreement. Employee also acknowledges that no promises or inducements to enter
into and execute this Agreement have been offered or made except those which are
specifically set out in this Agreement.
VIII.
Representations and Warranties by Employer
Employer represents and warrants to Employee that (a) Employer has taken
all necessary and appropriate action to authorize the execution, delivery and
performance of this Agreement, and (b) this Agreement constitutes the valid and
binding obligation of Employer, enforceable in
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accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, other similar laws affecting the enforcement of
creditor's rights in general, or general principles of equity.
IX.
Entire Agreement Between Parties
This Agreement constitutes the entire agreement between Employee and
Employer pertaining to the subjects contained in it and supersedes any and all
prior and/or contemporaneous agreements, representations, or understandings,
written or oral, including, without limitation, the Employment Agreement. It is
expressly understood and agreed that this Agreement may not be altered, amended,
modified or otherwise changed in any respect or particular whatsoever except in
writing duly executed by Employee and an authorized representative of Employer
acting on behalf of Employer.
X.
Notices
All notices hereunder shall be deemed to have been given or made when
personally delivered, one business day following deposit with an overnight
delivery service, or three business days following deposit in the mail,
registered or certified mail, postage prepaid as follows:
If to Employer:
NOVA Corporation
One Concourse Parkway, Suite 300
Atlanta, Georgia 30328
Attn: General Counsel
If to Employee:
James M. Bahin
8420 Lazy Oak Court
Dunwoody, Georgia 30350
With a copy to:
R. Lawrence Ashe, Jr.
Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, Suite 2400
Atlanta, Georgia 30308
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XI.
Non-Disparagement Provisions
Employee shall, and shall cause Employee's related entities and persons to,
refrain from making any remark or statement, whether oral or in writing (other
than legally required truthful statements and reports) that reasonably may be
construed as disparaging to Employer or any of Employer's related entities and
persons. Employer shall, and shall cause Employer's related entities and persons
to, refrain from making any remark or statement, whether oral or in writing
(other than legally required truthful statements and reports) that reasonably
may be construed as disparaging to Employee or any of Employee's related
entities and persons.
XII.
Miscellaneous Provisions
This Agreement shall be binding upon both Employee and Employee's related
entities and individuals, and upon Employer and Employer's related employers.
All signatories to this Agreement hereby warrant, covenant, and represent that
prior to the Employment Termination Date, they have not conveyed, transferred,
pledged, hypothecated, or in any manner whatsoever assigned or encumbered any of
the rights, demands, claims, suits, actions, or causes of action released
herein, and all signatories to this Agreement also hereby warrant, covenant and
represent that, prior to the Employment Termination Date, they have not filed a
lawsuit or asked the assistance of any governmental agency to enforce rights or
to seek remedies for any claim which is waived pursuant to the terms and
provisions of this Agreement. Each party hereto agrees, understands, and
acknowledges that each party is responsible for their own attorneys' fees, costs
and all other expenses arising from, or in any way related to claims released
herein. The undersigned parties, acting through their duly authorized officers
or individually, as the case may be, do hereby warrant that the signatories
hereto have express authority and have the legal capacity to enter into this
Agreement. This Agreement is to be construed in accordance with the laws of the
State of Georgia.
Signatures Appear on Following Page
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on this
23rd day June, 1999.
EMPLOYEE: EMPLOYER:
NOVA CORPORATION
/s/ James M. Bahin By: /s/ Ed Grzedzinski
- ---------------------- -----------------------
James M. Bahin Name: Ed Grzedzinski
Title: Chairman and CEO
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<PAGE>
EXHIBIT A
STOCK OPTIONS HELD BY EMPLOYEE
See Attached Description
<PAGE>
EXHIBIT 10.50
NOVA CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement (the "Agreement") is entered into
as of the 6th day of May, 1999, by and between NOVA Corporation (the "Company")
and EDWARD GRZEDZINSKI (the "Optionee").
W I T N E S S E T H:
WHEREAS, on October 30, 1998, the Board of Directors of the Company
authorized the grant of an option to purchase 375,000 shares of common stock of
the Company (the "10/98 Grant") to Optionee under the terms of the NOVA
Corporation 1996 Employees Stock Incentive Plan (the "1996 Plan");
WHEREAS, during 1998, Optionee had previously received an option to
purchase 100,000 shares of the Company's common stock;
WHEREAS, the terms of the 1996 Plan provide that no more than 200,000
shares of the Company's common stock may be made subject to aggregate stock
options granted during a calendar year to any one individual, so the 10/98 Grant
was in violation of the terms of the 1996 Plan;
WHEREAS, the Board of Directors has amended the 10/98 Grant to provide that
Optionee shall receive an option to purchase 100,000 shares of the Company's
common stock under the terms of the 1996 Plan;
WHEREAS, the Company wishes to grant to Optionee a non-incentive stock
option for the remaining 275,000 options at the same exercise price, and subject
to the same vesting schedule, as the 10/98 Grant, to reward Optionee for his
efforts on behalf of the Company and to encourage his continued loyalty and
diligence;
WHEREAS, the Company desires to grant this option outside any stock option
plan of the Company; and
WHEREAS, to further the interests of the Company and Optionee, the parties
hereto have set forth the terms of such option in writing in this Agreement;
NOW, THEREFORE, for and in consideration of the premises and mutual
promises herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties agree as follows:
1. Grant of Option. Effective as of May 6, 1999, the Company hereby
grants to Optionee a non-incentive stock option. Under that option and subject
to the terms and conditions set forth herein, Optionee shall have the right to
purchase 275,000 shares of the common stock of the Company (the "Common Stock");
such 275,000 shares hereinafter are referred to as the "Optioned Shares", and
this option hereinafter is referred to as the "Option". The Option is intended
to be a nonqualified option, and is not issued under any stock option plan of
the Company; notwithstanding, any capitalized terms used
<PAGE>
but not defined herein shall have the meanings of such terms as defined in the
1996 Plan.
2. Option Price. The price per share for each of the Optioned Shares
shall be $22.9375 (the "Option Price").
3. Exercise of Option.
(a) General. The Option may be exercised by Optionee's delivery to
the Secretary of the Company of a written notice of exercise executed by
Optionee (the "Notice of Exercise"). The Notice of Exercise shall be
substantially in the form set forth as Exhibit A, attached hereto and made a
part hereof, and shall identify the Option and the number of Optioned Shares
that are being exercised.
(b) Beginning of Exercise Period. The Option first shall become
exercisable (i.e., vested) according to the following schedule; provided, if
Optionee ceases to be an employee of the Company, his rights with regard to all
non-vested Options under this schedule shall cease immediately:
(i) As of October 30, 1999, Optionee shall have the right to
exercise 25% of the Optioned Shares;
(ii) As of October 30, 2000, Optionee shall have the right to
exercise an additional 25% of the Optioned Shares;
(iii) As of October 30, 2001, Optionee shall have the right to
exercise an additional 25% of the Optioned Shares;
(iv) As of October 30, 2002, Optionee shall have the right to
exercise the remainder of the Optioned Shares.
Notwithstanding the foregoing, the Option shall become 100% vested immediately
upon the death or Disability of Optionee or upon a Change of Control of the
Company.
(c) Partial Exercise. Optionee may exercise the Option for less than
the full number of exercisable Optioned Shares, but such exercise may not be
made for less than 50 shares or the total remaining shares subject to the
Option, if less than 50 shares.
4. Termination of Option. Notwithstanding any provisions to the contrary
herein, the Option shall not be exercisable either in whole or in part after the
earliest of:
(a) Ten years from the date of grant;
(b) The date that is immediately prior to the first anniversary of the
date on which Optionee dies (i) while employed by the Company, (ii) within the
three-month period that begins on the date on which Optionee ceases to be an
employee of the Company for any reason other than death or Disability or (iii)
within the one-year period that begins on the date on which Optionee ceases to
be an employee of the Company due to Disability;
(c) The date of expiration of the one-year period that begins on the
date on which Optionee ceases to be an employee of the Company due to
Disability; provided, if Optionee dies during such one-year period, the terms of
subsection (b) shall control;
(d) The date of expiration of the three-month period that begins on
the date on
<PAGE>
which Optionee ceases to be an employee of the Company for any reason other than
death or Disability; provided, if Optionee dies during such three-month period,
the terms of subsection (b) shall control;
(e) The date on which the Company gives notice (or is deemed to have
given notice) to Optionee of his termination of employment for Cause.
5. Option Non-Transferable. The Option shall not be transferable by
Optionee other than by will or by the laws of descent and distribution except
(i) by transfer to a Beneficiary upon the death of the Optionee, or (ii) by
transfer from the Optionee to a spouse, lineal ascendant or lineal descendant of
the Optionee or a spouse of a lineal ascendant or descendant of the Optionee
(but only to the extent that such transfer would not cause this Option to lose
an exemption from the provisions of Section 16 of the 1934 Act in accordance
with Rule 16b-3(a)(2) or the corresponding provisions, if any, of subsequent
regulations under Section 16 of the 1934 Act), and any purported transfer (other
than as excepted above) shall be null and void. After the death of the Optionee
and upon the death of the Optionee's Beneficiary, the Option may be transferred
by will or by the laws of descent and distribution. During the lifetime of
Optionee, the Option shall be exercisable only by Optionee (or, if he becomes
disabled or otherwise incapacitated, by the guardian of his property or his duly
appointed attorney-in-fact), and shall not be assignable or transferable by
Optionee and, subject to Section 6 hereof, no other person shall acquire any
rights in the Option.
6. Death of Optionee and Transfer of Option. In the event of the death of
Optionee while in the employ of the Company, within a period of one year after
the termination of his employment with the Company due to Disability, or within
a three-month period after the employee ceases to be an employee of the Company
for any reason other than for Cause, all or any of the unexercised portion of
the Option owned by the deceased Optionee may be exercised by Optionee's
Beneficiary at any time prior to the first anniversary of the date of the death
of Optionee, but in no event later than the date as of which such Option expires
pursuant to Section 4 hereof. Such exercise shall be effected in accordance
with the terms hereof as if such Beneficiary was Optionee herein. The Optionee
agrees that the following individual shall initially be his Beneficiary:
Name: Kathleen S. Grzedzinski
Address: 695 Peace Creek Trace
Alpharetta, Georgia 30005
The selection of a beneficiary by the Optionee and any subsequent modification
of the Optionee's Beneficiary shall be made pursuant to the terms and provisions
of the 1996 Plan, as if this Option had been issued under such 1996 Plan.
7. Medium and Time of Payment of Option Price.
(a) General. The Option Price shall be payable by Optionee (or his
Beneficiary in accordance with Section 6 hereof) upon exercise of the Option and
shall be paid in cash, in shares of the Common Stock (or by instructing the
Company to retain shares of Common Stock as payment), in other property or
services acceptable to the Company and allowed under applicable law, or any
combination thereof.
(b) Payment in Shares of the Common Stock. If Optionee pays all or
part of the Option Price with shares of the Common Stock, the following
conditions shall apply:
Nonqualified Stock Option Agreement -- Page 3
<PAGE>
(i) Optionee shall deliver to the Secretary of the Company a
certificate or certificates for shares of the Common Stock duly endorsed
for transfer to the Company with signature guaranteed by a member firm of a
national stock exchange or by a national or state bank (or guaranteed or
notarized in such other manner as the Company may require);
(ii) Optionee must have held any shares of the Common Stock used
to pay the Option Price for at least six months prior to the date such
payment is made;
(iii) Such shares shall be valued on the basis of the Fair
Market Value of the Common Stock on the date of exercise, as determined
pursuant to the terms of the Plan as if this Option had been granted
thereunder; and
(iv) The value of such Common Stock shall be less than or equal
to the Option Price. If Optionee delivers Common Stock with a value that
is less than the Option Price, then Optionee shall pay the balance of the
Option Price in a form allowed under subsection (a) above.
In addition to the payment of the Option Price, Optionee also shall pay in cash
(or have withheld from his normal pay) an amount equal to, or by instructing the
Company to retain Common Stock upon the exercise of the Option with a Fair
Market Value equal to, the amount, if any, which the Company at the time of
exercise is required to withhold under the income tax and FICA withholding
provisions of the Internal Revenue Code of 1986, as amended, and of the income
tax laws of the state of Optionee's residence.
8. Agreement of Optionee. Optionee acknowledges and understands that
certain restrictions may apply with respect to shares of the Common Stock
acquired by him pursuant to his exercise of the Option (including restrictions
on resale applicable to "affiliates" under Rule 144 of the Securities Act of
1933, as amended, and restrictions on resale applicable to shares of the Common
Stock that have not been registered under the Securities Act of 1933, as
amended, and applicable state securities laws). Optionee hereby agrees to
execute such documents and take such actions as the Company may require with
respect to state and federal securities laws and any restrictions on the resale
of such shares which may pertain.
9. Delivery of Stock Certificates. As promptly as administratively
practical after the date of exercise of the Option and the receipt by the
Company of full payment therefor, the Company shall deliver to Optionee a stock
certificate representing the shares of the Common Stock acquired by Optionee
pursuant to his exercise of the Option. Alternatively, the Company may deliver
the shares to the Optionee by electronic transfer.
10. Notices. All notices or other communications hereunder shall be in
writing and shall be effective (i) when personally delivered by courier
(including overnight carriers) or otherwise to the party to be given such notice
or other communication or (ii) on the third business day following the date
deposited in the United States mail if such notice or other communication is
sent by certified or registered mail with return receipt requested and postage
thereon fully prepaid. The addresses for such notices shall be as follows:
If to the Company:
NOVA Corporation
Attention: Corporate Secretary
One Concourse Parkway
Suite 300
Atlanta, Georgia 30328
Nonqualified Stock Option Agreement -- Page 4
<PAGE>
If to Optionee:
Edward Grzedzinski
695 Peace Creek Trace
Alpharetta, Georgia 30005
Any party hereto, by notice of the other party hereunder, may change its address
for receipt of notices hereunder.
11. Other Terms and Conditions. In addition to the terms and conditions
set forth herein, except as otherwise expressly provided herein, the Option is
subject to and governed by the other terms and conditions set forth in the Plan
as if this Option had been issued thereunder. The Plan is hereby incorporated
by reference.
12. Miscellaneous.
(a) The granting of the Option and the execution of this Agreement
shall not give Optionee any rights to similar grants in future years or any
right to be retained in the employ of the Company or to interfere in any way
with the right of the Company to terminate Optionee's employment at any time.
(b) Unless and except as otherwise specifically provided in this
Agreement, Optionee shall have no rights of a shareholder with respect to any
shares covered by the Option until the date of issuance of a stock certificate
to him for such shares.
(c) If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal regulatory agency of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions contained in this Agreement shall remain
in full force and effect, and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory agency determines that
this Agreement will not permit Optionee to acquire the full number of Optioned
Shares as provided in Section 1 hereof, it is the express intention of the
Company to allow Optionee to acquire such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) This Agreement shall be construed and enforced in accordance with
the laws of Georgia.
(e) This Agreement contains the entire understanding among the parties
and supersedes any prior understanding and agreements between them representing
the subject matter hereof. There are no representations, agreements,
arrangements or understandings, oral or written, between and among the parties
hereto relating to the subject matter hereof which are not fully expressed
herein.
(f) Section and other headings contained in this Agreement are for
reference purposes only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any provision
hereof.
Nonqualified Stock Option Agreement -- Page 5
<PAGE>
(g) This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which shall constitute one
agreement, and the signatures of any party or any counterpart shall be deemed to
be a signature to, and may be appended to, any other counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the first date written above.
NOVA CORPORATION
By: /s/ Cherie M. Fuzzell
---------------------
Title: Sr. Vice President and
General Counsel
OPTIONEE:
/s/ Edward Grzedzinski
----------------------
EDWARD GRZEDZINSKI
Nonqualified Stock Option Agreement -- Page 6
<PAGE>
EXHIBIT A
NOVA CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
NOTICE OF EXERCISE
This Notice of Exercise is given pursuant to the terms of the Nonqualified
Stock Option Agreement, dated __________________, _______, between NOVA
Corporation (the "Company") and the undersigned Optionee (the "Agreement"),
which Agreement represents Nonqualified Stock Option No. ________ and which is
made a part hereof and incorporated herein by reference.
EXERCISE OF OPTION. Optionee hereby exercises his option to purchase
_______ of his Optioned Shares. Optionee hereby delivers, together with this
written statement of exercise, the full Option Price with respect to the
exercised Optioned Shares, which consists of:
[COMPLETE ONLY ONE]
[ ] cash in the total amount of $_________________.
[ ] _________ shares of the Company's Common Stock.
[ ] cash in the total amount of $_________________ and
_________ shares of the Company's Common Stock.
[ ] other (specify): _________________________________
ACKNOWLEDGMENT. Optionee hereby acknowledges that, to the extent he is an
"affiliate" of the Company (as that term is defined in Rule 144 promulgated
under the Securities Act of 1933, as amended) or to the extent that the Optioned
Shares have not been registered under the Securities Act of 1933, as amended, or
applicable state securities laws, any shares of the Company's Common Stock
acquired by him as a result of his exercise of the Option pursuant to this
Notice are subject to, and the certificates representing such shares shall be
legended to reflect, certain trading restrictions under applicable securities
laws (including particularly the Securities and Exchange Commission's Rule 144),
and Optionee hereby agrees to comply with all such restrictions and to execute
such documents or take such other actions as the Company may require in
connection with such restrictions.
Executed this ______ day of _________________, _________.
OPTIONEE:
---------------------------------------
Edward Grzedzinski
NOVA Corporation hereby acknowledges receipt of this Notice of Exercise and
receipt of payment in the form and amount indicated above, all on this _____ day
of ________________, _______.
NOVA CORPORATION
By:
------------------------------------
Title:
---------------------------------
Nonqualified Stock Option Agreement -- Page 7
<PAGE>
EXHIBIT 10.51
-------------
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("Amendment"), dated as of June
17, 1999, and to be effective as of June 17, 1999 (the "Effective Date"), is
entered into by and among NOVA CORPORATION ("NOVA" and sometimes also called
"Parent"), NOVA INFORMATION SYSTEMS, INC. ("NIS" and sometimes also called the
"Original Borrower"), the lenders party hereto (collectively, the "Lenders"),
FIRST UNION NATIONAL BANk, as Documentation Agent, and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as agent for itself and the Lenders (the
"Agent"). Unless otherwise defined herein, capitalized terms used herein shall
have the meanings, assigned to them in the Credit Agreement.
R E C I T A L S:
---------------
WHEREAS, the Original Borrower, the Lenders and the Agent are parties to a
certain Credit Agreement dated as of October 27, 1997, as modified by the Waiver
dated December 23, 1997 (the "First Waiver"), as further amended by an Amendment
dated as of January 30, 1998 (the "First Amendment") and as further modified by
a Waiver dated as of March 31, 1999 (the "Second Waiver") (collectively, the
"Credit Agreement"), pursuant to which the Lenders have agreed to make loans to
the Original Borrower;
WHEREAS, the Parent desires to amend the Credit Agreement, so as to, among
other things, (i) permit each of NIS and/or NOVA to borrow and request Letters
of Credit under the Credit Agreement, (ii) increase the number of permitted
Interest Periods, (iii) provide for an additional representation and covenant
regarding Regulation U, (iv) remove certain margin stock from the negative
pledge provision, (v) permit NOVA to repurchase certain shares of its stock,
(vi) modify the covenant regarding Joint Ventures and Alliances, (vii) eliminate
the covenant regarding rental obligations, (viii) modify the requirement to
furnish certificates relative to certain Acquisitions, (ix) increase the limit
on permitted Acquisitions, (x) provide for an amendment fee, and (xi) make
certain other changes to the Credit Agreement and the Related Documents; and
WHEREAS, the Lenders are willing to amend the Credit Agreement, subject to
the terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
The parties agree that the Credit Agreement and the Related Documents are
hereby amended as follows:
<PAGE>
I. AMENDMENTS
----------
1.1 Each of NIS and NOVA as Borrowers. The Credit Agreement is amended so
---------------------------------
that notwithstanding any provision in the Credit Agreement to the contrary, each
of NIS and NOVA shall individually (i) be a Borrower under the Credit Agreement,
(ii) be entitled to request Revolving Loans and /or Letters of Credit for its
account, (iii) be entitled to the rights of the Borrower under the Credit
Agreement, and (iv) as to Revolving Loans or Letters of Credit requested by it,
be bound by the obligations of the Borrower in respect of such Revolving Loans
and Letters of Credit; provided, however, that (a) the aggregate principal
amount of all Revolving Loans to NIS and/or NOVA, when added to the LC Amount
applicable to all Letters of Credit for the account of NIS and/or NOVA shall not
exceed $80,000,000 (or such other amount as may be fixed pursuant to Section
2.4, 6.1 or 6.2), and (b) the LC Amount as to both NIS and NOVA shall not exceed
$10,000,000 in the aggregate. In furtherance of the foregoing, (x) each
reference in the Credit Agreement and the Related Documents to "the Borrower"
shall hereafter be deemed to refer to either or both of NIS or NOVA as
applicable (except that each such reference in Section 5.7(a) and 5.7(b) shall
be deemed to refer to NIS, each such reference in Section 14 shall be deemed to
refer to either NIS or NOVA, and each such reference in Sections 16 and 17 shall
be deemed to refer to each of NIS and NOVA), and (y) NOVA shall execute and
deliver to the Agent for the account of each Lender a new Revolving Note,
substantially in the form of Exhibit A (each such new Revolving Note to
constitute a Note under the Credit Agreement). With respect to each of the
installments payable on the Converted Revolving Loans pursuant to Section 3.7 of
the Credit Agreement, each of NIS and NOVA shall be deemed obligated to pay each
such installment according to the proportion that the principal amount of its
Revolving Loans outstanding on the Revolving Conversion Date bears to the
aggregate principal amount of all Revolving Loans outstanding on such date.
1.2 Interest Periods. Section 3.1 of the Credit Agreement is amended by
----------------
substituting "ten" for "five".
1.3 Margin Regulations. Section 9.14 of the Credit Agreement is amended by
------------------
adding thereto the following:
"None of the proceeds of the Revolving Loans or LC Obligations will be
used in any manner that would violate any of the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve
System."
1.4 Use of Proceeds. Section 9.18 of the Credit Agreement is amended by
---------------
adding thereto the following.
"The proceeds of the Revolving Loans and LC Obligations may also be
used to repurchase shares of stock to the extent permitted in Section
11.5."
-2-
<PAGE>
1.5 Indebtedness Relating to Joint Ventures. Section 11.1 of the Credit
---------------------------------------
Agreement is hereby amended by adding clause (j) as follows:
", and (j) Indebtedness (including Contingent Obligations) in respect
of Alliances pursuant to Section 11.8."
1.6 Negative Pledge. Sections 11.2 and 11.4 of the Credit Agreement are
---------------
amended by adding the following at the end of such Sections:
"Notwithstanding any provision hereof to the contrary, the provisions
of Section 11.2 (negative pledge) and 11.4 (asset dispositions) shall
not apply to any assets of the Parent or its Subsidiaries comprising
margin stock under Regulation U to the extent that the value of such
margin stock represents more than 25% of the value of all assets of
the Parent and its Subsidiaries."
1.7 Share Repurchases. "Section 11.5 of the Credit Agreement is amended by
-----------------
adding the following at the end of such Section:
Notwithstanding any provision in this Section 11.5 to the contrary,
NOVA Parent may repurchase shares of its common stock, subject,
-------
however, to compliance by NOVA with all of the following conditions:
-------
(a) the purchase price of all such shares so repurchased shall not
exceed $75,000,000 in the aggregate; (b) immediately before and after
giving effect to any such repurchase, no Default or Event of Default
shall exist; and (c) not less than 10 Business Days after any such
repurchase, NOVA shall furnish to the Agent notice thereof (such
notice to specify the number of shares repurchased and the aggregate
purchase price thereof), together with a certificate of a Responsible
Officer to the effect that the conditions in the foregoing clauses
(a), and (b) have been satisfied with respect to such repurchase.
Failure of NOVA to satisfy any of the foregoing conditions in
connection with a repurchase of its shares shall automatically
constitute an Event of Default.
1.8 Joint Ventures. Section 11.8 of the Credit Agreement is amended to
--------------
read in its entirety as follows:
"11.8 Joint Ventures. Not, and not permit any of its Subsidiaries
--------------
to, enter into any Joint Venture, except for:
(i) arrangements with independent sales organizations, trade or
similar associations or organizations or associate banks, in each case
to the extent made in the ordinary course of business; and
-3-
<PAGE>
(ii) profit sharing arrangements with other banks established in
connection with an Acquisition in payment or partial payment of the
purchase price;
(iii) Alliances as to which the aggregate Investment and
Indebtedness (including Contingent Obligations) of the Parent and its
Subsidiaries does not exceed $100,000,000, and
(iv) Alliances listed in Schedule 9.10;
-------------
provided, however, that the aggregate Investment and Indebtedness
-------- -------
(including Contingent Obligations) of the Parent and its Subsidiaries
in all Alliances permitted under clauses (iii) and (iv) above shall
not exceed $150,000,000 at any one time outstanding."
1.9 Rental Obligations. Section 11.9 of the Credit Agreement is hereby
------------------
deleted.
1.10 Regulation U. Section 11.12 of the Credit Agreement is amended to read
------------
in its entirety as follows:
"Section 11.12 Regulation U. Not, and not permit any Subsidiary to,
--------------------------
use any or permit any proceeds of the Revolving Loans or LC
Obligations to be used in any manner that would violate any of the
provisions of Regulation T, U or X of the Board of Governors of the
Federal Reserve System."
1.11 Parent Activities. Section 11.17 of the Credit Agreement is deleted.
-----------------
1.12 Certificate as to Acquisition Costs. Section 13.2.4 of the Credit
-----------------------------------
Agreement is deleted.
1.13 Limitation on Acquisitions. Section 13.2.6 of the Credit is amended to
--------------------------
read as follows:
"In any twelve month period after December 31, 1998, the Acquisition
Costs of such Acquisition, when added to the Acquisition Costs of all
other Acquisitions consummated during such twelve month period after
December 31, 1998, shall not exceed $100,000,000 in the aggregate."
1.14 Certain Definitions. The definitions of "CCTP Business" and "Wholly-
-------------------
owned Subsidiary" are amended by substituting "Parent" for "Borrower".
1.15 NIS Guaranty. NIS hereby jointly and severally guarantees all
------------
obligations of the Parent (including all obligations of the Parent as Borrower)
under the Credit Agreement. To implement such guaranty, NIS hereby becomes a
party to and a guarantor
-4-
<PAGE>
under the Subsidiary Guaranty dated as of April 30, 1999 executed by various
Subsidiaries of NOVA pursuant to the Second Waiver.
1.16 Confirmation of Guaranty and Parent Pledge. The Parent hereby
------------------------------------------
reaffirms its Parent Guaranty. The Parent hereby agrees that the Parent Pledge
Agreement, as supplemented by the Pledge Supplement dated as of April 30, 1999,
hereby applies to all Liabilities (including all obligations of NIS as Borrower
prior to or after the date hereof and all obligations of NOVA as Borrower after
the date hereof) and is hereby reaffirmed in all respects. Notwithstanding any
provision therein to the contrary, the parties agrees that the Collateral under
the Parent Pledge Agreement does not and shall not include any margin stock
under Regulation U.
1.17 Exhibits. The Exhibits to the Credit Agreement are hereby deemed to be
--------
revised so as to refer to NIS and/or NOVA as Borrower, as applicable.
1.18 Amendment Fee. Concurrently with the execution and delivery of this
-------------
Amendment, the Parent hereby agrees to pay to the Agent for the pro rata account
of the Lenders an amendment fee equal to 10 basis points times the amount of the
Aggregate Commitment in effect before giving effect to this Amendment.
1.19 Commitment Increase. The parties recognize that pursuant to Section
-------------------
2.4 of the Credit Agreement, NIS or NOVA as Borrower may request a Commitment
Increase from Bank of America National Trust and Savings Association of up to
$20,000,000 (it being understood that no Lender is obligated to increase its
Revolving Commitment and that such Commitment Increase shall only be applicable
with respect to any Lender that is so willing to increase its Revolving
Commitment).
II. EFFECTIVENESS
-------------
This Amendment shall be deemed effective as of the Effective Date, upon
receipt by the Agent of (i) payment of the amendment fee provided in Section
1.18 above and (ii) all of the following, each dated a date satisfactory to the
Agent and in form and substance satisfactory to the Agent:
2.1 Amendment. From the Parent, the Borrower and each of the Required
---------
Lenders, a duly executed original (or, if elected by the Agent, an executed
facsimile copy) of this Amendment, together with a duly executed Guarantor
Acknowledgement and Consent in the form attached hereto.
2.2 New Notes. For each Lender, an appropriately completed Revolving Note
---------
of the Parent substantially in the form of Exhibit A, payable to the order of
such Lender in the maximum amount equal to the Revolving Loan Commitment of such
Lender;
2.3 Parent Certificate. An officer's certificate of the Parent, signed by
------------------
the president or any vice-president of the Parent, and attested to by the
secretary or any assistant secretary, is to (i) resolutions of the Board of
Directors of the Parent, and (ii) the
-5-
<PAGE>
incumbency and signature of persons authorized to sign this Amendment and the
other documents furnished pursuant hereto;
2.4 NIS Certificate. an officer's certificate of NIS, signed by the
---------------
president or any vice-president of NIS, and attested to by the secretary or any
assistant secretary, as to (i) resolutions of the Board of Directors of NIS, and
(ii) the incumbency and signature of persons authorized to sign this Amendment
and the other documents furnished pursuant hereto;
2.5 Subsidiary Authorization. Evidence that the Guarantor Acknowledgement
------------------------
and Consents have been duly authorized.
2.6 Opinion. A favorable opinion of Long, Aldridge & Norman (and/or other
-------
counsel), counsel to the Parent, NIS and the other Subsidiaries, covering the
execution and delivery by the Parent, NIS and the other Subsidiaries, as
applicable, of this Amendment and the other documents furnished pursuant hereto,
and addressing such other legal matters as the Agent may require; and
2.7 Other. Such other supporting documents as the Agent may require;
-----
III. REPRESENTATIONS AND WARRANTIES
------------------------------
Each of NOVA and NIS hereby represents and warrants to the Agent and the
Lenders as follows:
3.1 No Default. No Default or Event of Default has occurred and is
----------
continuing.
3.2 Authorization. The execution, delivery and performance by the each of
-------------
the Parent, NIS and the guarantor Subsidiaries of this Amendment and the Related
Documents (to which it is a party) have been duly authorized by all necessary
corporate and other action and do not and will not require any registration
with, consent or approval of, notice to or action by, any Person in order to be
effective and enforceable. The Credit Agreement as modified by this Amendment
constitutes the legal, valid and binding obligations of each of the Parent, NIS
and the guarantor Subsidiaries, enforceable against each of them in accordance
with its terms.
3.3 Credit Agreement Representations. All representations and warranties of
--------------------------------
NOVA and NIS contained in Section 9 of the Credit Agreement are true and correct
in all material respects as of the date hereof as though made on the date hereof
(it being understood that Schedule 9.10 is deemed revised so as to list the
Subsidiaries comprising the PMT and Post Merger Acquisitions referred to in the
Second Waiver).
3.4 Subsidiaries. The certification as to charters, certificates of
------------
incorporation, bylaws, and incumbency and signatures of officers previously
furnished by the
-6-
<PAGE>
Subsidiaries pursuant to the Second Waiver remain true and correct as of the
date hereof as though made on the date hereof.
IV. MISCELLANEOUS
-------------
4.1 Miscellaneous. Except as herein expressly amended, all terms, covenants
-------------
and provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Amendment. This Amendment shall
be deemed incorporated into, and a part of, the Credit Agreement.
4.2 Successors and Assigns. This Amendment shall be binding upon and inure
----------------------
to the benefit of the parties and thereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Amendment.
4.3 Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the Law of the State of New York.
4.4 Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of a Lender or NOVA or NIS shall bind such Lender, NOVA or
NIS, respectively, with the same force and effect as the delivery of a hard copy
original. Any failure by the Agent to receive the hard copy executed original
of such document shall not diminish the binding effect of receipt of the
facsimile transmitted executed original of such document of the party whose hard
copy page was not received by the Agent.
4.5 Entire Agreement. This Amendment, together with the Credit Agreement,
----------------
contains the entire and exclusive agreement of the parties hereto with reference
to the matters discussed herein and therein. This Amendment supercedes all
prior drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 17.1 of the Credit
Agreement.
4.6 Severability. If any term or provision of this Amendment shall be
------------
deemed prohibited by or invalid under any applicable law, such provision shall
be invalidated without affecting the remaining provisions of this Amendment or
the Credit Agreement, respectively.
4.7 Legal Expenses. NOVA agrees to pay to or reimburse the Agent, upon
--------------
demand, for all costs and expenses (including allocated costs of in-house
counsel) of the
-7-
<PAGE>
Agent in connection with the development, preparation, negotiation, execution
and delivery of this Amendment.
(Signatures begin on the following page)
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the Date first above written.
NOVA INFORMATION SYSTEMS, INC.
By:_________________________________
Name:______________________________
Title:_______________________________
NOVA CORPORATION
By:_________________________________
Name:______________________________
Title:_______________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:_________________________________
Name:______________________________
Title:_______________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Lender
By:_________________________________
Name:______________________________
Title:_______________________________
FIRST UNION NATIONAL BANK, as a Lender
and as Documentation Agent
By:_________________________________
Name:______________________________
Title:_______________________________
SUNTRUST BANK ATLANTA, as a Lender
By:_________________________________
Name:______________________________
Title:_______________________________
-9-
<PAGE>
EXHIBIT A
FORM OF REVOLVING NOTE
Chicago, Illinois
$_________ June 17, 1999
The undersigned, FOR VALUE RECEIVED, promises to pay to the order of
____________________________________________________ (the "Lender") at the
principal office of Bank of America National Trust and Savings Association (the
"Agent") in San Francisco, California, _________________________ MILLION DOLLARS
($_________) or, if less, the aggregate unpaid principal amount of all Revolving
Loans (as defined in the Credit Agreement, hereinafter referred to) made by the
Lender to the undersigned pursuant to the Credit Agreement, payable in
installments as set forth in the Credit Agreement, with a final installment (in
the amount necessary to pay in full this Note) due and payable on the Revolving
Termination Date (as defined in the Credit Agreement).
The undersigned also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
--- -----
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds.
This Note is a Revolving Note described in, and is subject to the terms and
provisions of, a Credit Agreement, dated as of October 27, 1997 as amended or
modified (as the same may at any time be further amended or modified and in
effect, the "Credit Agreement"), among the undersigned, NOVA Information
Services, Inc., the lenders party thereto (including the Lender), the Issuing
Lender (as defined therein) and the Agent, and payment of this Note is secured
by certain of the Related Documents (as defined in the Credit Agreement).
Reference is hereby made to the Credit Agreement for a statement of the
prepayment rights and obligations of the undersigned, a description of the
properties mortgaged and assigned, the nature and extent of the collateral
security and the rights of the parties to the Related Documents in respect of
such collateral security, and for a statement of the terms and conditions under
which the due date of this Note may be accelerated. Upon the occurrence of any
Event of Default as specified in the Credit Agreement, the principal balance
hereof and the interest accrued hereon may be declared to be forthwith due and
payable, and any indebtedness of the holder hereof to the undersigned may be
appropriated and applied hereon.
-10-
<PAGE>
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement, the undersigned further agrees, subject only to any
limitation imposed by applicable law, to pay all reasonable expenses, including
attorneys' fees and legal expenses, incurred by the holder of this Note in
endeavoring to collect any amounts payable hereunder which are not paid when
due, whether by acceleration or otherwise.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE HAS BEEN DELIVERED IN CHICAGO, ILLINOIS AND SHALL BE DEEMED TO BE
A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
This Note is issued pursuant to the Second Amendment to the Credit
Agreement.
NOVA CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
-11-
<PAGE>
GUARANTOR ACKNOWLEDGMENT AND CONSENT
The undersigned, each a guarantor with respect to the Borrower's obligations
to the Agent and the Lenders under the Credit Agreement, do hereby (i)
acknowledge and consent to the execution, delivery and performance by NOVA
Corporation ("NOVA" or "Parent") and NOVA Information Systems, Inc. ("NIS") of
the foregoing Second Amendment to Credit Agreement ("Amendment"), (ii) hereby
jointly and severally guaranty all obligations of NIS and/or NOVA as Borrower
under the Credit Agreement, (iii) reaffirm and agree that the respective
guaranty, to which the undersigned is a party applies both to the obligations of
NIS and/or NOVA as Borrower under the Credit Agreement, and (iv) reaffirm and
agree and all documents and agreements executed and delivered by the undersigned
to the Agent and the Lenders in connection with the Credit Agreement, are in
full force and effect without defense, offset or counterclaim (capitalized terms
used herein have the meanings specified in the Amendment).
Dated as of June 17, 1999
[Signature pages begin on the following page]
-12-
<PAGE>
[Signature pages for Guarantor Acknowledgment and Consent]
NOVA CORPORATION
By:______________________________
Name:___________________________
Title:____________________________
BOULDER BANKCARD PROCESSING, INC.
By:______________________________
Name:___________________________
Title:____________________________
PMT SERVICES, INC.
By:______________________________
Name:___________________________
Title:____________________________
-13-
<PAGE>
[Signature pages for Guarantor Acknowledgment and Consent]
PINNACLE FINANCIAL TECHNOLOGIES, INC.
CENTRAL BANCSERVICE CORP.
NOVA LEADERSHIP COMPANY
NOVA ASSET MANAGEMENT COMPANY
NOVA LICENSING COMPANY
NOVA INFORMATION SERVICES COMPANY
PMT SERVICES, INC.
PMT ENTERPRISES, INC.
PMT RESOURCES, INC.
DATA TRANSFER ASSOCIATES, INC.
ERIK KRUEGER, INCORPORATED
FAIRWAY MARKETING GROUP, INC.
FERRANTE FINANCIAL SERVICES, INC.
IMA PAYMENT SYSTEMS, INC.
MBN NATIONAL, INC.
MONEY TRANSFER SYSTEMS, INC.
RETAIL PAYMENT SERVICES, INC.
RETAIL SYSTEMS CONSULTING, INC.
SUPERIOR BANKCARD SERVICE, INC.
SUPERIOR EQUIPMENT AND SALES, INC.
CVE CORPORATION
COMPUTER CHEQUE OF DES MOINES, INC.
COMPUTER CHEQUE OF OKLAHOMA CITY, INC.
NOR-JEN AVIATION CORP.
COMPUTER CHEQUE CORP.
COMPUTER CHEQUE OF KANSAS CITY, INC.
COMPUTER CHEQUE OF DALLAS, INC.
COMPUTER CHEQUE OF DENVER, INC.
CREDIT CHEQUE CORPORATION
CR PROFESSIONAL CORP.
COMPUTER CHEQUE OF MINNESOTA, INC.
BANCARD, INC.
LADCO FINANCIAL GROUP
LADCO FINANCE CORP. IV
ADCO FUNDING CORP. V
LADCO RECEIVABLES CORP.
By:_________________________________
John Fasano
Vice President, Finance
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 55,329
<SECURITIES> 0
<RECEIVABLES> 124,921
<ALLOWANCES> 16,611
<INVENTORY> 12,226
<CURRENT-ASSETS> 229,929
<PP&E> 108,541
<DEPRECIATION> 36,251
<TOTAL-ASSETS> 670,822
<CURRENT-LIABILITIES> 136,270
<BONDS> 0
0
0
<COMMON> 731
<OTHER-SE> 465,188
<TOTAL-LIABILITY-AND-EQUITY> 670,822
<SALES> 25,241
<TOTAL-REVENUES> 691,109
<CGS> 10,630
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,502
<INCOME-PRETAX> 55,122
<INCOME-TAX> 20,580
<INCOME-CONTINUING> 34,542
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,542
<EPS-BASIC> 0.47
<EPS-DILUTED> 0.46
</TABLE>
