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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999__________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-14342
NOVA CORPORATION
(Exact name of registrant as specified in its charter)
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GEORGIA 58-2209575
(State or Other Jurisdiction of (IRS Employer
Incorporation of Organization) Identification No.)
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ONE CONCOURSE PARKWAY, 30328
SUITE 300, ATLANTA, GEORGIA (Zip Code)
(Address of Principal Executive Offices)
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Registrant's telephone number, including area code: (770) 396-1456
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $0.01 par value per share New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 20, 2000, the aggregate market value of the common stock of
NOVA held by non-affiliates of the Registrant was approximately $1,396,681,495
based upon the closing price of $26.9375 per share on the New York Stock
Exchange on such date. Non-affiliate ownership is calculated by excluding all
shares that may be deemed to be beneficially owned by executive officers,
directors and other control persons, without conceding that all such persons are
"affiliates" for purposes of the federal securities laws. As of March 20, 2000,
there were 69,491,465 shares of the Registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1999 are incorporated herein by reference in Parts I and
II of this Annual Report on Form 10-K. Portions of the Registrant's Proxy
Statement for the 2000 Annual Meeting of Shareholders to be held on May 24,
2000, is incorporated herein by reference in Part III of this Annual Report on
Form 10-K. Pursuant to General Instruction G(3) of Form 10-K, the Registrant
will file the definitive Proxy Statement with the Securities and Exchange
Commission no later than April 29, 2000.
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NOVA CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
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ITEM PAGE
NUMBER NUMBER
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PART I
1. Business.................................................... 1
2. Properties.................................................. 21
3. Legal Proceedings........................................... 22
4. Submission of Matters to a Vote of Security Holders......... 22
4A. Executive Officers of the Registrant........................ 22
PART II
Market for Registrant's Common Equity and Related
5. Stockholder Matters......................................... 24
6. Selected Financial Data..................................... 24
Management's Discussion and Analysis of Financial Condition
7. and Results of Operation.................................... 24
Quantitative and Qualitative Disclosures About Market
7A. Risk........................................................ 24
8. Financial Statements and Supplementary Data................. 25
Changes in and Disagreements with Accountants on Accounting
9. and Financial Disclosure.................................... 25
PART III
10. Directors and Executive Officers of the Registrant.......... 26
11. Executive Compensation...................................... 26
Security Ownership of Certain Beneficial Owners and
12. Management.................................................. 26
13. Certain Relationships and Related Transactions.............. 26
PART IV
Exhibits, Financial Statement Schedules, and Reports on Form
14. 8-K......................................................... 27
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SIGNATURES.................................................. 33
INDEX OF FINANCIAL STATEMENTS...............................
INDEX OF EXHIBITS...........................................
Forward-looking Statements..................................
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In addition to historical information, this Annual Report on Form 10-K
contains "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), 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 since they
are based on various expectations and assumptions concerning future events,
which by their nature involve substantial risks and uncertainties beyond the
Company's control. Forward-looking statements may also be made in other reports
filed by the Company under the Exchange Act, press releases, and other
documents, as well as by the Company's management in oral statements. The
Company 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 the
Company to predict all of such factors. Further, the Company 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.
The Company's forward-looking statements are based upon numerous
assumptions, including assumptions relating to:
- Continued growth in the level of transaction volume;
- The impact of acquisitions (including without limitation the acquisition
of PMT Services, Inc.), portfolio purchases, joint ventures and other
alliances;
- Consolidation activity in the banking and transaction processing
industries;
- Pricing strategies and market concentration considerations;
- Strategies relating to new technologies and product development;
- Changes in credit card association rules, laws, regulations, or other
industry standards; and
- General economic conditions and industry trends.
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.
The Company refers readers to the information set forth under the caption "Item
1. Business -- Certain Risks Associated with the Business of the Company"
included in this Annual Report on Form 10-K, as well as "Item 5. Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained herein, for a more complete discussion of certain risk factors.
PART I
ITEM 1. BUSINESS
Atlanta-based NOVA Corporation is a provider of integrated
transaction-processing services, related software applications, and value-added
services for over 500,000 merchant locations. NOVA's target customers include
small to medium-sized business enterprises that require a full spectrum of
processing services, as well as community banks and financial institutions that
desire to provide their merchant customers with payment processing. NOVA has
continued to focus on the processing sector comprised of primarily small to
medium-sized merchants, because they have been historically overlooked and
benefit from the advantages of value-added services usually offered only to
large, nationally based merchants. NOVA provides transaction processing support
for all major credit, charge and debit cards, including VISA, MasterCard,
American Express, Discover, Diner's Club, and JCB, as well as check verification
services. The aggregate dollar volume of VISA and MasterCard transactions NOVA
processed in 1999 exceeded $57 billion.
NOVA provides merchants with a broad range of transaction processing
services, including authorizing card transactions at the point-of-sale ("POS"),
capturing and transmitting transaction data, effecting the
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settlement of payments, and assisting merchants in resolving billing disputes
with their customers. In addition, NOVA has developed several software
applications that can be delivered to its customers and updated for enhancements
via NOVA's proprietary telecommunications network (the "NOVA Network"). The NOVA
Network, initially developed by NOVA in conjunction with MCI WorldCom, Inc.
("MCI WorldCom"), is the principal conduit through which NOVA provides its
services. By combining its ability to employ technology effectively with the
capabilities of the NOVA Network, NOVA is able to respond quickly and
efficiently to the ever changing and diverse needs of its merchant customers.
NOVA was incorporated in Georgia in December 1995 pursuant to an alliance
between NOVA and First Union Corporation ("First Union"). NOVA Information
Systems, Inc. ("NOVA Information Systems"), a wholly-owned subsidiary of and
predecessor to NOVA, was incorporated in Georgia in February 1991. On September
24, 1998, NOVA acquired PMT Services, Inc. ("PMT") in a merger transaction,
whereby PMT became a wholly-owned subsidiary of NOVA (the "PMT Merger"). Unless
the context otherwise requires, references in this Annual Report on Form 10-K to
"NOVA" or "the Company" refer to NOVA Corporation and its subsidiaries.
SIGNIFICANT TRANSACTIONS, ALLIANCES AND MARKETING ARRANGEMENTS
CoreStates Portfolio. Pursuant to an agreement dated October 8, 1998, NOVA
acquired the merchant processing portfolio of First Union National Bank of
Delaware ("FUBD"), successor by merger to CoreStates Bank of Delaware, N.A.
("CoreStates"). FUBD is a wholly-owned subsidiary of First Union. The purchase
included all right, title, and interest in and assumption of certain liabilities
of CoreStates' merchant processing portfolio. The portfolio represented
annualized credit and debit card processing volume of approximately $3.1 billion
as of the date of the transaction.
PMT Merger. Effective September 24, 1998, NOVA acquired PMT in a merger
transaction (the "PMT Merger") accounted for as a pooling of interests.
Accordingly, the financial statements for all periods presented are restated to
include the historical financial information of the combined operations for NOVA
and PMT. PMT is an independent sales organization ("ISO") that markets and
services electronic credit card authorization and payment systems to merchants
located throughout the United States. PMT experienced significant growth by
utilizing operating and growth strategies focused on expanding its customer base
of small to medium-sized merchants through merchant portfolio purchases, trade
and other association affiliations, telemarketing efforts, and subsidiary sales
force acquisitions.
Key Merchant Services. In January 1998, NOVA purchased from KeyBank
National Association a 51% interest in Key Merchant Services, LLC ("KMS").
Pursuant to this agreement, NOVA provides transaction processing services to the
merchant customers of KMS and is responsible for its operation and management.
Upon consummation of this transaction, the KMS merchant portfolio represented
approximately $5.1 billion in annualized credit and debit card processing
volume.
MBNA Portfolio Purchase. On December 30, 1997, NOVA purchased
substantially all of the merchant portfolio of MBNA America Bank, N.A. ("MBNA").
In connection with the transaction, MBNA agreed to cooperate with NOVA in
marketing NOVA's merchant transaction processing services and to refer
exclusively to NOVA all merchants, trade associations, financial institutions,
ISOs and other organizations that request or evidence an interest in merchant
transaction processing services. NOVA, among other things, is required to pay to
MBNA a fee for each merchant that enters into a merchant transaction processing
contract with NOVA as a result of a referral from MBNA. NOVA is also required to
pay to MBNA a percentage of the portfolio's net revenues. NOVA's marketing
agreement with MBNA has an initial term expiring December 31, 2007 subject to
automatic two-year extensions unless either party gives notice of termination at
least seventy-five days prior to an expiration date. The MBNA portfolio
represented annualized credit and debit card processing volume of approximately
$1.0 billion on the date of the transaction.
Elan Merchant Services. Effective October 31, 1997, NOVA purchased from
Firstar Bank U.S.A., N.A. ("Firstar") a 51% interest in Elan Merchant Services,
LLC ("Elan"). Pursuant to this agreement, NOVA provides transaction processing
services to the merchant customers of Elan and is responsible for its
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operation and management. As of the date of purchase, the Elan portfolio
represented annualized credit and debit card processing volume of approximately
$3.0 billion.
INDUSTRY OVERVIEW
The transaction processing industry provides merchants with credit, charge
and debit card and other payment processing services, as well as related
information services. This industry has grown rapidly in recent years as a
result of wider merchant acceptance and increased consumer use of such cards and
advances in transaction processing and telecommunications technology. These
factors, together with efficiencies derived from economies of scale, have
resulted in the consolidation of transaction processing providers and the
availability of more sophisticated products and services to all market segments.
Increased Growth in Card Use. The proliferation in the uses and types of
credit, charge and debit cards, rapid technological advances in transaction
processing, and financial incentives offered by credit card associations and
issuers have contributed greatly to wider merchant acceptance and increased
consumer use of such cards. For example, industry sources indicate that for the
year ended December 31, 1998, charge volume of VISA and MasterCard and other
credit cards grew at an annual growth rate of approximately 8%, to $1.2
trillion. Such sources project that the charge volume of general purpose cards
will exceed $2.0 trillion by 2005. Industry sources also anticipate further
increases in credit and charge card acceptances as the number of general purpose
cardholders increases to an expected 166 million over the same period. In 1998,
the expanded use of debit cards as an alternative to cash and checks at the
point of sale increased 42% over 1997, to $168.5 billion. Industry sources
anticipate that consumers increased usage of debit cards will eclipse the growth
of credit cards in future years. In 1998, 73% of transactions processed were
with credit cards. Industry sources further predict that by the year 2010
transactions processed with credit cards will decrease to 41% as a result of
increasing debit card use. (The Nilson Report -- December 1999).
Technology. Rapid technological advances in transaction processing,
particularly the transition from paper-based to electronic processing, have
contributed greatly to wider merchant acceptance and increased consumer use of
such cards. Electronic processing provides greater convenience to merchants and
consumers, reduces fees charged to merchants, and facilitates faster and more
accurate settlement of payments. Increased card acceptance and usage, coupled
with technological advances in electronic processing, have created an
opportunity for service providers to offer a variety of sophisticated processing
and information services to a broader base of merchants.
At present, many large transaction processors continue to provide customer
service and applications via legacy systems that often are difficult and costly
to alter, enhance, or customize. Accordingly, transaction processors that
continue to utilize these systems for customer service and applications may find
it difficult to meet the increasing demands of small to medium-sized merchants
for more sophisticated products and services tailored to their diverse and
changing needs. In contrast to less flexible legacy systems, transaction
processors utilizing less costly, scalable and networked computer systems,
(including distributed client/server architecture and relational database
management systems solutions), enjoy greatly improved flexibility and
responsiveness in providing customer service and applications to its customer
base. In addition, the use of fiber optic and advanced switching technologies in
telecommunications networks and competition among long-distance carriers further
enhance the ability of processors to provide faster and more reliable service at
lower per-transaction costs than previously possible.
As a result of advances in personal computer and POS terminal technologies,
transaction processors can provide merchants with expanded access to a greater
array of sophisticated services at the POS, resulting in increased demand for
such services. In addition, merchant use of increasingly sophisticated
integrated cash registers and networked systems has created further demand for
comparably advanced and sophisticated products and services accessible at the
POS. These trends have created opportunity for transaction processors to
leverage technologies by developing business management and other software
application products and services.
Segmentation of Merchants and Service Providers. The transaction
processing industry is characterized by a small number of large transaction
processors that focus primarily on servicing large merchants and by
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many smaller transaction processors that provide a limited range of services to
small to medium-sized merchants. Large merchants (i.e., those with multiple
locations and high volumes of card transactions) typically demand and receive
the full range of transaction processing services as well as customized
information services at low per-transaction costs. By contrast, transaction
processors historically have not offered small to medium-sized merchants the
same level of services as large merchants or relatively low per-transaction
costs offered to larger merchants. The growth in card transactions and the
transition from paper-based to electronic transaction processing, however, have
caused small to medium-sized merchants increasingly to demand sophisticated
transaction processing and information services similar to those provided to
large merchants.
Community and regional banks and ISOs are the primary groups that market
and sell transaction processing services to small to medium-sized merchants.
Typically, these banks and ISOs outsource all or a portion of the transaction
processing services they offer. It is difficult, however, for banks and ISOs to
provide sophisticated value-added services or to customize transaction
processing services for the small to medium-sized merchant on a cost-effective
basis. Accordingly, services to small to medium-sized merchants historically
have been characterized by basic transaction processing services without the
availability of the more sophisticated processing, information-based services,
or customer support offered to large merchants.
Consolidation. The transaction processing industry has undergone rapid
consolidation over the last several years. The costs to convert from paper-based
to electronic processing and merchant demand for improved customer service and
additional customer applications have made it difficult for community and
regional banks and ISOs to remain competitive. Many of these processors are
unwilling or unable to invest the capital required to meet evolving market
demands, and are increasingly exiting the transaction processing business, or
otherwise seeking alliance partners to provide transaction processing to their
customers. Despite this ongoing consolidation, the industry remains fragmented.
Management believes that although the ten largest bankcard processors account
for a significant portion of the total charge volume processed there are several
hundred additional registered service providers marketing and selling
transaction processing services to merchants . Management believes that these
factors will result in continuing industry consolidation opportunities over the
next several years.
MERCHANT SERVICES PROVIDED BY NOVA
Authorization Services. NOVA provides electronic transaction authorization
services for all major credit, charge and debit cards. Authorization generally
involves approving a cardholder's purchase at the POS, after verifying that the
card has not been reported lost or stolen and that the purchase amount is within
the cardholder's credit or account limit. The electronic authorization process
for a credit card transaction begins when the merchant "swipes" the card through
its POS terminal and enters the amount of the purchase. After capturing the
data, the POS terminal transmits the authorization request via the NOVA Network
to NOVA's switching center, where the data is routed to the appropriate credit
card association for authorization. The credit card association then approves or
declines the transaction and the response is transmitted back to NOVA's
switching center, where it is routed to the appropriate merchant.
Data Capture and Reporting Services. At the time of authorization, data
relating to the transaction, such as the purchase price and card number, is
recorded electronically both at the merchant's POS terminal and by NOVA. This
data replication maximizes NOVA's ability to reconcile transaction data with
each merchant and to protect against potential loss of data. On a periodic basis
throughout the day, the merchant aggregates and organizes this transaction data,
using a software application that NOVA has programmed into the merchant's POS
terminal, and transmits this information to NOVA where it is organized into
various files. These files are generally transmitted to either Vital Processing
Services L.L.C. ("Vital"), Mellon Bank ("Mellon"), or First Data Resources
("FDR") (collectively "merchant accounting vendors"), for merchant accounting as
described below. NOVA maintains a file in its database from which NOVA runs
"Witness," its proprietary fraud detection software program against each of the
day's transactions processed via the NOVA Network. NOVA also utilizes this
information to provide merchants with information services such as specialized
management reports and to facilitate its other customer service operations.
Merchants can access
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this archived information through NOVA's customer service representatives or
through applications such as NOVA ACS, which allow the merchant direct access to
NOVA's database through a personal computer.
Settlement, Accounting and Clearing Services. NOVA assigns each of its
merchant customers to a merchant accounting vendor which performs merchant
accounting services on NOVA's behalf. At least once each day, NOVA forwards
transaction data regarding its merchant customers to the merchant accounting
vendors. The merchant accounting vendors reorganize and accumulate the data on a
merchant-by-merchant and card issuer-by-card issuer basis and forward the data
to the credit card associations for ultimate payment. On a monthly basis, each
merchant accounting vendor sends statements to NOVA's merchant customers for
whom they provide settlement and accounting services, detailing the previous
month's transaction activity.
NOVA is registered with VISA and MasterCard as a certified processor and
member service provider. Regions Bank, Bank of the West, Imperial Bank, First
National Bank of Omaha ("FNBO"), Zions Bank, Firstar, KeyBank and First Union
National Bank ("FUNB") a subsidiary of First Union, serve as the primary member
clearing banks for NOVA. NOVA's clearing banks receive payment for merchant
transactions from the credit card associations (net of fees payable to the
credit card associations and card issuing banks), from which the clearing banks
remit payment to the merchant for the gross amount of the merchant's
transactions. Once each month, NOVA collects applicable merchant discount and
other fees from each merchant for transactions effected and services provided
during the preceding month.
Chargeback Services. In the event of a billing dispute between a
cardholder and a merchant, NOVA assists the merchant in investigating and
resolving the dispute. These billing disputes include, among others: (i)
non-receipt of merchandise or services; (ii) unauthorized use of a credit card;
and (iii) quality of the goods purchased or the services rendered. NOVA provides
a sophisticated chargeback control system for its merchants and utilizes
proprietary software programs to actively prescreen disputes. The chargeback
control system enables NOVA to reduce the time and expense spent on cardholder
requests for chargebacks. In the event a billing dispute between a cardholder
and a merchant is resolved in favor of the cardholder, the transaction is
"charged back" to the merchant and that amount is credited or otherwise refunded
to the cardholder. If NOVA or its clearing banks are unable to collect such
amounts from the merchant's account, and if the merchant refuses or is unable to
reimburse NOVA for the chargeback, NOVA bears the loss for the amount of the
refund paid to the cardholder.
Customer Service and Support. NOVA provides its merchant customers with a
variety of customer services and support. These services include the provision
of POS terminals (on a sale or lease basis), software application downloads for
POS terminals, POS terminal maintenance and customized software for merchant
development. In addition, NOVA maintains a 24-hour-a-day, seven-day-a-week
helpline staffed by full-time customer service representatives.
TECHNOLOGY
One of NOVA's principal strategies is to utilize available technologies to
deliver transaction processing and related software application products and
services on a cost-effective basis. To effect this strategy, NOVA regularly
adapts and uses technologies developed for applications outside the transaction
processing industry. In particular, technologies developed for networked
computing and the telecommunications market have been important to the NOVA
Network and NOVA's service capabilities. In addition, NOVA exercises significant
control over the development and enhancement of the combination of hardware,
software and network services that comprise its transaction processing and
information delivery system. This provides NOVA with greater control over the
functionality, quality, reliability, cost and efficiency of its transaction
processing services and related software application products and services.
The NOVA Network. The NOVA Network, initially developed in conjunction
with MCI WorldCom, is NOVA's proprietary telecommunications platform and the
principal conduit through which NOVA provides services to merchants. The NOVA
Network's design provides efficient switching capabilities, resulting in rapid
response time for transaction authorizations. The NOVA Network employs high
speed switching and routing communications, supplying substantial capacity
capable of supporting sophisticated value-added services. In working with MCI
WorldCom, NOVA designed a network specifically tailored to the services NOVA
desired
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to provide, the equipment needed to furnish those services and the functionality
those services were designed to achieve. As customer needs change and as
technology improves, management believes that it will be able to adapt and
customize the NOVA Network as necessary to achieve the functionality it desires.
Currently, both MCI WorldCom and AT&T Corp. provide long-distance service as
well as technical support for the NOVA Network. NOVA's long distance service and
support agreement with MCI WorldCom expires in July 2001. The agreement is
subject to earlier termination by NOVA if MCI WorldCom fails to meet certain
agreed-upon performance objectives. Local access is provided by a subsidiary of
MCI WorldCom and by BellSouth Corporation.
The NOVA Network utilizes Integrated Services Digital Network ("ISDN") and
its associated Non-Facilities Associated Signaling ("NFAS") features. The NFAS
features of the NOVA Network facilitate portability of the NOVA Network to
long-distance and local telecommunications access. This enhanced portability
enables NOVA to utilize alternate long-distance providers, and, therefore, to
demand competitive tariffs. NOVA has developed and tested a network interface
with other long-distance providers and management believes that, if necessary or
convenient, NOVA could utilize the telecommunications access of other providers
in connection with the NOVA Network. Management believes that transferring the
NOVA Network to AT&T, or another telecommunications access provider, can be
accomplished without sacrificing any significant performance or operational
attributes of the NOVA Network, although such a transfer may increase NOVA's
expenses for network services.
The reliability of the NOVA Network is enhanced by the backup service
provided by AT&T. The existence and maintenance of this backup system, which is
designed so no single element is shared with the principal MCI WorldCom system,
enhances NOVA's ability to provide a high level of reliability in its network
service. Through an agreement with Electronic Data Systems Corporation, NOVA
maintains a voice authorization backup system. This backup system allows
merchants to receive voice authorization of transactions in the event of a POS
terminal malfunction, network outage or other similar circumstances.
Another advantage of the NOVA Network is its proprietary "TCP/IP" routing
network, which provides greater resiliency and routing capabilities compared to
transaction processing companies that employ a front-end processor switch and a
back end switch. After a POS transaction reaches the NOVA Network via either MCI
WorldCom or AT&T, it is immediately converted to TCP/IP protocol. Once
converted, the transaction is switched and routed through the NOVA Network via
the optimal path. NOVA maintains a fully redundant, three-tier meshed network
utilizing 3COM Corporation switches and routers. In addition, NOVA uses Open
Shortest Path First ("OSPF") routing protocol to ensure the optimal path is
always utilized between the modems on the network front-end and the NOVA hosts
that switch transactions to the credit and debit card networks. OSPF also
ensures speedy network re-routing in the event of hardware failure.
Because the NOVA Network is TCP/IP based, and the Internet is a large,
public TCP/IP network, processing Internet-originated transactions is a logical
extension of NOVA's core competency.
Software Development for POS Terminals and PCs. NOVA continuously develops
new software applications for POS terminals and PCs in an effort to improve
existing and create additional product and service offerings. NOVA's software
development capability is critical to its ability to respond flexibly to
changing customer needs and improving technologies. NOVA has programmed most of
the POS terminals utilized by its merchant customers with specific applications.
By programming POS terminals, NOVA can avoid the limitations of the preexisting
applications programmed into POS terminals, which are designed for broad
applicability to a wide range of users, and can provide its merchant customers
with specifically tailored applications at an increased level of functionality.
Since NOVA generally distributes such software application products by
downloading such applications over the NOVA Network, merchants are able to
utilize NOVA's products and services quickly and inexpensively.
As NOVA's merchants increase their use of PCs and fully-integrated cash
registers and payment systems, NOVA is extending its POS terminal software
application product and service offerings to PCs and expanding the number of its
products and services available for PC use or that otherwise allow the POS
terminal to interface with a PC. For instance, NOVA ACS, PC Transact_It, and
NOVA Shadow Pay are PC-based applications. While merchant use of such products
and services currently is limited, and there can be no
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assurance that such products and services will be widely accepted, NOVA expects
such use to increase. NOVA and First Union are actively pursuing with KeyBank
and other third parties initiatives relating to transaction processing via the
Internet and procurement and purchasing cards. Management believes that these
and other efforts may result in the development of additional software
application products and value-added services.
NOVA actively encourages third party software developers to write
applications to NOVA's specifications and network protocols. These applications,
once certified by NOVA, allow integration of NOVA's transaction processing
services with the business management software created by such developers for
use at the merchant's POS. For example, NOVA recently developed NOVA TransPort,
which consists of client and server software that encrypts transactions via the
Internet. NOVA makes their client application programmer interface (API)
software available to value-added resellers ("VARs"), such as GO Software, Inc.,
to integrate into their applications. GO Software, Inc. (now part of
ShopNow.com's eBusiness unit), one of the first VARs to integrate this software
into their application line, has several products capable of sending encrypted
transactions via the Internet directly to NOVA for processing. Merchants enjoy
dedicated, leased-line performance at Internet connection costs for transaction
processing. In this way, VARs indirectly perform a marketing function for NOVA
since they frequently market their software on a fully-integrated basis with
NOVA's transaction processing services, creating additional opportunities to
reach small to medium-sized merchants. NOVA has certified in excess of 200 third
party software developers, including Aluim Payment Groups, Atomic Software,
Southern DataCom, Inc., Datacap, Inc., Tellen Software Inc., and UniPay.
Use of Networked Systems for Customer Service. As a result of the
information access and retrieval capabilities of networked systems, which
provide real-time information to any of NOVA's customer service representatives,
NOVA can provide a level of customer service and support to small to
medium-sized merchants historically available only to much larger merchants. For
example, any of NOVA's customer service representatives may access, on a
real-time basis, all of the relevant information pertaining to any particular
merchant that may call and ask for assistance. NOVA has also implemented an
on-line, informational database that provides NOVA's customer service
representatives user-friendly access to an array of additional information
relative to NOVA's services, products and systems, which allows NOVA to more
quickly and effectively resolve customer service inquiries. Additionally, the
NOVA Network is highly automated and requires minimal staffing, which allows
NOVA to contain costs and achieve greater operating efficiencies.
SOFTWARE APPLICATION PRODUCTS AND VALUE-ADDED SERVICES
In addition to card transaction processing, NOVA offers related software
application products and value-added services to its merchant customers. NOVA
designed these products and services to run on existing POS terminals and
DOS-and Windows-based PCs. An integral part of NOVA's strategy is make available
a broad range of products and services historically unavailable to small to
medium-sized merchants. By doing so, NOVA seeks to differentiate itself among
the banks and ISOs serving this portion of the market. Management believes that
the quality and reliability of its products and services enhance NOVA's ability
to attract and retain merchant customers.
NOVA currently offers a variety of software application products and
value-added services, including the following core products and services that
are basic to the NOVA Network:
NOVA Encompass. NOVA Encompass is the latest generation of NOVA's user
interface. NOVA presently provides NOVA Encompass to all new merchant customers,
and generally charges a one-time fee to upgrade existing merchants to NOVA
Encompass. In addition to NOVA's core transaction processing services, NOVA
Encompass enables merchants to access NOVA's software application products and
value-added services, including those described below. NOVA Encompass also
allows the merchant to access other business management applications, including
customized end-of-day processing (allowing, for instance, the performance by the
merchant of daily audit functions) and other review and reporting features
(e.g., summary report generation). Designed as a flexible "modular" system, NOVA
Encompass allows the merchant to add features and capability as its business
needs evolve.
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NOVA Shadow Pay. NOVA Shadow Pay addresses the increasing use by merchants
of integrated and modem-enabled PCs. NOVA Shadow Pay eliminates the necessity of
a traditional, stand-alone POS terminal. NOVA Shadow Pay is a PC application
that allows the merchant's modem-enabled PC to capture the transaction data that
is keyed or otherwise input into the cash register or PC, and transmits such
data for authorization and processing, eliminating both the need for a
stand-alone POS terminal and redundant keying of transaction data. In addition,
NOVA Shadow Pay provides the merchant access to certain review and reporting
features allowing, for instance, the merchant to more easily reconcile
transaction activity for any given period with the data captured and stored by
the merchant's PC. NOVA charges a one-time license fee for access to NOVA Shadow
Pay.
NOVA Mass Transact and PC Transact_It. NOVA Mass Transact is a
large-volume transaction processing application that NOVA developed specifically
for businesses processing large numbers of credit card transactions on a batch
basis. A merchant using NOVA Mass Transact (typically one that accepts a large
number of credit card transactions by telephone or mail) assembles a batch file
of transactions and the merchant's mainframe transmits that information to NOVA
for processing. Insurance companies and magazine publishers, each of which
process large numbers of transactions for recurring payments such as insurance
premiums and subscription renewals, respectively, are examples of the type of
merchant customers who currently utilize NOVA Mass Transact. PC Transact_It is a
similar application that allows PCs, rather than mainframes, to process
transactions on a batch basis. Merchants who subscribe to NOVA Mass Transact or
PC Transact_It pay a one-time license fee and a percentage of the amount of each
transaction processed.
InnResponse and NOVALodge. InnResponse and NOVALodge are transaction
processing applications designed to address the special needs of the hospitality
industry. InnResponse is a lodging solution for small hotels and motels and
tracks check-in and check-out data by portfolio. NOVALodge is a PC-based
application for larger hospitality facilities and accommodates multiple
terminals at a front desk as well as multiple on-site locations such as
restaurants, gift shops or golf facilities. Enhanced reporting provides totals
and allows sorting by terminal or location.
NOVA Gratuit. NOVA Gratuit is a transaction processing application
designed specifically for use by restaurants. NOVA Gratuit tracks server data
and includes "tip" capability and enhanced reporting capabilities. Similar to
NOVA Encompass, NOVA Gratuit software integrates a time clock into the software
as well as a frequent diner program.
In addition to NOVA's core products and services, NOVA offers the following
value-added software applications and services:
NOVA ACS. NOVA ACS (Automated Customer Service) is a PC-based system that
enables NOVA's bank alliance and ISO partners to access NOVA's databases in
order to track and compile the transaction processing activity of their
respective merchant customers. Merchants also utilize NOVA ACS to access NOVA's
databases to track and compile information regarding their own transaction
activity. Through such access and related information retrieval capabilities,
NOVA ACS expands greatly the banks', ISOs' and merchants' ability to design and
obtain customized informational reports and, in the case of banks and ISOs, to
perform for their merchant customers a variety of customer service related
activities. NOVA ACS, which was introduced in 1997, incorporates retrieval and
chargeback information as well as on-line statements. These enhancements give
the ISO, bank or merchant the opportunity to retrieve information on-line.
Cellular Digital Packet Data. Cellular Digital Packet Data, marketed under
the name "TRAVERSE," uses cellular airwaves, as opposed to traditional phone
lines, enabling wireless transaction authorization and processing. NOVA
currently has agreements with AT&T Wireless Services, GTE Corporation and Bell
Atlantic NYNEX Mobile to provide cellular transmission services. TRAVERSE
enables transaction authorization and processing in environments where
traditional phone lines are unavailable, inconvenient and/or prohibitively
expensive, affording merchants increased flexibility, mobility and security in
processing card transactions. Further, TRAVERSE allows merchants that have
relied on paper-based processing, where the ability to check if a card is stolen
or credit limits exceeded is generally unavailable or inconvenient, to convert
to electronic processing. In so doing, such merchants can also avoid the higher
rates imposed by each of VISA and MasterCard for paper-based transactions.
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BellSouth Wireless Data. NOVA also has wireless transaction services
through BellSouth Wireless Data's MOBITEX service, a nationwide network covering
approximately 93% of the metropolitan United States. This wireless service
provides many of the same features and functions as the CDPD wireless
networks -- also freeing the user from the traditional phone line. For instance,
the BellSouth Wireless Network was chosen by 3COM's Palm division to power their
Palm VII wireless Palm Pilots because of the nationwide coverage it provides.
For NOVA's wireless Point of Sale customers this gives them the same mobile
processing capabilities regardless of their geographical location. They can use
their wireless POS terminal anywhere there is coverage without making any
modifications to their terminal.
Internet Processing. NOVA is actively pursuing development initiatives
relating to transaction processing services on the Internet and other forms of
electronic commerce. NOVA is exploring with KeyBank and other third parties
several Internet-related opportunities, which include processing transactions
via the Internet, accepting merchant applications via the Internet and
developing, on behalf of merchants, "home-pages" on the Internet. In addition,
NOVA has entered into agreements with several companies which will provide to
NOVA encryption services (a security measure) for transactions processed via the
Internet. These Internet-related initiatives are still in formative stages and
security is the prevailing issue and concern. NOVA, however, is active in the
development process and management believes that the Internet may, ultimately,
become another distribution channel for NOVA's products and services.
Electronic Gift Card. NOVA's Electronic Gift Card ("EGC") program is an
automated application that encourages customer loyalty by allowing merchants to
sell electronic gift cards redeemable for merchandise in their stores. The gift
cards are activated for a pre-determined amount through a POS terminal and are
available in disposable (one-time use) and re-loadable (additional value can be
added) form.
CUSTOMER BASE
NOVA's merchant customer base consists primarily of small to medium-sized
merchants, with a historic concentration in the restaurant, specialty retail,
furniture, automobile repair and lodging industries. In addition, banks also are
customers of NOVA insofar as those banks accept credit card cash advance
transactions. While NOVA's merchants vary significantly in size, a typical
merchant customer generates approximately $100,000 in annual charge volume.
Although NOVA focuses on small to medium-sized merchants, NOVA also serves a
significant number of large merchants and has in place the technical,
operational and management infrastructure necessary to continue to serve large
merchants. For the years ended December 31, 1999 and 1998, no merchant customer
accounted for more than 2% of NOVA's revenues. At December 31, 1999, NOVA
provided transaction processing services to more than 500,000 merchant locations
nationwide.
NOVA generally enters into direct contractual relationships with its
merchants, thereby reducing NOVA's financial risks in the event any of NOVA's
bank alliance relationships terminate. In contrast to NOVA's approach, the
typical transaction processor/bank relationship involves a processor negotiating
with a bank to serve all of the bank's merchants, with the bank maintaining
direct control over each merchant relationship. Such a structure exposes the
processor to the risk that each of the merchant relationships, and the
associated revenues, easily could be jeopardized if, for example, the bank were
to sell its merchant business portfolio to an acquiror that provided its own
transaction processing services.
MARKETING
NOVA markets its services through three principal channels:
- bank alliances, including joint ventures,
- ISO partnering, and
- direct sales and other marketing efforts.
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In addition, NOVA engages in marketing efforts that include marketing
agreements with various trade and other associations and marketing through
value-added resellers that integrate NOVA's transaction processing services with
specialized business management software.
Bank Alliances Through bank alliances, NOVA offers its services to
merchants in cooperation with community and regional banks, allowing NOVA to
capitalize on the banks' presence in particular geographic markets. NOVA's
primary bank alliances are with First Union, Regions Bank, Bank of the West,
Crestar Bank, MBNA, and, through NOVA's joint ventures, KeyBank and Firstar.
These relationships provide NOVA the opportunity to further its market
penetration and increase the size of its customer base through the marketing
assistance, support and exclusive merchant referrals provided by the
participating banks. NOVA's bank alliances consist of four types of
relationships:
- "Acquisition Alliances" created as a result of NOVA's purchase of a
bank's merchant portfolio, pursuant to which NOVA provides transaction
processing services on a co-branded basis with such bank;
- "Joint Venture Alliances," generally in the form of a limited liability
company owned jointly by NOVA and a bank, pursuant to which NOVA provides
transaction processing services and the bank provides marketing and
referral services to the joint venture;
- "Agent Bank Alliances" pursuant to which a bank purchases NOVA's services
and markets and resells those services directly to merchants; and
- "Bank Referral Alliances" whereby a bank refers to NOVA merchants who
desire or otherwise inquire about transaction processing services.
Pursuant to its Acquisition Alliances and Joint Venture Alliances, NOVA
offers banks the opportunity to transfer management and operational
responsibility for their merchant portfolios to NOVA either directly or through
the joint venture. NOVA's Acquisition Alliance and Joint Venture Alliance
partners continue to offer transaction processing services on a co-branded basis
in cooperation with NOVA or the joint venture. In connection with Acquisition
Alliances and Joint Venture Alliances, NOVA or the joint venture may maintain
transaction processing salespersons on-site at the bank partner's branch
locations. The salespersons service existing merchant customers and market and
sell NOVA's processing services to new merchant customers. As a result of this
structure, NOVA can often effect a nondisruptive transition of services from the
merchants' perspective following the creation of the Acquisition or Joint
Venture Alliance. To facilitate this transition process and to assist its
Acquisition Alliance and Joint Venture Alliance partners, NOVA has created an
intensive training program whereby NOVA's personnel train and educate its
Acquisition Alliance and Joint Venture Alliance partners in all aspects of
NOVA's transaction processing services, software application products and
value-added services.
NOVA compensates its bank alliance partners through varying means. NOVA
typically compensates its Acquisition Alliance partners by remitting to them a
residual for each transaction that NOVA processes for merchants attributable to
the alliance. NOVA compensates its Bank Referral Alliance partners typically by
paying them a one-time referral fee. NOVA does not directly compensate its Agent
Bank Alliance partners as they derive revenue by reselling NOVA's services to
merchants at a price determined by the agent bank.
NOVA has expanded its alliance efforts through a marketing agreement with
Kessler Financial Services L.P. ("Kessler"), an independent marketing
organization. Pursuant to this agreement, Kessler identifies potential alliance
or acquisition prospects for NOVA. NOVA's agreement with Kessler is scheduled to
expire June 30, 2001, subject to renewal for two additional years unless either
NOVA or Kessler gives notice of termination prior to the expiration of the
initial term.
NOVA also employs a direct sales force that markets the services of NOVA on
behalf of NOVA's alliance, ISO and joint venture partners. The internal sales
force includes a national account sales team that supports Acquisition Alliances
and Joint Venture Alliances in signing larger and more technologically
sophisticated merchants.
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ISO Partnering. With the acquisition of the merchant portfolio of the Bank
of Boulder in December 1994, NOVA made its first significant entry into the ISO
marketing channel. NOVA significantly expanded its presence in this channel
through the PMT Merger. NOVA's ISO partners market NOVA's products in
conjunction with other products offered by the ISO, such as card readers and
related equipment. Generally, ISO partnering involves engaging an ISO to market
and sell NOVA's products and services on a non-exclusive basis. An ISO that
desires to refer a merchant customer to NOVA will procure the merchant's
application and submit it to NOVA on the merchant's behalf. Thereafter, if the
application is approved, the ISO will sell or lease point of sale terminals and
related hardware and software to such merchant. NOVA compensates ISO's by paying
them a residual for each transaction processed by NOVA for merchants referred to
NOVA by the ISO. The ISO's determination of whether to refer a particular
merchant to NOVA depends on a variety of factors, including the terms of the
residual offered by NOVA and the industry in which the merchant conducts its
business.
Other Marketing Efforts. In addition to bank alliances and ISO partnering,
NOVA engages in other marketing efforts that management believes complement and
diversify further NOVA's overall marketing strategy:
Association Marketing. NOVA has marketing agreements with
approximately 300 trade and other associations. Through its association
marketing program, NOVA negotiates and enters into marketing agreements
whereby associations endorse and promote to their membership the
transaction processing services provided by NOVA, creating additional
opportunities for NOVA to reach small to medium-sized merchants.
Marketing Through Value-Added Resellers. NOVA's marketing efforts are
diversified further through the integration of its transaction processing
services with the specialized business management software of a growing
number of value-added resellers. Value-added resellers perform a marketing
function for NOVA since their software often is offered on a
fully-integrated basis with NOVA's transaction processing services,
creating additional opportunities for NOVA to satisfy the particular needs
of its merchant customers.
Product Offerings. NOVA offers a suite of products and services
tailored for the Retail, Hospitality, Lodging, Restaurant, Supermarket,
Mail Order/Telephone Order, "Emerging" and Internet markets. NOVA merchants
have a variety of products and service options all designed to streamline
operations, offer customers choices, and increase operating efficiencies.
- Point-of Sale Solutions
- PC-Based Solutions
- Value- Added Services
- E-Commerce/Internet Solutions
- Credit Card Processing
- Debit, Checks and Other Payment Processing
- State Subsidized Programs (EBT)
- Corporate Purchasing Cards
- Credit Card Processing via Phone Batch Processing
- Connecting Multiple Locations
- PC/Terminal Integration
- PC Based Applications
- Wireless Credit Card Processing
- Detailed Transaction Reporting
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- Customer Loyalty Programs
- Address and Card Verification
NOVA periodically reviews its marketing efforts and distribution channels
to minimize channel conflict. Although channel conflict among bank alliances,
ISO partnering, direct sales and other marketing efforts may occur, to date NOVA
has not experienced any significant conflict while pursuing its overall sales
strategy.
ACQUISITION STRATEGY
The transaction processing industry has undergone rapid consolidation over
the last several years. The costs to convert from paper-based to electronic
processing, merchant requirements for improved customer service, and the demands
for additional customer applications have made it difficult for community and
regional banks and ISOs to remain competitive. Many of these providers are
unwilling or unable to invest the capital required to meet these demands, and
increasingly are exiting the transaction processing business or otherwise
seeking alliance partners to provide transaction processing for their customers.
Since inception, NOVA has sought to capitalize on this trend by pursuing an
active acquisition strategy and engaging in joint ventures and bank alliances.
NOVA intends to continue to pursue purchases of merchant portfolios and the
formation of joint ventures and alliances with other financial institutions in
order to facilitate growth, expand NOVA's distribution channels and achieve
greater economies of scale. This strategy focuses on the merchant portfolios and
related assets of banks and ISOs that no longer desire or are unable to provide
efficient and cost-effective transaction processing services. NOVA attempts to
structure its acquisitions, joint ventures and alliances both to increase its
merchant base and to expand its distribution and marketing capabilities.
NOVA continues to evaluate potential joint ventures and alliances,
purchases of merchant portfolios and purchases of ISOs. In addition, each of the
First Union and the Crestar marketing relationships may create additional
purchase opportunities for NOVA, as NOVA and each of First Union and Crestar
have agreed that NOVA generally may, at its option and subject to agreement on
price and other terms, purchase from First Union or Crestar any merchant
portfolios purchased by First Union or Crestar through whole-bank or other
acquisitions. For instance, in October 1998, NOVA acquired the merchant
processing portfolio previously owned by CoreStates in connection with a merger
transaction between First Union and CoreStates. There can be no assurances,
however, (1) as to whether either of the First Union and Crestar relationships
will provide future acquisition opportunities; (2) that any such acquisition
opportunities can be completed on terms favorable to NOVA, if at all; or (3) as
to the timing of such transactions.
RISK MANAGEMENT
NOVA views its risk management and fraud avoidance practices as integral to
its operations and overall success because of NOVA's potential liability for
merchant fraud, charge-backs and other losses. Risk management and fraud
avoidance occur initially at the application stage when NOVA utilizes various
criteria to accept or deny merchant applications and to determine the rate
structure charged. Such criteria include the applicant's credit history and the
industry in which the applicant conducts its business. For higher-risk
merchants, NOVA may require a guarantee or an escrow deposit or place a maximum
volume limitation on transactions processed.
NOVA's principal tool in its risk management and fraud avoidance program is
"Witness," its proprietary rule-based fraud detection software program which
allows NOVA to identify potentially fraudulent transactions before funds are
transferred to the merchant. Witness runs against each of the day's transactions
processed on the NOVA Network, resulting in a computer-generated identification
of potentially fraudulent activity. Once identified, individuals analyze and
review the suspect transactions to resolve potential problems. This can be
accomplished before funds are transferred to the merchant in payment for such
transactions. If NOVA needs more time to review a transaction or series of
transactions, however, NOVA can specify that the
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batches containing the identified transactions be withheld from further
processing to allow additional time to attempt to verify the authenticity of
such transactions. Witness also allows NOVA to review certain types of
transactions on a real time basis. Consequently, NOVA has the ability to
intercept and review potentially fraudulent transactions and stop payment or
otherwise resolve them, as appropriate, prior to the time when financial
liability for such transactions has shifted to NOVA. This ability is critical to
NOVA's overall program to control fraud and manage risk and is an example of
NOVA's strategy of leveraging available technologies, and the NOVA Network, to
its competitive advantage.
Despite NOVA's risk management and fraud avoidance capabilities, NOVA is
unable to identify all fraudulent transactions, thereby resulting in financial
exposure to NOVA. Further, until NOVA converts each newly acquired merchant
account to NOVA's merchant accounting vendors, NOVA is unable to apply fully its
risk management and fraud avoidance practices to such merchant accounts.
In connection with portfolio purchases, NOVA reviews any merchant portfolio
that it proposes to purchase and determines whether the portfolio meets NOVA's
standards and guidelines and is otherwise a suitable acquisition target. The
review process includes analyzing the composition of the portfolio, applying
uniform standards and underwriting guidelines developed by NOVA to the portfolio
and identifying any high-risk merchants contained in the portfolio. If NOVA
decides to proceed with the acquisition, NOVA will focus on the high-risk
merchants identified by its review and attempt to manage the risk associated
with such merchants. Typically, NOVA will seek to exclude high-risk merchants
from the portfolio purchase, require the seller of the merchant portfolio to
establish a reserve account or require the seller to indemnify NOVA for any
liability associated with such merchants. NOVA constantly seeks to refine its
due diligence procedures and practices, and management expects to continue to
improve its due diligence efforts. Nevertheless, the Company can give no
assurance that its due diligence process will identify all high-risk merchants
or that NOVA will otherwise properly assess the risk attributes of any purchased
portfolio.
MERCHANT ACCOUNTING AND CLEARING BANK RELATIONSHIPS
NOVA relies upon third parties vendors to provide merchant accounting and
clearing bank services to NOVA and its merchant customers. In each of these
instances, NOVA has engaged multiple providers to safeguard against the loss of
services or quality of any one of these providers.
Merchant accounting services consist of reorganizing and accumulating daily
transaction data on a merchant-by-merchant and card issuer-by-card issuer basis,
and forwarding this data to the credit card associations for ultimate payment.
These services are provided by our merchant accounting vendors. In 1999, we
implemented internal systems to provide our own merchant accounting services. As
of December 31, 1999, approximately 6.5% of NOVA's total volume was being
serviced internally.
Clearing Bank Arrangements. NOVA's clearing banks receive payment for
merchant transactions from credit card associations (net of fees payable to the
credit card associations and card issuing banks), from which the clearing banks
remit payment to the merchant for the gross amount of the merchant's
transactions. Once each month, NOVA collects applicable merchant discount and
other fees from each merchant for transactions effected and services provided
during the preceding month. NOVA, along with all other nonbank transaction
processors that process VISA and MasterCard transactions, must be sponsored by a
financial institution that is a principal member of the VISA and MasterCard
credit card associations in order to process these bankcard transactions.
Through each of Regions Bank, Bank of the West, Imperial Bank, FNBO, Zions Bank,
Firstar, KeyBank and FUNB, which serve as member clearing banks for NOVA, NOVA
is registered with VISA and MasterCard as a certified processor and member
service provider. NOVA is registered at the highest level of designation for a
merchant processor by VISA, Tier 1 Acquirer Processor, and MasterCard, Type I
Third Party Processor. While NOVA's registration as a certified processor and
member service provider is necessary in order for NOVA to process VISA and
MasterCard transactions, management believes that the revocation of such
registrations is unlikely and inconsistent to the objectives of both the credit
card associations and the clearing banks because of the adverse effect such
action would have on the continuity of credit card acceptance.
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NOVA's agreements with its principal member clearing banks generally
provide that the merchant relationship is controlled by NOVA. Accordingly, NOVA
generally is not obligated to continue to utilize the clearing services of these
banks, and may transfer the clearing functions to another principal member
clearing bank (i.e., any member of the VISA and MasterCard associations),
although there can be no assurance that NOVA would be able to find a financial
institution to sponsor it on terms acceptable to NOVA.
CUSTOMER SERVICE AND SUPPORT
NOVA is dedicated to providing reliable and effective customer service and
support to its merchant customers. The information access and retrieval
capabilities of the NOVA Network, where real-time information is available to
NOVA's customer service representatives, allow NOVA to provide a level of
customer service and support to small to medium-sized merchants historically
available only to much larger merchants. For example, any of NOVA's customer
service representatives may access, on a real-time basis, all of the relevant
information pertaining to any particular merchant that may call and ask for
assistance. NOVA also has implemented an on-line, informational database that
provides NOVA's customer service representatives user-friendly access to an
array of additional information relative to NOVA's services, products and
systems, which generally allows NOVA to more quickly and effectively resolve
customer service inquiries.
NOVA maintains a 24-hour-a-day, seven-day-a-week helpline at its operations
center in Knoxville, Tennessee. NOVA measures the efficiency of its customer
service through certain quantitative data such as the number of rings prior to
operator pick-up, the number of abandoned calls, the number of calls per day and
the number of calls per customer service representative. NOVA has developed
comprehensive programs and procedures for training its approximately 315
full-time customer service representatives to assist NOVA's merchant clients in
a timely and efficient manner with any problems, issues or concerns they may
have. Management is dedicated to providing outstanding customer service and
support and continually reviews its policies and procedures in an effort to
improve these services.
PROPRIETARY RIGHTS
NOVA has developed proprietary software for use in four principal areas:
(i) applications for POS terminals and PCs; (ii) transaction switching; (iii)
the NOVA Network; and (iv) customer service and charge-backs. NOVA regards its
proprietary software as protected by trade secret, copyright, trademark and
patent laws. NOVA attempts to safeguard its software through the protection
afforded by the above-referenced laws, employee and third-party non-disclosure
agreements, licensing agreements and other methods of protection. Despite these
precautions, it may be possible for unauthorized third parties to copy, obtain
or reverse engineer certain portions of NOVA's software or to otherwise obtain
or use other information NOVA regards as proprietary. While NOVA's competitive
position may be affected by its ability to protect its software and other
proprietary information, management believes that the protection afforded by
trade secret and copyright laws are less significant to NOVA's success than
other factors such as the knowledge, ability and experience of NOVA's personnel
and the continued pursuit and implementation of its operating strategies.
As the number of software application products in the transaction
processing industry increases, and as the functionality of such products further
overlaps, third parties could assert that NOVA's software application products
infringe or may infringe the proprietary rights of such entities. These third
parties may seek damages from NOVA as a result of such alleged infringement,
demand that NOVA license certain proprietary rights from them or otherwise
demand that NOVA cease and desist from its use and/or license of the allegedly
infringing software. Although management is not currently aware of any alleged
infringement issues, any such action, if it were to occur, may result in
protracted and costly litigation or royalty arrangements or otherwise have a
material adverse effect on NOVA's financial condition and results of operations.
NOVA currently licenses certain software from third parties to supplement
its internal software and technology development and to shorten time-to-market
software application product deliveries. For instance, NOVA licenses the
software for NOVA Time. Management believes that it will be necessary to
continue this practice in the future, although there can be no assurance that
NOVA will be able to do so on favorable terms
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or at all. NOVA's servicemarks include INNRESPONSE, INNSYNCHRA MASS TRANSACT,
NOVA, NOVA INFORMATION SYSTEMS, NOVA-PERKS, NOVA ACS, NOVA REMOTE ACS, NOVA
CLOCK, NOVA ENCOMPASS, NOVA GRATUIT, NOVALODGE, NOVA SHADOW PAY, NOVA TIME, NOVA
TRANSPORT, NOVA WEBWAY, ON-SET, PC TRANSACT_IT, POS CONTROL, TRAVERSE.
Additionally, NOVA-PERKS and ON-SET are registered with the U.S. Patent and
Trademark Office (the "PTO"). As a result of acquisitions, NOVA also owns the
following servicemarks: SBS, SBS and Design, SUPERIOR BANKCARD SERVICE and
MERCHANT MILES CLUB. Both SBS and MERCHANT MILES CLUB are registered with the
PTO, while the applications for SBS and Design, and SUPERIOR BANKCARD SERVICE
are pending with the PTO. NOVA is also the owner of the following domain name
registrations: merchantconnect.com, merchantconnect.net, novacorp.net,
novainfo.com, novainfo.net, merchanttoolbox.com and merchanttoolbox.net.
COMPETITION AND CONSOLIDATION
The market for providing credit, charge and debit card transaction
processing services to the small to medium-sized merchant segment served by NOVA
is highly competitive. The level of competition has increased significantly
since NOVA's inception, and this trend is expected to continue. NOVA competes in
this market segment on the basis of price, the availability of related products
and services, the quality of customer service and support, and transaction
processing speed, quality and reliability. NOVA's principal competitors in this
market segment include other smaller vertically integrated processors, community
and regional banks and ISOs and, increasingly, the ten largest bankcard
processors. Several of NOVA's competitors and potential competitors have greater
financial, technological, marketing and personnel resources than NOVA, and there
can be no assurance that NOVA will continue to be able to compete successfully
with such entities. In addition, the competitive pricing pressures that would
result from any increase in competition would adversely affect NOVA's margins
and may have a material adverse effect on NOVA's financial condition and results
of operations.
According to industry sources, the ten largest bankcard processors
accounted for approximately 68% of the total charge volume processed in 1998,
the latest year for which statistics are available. The largest bankcard
processor accounted for approximately 16% of the total charge volume processed
in 1999.
NOVA believes that it has reached a sufficient size whereby economies of
scale allow it to offer competitive pricing. However, certain of NOVA's
competitors may have lower costs which could potentially give them an advantage.
As a result of its experience in payment processing, NOVA has been able to
develop operating efficiencies that NOVA believes allow it to competitively bid
for new business. In addition, NOVA has continually made technological
improvements and is thus able to respond to the unique needs of merchants in
various industries. Management believes that the quality, speed and reliability
of the NOVA Network and the breadth, flexibility and user-friendliness of its
software application products and services constitute a competitive advantage.
NOVA intends to maintain its strategy of focusing on small to medium-sized
merchants because management believes this market segment is somewhat less price
sensitive than larger accounts.
NOVA faces increasing competition from other transaction processors for
available acquisition opportunities. In addition, community and regional banks,
which serve as a marketing channel for NOVA's services and whose transaction
processing businesses have been NOVA's primary source of acquisition
opportunities, have been undergoing extensive consolidation reflective of
underlying trends in the financial institution industry and unrelated to their
transaction processing businesses. As a result, smaller banks that may have
sought to divest themselves of their transaction processing businesses may be
acquired by banks that compete with NOVA or banks that have a relationship or
alliance with one or more competitors of NOVA, thus potentially depriving NOVA
of distribution channels and/or acquisition opportunities.
BANKING REGULATION
Because KeyBank and Firstar are nationally chartered banks, it was
necessary to obtain written approval from the Office of the Comptroller of the
Currency (the "OCC"), in its role as the regulatory body for
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national banks, prior to consummation of the KMS and Elan joint ventures.
Moreover, certain banking laws and regulations may be implicated in the event
either NOVA or the limited liability companies enter into or acquire any other
entity which is engaged in a business that is substantially different from the
business activities NOVA, or the limited liability companies, currently conduct.
As a consequence, NOVA may be required to take certain measures, such as
applying for any required regulatory consent or assisting either KeyBank,
Firstar, or the limited liability companies, as the case may be, to prepare such
applications. If the required consents and approvals are not received, NOVA may
not engage in the new business activity.
EMPLOYEES
As of February 25, 2000, NOVA had 1,625 full-time employees, and 55
part-time employees. Positive employee relationships are a hallmark of NOVA's
business environment. NOVA's employees are not represented by a collective
bargaining agreement nor has NOVA ever experienced any work stoppage.
NOVA has completed the conversion and consolidation of the majority of all
PMT operations into the NOVA operations centers in Knoxville and Atlanta. As
part of this consolidation, NOVA has moved PMT's Nashville, Tennessee operations
to NOVA's existing facilities in Atlanta, Georgia and Knoxville, Tennessee.
CERTAIN RISKS ASSOCIATED WITH THE BUSINESS OF THE COMPANY
In addition to the risks and other considerations discussed elsewhere in
this report, set forth below is a discussion of certain risk factors relating to
the Company's business and operations. These risk factors are drafted in "Plain
English" format in accordance with Rule 421 of the Securities Act. Accordingly,
references to "we" and "our" refer to NOVA and its subsidiaries.
We are Dependent upon VISA and MasterCard Registration and Financial
Institution Sponsors in Order to Conduct Our Business
We must be sponsored by a financial institution that is a principal member
of the VISA and MasterCard credit card associations in order to process bankcard
transactions. Our designation with VISA and MasterCard as a certified processor
and our status as a member service provider are dependent upon the sponsorship
of member clearing banks and our continuing adherence to the standards of the
VISA and MasterCard credit card associations. The member financial institutions
of VISA and MasterCard set these standards. Some of the member financial
institutions of VISA and MasterCard provide transaction processing services in
direct competition with our services. In the event we fail to comply with these
standards, VISA or MasterCard could suspend or terminate our designation as a
certified processor or our status as a member service provider. The termination
of our member service provider registration or our status as a certified
processor, or any changes in the VISA or MasterCard rules that prevent our
registration or otherwise limit our ability to provide transaction processing
and marketing services for VISA or MasterCard, would have a material adverse
effect on our business, financial condition and results of operations. See
"Business -- Merchant Accounting and Clearing Bank Relationships."
Increased Consolidation in the Marketplace Affects the Price and Availability
of Acquisition, Joint Venture and Alliance Opportunities
Historically, our growth has been dependent upon the purchase of additional
merchant portfolios and the acquisition of operating businesses and transaction
processing assets. Going forward, we face increasing competition from other
transaction processors for available acquisition, joint venture and alliance
opportunities. As a result, we may not be able to negotiate new acquisitions,
joint ventures and alliances on terms that are as favorable as terms negotiated
in past transactions. In addition, the financial industry continues to undergo
extensive consolidation. As a result, community and regional banks, which have
historically been a primary source of new merchant portfolios for NOVA, may
instead be acquired by financial institutions that either directly compete with
us or that have a relationship or alliance with one or more of our competitors.
Acquisitions such as these potentially deprive us of acquisition opportunities.
Consequently, we cannot be sure (1) that the historical or current level of
acquisition opportunities will continue to exist; (2) that we will be
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<PAGE> 19
able to locate and acquire merchant portfolios, operating businesses and
transaction processing assets that satisfy our criteria; or (3) that such
transactions will be on terms that are favorable to NOVA.
We May Not Accurately Analyze the Risks Associated with Purchased Merchant
Portfolios, Joint Ventures or Business Combinations
When we evaluate the potential purchase of a merchant portfolio, a joint
venture or a business combination, we conduct a review of the related merchant
portfolio. The review process includes analyzing the composition of the merchant
portfolio, applying our uniform standards and underwriting guidelines to the
merchant portfolio and attempting to identify high-risk merchants included in
the merchant portfolio. Even with such a review, it is not possible to properly
identify and assess all of the risks associated with a merchant portfolio or
otherwise identify all of the high-risk merchants. If we fail to accurately
assess these risks or to identify all of the high-risk merchants in the
portfolio, we may experience larger-than-expected losses from charge-backs or
merchant fraud. See "Business -- Risk Management."
Delays in Conversion of Merchant Portfolios to Our Network May Decrease Our
Anticipated Cost-Savings
Generally, merchants in a newly-acquired portfolio are not operating on the
NOVA Network and may not use the same merchant accounting processors that we
use. Until we convert each newly-purchased merchant to the NOVA Network and our
merchant accounting processors, we do not fully realize the anticipated cost
savings and synergies from the portfolio purchase, business combination or joint
venture. For instance, until we convert the merchants to the NOVA Network, we
have to pay third parties for processing services. Further, we have little, if
any, control over the performance of the other networks and processors. Finally,
we typically are not able to apply fully our risk management and fraud avoidance
practices to these merchants, which increases the possibility of losses due to
fraud.
Our Acquisition Strategy Will Require Substantial Capital Resources and
Additional Indebtedness
Our acquisition strategy will require substantial capital resources and is
likely to result in the need for additional indebtedness. We cannot be sure,
however, that we will be able to obtain financing for future acquisitions on
favorable terms.
The Success of Our Joint Ventures Is Dependent Upon the Continued Cooperation
of Our Joint Venture Partners
The Elan joint venture and the KMS joint venture involved the formation of
a limited liability company that we jointly own with Firstar and KeyBank,
respectively. As a result, our continued cooperation with each of Firstar and
KeyBank is important to the success of the joint ventures. We cannot give any
assurance that our relationship with either Firstar or KeyBank will continue to
be cooperative and, accordingly, there can be no assurance that we will realize
the anticipated economic benefits from the joint ventures. In addition, we
provide management and processing services to each of the joint ventures which
imposes increased administrative, managerial and technological demands on our
infrastructure and related systems, and there can be no assurance that we will
meet successfully such material demands and requirements. See "-- Continued
Consolidation in the Banking Industry May Adversely Affect Our Marketing
Channels."
Termination of Our Joint Ventures with Firstar and KeyBank Could Have an
Adverse Impact on Our Financial Condition and Results of Operations
Our joint ventures with Firstar and KeyBank were formed for a fixed time
period (until August 2008 and January 2005, respectively, subject in each case
to renewal provisions), but are subject to earlier termination by us or Firstar
or KeyBank under a variety of circumstances. In the event of early termination,
or upon termination of either joint venture upon expiration of its term, the
then-current assets and merchant portfolio of the terminated joint venture are
subject to "repurchase rights" by either us, or Firstar or KeyBank, depending
upon the circumstances of termination. For example, each of the joint ventures
imposes upon us certain standards with respect to the performance of our
processing services. In the event we breach these
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<PAGE> 20
standards and do not cure the breach, Firstar or KeyBank, as the case may be,
would have the right to purchase our interest in the respective joint venture.
If either Firstar or KeyBank purchases our interest in the respective joint
venture, we would experience a significant decrease in the number of merchant
locations that we serve and the aggregate sales volume that we process. This
type of decrease could have a material adverse effect on our financial condition
and results of operations. Further, when we evaluated the joint ventures and
established a purchase price in connection with our investment in the joint
ventures, we assumed the continuance of each of the joint ventures for a minimum
term. We may not realize the anticipated economic and marketing benefits from
the joint ventures in the event one or both is terminated early.
Increasing Competition in the Transaction Processing Industry May Have a
Material Adverse Effect on Our Business, Financial Condition and Results of
Operations
The credit, charge and debit card transaction processing services business
is highly competitive. The level of competition has increased significantly in
recent years, and we expect this trend to continue. Several of our competitors
and potential competitors have greater financial, technological, marketing and
personnel resources, and we are uncertain whether we will continue to be able to
compete successfully with such entities. In addition, our profit margins could
decline because of competitive pricing pressures that may have a material
adverse effect on our business, financial condition and results of operations.
Continued Consolidation in the Banking Industry May Adversely Affect Our
Marketing Channels
We market our services through several different marketing channels,
including through our joint ventures and alliances with banks. In the event that
the trend toward consolidation in the banking industry continues, banks with
which we have alliances may be acquired by banks with which we compete or that
have a relationship with one or more of our competitors. This scenario could
potentially result in the loss of a distribution channel.
Increased Merchant Attrition May Have a Material Adverse Effect on Our
Business, Financial Condition and Results of Operations
We experience attrition in our merchant base in the ordinary course of
business resulting from several factors, including business closures, losses to
competitors and conversion-related losses. In addition, substantially all of our
contracts with merchants may be terminated by us or the merchant upon prior
notice of 30 days or less. Increased merchant attrition may have a material
adverse effect on our financial condition and results of operations. We cannot
give any assurances that we will not experience higher rates of merchant
attrition in the future, particularly in connection with purchased merchant
portfolios.
We Are Dependent Upon Our Merchant Accounting Relationships with Third Parties
We outsource certain merchant accounting services to our merchant
accounting vendors. These services consist of reorganizing and accumulating
daily transaction data on a merchant-by-merchant and card issuer-by-card issuer
basis, and forwarding this data to the credit card associations for ultimate
payment. If our Merchant Accounting Vendors do not continue to perform these
services efficiently and effectively, our relationships with our merchant
customers may be adversely affected and merchants may terminate their processing
agreements. During 1999 we implemented internal systems to provide our own
merchant accounting services, as of December 31, 1999, approximately 6.5% of
NOVA's total volume was being serviced internally. We are continuing to develop
the internal systems to provide the functionality necessary to service all of
our merchant customers. However, if our Merchant Accounting Vendors terminate
their agreements with us prior to achieving full functionality of our internal
systems, we would have to seek alternative outsourcing arrangements to provide
these merchant accounting services. We are not certain whether we could locate
alternative outsourcing arrangements on terms as favorable to us as the existing
contracts. Accordingly, termination of the agreement with any merchant
accounting vendor could have a material adverse effect on our business,
financial condition and results of operations.
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<PAGE> 21
Increases in Credit Card Association Fees May Adversely Affect Our
Profitability
VISA and MasterCard have increased their respective fees, or "interchange
rates," each year. Although we historically have reflected these increases in
our pricing to merchants, there can be no assurance that merchants will continue
to assume the entire impact of the future increases or that transaction
processing volumes and merchant attrition will not be adversely affected by the
increases.
Increases in Chargebacks May Adversely Affect Our Profitability
When a billing dispute between a cardholder and a merchant is resolved in
favor of the cardholder, the transaction is "charged back" to the merchant's
account and the amount of the transaction is credited to the cardholder. Reasons
for billing disputes include, among others: (1) non-receipt of merchandise or
services; (2) unauthorized use of a credit card; and (3) quality of the goods
sold or the services rendered by that merchant. If the merchant does not have
sufficient funds in its account to cover the chargeback, and if the merchant
refuses or is not able due to bankruptcy or other reasons to reimburse us for
the chargeback, we bear the loss for the amount of the refund paid to the
cardholder. We attempt to reduce our exposure to such losses by (1) performing
periodic credit reviews of our merchant customers; and (2) adjusting the rate we
charge a merchant based, in part, on the merchant's credit risk, business or
industry. However, we cannot give any assurances that we will not experience
significant losses from chargebacks in the future. Increases in chargebacks not
paid by merchants may have a material adverse effect on our business, financial
condition and results of operations. See "Business -- Risk Management."
We Bear the Risk of Fraud Committed by Our Merchant Customers
We bear the risk of losses caused by fraudulent credit card transactions
initiated by our merchant customers. Examples of merchant fraud include
inputting false sales transactions or false credits. We monitor merchant
transactions against a series of standards developed to detect merchant fraud.
Despite our efforts to detect merchant fraud, however, it is possible that we
will experience significant amounts of merchant fraud in the future, which may
have a material adverse effect on our business, financial condition and results
of operations. See "Business -- Risk Management" and "Business -- Customer
Base."
We Are Dependent Upon MCI WorldCom for Telecommunications Services
Our proprietary telecommunications network, the NOVA Network, is a critical
component of our transaction processing services. MCI WorldCom provides to us
long-distance and local telecommunications access and technical support for the
NOVA Network. This agreement has an initial term of three years which expires
July 1, 2001, although we have the right to terminate the agreement earlier in
the event of quality deficiencies in MCI WorldCom's service. The agreement will
automatically renew for additional one-year terms unless either party gives the
other party written notice at least 30 days prior to the end of the term. If the
agreement is terminated or not renewed, we would be required to utilize the
long-distance and local telecommunications access of another long-distance
provider, which may increase our expenses for network services and consequently
have a material adverse effect on our financial condition and results of
operations. See "Business -- Technology."
We May Become Subject to Certain State Taxes That Currently Are Not Passed
through to Our Merchants
We, like other transaction processing companies, may be subject to state
taxation of certain portions of our fees charged to merchants for our services.
Application of this tax is an emerging issue in the transaction processing
industry and the states have not yet adopted uniform guidelines. If we are
required to pay such taxes and are not able to pass this tax expense through to
our merchant customers, our financial condition and results of operations could
be adversely affected.
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<PAGE> 22
We Must Continue to Update and Develop Technological Capabilities and New
Products in Order to Compete
The transaction processing industry, and the software application products
and value-added services of the type that we offer, have been characterized by
rapidly changing technology and the development of new products and services. We
believe that our future success will depend, in part, on our ability to continue
to improve our existing products and services and to offer our merchant
customers new products and services. We cannot give any assurances that we will
continue to improve existing products and services or to develop successful new
products and services, nor can we be certain that our newly-developed products
and services will perform satisfactorily or be widely accepted in the
marketplace. See "Business -- Software Application Products and Value Added
Services."
We Experience Fluctuations in Our Quarterly Operating Results
We have experienced, and expect to continue to experience, significant
seasonality in our business, resulting in fluctuations in our quarterly
operating results. We typically realize higher revenues in the third calendar
quarter and lower revenues in the first calendar quarter, reflecting increased
transaction volumes during the summer months and a significant decrease in
transaction volume during the period immediately following the holiday season.
The timing of purchases of merchant portfolios and joint ventures, and the
timing and magnitude of expenses for merchant portfolio conversions, also affect
our quarterly results. Fluctuations in operating results may result in
volatility in the price of our common stock.
We Need to Retain the Services of Our Executive Management Team
Our success depends largely on the efforts and skills of our executive
officers and key employees, particularly Edward Grzedzinski. The loss of the
services of one or more of these persons could materially adversely affect our
business, financial condition and results of operations. We have entered into
employment agreements with Mr. Grzedzinski and other members of management.
A Significant Portion of Our Assets Consists of Intangible Assets
A substantial portion of our assets are intangible assets related to
purchased merchant portfolios or business operations. A material decline in the
revenues generated from any of our purchased merchant portfolios or business
operations could reduce the fair value of the portfolio or operations.
Consequently, we would be required to reduce the carrying value of the related
intangible asset. Additionally, changes in accounting policies or rules that
affect the way in which we reflect these intangible assets in our financial
statements, or the way in which we treat the assets for tax purposes, could have
a material adverse effect on our financial condition.
Agreements Limit Our Ability to Engage in Other Businesses and Impose
Territorial Restrictions
Our joint venture agreements with Firstar and KeyBank provide that, to the
extent required by applicable banking laws and regulations, we must take certain
measures in the event we or the joint ventures enter into or acquire any other
entity which is engaged in a business that is substantially different from our
current business activities. These measures may include applying for any
required regulatory consent, or assisting either KeyBank, Firstar, or our joint
ventures in preparing the required applications. If the bank regulatory
authorities do not grant the required consents and approvals, we may not engage
in the new business activity.
In connection with our alliances with First Union and Crestar, and our
joint ventures with Firstar and KeyBank, we agreed that we will not, without the
prior consent of the affected entity, enter into certain marketing or, in
certain instances, acquisition or purchase agreements with third parties located
in specified geographic areas where, as of the date of such transactions, any of
First Union, Crestar, Firstar or KeyBank maintain a significant banking
presence. The effect of these territorial restrictions is to limit in certain
respects our ability to directly seek or take advantage of certain business or
marketing opportunities other than through a venture with our regional bank
partners. The agreements generally do not prohibit us from pursuing transactions
indirectly through the respective alliance or joint venture.
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<PAGE> 23
Our Articles of Incorporation and Shareholder Rights Plan May Impede a
Takeover of NOVA
Some provisions of our Articles of Incorporation and Bylaws, and certain
provisions of Georgia law, could have the effect of delaying, deferring or
preventing an acquisition of our company. For example, our Articles of
Incorporation permit the Board of Directors to issue up to 5,000,000 shares of
preferred stock with such designations, powers, preferences and rights as it
determines, without any further vote or action by our shareholders. The issuance
of preferred stock could discourage bids for the outstanding shares of common
stock at a premium and have a material adverse effect on the market price of the
common stock.
We have also adopted a Shareholder Rights Plan (the "Rights Plan"). Under
the Rights Plan, each of our shareholders (as of a certain date) received one
stock purchase right ("Right") for each share of NOVA stock that they owned. If
a third party acquires 10% or more of our outstanding stock, then the Rights
become exercisable, and the holder of each Right is entitled to purchase
additional shares of our common stock at a price that is lower than the
then-current market price. In addition, if we are acquired after a third party
acquired 10% or more of our outstanding stock, then each Right holder will be
entitled to purchase, at the then-current price, a number of the acquiring
party's shares equal in value to those obtainable if the Rights were exercisable
in our stock. The Rights Plan could have the effect of making it more difficult
for a third party to acquire, or discourage a third party from attempting to
acquire, control of us without negotiating with our board of directors.
The Price of Our Common Stock Has Been Volatile and Could Continue to
Fluctuate Substantially
Our common stock is traded on the New York Stock Exchange. Since our
initial public offering in May 1996, there has been and may continue to be
significant volatility in the market for the common stock, based on a variety of
factors, including the following:
- future announcements concerning us or our competitors;
- changes in quarterly operating results;
- the gain or loss of significant contracts;
- the entry of new competitors into our markets;
- changes in management;
- announcements of technological innovations or new products by us or our
competitors; and
- other events and circumstances, some of which are beyond our control.
Future Sales of Our Common Stock Could Cause the Price of Our Shares to
Decline
Sales of a substantial number of shares of our common stock in the public
market could cause the price of the common stock to decline and could impair our
ability to raise equity capital. As of March 20, 2000, we have outstanding
approximately 69,491,465 shares of common stock. An additional 9,901,668 shares
of common stock that may be issued in the future (upon exercise of options
granted and to be granted under our stock option plans) have been or will be
registered under the Securities Act and therefore will be freely tradeable when
exercisable, subject to the volume and certain other conditions of Rule 144
promulgated under the Securities Act in the case of shares to be sold by our
affiliates. Options and warrants for the purchase of approximately 8,821,399
shares of common stock were outstanding as of March 20, 2000, of which options
and warrants for 2,182,395 shares were exercisable, with an additional 520,032
options to vest within sixty days of that date.
ITEM 2. PROPERTIES
NOVA's principal executive offices are located in Atlanta, Georgia and
consist of approximately 38,000 square feet that are leased pursuant to an
agreement scheduled to expire February 2002. All facilities are used
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<PAGE> 24
primarily for administrative, sales and marketing, and operational functions.
The following table describes the principal facilities being used in connection
with NOVA's operations:
<TABLE>
<CAPTION>
APPROXIMATE
PROPERTIES SQUARE FOOTAGE LEASE/OWN LOCATION
- ---------- -------------- --------- -------------
<S> <C> <C> <C>
Corporate Headquarters....................... 38,000 Lease Atlanta, GA
Sales and Operations Center.................. 91,000 Lease Atlanta, GA
Sales and Operations Center.................. 29,000 Lease Dunwoody, GA*
Operations Center**.......................... 140,000 Own Knoxville, TN
PMT Corporate Offices***..................... 100,000 Lease Nashville, TN
The Company also occupies other leased
properties totaling approximately 90,000
square feet in various locations to support
sales and operations.
</TABLE>
- ---------------
* NOVA expects that the Dunwoody sales and operations center will be
consolidated into the Atlanta, GA sales and operations center.
** The operations centers consist of 140,000 square feet in two primary
buildings. The original 26,000 square foot facility is leased pursuant to a
sublease agreement scheduled to expire September 1, 2003. NOVA expanded into
its new 112,000 square foot operations center during the third quarter of
1998. During 1998, 84,000 square feet was utilized during initial occupancy,
while the remaining 28,000 square feet has been renovated and scheduled for
operation in February 2000.
*** The corporate offices were the headquarters of PMT prior to the PMT Merger.
As part of the consolidation plans completed during 1999, the facility has
been vacated and was totally subleased effective in November of 1999.
NOVA believes that its facilities are suitable and adequate for its
business needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
NOVA 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 effect on the
financial condition of NOVA.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of NOVA's shareholders during the fourth
quarter of the fiscal year ended December 31, 1999.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below, in accordance with General Instruction G(3) of Form 10-K
and Instruction 3 to Item 401(b) of Regulation S-K, is certain information
regarding the executive officers of NOVA as of March 24, 2000.
Each executive officer will serve until a successor is elected or appointed
and qualified, or until his earlier resignation, removal from office or death.
Edward Grzedzinski, 45, has served with NOVA or its predecessor since
February 1991, most recently as Chairman of the Board, President and Chief
Executive Officer. He co-founded NOVA's wholly-owned subsidiary and predecessor,
NOVA Information Systems, as its Chief Operating Officer in 1991 and was named
Chief Executive Officer in September 1995. Mr. Grzedzinski has over 13 years
experience in the bankcard industry.
Pamela A. Joseph, 41, has served with NOVA or its predecessor since July
1994, most recently as director and President and Chief Operating Officer of
NOVA Information Systems. Prior to joining NOVA,
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Ms. Joseph served for over two years as Director, New Market Development, for
VISA and for eight years in various management positions at Wells Fargo Bank.
Nicholas H. Logan, 39, has served with NOVA since September 1998, most
recently as Senior Executive Vice President. Prior to joining NOVA, Mr. Logan
served as Senior Group Vice President of Business Development for Cardservice
International from 1995 to 1998. From 1994 to 1995, he held various executive
level positions in sales and marketing with Harbridge Merchant Services and Card
Establishment Services. Mr. Logan has over eleven years of experience in the
bankcard industry.
Cherie M. Fuzzell, 36, has served with NOVA since February 1999, most
recently as Senior Vice President, Secretary and General Counsel. Prior to
joining NOVA, Ms. Fuzzell served for almost four years with Magellan Health
Services, most recently as Vice President, Mergers & Acquisitions.
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<PAGE> 26
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
NOVA Corporation Common Stock is traded on the New York Stock Exchange (its
principal market) under the symbol NIS.
The following table provides the high and low sales prices of the common
stock as reported for the periods indicated:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
<S> <C> <C> <C> <C>
First Quarter................................. $33.5000 $21.0000 $33.3750 $23.0000
Second Quarter................................ 28.2500 20.0000 36.3750 31.0000
Third Quarter................................. 28.2500 24.3125 37.1875 25.7500
Fourth Quarter................................ 31.8125 22.8125 34.6875 24.2500
</TABLE>
SHAREHOLDERS
As of March 20, 2000, there were approximately 145 shareholders of record
of the Company's Common Stock and 69,491,465 shares outstanding.
DIVIDENDS
The Company has never paid cash dividends on its Common Stock. The Board of
Directors' policy is to retain any available earnings for use in the operation
and expansion of the Company's business. Therefore, no payment of cash dividends
is likely in the foreseeable future. The Company's loan agreement restricts the
payment of dividends. See Note 8 of the Consolidated Financial Statements.
RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 6. SELECTED FINANCIAL DATA
The section entitled "Selected Consolidated Financial Data" of the
Company's 1999 Annual Report to Shareholders is incorporated herein by reference
and filed as part of Exhibit 13 to this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Company's 1999 Annual Report to
Shareholders is incorporated herein by reference and filed as part of Exhibit 13
to this Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk, including changes in interest rates,
primarily related to long-term debt obligations and notes receivable. A
discussion of our accounting policies for financial instruments and further
disclosures relating to financial instruments is included in the Summary of
Significant Accounting Policies in the Notes to Consolidated Financial
Statements. We monitor the risks associated with interest rates and have
established policies and business practices to protect against these and other
exposures.
Based on the Company's long-term debt obligations and note receivable at
December 31, 1999, a 1% increase in market interest rates would increase
interest expense and interest income by $695,000 and $137,000, respectively.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Accompanying Notes to
Consolidated Financial Statements and the section entitled "Report of
Independent Auditors" of the Company's 1999 Annual Report to Shareholders are
incorporated herein by reference and filed as part of Exhibit 13 to this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
Certain information required by Part III is omitted from this report but is
incorporated herein by reference to NOVA's definitive Proxy Statement for the
2000 Annual Meeting of Shareholders (the "Proxy Statement"). Such Proxy
Statement will be filed with the Securities and Exchange Commission no later
than 120 days after December 31, 1999.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In accordance with General Instruction G(3) of the Form 10-K, the
information relating to the directors of NOVA, including directors who are
executive officers of NOVA, is set forth under the caption "Proposal
1 -- Election of Directors" in the Proxy Statement and is incorporated herein by
reference. Pursuant to Instruction 3 of Item 401(b) of Regulation S-K and
General Instruction G(3) of Form 10-K, information relating to the executive
officers of NOVA is set forth under the caption "Executive Officers of the
Registrant" in Part I, Item 4A of this Report.
Compliance with Section 16(a) of the Exchange Act: Section 16(a) of the
Exchange Act, and the regulations of the Commission thereunder require NOVA's
directors, officers and any persons who own more than 10% of NOVA's common
stock, as well as certain affiliates of such persons, to file reports with the
Commission with respect to their ownership of NOVA's common stock. Directors,
officers and persons owning more than 10% of NOVA's common stock are required by
Commission regulations to furnish NOVA with copies of all Section 16(a) reports
they file. Based solely on its review of the copies of such reports received by
it and representations that no other reports were required of those persons,
NOVA believes that during fiscal 1999, all filing requirements applicable to its
directors and officers were complied with in a timely manner.
ITEM 11. EXECUTIVE COMPENSATION
In accordance with General Instruction G(3) of Form 10-K, the information
relating to executive compensation set forth under the caption "Executive
Compensation" in the Proxy Statement is incorporated herein by reference;
provided, such incorporation by reference shall not be deemed to include or
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In accordance with General Instruction G(3) of Form 10-K, the information
relating to security ownership by certain persons set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with General Instruction G(3) of Form 10-K, the information
relating to certain relationships and related transactions set forth under the
caption "Certain Relationships and Related Transactions" in the Proxy Statement
is incorporated herein by reference.
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<PAGE> 29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this Report:
1. Financial Statements
The consolidated financial statements of NOVA and the related reports of
independent auditors thereon which are required to be filed as part of this
Report are included in NOVA's 1999 Annual Report to Shareholders and are
incorporated by reference herein. Such information is filed as part of Exhibit
13 to this Report. These consolidated financial statements are as follows:
Consolidated Balance Sheets at December 31, 1999 and 1998.
Consolidated Statements of Operations for the years ended December 31,
1999, and 1998, and 1997.
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999, and 1998, and 1997.
Consolidated Statements of Cash Flows for the years ended December 31,
1999, and 1998, and 1997.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial statement schedule of NOVA is included
in Item 14(d):
Schedule II Valuation and Qualifying Accounts
Schedules not included above have been omitted because they are not
applicable, not material, or the required information is given in the financial
statements or notes thereto.
3. Exhibits
The following exhibits are incorporated by reference or filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1 -- Agreement and Plan of Merger dated as of June 17, 1998,
among the Registrant, Church Merger Corp. and PMT Services,
Inc.(8)
3.1 -- Articles of Incorporation of the Registrant, as amended(1),
as amended by the Articles of Amendment filed June 8,
1999(15)
3.2 -- Amended and Restated Bylaws of the Registrant**
4.1 -- Specimen Common Stock certificate**
4.2 -- See Articles of Incorporation of the Registrant and Bylaws
of the Registrant, filed as Exhibits 3.1 and 3.2,
respectively
4.3 -- Shareholders Agreement dated January 31, 1996, among the
Registrant (formerly NOVA Holdings, Inc.), NOVA Information
Systems, Inc., First Union Corporation, WorldCom, Inc.,
Warburg, Pincus Investors, L.P. and each of the other
Original Shareholders(1), as amended by supplements dated as
of August 15, 1997, August 22, 1997 and September 8, 1997(7)
4.4 -- Shareholder Agreement, dated June 17, 1998, between the
Registrant and Richardson M. Roberts(8)
4.5 -- Shareholder Agreement, dated June 17, 1998, between the
Registrant and Gregory S. Daily(8)
4.6 -- Registration Rights Agreement, dated as of June 17, 1998, by
and among the Registrant, Richardson M. Roberts and Gregory
S. Daily(8)
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
4.7 -- Registration Rights Agreement dated January 31, 1996, among
the Registrant (formerly NOVA Holdings, Inc.), Warburg,
Pincus Investors, L.P., WorldCom, Inc., and First Union
Corporation(1)
4.8 -- Rights Agreement, dated as of July 9, 1999, between the
Registrant and First Union National Bank, as Rights
Agent(15)
9.1 -- Shareholders Agreement, incorporated by reference to Exhibit
4.3(1)
9.2 -- Shareholder Agreement, incorporated by reference to Exhibit
4.4(8)
9.3 -- Shareholder Agreement, incorporated by reference to Exhibit
4.5(8)
10.1 -- Shareholders Agreement, incorporated by reference to Exhibit
4.3(1)
10.2 -- Shareholder Agreement, incorporated by reference to Exhibit
4.4(8)
10.3 -- Shareholder Agreement, incorporated by reference to Exhibit
4.5(8)
10.4 -- Registration Rights Agreement, incorporated by reference to
Exhibit 4.6(8)
10.5 -- Registration Rights Agreement, incorporated by reference to
Exhibit 4.7(1)
10.6 -- PMT Services, Inc. 1997 Nonqualified Stock Option Plan(9)
10.7 -- PMT Services, Inc. 1994 Non-Employee Director Stock Option
Plan(9)
10.8 -- PMT Services, Inc. 1994 Incentive Stock Plan(9)
10.9 -- 1991 Employees Stock Option and Stock Appreciation Rights
Plan as amended(1)
10.10 -- 1996 Employees Stock Incentive Plan, as amended by the First
Amendment(1), the Second Amendment, the Third Amendment(8),
and the Fourth Amendment(10)
10.11 -- 1996 Directors Stock Option Plan, as amended and
restated(10)
10.12 -- Contribution Agreement, dated October 30, 1995, among the
Registrant (formerly NOVA Holdings, Inc.), NOVA Information
Systems, Inc., the then-current shareholders of NOVA
Information Systems, Inc., First Union Corporation, the
First Union Banks, and First Fidelity Bancorporation and its
banking subsidiaries(1)
10.13 -- Lease Agreement dated May 31, 1996, by and between NOVA
Information Systems and Concourse I, Ltd.(3), as amended by
the First Amendment dated February, 1999, effective April 1,
1999(14)
10.14 -- Sublease, dated April 1, 1991, between Inter-Banc, Inc. and
The Baptist Health System of East Tennessee, Inc.(1)
10.15 -- Amended and Restated Credit Agreement, dated as of November
16, 1999, among NOVA Corporation and NOVA Information
Systems, Inc., as Borrowers and Guarantors, certain
subsidiaries of the Borrowers, as Guarantors, the Lenders
identified therein, and Bank of America, N.A. as
Administrative Agent**
10.16 -- Service Agreement dated July 2, 1998, between NOVA
Information Systems and WorldCom Technologies, Inc.(11)
10.17 -- Processing Services Agreement, dated July 1, 1998, between
NOVA Information Systems and Vital Processing Services,
L.L.C.(11)
*10.18 -- Marketing Agreement, dated June 30, 1994, between NOVA
Information Systems and Kessler Financial Services, L.P.(1),
and Addendum to Marketing Agreement dated July 24, 1997,
effective January 1, 1997, between NOVA Information Systems
and Kessler Financial Services, L.P.(6)
*10.19 -- Agreement Regarding Merchant Processing Services and Other
Matters, dated May 5, 1995, among NOVA Information Systems,
First Alabama Bank and Regions Financial Corp.(1)
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
*10.20 -- Agreement dated June 3, 1992, as amended December 9, 1992,
and November 2, 1994, between NOVA Information Systems and
Mellon Bank, together with the Letter Agreement dated June
3, 1992, between NOVA Information Systems and Mellon Bank
relating to fees, as amended December 10, 1992, and June 10,
1997(1), both as amended by Letter Agreement June 10,
1997(6)
10.21 -- Depositary and Processing Agreement, dated September 30,
1993, between NOVA Information Systems and Bank of the
West(1)
10.22 -- Merchant Business Purchase Agreement, dated October 18,
1994, as amended November 30, 1994, and December 9, 1994,
among NOVA Information Systems, Inc., the Bank of Boulder,
Bolder Bancorporation and NOVA Newco, Inc.(1)
10.23 -- Marketing Agreement, dated October 1, 1992, between NOVA
Information Systems and MBNA America Bank, N.A.(1)
10.24 -- Agreement Not to Compete, dated October 1, 1992, between
NOVA Information Systems and MBNA America Bank, N.A.(1)
10.25 -- Depositary and Settlement Agreement, dated January 31, 1996,
among the Registrant (formerly NOVA Holdings, Inc.), NOVA
Information Systems and FUNB(1)
10.26 -- Marketing Support Agreement, dated January 31, 1996, among
the Registrant (formerly NOVA Holdings, Inc.), NOVA
Information Systems and the First Union Banks(1)
10.27 -- Merchant Asset Purchase Agreement, dated May 29, 1997,
between NOVA Information Systems and Crestar Bank(4)
10.28 -- Agreement Respecting a Limited Liability Company, dated
October 7, 1997, by and among NOVA Information Systems,
Firstar Bank U.S.A., N.A. d/b/a Elan Financial Services and
Firstar Bank Milwaukee, N.A.(5)
*10.29 -- Agreement Respecting a Limited Liability Company, dated
December 12, 1997, by and among the Registrant, NOVA
Information Systems and Key Bank National Association(6)
*10.30 -- Merchant Asset Purchase Agreement, dated December 30, 1997,
by and between NOVA Information Systems and MBNA America
Bank, N.A.(6)
*10.31 -- Merchant Asset Purchase Agreement, dated October 8, 1998,
among the Registrant, Core States Bank of Delaware, N.A.,
First Union National Bank and NOVA Information Systems,
Inc.(12)
10.32 -- Stock Option Agreement dated June 17, 1998, between the
Registrant (as issuer) and PMT Services, Inc.(8)
10.33 -- Stock Option Agreement dated June 17, 1998, between PMT
Services, Inc. (as issuer) and the Registrant(8)
10.34 -- Employment Agreement, dated June 17, 1998, by and between
Richardson M. Roberts and the Registrant(8)
10.35 -- Employment Agreement, dated June 17, 1998, by and between
Gregory S. Daily and the Registrant(8)
10.36 -- Employment Agreement, effective February 15, 1999, between
the Registrant and Rebecca L. Powell(14)
10.37 -- Employment Agreement, effective February 15, 1999, between
the Registrant and Pamela A. Joseph(14)
10.38 -- Employment Agreement, effective February 15, 1999, between
the Registrant and John Perry(14)
10.39 -- Employment Agreement, effective June 16, 1999, between the
Registrant and Edward Grzedzinski(15)
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.40 -- Employment Agreement, dated October 27, 1995, effective
January 31, 1996, between NOVA Information Systems and James
M. Bahin(1)
10.41 -- Severance Agreement, effective December 31, 1998, between
the Registrant and Gregory S. Daily(13)
10.42 -- Severance Agreement, effective December 31, 1998, between
the Registrant and Richardson M. Roberts(13)
10.43 -- Employment Agreement, effective February 15, 1999, between
the Registrant and Nicholas H. Logan(14)
10.44 -- Employment Agreement, effective June 8, 1999, between the
Registrant and Philip J. Mazzilli(15)
10.45 -- Separation Agreement, effective June 23, 1999, between the
Registrant and James M. Bahin(15)
10.46 -- Stock Option Agreement dated May 6, 1999 between the
Registrant and Edward Grzedzinski(15)
10.47 -- Rights Agreement, dated as of July 9, 1999, between the
Registrant and First Union National Bank, as Rights Agent,
incorporated by reference to Exhibit 4.3(15)
10.48 -- NOVA Corporation Deferred Compensation Plan, effective
November 10, 1999**
10.49 -- NOVA Corporation Deferred Compensation Plan Trust Agreement,
effective November 10, 1999**
10.50 -- Employment Agreement, dated February 15, 1999, between the
Registrant and Cherie M. Fuzzell**
10.51 -- Office Lease Agreement dated as of October 21, 1999, between
EOP-Perimeter Center, L.L.C. and NOVA Georgia Services,
L.P.**
13 -- 1999 Annual Report to Shareholders -- Following portions
only: "Selected Consolidated Financial Data;" "Management's
Discussion and Analysis of Financial Condition and Results
of Operations;" the Consolidated Financial Statements and
Accompanying Notes to Consolidated Financial Statements and
the "Report of Independent Auditors"**
21 -- Subsidiaries of the Registrant**
23.1 -- Consent of Ernst & Young LLP**
23.2 -- Consent of PricewaterhouseCoopers LLP relating to the
audited financial statements of PMT Services, Inc.**
24 -- Powers of Attorney (included on the signature page of this
Annual Report on Form 10-K)
27 -- Financial Data Schedule**
</TABLE>
- ---------------
* Confidential treatment pursuant to 17 CFR ((S)(S)) 200.80 and 230.406 has
been requested regarding certain portions of the indicated Exhibit, which
portions have been filed separately with the Commission.
** Filed herewith.
(1) Filed as an exhibit to the Company's Registration Statement on Form S-1
(Registration No. 333-1788), and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, Commission File No. 1-14342, and
incorporated herein by reference.
(3) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, filed on June 18, 1996, Commission File No.
1-14342, and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Current Report on Form 8-K filed June
12, 1997, Commission File No. 1-14342, and incorporated herein by
reference.
30
<PAGE> 33
(5) Filed as an exhibit to the Company's Current Report on Form 8-K filed
November 14, 1997, Commission File No. 1-14342, and incorporated herein by
reference.
(6) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, Commission File No. 1-14342, and
incorporated herein by reference.
(7) Filed as an exhibit to the Company's Registration Statement on Form S-1
(Registration No. 333-45997), and incorporated herein by reference.
(8) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, Commission file No. 1-14342, and incorporated
herein by reference.
(9) Filed as an exhibit to the Company's Registration Statement on Form S-8
(Registration No. 333-64681), filed September 19, 1998 and incorporated
herein by reference.
(10) Filed as an exhibit to the Company's Registration Statement on Form S-8
(Registration No. 333-64683), filed September 19, 1998 and incorporated
herein by reference.
(11) Filed as an exhibit to the Company's Registration Statement on Form S-4
(Registration No. 333-61867), and incorporated herein by reference.
(12) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, Commission File No. 1-14342, and
incorporated herein by reference.
(13) Filed as an exhibit to the Company's Annual Report on Form 10-K/A,
Amendment No. 2, for the fiscal year ended December 31, 1998, Commission
File No. 1-14342, filed with the SEC on May 11, 1999, and incorporated
herein by reference.
(14) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, Commission File No. 1-14342, and incorporated
herein by reference.
(15) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, Commission File No. 1-14342, and incorporated
herein by reference.
(16) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, Commission File No. 1-14342, and
incorporated herein by reference.
(b) Reports on Form 8-K
The Company did not file any Current Report(s) on Form 8-K during the
quarter ended December 31, 1999.
(c) Exhibits
All exhibits required by Item 601 of Regulation S-K are incorporated herein
by reference or are filed herewith.
31
<PAGE> 34
(d) Financial Statement Schedules
The following financial statement schedules are filed herewith:
SCHEDULE II
NOVA CORPORATION, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE
AT THE SUBSIDIARY CURRENT
BEGINNING FISCAL CURRENT YEAR BALANCE
OF THE YEAR YEAR WRITE- THE END OF
PERIOD CONVERSION COST/EXPENSE OFFS(1) THE PERIOD
--------- ---------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C>
Fiscal year ending December 31, 1999:
Reserve for Doubtful Accounts and
Chargebacks............................ $11,683 $ 2,191 $ 7,163 $ 6,252 $14,785
Credit and Fraud Loss Reserve............. 12,777 (2,666) 17,012 9,395 17,728
Accrued merger and consolidation
charges................................ 45,724 -- 6,663 43,574 8,813
Fiscal year ending December 31, 1998:
Reserve for Doubtful Accounts and
Chargebacks............................ $ 5,304 $ 78 $14,688 $ 8,387 $11,683
Credit and Fraud Loss Reserve............. 6,738 991 10,823 5,775 12,777
Accrued merger and consolidation
charges................................ -- -- 90,720 44,996 45,724
Fiscal year ending December 31, 1997:
Reserve for Doubtful Accounts and
Chargebacks............................ $ 4,366 $ 0 $ 3,608 $ 2,670 $ 5,304
Credit and Fraud Loss Reserve............. 4,534 0 6,296 4,092 6,738
</TABLE>
- ---------------
(1) Uses of the merger and consolidation reserve include non-cash items of $1.9
million and $18.5 million during 1999 and 1998, respectively.
32
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, NOVA has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 30th day of
March, 2000.
By: /s/ Edward Grzedzinski
------------------------------------
Edward Grzedzinski
Chairman of the Board,
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Edward Grzedzinski and Henry C. Lyon, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Annual Report on Form 10-K, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or either of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of NOVA
and in the capacities indicated on March 30, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ Edward Grzedzinski Director, Chairman of the Board, President and
- ----------------------------------------------------- Chief Executive Officer (Principal Executive
Edward Grzedzinski Officer)
/s/ Henry C. Lyon Vice President (Principal Financial and
- ----------------------------------------------------- Accounting Officer)
Henry C. Lyon
/s/ Charles T. Cannada Director
- -----------------------------------------------------
Charles T. Cannada
/s/ Gregory S. Daily Vice Chairman of the Board
- -----------------------------------------------------
Gregory S. Daily
/s/ Pamela A. Joseph Director and Senior Executive Vice President
- -----------------------------------------------------
Pamela A. Joseph
/s/ Stephen D. Kane Director
- -----------------------------------------------------
Stephen D. Kane
/s/ Dr. Henry Kressel Director
- -----------------------------------------------------
Dr. Henry Kressel
/s/ George M. Miller, II Director
- -----------------------------------------------------
George M. Miller, II
/s/ Stephen E. Wall Director
- -----------------------------------------------------
Stephen E. Wall
</TABLE>
33
<PAGE> 36
Index of Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1 -- Agreement and Plan of Merger dated as of June 17, 1998,
among the Registrant, Church Merger Corp. and PMT Services,
Inc.(8)
3.1 -- Articles of Incorporation of the Registrant, as amended(1),
as amended by the Articles of Amendment filed June 8,
1999(15)
3.2 -- Amended and Restated Bylaws of the Registrant**
4.1 -- Specimen Common Stock certificate**
4.2 -- See Articles of Incorporation of the Registrant and Bylaws
of the Registrant, filed as Exhibits 3.1 and 3.2,
respectively
4.3 -- Shareholders Agreement dated January 31, 1996, among the
Registrant (formerly NOVA Holdings, Inc.), NOVA Information
Systems, Inc., First Union Corporation, WorldCom, Inc.,
Warburg, Pincus Investors, L.P. and each of the other
Original Shareholders(1), as amended by supplements dated as
of August 15, 1997, August 22, 1997 and September 8, 1997(7)
4.4 -- Shareholder Agreement, dated June 17, 1998, between the
Registrant and Richardson M. Roberts(8)
4.5 -- Shareholder Agreement, dated June 17, 1998, between the
Registrant and Gregory S. Daily(8)
4.6 -- Registration Rights Agreement, dated as of June 17, 1998, by
and among the Registrant, Richardson M. Roberts and Gregory
S. Daily(8)
4.7 -- Registration Rights Agreement dated January 31, 1996, among
the Registrant (formerly NOVA Holdings, Inc.), Warburg,
Pincus Investors, L.P., WorldCom, Inc., and First Union
Corporation(1)
4.8 -- Rights Agreement, dated as of July 9, 1999, between the
Registrant and First Union National Bank, as Rights
Agent(15)
9.1 -- Shareholders Agreement, incorporated by reference to Exhibit
4.3(1)
9.2 -- Shareholder Agreement, incorporated by reference to Exhibit
4.4(8)
9.3 -- Shareholder Agreement, incorporated by reference to Exhibit
4.5(8)
10.1 -- Shareholders Agreement, incorporated by reference to Exhibit
4.3(1)
10.2 -- Shareholder Agreement, incorporated by reference to Exhibit
4.4(8)
10.3 -- Shareholder Agreement, incorporated by reference to Exhibit
4.5(8)
10.4 -- Registration Rights Agreement, incorporated by reference to
Exhibit 4.6(8)
10.5 -- Registration Rights Agreement, incorporated by reference to
Exhibit 4.7(1)
10.6 -- PMT Services, Inc. 1997 Nonqualified Stock Option Plan(9)
10.7 -- PMT Services, Inc. 1994 Non-Employee Director Stock Option
Plan(9)
</TABLE>
1
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.8 -- PMT Services, Inc. 1994 Incentive Stock Plan(9)
10.9 -- 1991 Employees Stock Option and Stock Appreciation Rights
Plan as amended(1)
10.10 -- 1996 Employees Stock Incentive Plan, as amended by the First
Amendment(1), the Second Amendment and the Third
Amendment(8), and the Fourth Amendment(10)
10.11 -- 1996 Directors Stock Option Plan, as amended and
restated(10)
10.12 -- Contribution Agreement, dated October 30, 1995, among the
Registrant (formerly NOVA Holdings, Inc.), NOVA Information
Systems, Inc., the then-current shareholders of NOVA
Information Systems, Inc., First Union Corporation, the
First Union Banks, and First Fidelity Bancorporation and its
banking subsidiaries(1)
10.13 -- Lease Agreement dated May 31, 1996, by and between NOVA
Information Systems and Concourse I, Ltd.(3), as amended by
the First Amendment dated February, 1999, effective April 1,
1999(14)
10.14 -- Sublease, dated April 1, 1991, between Inter-Banc, Inc. and
The Baptist Health System of East Tennessee, Inc.(1)
10.15 -- Credit Agreement, dated October 27, 1997, among NOVA
Information Systems, the Lenders named therein, First Union
National Bank as Documentation Agent and Bank of America
National Trust and Savings Association, as Agent(6), as
amended by the First Amendment dated January 30, 1998, as
amended by the Second Amendment dated June 17, 1999(15), as
amended by the Third Amendment dated August 25, 1999 (16),
as amended by the Fourth Amendment dated November 16, 1999**
10.16 -- Service Agreement dated July 2, 1998, between NOVA
Information Systems and WorldCom Technologies, Inc.(11)
10.17 -- Processing Services Agreement, dated July 1, 1998, between
NOVA Information Systems and Vital Processing Services,
L.L.C.(11)
*10.18 -- Marketing Agreement, dated June 30, 1994, between NOVA
Information Systems and Kessler Financial Services, L.P.(1),
and Addendum to Marketing Agreement dated July 24, 1997,
effective January 1, 1997, between NOVA Information Systems
and Kessler Financial Services, L.P.(6)
*10.19 -- Agreement Regarding Merchant Processing Services and Other
Matters, dated May 5, 1995, among NOVA Information Systems,
First Alabama Bank and Regions Financial Corp.(1)
*10.20 -- Agreement dated June 3, 1992, as amended December 9, 1992,
and November 2, 1994, between NOVA Information Systems and
Mellon Bank, together with the Letter Agreement dated June
3, 1992, between NOVA Information Systems and Mellon Bank
relating to fees, as amended December 10, 1992, and June 10,
1997(1), both as amended by Letter Agreement June 10,
1997(6)
10.21 -- Depositary and Processing Agreement, dated September 30,
1993, between NOVA Information Systems and Bank of the
West(1)
10.22 -- Merchant Business Purchase Agreement, dated October 18,
1994, as amended November 30, 1994, and December 9, 1994,
among NOVA Information Systems, Inc., the Bank of Boulder,
Bolder Bancorporation and NOVA Newco, Inc.(1)
10.23 -- Marketing Agreement, dated October 1, 1992, between NOVA
Information Systems and MBNA America Bank, N.A.(1)
10.24 -- Agreement Not to Compete, dated October 1, 1992, between
NOVA Information Systems and MBNA America Bank, N.A.(1)
</TABLE>
2
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.25 -- Depositary and Settlement Agreement, dated January 31, 1996,
among the Registrant (formerly NOVA Holdings, Inc.), NOVA
Information Systems and FUNB(1)
10.26 -- Marketing Support Agreement, dated January 31, 1996, among
the Registrant (formerly NOVA Holdings, Inc.), NOVA
Information Systems and the First Union Banks(1)
10.27 -- Merchant Asset Purchase Agreement, dated May 29, 1997,
between NOVA Information Systems and Crestar Bank(4)
10.28 -- Agreement Respecting a Limited Liability Company, dated
October 7, 1997, by and among NOVA Information Systems,
Firstar Bank U.S.A., N.A. d/b/a Elan Financial Services and
Firstar Bank Milwaukee, N.A.(5)
*10.29 -- Agreement Respecting a Limited Liability Company, dated
December 12, 1997, by and among the Registrant, NOVA
Information Systems and Key Bank National Association(6)
*10.30 -- Merchant Asset Purchase Agreement, dated December 30, 1997,
by and between NOVA Information Systems and MBNA America
Bank, N.A.(6)
*10.31 -- Merchant Asset Purchase Agreement, dated October 8, 1998,
among the Registrant, Core States Bank of Delaware, N.A.,
First Union National Bank and NOVA Information Systems,
Inc.(12)
10.32 -- Stock Option Agreement dated June 17, 1998, between the
Registrant (as issuer) and PMT Services, Inc.(8)
10.33 -- Stock Option Agreement dated June 17, 1998, between PMT
Services, Inc. (as issuer) and the Registrant(8)
10.34 -- Employment Agreement, dated June 17, 1998, by and between
Richardson M. Roberts and the Registrant(8)
10.35 -- Employment Agreement, dated June 17, 1998, by and between
Gregory S. Daily and the Registrant(8)
10.36 -- Employment Agreement, effective February 15, 1999, between
the Registrant and Rebecca L. Powell(14)
10.37 -- Employment Agreement, effective February 15, 1999, between
the Registrant and Pamela A. Joseph(14)
10.38 -- Employment Agreement, effective February 15, 1999, between
the Registrant and John Perry(14)
10.39 -- Employment Agreement, effective June 16, 1999, between the
Registrant and Edward Grzedzinski(15)
10.40 -- Employment Agreement, dated October 27, 1995, effective
January 31, 1996, between NOVA Information Systems and James
M. Bahin(1)
10.41 -- Severance Agreement, effective December 31, 1998, between
the Registrant and Gregory S. Daily(13)
10.42 -- Severance Agreement, effective December 31, 1998, between
the Registrant and Richardson M. Roberts(13)
10.43 -- Employment Agreement, effective February 15, 1999, between
the Registrant and Nicholas H. Logan(14)
10.44 -- Employment Agreement, effective June 8, 1999, between the
Registrant and Philip J. Mazzilli(15)
10.45 -- Separation Agreement, effective June 23, 1999, between the
Registrant and James M. Bahin(15)
</TABLE>
3
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.46 -- Stock Option Agreement dated May 6, 1999 between the
Registrant and Edward Grzedzinski(15)
10.47 -- Rights Agreement, dated as of July 9, 1999, between the
Registrant and First Union National Bank, as Rights Agent,
incorporated by reference to Exhibit 4.3(15)
10.48 -- NOVA Corporation Deferred Compensation Plan, effective
November 10, 1999**
10.49 -- NOVA Corporation Deferred Compensation Plan Trust Agreement,
effective November 10, 1999**
10.50 -- Employment Agreement, dated February 15, 1999, between the
Registrant and Cherie M. Fuzzell**
10.51 -- Office Lease Agreement dated as of October 21, 1999, between
EOP-Perimeter Center, L.L.C. and NOVA Georgia Services, L.P.**
13 -- 1999 Annual Report to Shareholders -- Following portions
only: "Selected Consolidated Financial Data;" "Management's
Discussion and Analysis of Financial Condition and Results
of Operations;" the Consolidated Financial Statements and
Accompanying Notes to Consolidated Financial Statements and
the "Report of Independent Auditors"**
21 -- Subsidiaries of the Registrant**
23.1 -- Consent of Ernst & Young LLP.**
23.2 -- Consent of Pricewaterhouse Coopers, LLP. relating to the
audited financial statements of PMT Services, Inc.**
24 -- Powers of Attorney (included on the signature page of this
Annual Report on Form 10-K)
27 -- Financial Data Schedule (for SEC use only).**
</TABLE>
- ---------------
* Confidential treatment pursuant to 17 CFR ((S)(S)) 200.80 and 230.406 has
been requested regarding certain portions of the indicated Exhibit, which
portions have been filed separately with the Commission.
** Filed herewith.
(1) Filed as an exhibit to the Company's Registration Statement on Form S-1
(Registration No. 333-1788), and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, Commission File No. 1-14342, and
incorporated herein by reference.
(3) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, filed on June 18, 1996, Commission File No.
1-14342, and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Current Report on Form 8-K filed June
12, 1997, Commission File No. 1-14342, and incorporated herein by reference.
(5) Filed as an exhibit to the Company's Current Report on Form 8-K filed
November 14, 1997, Commission File No. 1-14342, and incorporated herein by
reference.
(6) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, Commission File No. 1-14342, and
incorporated herein by reference.
(7) Filed as an exhibit to the Company's Registration Statement on Form S-1
(Registration No. 333-45997), and incorporated herein by reference.
(8) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, Commission file No. 1-14342, and incorporated
herein by reference.
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<PAGE> 40
(9) Filed as an exhibit to the Company's Registration Statement on Form S-8
(Registration No. 333-64681), filed September 19, 1998 and incorporated
herein by reference.
(10) Filed as an exhibit to the Company's Registration Statement on Form S-8
(Registration No. 333-64683), filed September 19, 1998 and incorporated
herein by reference.
(11) Filed as an exhibit to the Company's Registration Statement on Form S-4
(Registration No. 333-61867), and incorporated herein by reference.
(12) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, Commission File No. 1-14342, and
incorporated herein by reference.
(13) Filed as an exhibit to the Company's Annual Report on Form 10-K/A,
Amendment No. 2, for the fiscal year ended December 31, 1998, Commission
File No. 1-14342, filed with the SEC on May 11, 1999, and incorporated
herein by reference.
(14) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, Commission File No. 1-14342, and incorporated
herein by reference.
(15) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, Commission File No. 1-14342, and incorporated
herein by reference.
(16) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, Commission File No. 1-14342, and
incorporated herein by reference.
5
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
NOVA CORPORATION
ARTICLE I
OFFICES
The Corporation shall at all times maintain a registered office in the
State of Georgia and a registered agent at that address but may have other
offices located within or without the State of Georgia as the Board of Directors
may determine.
ARTICLE II
SHAREHOLDERS' MEETINGS
2.1 ANNUAL MEETING. A meeting of shareholders of the Corporation shall
be held annually within five (5) months of the end of each fiscal year of the
Corporation. The annual meeting shall be held at such time and place and on such
date as the Directors shall determine from time to time and as shall be
specified in the notice of the meeting.
To be properly brought before the meeting, business must be brought
before the meeting (i) by or at the direction of the Board of Directors or (ii)
by any Shareholder of the Corporation entitled to vote at the meeting who
complies with the procedures set forth in this Section 2.1; provided, in each
case, that such business proposed to be conducted is, under the law and
applicable rules and regulations, an appropriate subject for Shareholder action.
For business to be properly brought before an annual meeting by a
Shareholder, the Shareholder must give timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a Shareholder's notice must be
received by the Secretary at the principal executive offices of the Corporation
at least 120 calendar days before the first anniversary of the date that the
Corporation's proxy statement was released to Shareholders in connection with
the previous year's annual meeting of Shareholders. However, if no annual
meeting of Shareholders was held in the previous year or if the date of the
annual meeting of Shareholders has been changed by more than 30 calendar days
from the date contemplated at the time of the previous year's proxy statement,
the notice shall be received by the Secretary at the principal executive offices
of the Corporation not fewer than the later of (i) 150 calendar days prior to
the date of the contemplated annual meeting or (ii) the date which is 10
calendar days after the date of the first public announcement or other
notification to the Shareholders of the date of the contemplated annual meeting.
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Such Shareholder's notice to the Secretary shall set forth with respect
to any proposal such Shareholder proposes to bring before the annual meeting (i)
a brief description of the business desired to be bought before the annual
meeting and the reasons for conducting such business at the annual meeting; (ii)
the name and address, as they appear on the Corporation's books, of the
Shareholder proposing such business; (iii) the class and number of shares of the
Corporation which are beneficially owned by such Shareholder; (iv) the dates
upon which the Shareholder acquired such shares; (v) documentary support for any
claim of beneficial ownership; (vi) any material interest of such Shareholder in
such business; (vii) a statement in support of the matter and, for proposals
sought to be included in the Corporation's proxy statement, any other
information required by Securities and Exchange Commission Rule 14a-8; and
(viii) as to each person whom the Shareholder proposes to nominate for election
or reelection as Director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of Directors
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a Director if elected, and evidence satisfactory to the
Corporation that such nominee has no interests that would limit his or her
ability to fulfill his or her duties of office).
In addition, if the Shareholder intends to solicit proxies from the
shareholders of the Corporation, such Shareholder shall notify the Corporation
of this intent in accordance with Securities and Exchange Commission Rule 14a-4
and/or Rule 14a-8. (amended effective 5/26/99)
2.2 SPECIAL MEETINGS. Special meetings of the shareholders may be
called at any time by the President or any other holder or holders of at least
50 percent of the Corporation's outstanding Voting Stock (as defined in the
Corporation's Articles of Incorporation). Special meetings shall be held at such
a time and place and on such date as shall be specified in the notice of the
meeting. (amended effective 6/08/99)
For business to be properly brought before a special meeting by a
Shareholder, the Shareholder must give timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a Shareholder's notice must be
received by the Secretary at the principal executive offices of the Corporation
at least 120 calendar days prior to the date of the special meeting.
Such Shareholder's notice to the Secretary shall set forth with respect
to any proposal such Shareholder process to bring before the special meeting (i)
a brief description of the business desired to be brought before the special
meeting and the reasons for conducting such business at the special meeting;
(ii) the name and address, as they appear on the Corporation's books, of the
Shareholder proposing such business; (iii) the class and number of shares of the
Corporation which are beneficially owned by such Shareholder; (iv) the dates
upon which the Shareholder acquired such shares; (v) documentary support for any
claim of beneficial ownership; (vi) any material interest of such Shareholder in
such business; (vii) a statement in support of the matter
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<PAGE> 3
and, for proposals sought to be included in the Corporation's proxy statement,
any other information required by Rule 14a-8; and (viii) if the Shareholders
requesting the special meeting propose to nominate one or more persons for
election or reelection as Director, all information relating to such person that
is required to be disclosed in solicitations of proxies for election of
Directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
( including such person's written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected, and evidence reasonably
satisfactory to the Corporation that such nominee has no interests that would
limit their ability to fulfill their duties of office).
In addition, if the Shareholder intends to solicit proxies from the
shareholders of the Corporation, such Shareholder shall notify the Corporation
of this intent in accordance with Securities and Exchange Commission Rule 14a-4
and/or Rule 14a-8. (amended effective 5/26/99)
2.3 PLACE. Annual or special meetings of shareholders may be held
within or without the State of Georgia.
2.4 NOTICE. Notice of annual or special shareholders' meetings stating
the place, day and hour of the meeting shall be given in writing not less than
ten nor more than sixty days before the date of the meeting, either mailed to
the last known address of such shareholder as shown in the stock records of the
Corporation or personally given to the shareholder. Notice of any special
meeting of shareholders shall state the purpose or purposes for which the
meeting is called. The notice of any meeting at which amendments to or
restatements of the Articles of Incorporation, merger, share exchange or
consolidation of the Corporation, or the disposition of corporate assets
requiring shareholder approval are to be considered shall state such purpose,
and shall further comply with all requirements of law. Notice of a meeting may
be waived by an instrument in writing executed before or after the meeting. The
waiver need not specify the purpose of the meeting or the business transacted,
unless one of the purposes of the meeting concerns a plan of merger, share
exchange or consolidation, in which event the waiver shall comply with the
further requirements of law concerning such waivers. Attendance at such meeting
in person or by proxy shall constitute a waiver of notice thereof unless the
shareholder shall provide written notice to the Corporation prior to the taking
of any action by the shareholders at such meeting that his attendance is not to
be deemed a waiver of the requirement that such notice be given or of the
adequacy of any notice that may have been given to such shareholder.
2.5 QUORUM. At all meetings of shareholders the presence in person or
by proxy of persons having the right to cast a majority of the votes entitled to
be cast at such meeting by a voting group shall constitute a quorum of that
voting group for the transaction of business. Regardless of whether a quorum is
present, the affirmative vote of a majority of the votes entitled to be cast by
those present shall be sufficient to adjourn a meeting from day to day, and to
specify the time and place to which the meeting is adjourned.
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<PAGE> 4
2.6 PROXIES; REQUIRED VOTE. At every meeting of the shareholders,
including meetings of shareholders for the election of Directors, any
shareholder having the right to vote shall be entitled to vote in person or by
proxy, but no proxy shall be voted after eleven months from its date, unless
said proxy provides for a longer period. If a quorum is present, action on a
matter (other than the election of directors) by a voting group is approved by
such voting group if the votes cast within such voting group favoring such
action exceed the votes cast within such voting group opposing such action,
unless the Articles of Incorporation, a bylaw adopted by the shareholders, or
the Georgia Business Corporation Code requires a greater number of affirmative
votes. The required vote for the election of directors shall be governed by the
Georgia Business Corporation Act.
2.7 PRESIDING OFFICER AND SECRETARY. At every meeting of shareholders
the Chairman of the Board, or in his absence or if there be none, the Vice
Chairman of the Board, or in his absence or if there be none, the President, or
in his absence a Vice President, or, if none be present, the appointee of the
meeting, shall preside. The Secretary, or in his absence an Assistant Secretary,
or if none be present, the appointee of the presiding officer of the meeting,
shall act as secretary of the meeting.
2.8 SHAREHOLDER LIST. The officer or agent having charge of the stock
transfer books of the Corporation shall produce for inspection of any
shareholder at, and continuously during, every meeting of the shareholders, a
complete alphabetical list of shareholders arranged by voting group (and within
each voting group by class or series of shares) showing the address and share
holdings of each shareholder. If the record of shareholders readily shows such
information, it may be produced in lieu of such a list.
2.9 ACTION IN LIEU OF MEETING. Any action to be taken at a meeting of
the shareholders of the Corporation, or any action that may be taken at a
meeting of the shareholders, may be taken without a meeting if a consent in
writing setting forth the action so taken shall be obtained from the requisite
persons entitled to vote at a meeting.
2.10 VOTING GROUP. Voting group means all shares of one or more classes
or series that are entitled to vote and be counted together collectively on a
matter at a meeting of shareholders. All shares entitled to vote generally on
the matter are for that purpose a single voting group.
ARTICLE III
DIRECTORS
3.1 MANAGEMENT. Subject to these bylaws, or any lawful agreement
between the shareholders, the full and entire management of the affairs and
business of the Corporation shall be vested in the Board of Directors, which
shall have and may exercise all of the powers that may be exercised or performed
by the Corporation. In furtherance of the power of the Board of
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<PAGE> 5
Directors hereunder and not by way of limitation, the following actions may not
be taken on behalf of the Corporation without prior approval of a majority of
the entire Board of Directors: (1) approving the acquisition of any business
whether by a plan of merger, share exchange, asset purchase or otherwise; (2)
the creation, incurrence or assumption of any indebtedness; (3) approving
capital expenditures in excess of an aggregate of $50,000 in any one fiscal
year; (4) approving or directing a change of employment or compensation of any
executive officer; or (5) approving the sale of any assets in excess of an
aggregate of $50,000 in any fiscal year.
3.2 Number of Directors. The Board of Directors shall fix by resolution
the precise number of members of the Board of Directors. Directors shall be
elected at each annual meeting of the shareholders and shall serve for a term of
one year and until their successors are elected. A majority of said directors
shall constitute a quorum for the transaction of business. All resolutions
adopted and all business transacted by the Board of Directors shall require the
affirmative vote of a majority of the directors present at the meeting. (amended
effective 1/31/96)
3.3 ELECTION OF DIRECTORS. Directors shall be elected annually, at the
annual meeting of shareholders or at a special meeting in lieu of the annual
meeting of shareholders or by written consent of the holders of shares entitled
to vote thereon in lieu of a meeting. The Directors shall serve for a term of
one year and until their successors are elected. If the annual election of
Directors is not held on the date designated therefor, the Directors shall cause
such election to be held as soon thereafter as convenient.
3.4 RESIGNATION. Any Director may resign at any time either orally at
any meeting of the Board of Directors or by so advising the Chairman of the
Board, if any, or the President, or by giving written notice to the Corporation.
A Director who resigns may postpone the effectiveness of his resignation to a
future date or upon the occurrence of a future event specified in a written
tender of resignation. If no time of effectiveness is specified therein, a
resignation shall be effective upon tender. A vacancy shall be deemed to exist
at the time a resignation is tendered, and the Board of Directors or the
shareholders may, then or thereafter, elect or appoint a successor to take
office when the resignation by its terms becomes effective.
3.5 COMPENSATION. Directors may be allowed such compensation for
attendance at regular or special meetings of the Board of Directors and of any
special or standing committees thereof as may be determined from time to time by
resolution of the Board of Directors.
3.6 NUMBER; REMOVAL. The Board of Directors shall consist of one or
more individuals, the precise number to be fixed by resolution of the
shareholders or the Board of Directors from time to time; provided, however,
that no decrease in the number of Directors shall have the effect of shortening
the term of an incumbent Director. In the event of any increase or decrease in
the authorized number of Directors, each Director then serving shall continue as
a Director until the expiration of his current term, or his earlier resignation,
removal from office or death. Directors may be removed by the shareholders with
or without cause in accordance with
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<PAGE> 6
Section 14-2-808 of the Georgia Business Corporation Code. Removal action may be
taken at any shareholders' meeting with respect to which notice of such purpose
has been given, and a removed Director's successor may be elected at the same
meeting to serve the unexpired term.
ARTICLE IV
COMMITTEES
4.1 EXECUTIVE COMMITTEE.
(a) The Board of Directors may by resolution adopted by a majority of
the entire Board designate an Executive Committee of one or more directors. Each
member of the Executive Committee shall hold office until the first meeting of
the Board of Directors after the annual meeting of shareholders next following
his election and until his successor is elected and qualified, or until his
death, resignation or removal, or until he shall cease to be a director.
(b) During the intervals between the meetings of the Board of
Directors, the Executive Committee may exercise all the authority of the Board
of Directors; provided, however, that the Executive Committee shall not have the
power to amend or repeal any resolution of the Board of Directors that by its
terms shall not be subject to amendment or repeal by the Executive Committee,
and the Executive Committee shall not have the authority of the Board of
Directors in reference to (1) approving or proposing to shareholders action
required to be approved by shareholders; (2) filling vacancies on the Board of
Directors or on any of its committees; (3) amending the Articles of
Incorporation; (4) adopting, amending or repealing bylaws; (5) authorizing the
issuance of any securities; (6) approving the acquisition of any business
whether by a plan of merger, share exchange, asset purchase or otherwise; (7)
approving the creation, incurrence or assumption of any indebtedness; (8)
approving capital expenditures in excess of an aggregate of $50,000 in any one
fiscal year; (9) approving or directing a change of employment or compensation
of any executive officer; or (10) approving the sale of any assets in excess of
an aggregate of $50,000 in any fiscal year.
(c) The Executive Committee shall meet from time to time on call of the
Chairman of the Board or the President or of any two or more members of the
Executive Committee. Meetings of the Executive Committee may be held at such
place or places, within or without the State of Georgia, as the Executive
Committee shall determine or as may be specified or fixed in the respective
notices or waivers of such meetings. The Executive Committee may fix its own
rules of procedures, including provision for notice of its meetings. It shall
keep a record of its proceedings and shall report these proceedings to the Board
of Directors at the meeting thereof held next after they have been taken, and
all such proceedings shall be subject to revision or alteration by the Board of
Directors except to the extent that action shall have been taken pursuant to or
in reliance upon such proceedings prior to any such revision or alteration.
(d) The Executive Committee shall act by majority vote of its members;
provided, that contracts or transactions of and by the Corporation in which
officers or directors of the
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<PAGE> 7
Corporation are interested shall require the affirmative vote of a majority of
the disinterested members of the Executive Committee, at a meeting of the
Executive Committee at which the material facts as to the interest and as to the
contract or transaction are disclosed or known to the members of the Executive
Committee prior to the vote.
(e) Members of the Executive Committee may participate in committee
proceedings by means of conference telephone or similar communications equipment
by means of which all persons participating in the proceedings can hear each
other, and such participation shall constitute presence in person at such
proceedings.
(f) The Board of Directors, by resolution adopted in accordance with
paragraph (a) of this section, may designate one or more directors as alternate
members of the Executive Committee who may act in the place and stead of any
absent member or members at any meeting of said committee.
4.2 COMPENSATION AND AUDIT COMMITTEES. The Board of Directors shall by
resolution adopted by a majority of the entire Board designate a Compensation
Committee and Audit Committee, each consisting of three (3) directors. Each
member of the Compensation Committee and Audit Committee shall hold office until
the first meeting of the Board of Directors after the annual meeting of
shareholders next following his election and until his successor is elected and
qualified, or until his death, resignation or removal, or until he shall cease
to be a director. The Board of Directors will at all times maintain a
Compensation Committee and an Audit Committee of the Board of Directors. At
least a majority of the members of each such committee shall consist of
directors who are not members of management of the Corporation. The Compensation
Committee shall make recommendations to the Board of Directors regarding all
matters of compensation, including stock options for employees of the
Corporation.
4.3 OTHER COMMITTEES. The Board of Directors, by resolution adopted by
a majority of the entire Board, may designate one or more committees, each
committee to consist of two or more of the Directors of the Corporation, which
shall have such name or names and shall have and may exercise such powers of the
Board of Directors, except as otherwise provided by law, by the Articles of
Incorporation or by these Bylaws, as may be determined from time to time by the
Board of Directors. Such committees shall provide for their own rules of
procedure, subject to the same restrictions thereon as provided above for the
Executive Committee.
4.4 REMOVAL. The Board of Directors shall have power at any time to
remove any member of any committee, with or without cause, and to fill vacancies
in and to dissolve any such committee.
ARTICLE V
MEETINGS OF THE BOARD OF DIRECTORS
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5.1 TIME AND PLACE. Meetings of the Board of Directors may be held at
any place either within or without the State of Georgia. Each newly elected
Board of Directors shall meet immediately following the close of the annual
meeting of shareholders and at the place thereof, or such newly elected Board of
Directors may hold such meeting at such place and time as shall be fixed by the
consent in writing of all the Directors. In any such case no notice of such
meeting to the newly elected Directors shall be necessary in order legally to
constitute the meeting. If the Board of Directors is elected by written consent
of shareholders without a meeting, then the newly elected Board shall meet as
soon as is reasonably practicable after such consent is duly filed with the
Corporation, at the call of the Chairman of the Board, if any, or of the
President or of at least one-third of the Directors then in office, at such time
and place as shall be specified by written notice thereof given to each Director
either by personal delivery or by mail, telegram, or cablegram at least two days
before the meeting.
5.2 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held without notice at such time and place, within or without the State of
Georgia, as shall be determined by the Board of Directors from time to time.
5.3 SPECIAL MEETINGS; NOTICE. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President on not
less than two days' notice by telephone, mail, telegram, cablegram or personal
delivery to each Director and shall be called by the Chairman of the Board, the
President or the Secretary in like manner and on like notice on the written
request of any two or more Directors. Any such special meeting shall be held at
such time and place, within or without the State of Georgia, as shall be stated
in the notice of meeting. No notice of any meeting of the Board of Directors
need state the purposes thereof.
5.4 WAIVER OF NOTICE. Notice of any meeting may be waived by an
instrument in writing executed before or after the meeting. Attendance in person
at any such meeting shall constitute a waiver of notice thereof.
5.5 QUORUM. At all meetings of the Board of Directors, the presence of
a majority of the authorized number of Directors shall be necessary and
sufficient to constitute a quorum for the transaction of business. Directors may
participate in any meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by means of such
communications equipment shall constitute the presence in person at such
meeting. The act of a majority of the Directors present at any meeting at which
there is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by law, the Articles of Incorporation or these
bylaws. In the absence of a quorum a majority of the Directors present at any
meeting may adjourn the meeting from time to time until a quorum is present.
Notice of any adjourned meeting need only be given by announcement at the
meeting at which the adjournment is taken.
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<PAGE> 9
5.6 ACTION IN LIEU OF MEETING. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent setting forth the action so
taken is signed by all members of the Board of Directors or of such committee,
as the case may be, and such written consent is delivered to the Corporation for
filing with the minutes of the proceedings of the Board of Directors or of such
committee and any further requirements of law pertaining to such consents have
been complied with.
5.7 INTERESTED DIRECTORS AND OFFICERS. An interested Director or
officer is one who is a party to a contract or transaction with the Corporation
or who is an officer or Director of, or has a financial interest in, another
corporation, partnership, association or other entity which is a party to a
contract or transaction with the Corporation. Contracts and transactions between
the Corporation and one or more interested Directors or officers shall not be
void or voidable solely because of the involvement or vote of such interested
persons as long as (i) the contract or transaction is approved in good faith by
the Board of Directors or appropriate committee by the affirmative vote of a
majority of disinterested Directors, even if the disinterested Directors be less
than a quorum, at a meeting of the Board or committee at which the material
facts as to the interest of the interested person or persons and the contract or
transaction are disclosed or known to the Board or committee prior to the vote;
or (ii) the contract or transaction is approved in good faith by the
shareholders after the material facts as to the interest of the interested
person or persons and the contract or transaction have been disclosed to them;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified by the Board, committee, or
shareholders. Interested Directors may be counted in determining the presence of
a quorum at a meeting of the Board or committee which authorizes the contract or
transaction.
ARTICLE VI
OFFICERS, AGENTS AND EMPLOYEES
6.1 GENERAL PROVISIONS. The officers of the Corporation shall consist
of a President, a Secretary, and a Treasurer, and may include a Chairman of the
Board, a Vice Chairman of the Board, one or more Executive Vice Presidents,
Senior Vice Presidents and Vice Presidents, one or more Assistant Secretaries,
and one or more Assistant Treasurers. The officers shall be elected by the Board
of Directors at the first meeting of the Board of Directors after the annual
meeting of the shareholders in each year or shall be appointed as provided in
these bylaws. The Board of Directors may elect other officers, agents and
employees, who shall have such authority and perform such duties as may be
prescribed by the Board of Directors. All officers shall hold office until the
meeting of the Board of Directors following the next annual meeting of the
shareholders after their election or appointment and until their successors
shall have been elected or appointed and shall have qualified. Any two or more
offices may be held by the same person. Any officer, agent or employee of the
Corporation may be removed by the Board of Directors with or without cause. Such
removal without cause shall be without prejudice to such
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<PAGE> 10
person's contract rights, if any, but the election or appointment of any person
as an officer, agent or employee of the Corporation shall not of itself create
contract rights. The compensation of officers, agents and employees elected by
the Board of Directors shall be fixed by the Board of Directors. The Board of
Directors may require any officer, agent or employee to give security for the
faithful performance of his duties.
6.2 POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD, THE VICE CHAIRMAN
OF THE BOARD AND THE PRESIDENT. The powers and duties of the Chairman of the
Board, the Vice Chairman of the Board and the President, subject to the
supervision and control of the Board of Directors, shall be those usually
appertaining to their respective offices and whatever other powers and duties
are prescribed by these bylaws or by the Board of Directors.
(a) The Chairman of the Board shall preside at all meetings of the
Board of Directors and at all meetings of the shareholders.
(b) The Vice Chairman of the Board shall, in the absence or disability
of the Chairman, perform the duties of the Chairman.
(c) The President shall, unless otherwise provided by the Board of
Directors, be the chief executive officer of the Corporation. He shall have
general charge of the business and affairs of the Corporation and shall keep the
Board of Directors fully advised. He shall employ and discharge employees and
agents of the Corporation, except such as shall be elected by the Board of
Directors, and he may delegate these powers. He shall have such powers and
perform such duties as generally pertain to the office of the President, as well
as such further powers and duties as may be prescribed by the Board of
Directors. The President may vote the shares or other securities of any other
domestic or foreign corporation of any type or kind which may at any time be
owned by the Corporation, may execute any shareholders' or other consents in
respect thereof and may in his discretion delegate such powers by executing
proxies, or otherwise, on behalf of the Corporation. The Board of Directors, by
resolution from time to time, may confer like powers upon any other person or
persons.
6.3 POWERS AND DUTIES OF VICE PRESIDENTS. Each Executive Vice
President, Senior Vice President and Vice President shall have such powers and
perform such duties as the Board of Directors or the President may prescribe and
shall perform such other duties as may be prescribed by these bylaws. In the
absence or inability to act of the President, unless the Board of Directors
shall otherwise provide, the Executive Vice President, or if there be none, the
Senior Vice President who has served in that capacity for the longest time and
who shall be present and able to act, or if there be none, the Vice President
who has served in that capacity for the longest time and who shall be present
and able to act, shall perform all duties and may exercise any of the powers of
the President. The performance of any such duty by an Executive Vice President,
a Senior Vice President or a Vice President shall be conclusive evidence of his
power to act.
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6.4 POWERS AND DUTIES OF THE SECRETARY. The Secretary shall have charge
of the minutes of all proceedings of the shareholders and of the Board of
Directors and shall keep the minutes of all their meetings at which he is
present. Except as otherwise provided by these bylaws he shall attend to the
giving of all notices to shareholders and Directors. He shall have charge of the
seal of the Corporation, shall attend to its use on all documents the execution
of which on behalf of the Corporation under its seal is duly authorized and
shall attest the same by his signature whenever required. He shall have charge
of the record of shareholders of the Corporation, of all written requests by
shareholders that notices be mailed to them at an address other than their
addresses on the record of shareholders, and of such other books and papers as
the Board of Directors may direct. Subject to the control of the Board of
Directors, he shall have all such powers and duties as generally are incident to
the position of corporate secretary or as may be assigned to him by the
President or the Board of Directors.
6.5 POWERS AND DUTIES OF THE TREASURER. The Treasurer shall have charge
of all funds and securities of the Corporation, shall endorse the same for
deposit or collection when necessary and deposit the same to the credit of the
Corporation in such banks or depositories as the Board of Directors may
authorize. He may endorse all commercial documents requiring endorsements for or
on behalf of the Corporation and may sign all receipts and vouchers for payments
made to the Corporation. He shall have all such powers and duties as generally
are incident to the position of corporate treasurer or as may be assigned to him
by the President or by the Board of Directors.
6.6 DELEGATION OF DUTIES. In case of the absence of any officer of the
Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors (or in the case of Assistant Secretaries or
Assistant Treasurers only, the President) may confer for the time being the
powers and duties, or any of them, of such officer upon any other officer
(provided that the powers and duties of the President may not be conferred upon
the Secretary, and vice versa), or elect or appoint any new officer to fill a
vacancy created by death, resignation, retirement or termination of any officer.
In such latter event such new officer shall serve until the next annual election
of officers.
ARTICLE VII
CAPITAL STOCK
7.1 CERTIFICATES. The interest of each shareholder shall be evidenced
by a certificate or certificates representing shares of the Corporation which
shall be in such form as the Board of Directors may from time to time adopt and
shall be numbered and shall be entered in the books of the Corporation as they
are issued. Each certificate representing shares shall set forth upon the face
thereof the following:
(a) the name of this Corporation;
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(b) that the Corporation is organized under the laws of the State of
Georgia;
(c) the name or names of the person or persons to whom the certificate
is issued;
(d) the number and class of shares, and the designation of the series,
if any, which the certificate represents; and
(e) if any shares represented by the certificate are non-voting shares,
a statement or notation to that effect; and, if the shares represented by the
certificate are subordinate to shares of any other class or series with respect
to dividends or amounts payable on liquidation, shall further set forth on
either the face or back of the certificate a clear and concise statement to that
effect.
Each certificate shall be signed by the President or a Vice President
and the Secretary or an Assistant Secretary and may be sealed with the seal of
the Corporation or a facsimile thereof. If a certificate is countersigned by a
transfer agent or registered by a registrar, other than the Corporation itself
or an employee of the Corporation, the signature of any such officer of the
Corporation may be a facsimile. In case any officer or officers who shall have
signed, or whose facsimile signature or signatures shall have been used on, any
such certificate or certificates shall cease to be such officer or officers of
the Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be delivered as though the person
or persons who signed such certificate or certificates or whose facsimile
signatures shall have been used thereon had not ceased to be such officer or
officers.
7.2 SHAREHOLDER LIST. The Corporation shall keep or cause to be kept a
record of the shareholders of the Corporation which readily shows, in
alphabetical order or by alphabetical index, by voting group and, within each
voting group, by classes or series of stock, if any, the names of the
shareholders entitled to vote, with the address of and the number of shares held
by each. Said record shall be presented and kept open at all meetings of the
shareholders.
7.3 TRANSFERS OF SHARES. Transfers of stock shall be made on the books
of the Corporation only by the person named in the certificate, or by power of
attorney lawfully constituted in writing, and upon surrender of the certificate
thereof, or in the case of a certificate alleged to have been lost, stolen or
destroyed, upon compliance with the provisions of Section 7.9 of these bylaws.
7.4 AUTHORIZATION OF DECLARATION OF DISTRIBUTIONS AND DIVIDENDS. Unless
the Articles of Incorporation provide otherwise, the Board of Directors from
time to time in its discretion may authorize or declare distributions or share
dividends in accordance with the Georgia Business Corporation Code.
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7.5 DUTY OF CORPORATION TO REGISTER TRANSFER. The Corporation is under
a duty to register the transfer of shares only if:
(a) the certificate is endorsed by the appropriate person or persons;
and
(b) reasonable assurance is given that the endorsement or affidavit is
genuine and effective; and
(c) the Corporation either has no duty to inquire into adverse claims
or has discharged that duty; and
(d) the requirements of any applicable law relating to the collection
of taxes have been met; and
(e) the transfer in fact is rightful or is to a bona fide purchaser.
7.6 RECORD DATES.
(a) For the purpose of determining shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a determination
of shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed seventy days. If the stock transfer books shall be closed for the purpose
of determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days immediately
preceding such meeting.
(b) In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any such determination of
shareholders, such date to be not more than seventy days and, in case of a
meeting of shareholders, not less than ten days, prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
7.7 REGISTERED OWNER. The Corporation shall be entitled to treat the
holder of record of any share of stock of the Corporation as the person entitled
to vote such share, to receive any dividend or other distribution with respect
to such share, and for all other purposes and accordingly shall not be bound to
recognize any equitable or other claim or interest in such share on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
7.8 TRANSFER AGENT AND REGISTRARS. The Board of Directors may appoint
one or more transfer agents and one or more registrars and may require each
stock certificate to bear the signature or signatures of a transfer agent or a
registrar or both.
7.9 LOST CERTIFICATES. Any person claiming a certificate of stock to be
lost, stolen or destroyed shall make an affidavit or affirmation of the fact in
such manner as the Board of
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Directors may require and shall, if the Directors so require, give the
Corporation a bond of indemnity in form and amount and with one or more sureties
satisfactory to the Board of Directors, whereupon an appropriate new certificate
may be issued in lieu of the certificate alleged to have been lost, stolen or
destroyed.
7.10 FRACTIONAL SHARES OR SCRIP. The Corporation may, when and if
authorized so to do by its Board of Directors, issue certificates for fractional
shares or scrip in order to effect share transfers, share distributions or
reclassifications, mergers, consolidations or reorganizations. Holders of
fractional shares shall be entitled, in proportion to their fractional holdings,
to exercise voting rights, receive dividends and participate in any of the
assets of the Corporation in the event of liquidation. Holders of scrip shall
not, unless expressly authorized by the Board of Directors, be entitled to
exercise any rights of a shareholder of the Corporation, including voting
rights, dividend rights or the right to participate in any distribution of
assets of the Corporation in the event of liquidation. In lieu of issuing
fractional shares or scrip, the Corporation may pay in cash the fair value of
fractional interests as determined by the Board of Directors; and the Board of
Directors may adopt resolutions regarding rights with respect to fractional
shares or scrip as it may deem appropriate, including without limitation the
right for persons entitled to receive fractional shares to sell such fractional
shares or purchase such additional fractional shares as may be needed to acquire
one full share, or sell such fractional shares or scrip for the account of such
persons.
ARTICLE VIII
BOOKS AND RECORDS; SEAL; ANNUAL STATEMENTS
8.1 INSPECTION OF BOOKS AND RECORDS. Any person who is the holder of
record of, or authorized in writing by the holders of record of, more than two
percent (2%) of the outstanding shares of any class or series of the
Corporation, upon written demand stating the purpose thereof, shall have the
right to inspect in person or by agent or attorney, at any reasonable time or
times, excerpts from minutes of any meeting of the Board of Directors, records
of any action of a committee thereof while acting in place of the Board of
Directors on behalf of the Corporation, minutes of any meeting of shareholders,
and records of action taken by the shareholders or Board of Directors without a
meeting, accounting records of the Corporation, and the record of shareholders
and to make copies therefrom.
A shareholder may inspect and copy the records described in the
immediately preceding paragraph only if (1) his demand is made in good faith and
for a proper purpose that is reasonably relevant to his legitimate interest as a
shareholder; (2) he describes with reasonable particularity his purpose and the
records he desires to inspect; (3) the records are directly connected with his
purpose; and (4) the records are to be used only for the stated purpose.
If the Secretary or a majority of the Board of Directors find the
request proper, the Secretary shall promptly notify the shareholder of the time
and place at which the inspection may be conducted.
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If said request is found by the Secretary or the Board of Directors not
to be proper, the Secretary shall promptly notify the requesting shareholder on
or prior to the date on which the shareholder requested to conduct the
inspection. The Secretary shall specify in said notice the basis for the
rejection of the shareholder's request.
The Secretary and the Board of Directors shall at all times be entitled
to rely on the corporate records in making any determination hereunder.
8.2 SEAL. The corporate seal shall be in such form as the Board of
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time, the signature of the Corporation followed by the
word "Seal" enclosed in parentheses or scroll shall be deemed the seal of the
Corporation.
8.3 ANNUAL STATEMENTS. Not later than four months after the close of
each fiscal year, and in any case prior to the next annual meeting of
shareholders, the Corporation shall prepare:
(a) A balance sheet showing in reasonable detail the financial
condition of the Corporation as of the close of its fiscal year;
(b) A profit and loss statement showing the results of its operations
during its fiscal year. Upon written request, the Corporation promptly shall
mail to any shareholder of record a copy of the most recent such balance sheet
and profit and loss statement; and
(c) Such other documents and reports as may be required by law.
ARTICLE IX
INDEMNIFICATION
9.1 CERTAIN DEFINITIONS. As used in this Article, the following
capitalized terms shall have the following meanings:
(a) "Corporation" includes any domestic or foreign predecessor entity
of this Corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise. A Director is
considered to be serving an employee benefit plan at the Corporation's request
if his
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duties to the Corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a Director.
(c) "Expenses" includes attorneys' fees.
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable Expenses incurred with respect to a proceeding.
(e) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(f) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
and whether formal or informal.
(g) "Reviewing Party" shall mean the person or persons making the
entitlement determination pursuant to Section 9.4 of this Article, and shall not
include a court making any determination under this Article or otherwise.
9.2 BASIC INDEMNIFICATION ARRANGEMENT.
(a) Except as provided in Section 9.7 and subsections 9.2(d), 9.2(e)
and 9.2(f) below, the Corporation shall indemnify an individual who is made a
Party to a Proceeding because he is or was a Director against Liability incurred
by him in the Proceeding if he acted in a manner he believed in good faith to be
in or not opposed to the best interests of the Corporation and, in the case of
any criminal Proceeding, he had no reasonable cause to believe his conduct was
unlawful.
(b) A person's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection 9.2(a).
(c) The termination of a Proceeding by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, be determinative that the proposed indemnitee did not meet the standard
of conduct set forth in subsection 9.2(a).
(d) The Corporation shall not indemnify a person under this Article in
connection with (i) a Proceeding by or in the right of the Corporation in which
such person was adjudged liable to the Corporation, unless, and then only to the
extent that, the Reviewing Party, or a court of competent jurisdiction acting
pursuant to Section 9.5 of this Article or Section 14-2-854 of the Georgia
Business Corporation Code, determines that, in view of the circumstances of the
case, the indemnitee is fairly and reasonably entitled to indemnification, or
(ii) any Proceeding in which such person was adjudged liable on the basis that
he improperly received a personal benefit, unless, and then only to the extent
that, the Reviewing Party, or a court of competent jurisdiction acting
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pursuant to Section 9.5 of this Article or Section 14-2-854 of the Georgia
Business Corporation Code, determines that, in view of the circumstances of the
case, such person is fairly and reasonably entitled to indemnification.
(e) Indemnification permitted under this Article in connection with a
Proceeding by or in the right of the Corporation shall include reasonable
Expenses, penalties, fines (including an excise tax assessed with respect to an
employee benefit plan) and amounts paid in settlement in connection with the
Proceeding, but, unless ordered by a court, shall not include judgments.
(f) Notwithstanding any other provision of this Article, no person
shall be entitled to indemnification or advancement of Expenses hereunder with
respect to any Proceeding or claim brought or made by him against the
Corporation, other than a Proceeding or claim seeking or defending such person's
right to indemnification or advancement of expense pursuant to Section 9.5
hereof or otherwise.
(g) If any person is entitled under any provision of this Article to
indemnification by the Corporation for some portion of Liability incurred by
him, but not the total amount thereof, the Corporation shall indemnify such
person for the portion of such Liability to which he is entitled.
(h) The Corporation shall indemnify a Director to the extent that he
has been successful, on the merits or otherwise, in the defense of any
Proceeding to which he was a Party, or in defense of any claim, issue or matter
therein, because he is or was a Director, against reasonable Expenses incurred
by him in connection with the Proceeding.
9.3 ADVANCES FOR EXPENSES.
(a) The Corporation shall pay for or reimburse the reasonable Expenses
incurred by a Director as a Party to a Proceeding in advance of final
disposition of the Proceeding if:
(i) Such person furnishes the Corporation a written
affirmation of his good faith belief that he has met the standard of
conduct set forth in subsection 9.2(a) above and that his conduct does
not constitute behavior of the kind described in subsections 9.7
(i)-(iv) below; and
(ii) Such person furnishes the Corporation a written
undertaking (meeting the qualifications set forth below in subsection
9.3(b)), executed personally or on his behalf, to repay any advances if
it is ultimately determined that he is not entitled to indemnification
under this Article or otherwise.
(b) The undertaking required by subsection 9.3(a)(ii) above must be an
unlimited general obligation of the proposed indemnitee but need not be secured
and shall be accepted without reference to financial ability to make repayment.
If a Director seeks to enforce his rights to indemnification in a court pursuant
to Section 9.5, such undertaking to repay shall not be
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applicable or enforceable unless and until there is a final court determination
that he is not entitled to indemnification, as to which all rights of appeal
have been exhausted or have expired.
9.4 AUTHORIZATION OF AND DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.
(a) The Corporation acknowledges that indemnification of a Director
under Section 9.2 has been pre-authorized by the Corporation in the manner
described in subsection 9.4(b) below. Nevertheless, the Corporation shall not
indemnify a Director under Section 9.2 unless a separate determination has been
made in the specific case that indemnification of such person is permissible in
the circumstances because he has met the standard of conduct set forth in
subsection 9.2(a); provided, however, that no entitlement decision need be made
prior to the advancement of Expenses and that, regardless of the result or
absence of any such determination, and unless limited by the Articles of
Incorporation of this Corporation, the Corporation shall make any
indemnification mandated by Section 9.2(h) above.
(b) The determination referred to in subsection 9.4(a) above shall be
made, at the election of the Board of Directors:
(i) by the Board of Directors of the Corporation by majority
vote of a quorum consisting of directors not at the time parties to the
Proceeding;
(ii) if a quorum cannot be obtained under subdivision (i), by
majority vote of a committee duly designated by the Board of Directors
(in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to
the Proceeding;
(iii) by special legal counsel:
(1) selected by the Board of Directors or its
committee in the manner prescribed in subdivision (i) or (ii);
or
(2) if a quorum of the Board of Directors cannot be
obtained under subdivision (i) and a committee cannot be
designated under subdivision (ii), selected by a majority vote
of the full Board of Directors (in which selection directors
who are parties may participate); or
(iv) by the shareholders; provided that shares owned by or
voted under the control of directors who are at the time parties to the
Proceeding may not be voted on the determination.
(c) As acknowledged above, the Corporation has pre-authorized the
indemnification of Directors hereunder, subject to a case-by-case determination
that the proposed indemnitee met the
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applicable standard of conduct under subsection 9.2(a). Consequently, no further
decision need or shall be made on a case-by-case basis as to the authorization
of the Corporation's indemnification of Directors hereunder. Nevertheless,
except as set forth in subsection 9.4(d) below, evaluation as to reasonableness
of Expenses of a Director in the specific case shall be made in the same manner
as the determination that indemnification is permissible, as described in
subsection 9.4(b) above, except that if the determination is made by special
legal counsel, evaluation as to reasonableness of Expenses shall be made by
those entitled under subsection 9.4(b)(iii) to select counsel.
(d) Notwithstanding the requirement under subsection 9.4(c) that the
Reviewing Party evaluate the reasonableness of Expenses claimed by the proposed
indemnitee, any Expenses claimed by the proposed indemnitee shall be deemed
reasonable if the Reviewing Party fails to make the evaluation required by
subsection 9.4(c) within thirty days following the proposed indemnitee's written
request for indemnification for, or advancement of, Expenses.
(e) The Reviewing Party, however chosen, shall make the requested
determination as promptly as reasonably practical after a request for
indemnification is presented.
9.5 COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES. Unless
this Corporation's Articles of Incorporation provide otherwise, a Director who
is a Party to a Proceeding may apply for indemnification or advances for
Expenses to the court conducting the Proceeding or to another court of competent
jurisdiction. For purposes of this Article, the Corporation hereby consents to
personal jurisdiction and venue in any court in which is pending a Proceeding to
which a Director is a Party. Regardless of any determination by the Reviewing
Party that the proposed indemnitee is not entitled to indemnification or
advancement of Expenses or as to the reasonableness of Expenses, and regardless
of any failure by the Reviewing Party to make a determination as to such
entitlement or the reasonableness of Expenses, such court's review shall be a de
novo review. On application, the court, after giving any notice it considers
necessary, may order indemnification or advancement of Expenses if it determines
that:
(i) The applicant is entitled to mandatory indemnification under
Section 9.2(h) above (in which case the Corporation shall pay the indemnitee's
reasonable Expenses incurred to obtain court-ordered indemnification);
(ii) The applicant is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not he met the standard of
conduct set forth in subsection 9.2(a) above or was adjudged liable as described
in subsection 9.2(d) above (in which case any court-ordered indemnification need
not be limited to reasonable Expenses incurred by the indemnitee but may include
Expenses, penalties, fines, judgments, amounts paid in settlement and any other
amounts ordered by the court to be indemnified, and, whether or not so ordered,
the Corporation shall pay the applicant's reasonable Expenses incurred to obtain
court-ordered indemnification); or
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(iii) In the case of advances for Expenses, the applicant is entitled
pursuant to the Articles of Incorporation, Bylaws or applicable resolution or
agreement to payment for or reimbursement of his reasonable Expenses incurred as
a Party to a Proceeding in advance of final disposition of the Proceeding (in
which case the Corporation shall pay the applicant's reasonable Expenses
incurred to obtain court-ordered advancement of Expenses); or
(iv) The applicant is otherwise entitled to enforcement of his rights
hereunder (in which case the Corporation shall pay the indemnitee's reasonable
Expenses incurred to obtain such enforcement).
9.6 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS. Unless this
Corporation's Articles of Incorporation provide otherwise, (i) the Corporation
shall indemnify and advance Expenses under this Article to an officer of the
Corporation who is not a Director to the same extent, and subject to the same
conditions, as to a Director, and (ii) the Corporation may, subject to
authorization in the specific case, indemnify and advance Expenses under this
Article to an employee or agent of the Corporation who is not a Director to the
same extent as to a Director, or to any lesser extent (or greater extent if
permitted by law) determined by the Board of Directors.
9.7 LIMITATIONS ON INDEMNIFICATION. Regardless of whether a proposed
indemnitee has met the applicable standard of conduct set forth in subsection
9.2(a), the Corporation shall not indemnify a person under this Article for any
Liability incurred in a Proceeding in which the person is adjudged liable to the
Corporation or is subjected to injunctive relief in favor of the Corporation:
(i) for any appropriation, in violation of his duties, of any business
opportunity of the Corporation;
(ii) for acts or omissions which involve intentional misconduct or a
knowing violation of law;
(iii) for the types of liability set forth in Section 14-2-832 of the
Georgia Business Corporation Code; or
(iv) for any transaction from which he received an improper personal
benefit.
9.8 LIABILITY INSURANCE. The Corporation may purchase and maintain
insurance on behalf of a Director or an individual who is or was an officer,
employee or agent of the Corporation or who, while an officer, employee or agent
of the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise against Liability asserted against or incurred by him in
that capacity or arising from his
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status as a Director, officer, employee, or agent, whether or not the
Corporation would have power to indemnify him against the same Liability under
Section 9.2, Section 9.3 or Section 9.4 above.
9.9 WITNESS FEES. Nothing in this Article shall limit the Corporation's
power to pay or reimburse Expenses incurred by a person in connection with his
appearance as a witness in a Proceeding at a time when he has not been made a
named defendant or respondent in the Proceeding.
9.10 REPORT TO SHAREHOLDERS. If the Corporation indemnifies or advances
Expenses to a Director in connection with a Proceeding by or in the right of the
Corporation, the Corporation shall report the indemnification or advance, in
writing, to the shareholders with or before the notice of the next shareholders'
meeting.
9.11 SECURITY FOR INDEMNIFICATION OBLIGATIONS. The Corporation may at
any time and in any manner, at the discretion of the Board of Directors, secure
the Corporation's obligations to indemnify or advance Expenses to a person
pursuant to this Article.
9.12 NO DUPLICATION OF PAYMENTS. The Corporation shall not be liable
under this Article to make any payment to a person hereunder to the extent such
person has otherwise actually received payment (under any insurance policy,
agreement or otherwise) of the amounts otherwise payable hereunder.
9.13 SUBROGATION. In the event of payment under this Article, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.
9.14 CONTRACT RIGHTS. The right to indemnification and advancement of
Expenses conferred hereunder to Directors shall be a contract right and shall
not be affected adversely to any Director by any amendment of these Bylaws with
respect to any action or inaction occurring prior to such amendment; provided,
however, that this provision shall not confer upon any indemnitee or potential
indemnitee (in his capacity as such) the right to consent or object to any
subsequent amendment of these Bylaws.
9.15 SPECIFIC PERFORMANCE. In any Proceeding brought by or on behalf of
a Director to specifically enforce the provisions of this Article, the
Corporation hereby waives the claim or defense therein that the plaintiff or
claimant has an adequate remedy at law, and the Corporation shall not urge in
any such Proceeding the claim or defense that such remedy at law exists. The
provisions of this Section 9.15, however, shall not prevent the Director from
seeking a remedy at law in connection with any breach of the provisions of this
Article.
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9.16 NON-EXCLUSIVITY, ETC. The rights of a Director hereunder shall be
in addition to any other rights with respect to indemnification, advancement of
Expenses or otherwise that he may have under contract or the Georgia Business
Corporation Code or otherwise.
9.17 AMENDMENTS. It is the intent of the Corporation to indemnify and
advance Expenses to its Directors to the full extent permitted by the Georgia
Business Corporation Code, as amended from time to time. To the extent that the
Georgia Business Corporation Code is hereafter amended to permit a Georgia
business corporation to provide to its directors greater rights to
indemnification or advancement of Expenses than those specifically set forth
hereinabove, this Article shall be deemed amended to require such greater
indemnification or more liberal advancement of Expenses to the Corporation's
Directors, in each case consistent with the Georgia Business Corporation Code as
so amended from time to time. No amendment, modification or rescission of this
Article, or any provision hereof, the effect of which would diminish the rights
to indemnification or advancement of Expenses as set forth herein shall be
effective as to any person with respect to any action taken or omitted by such
person prior to such amendment, modification or rescission.
9.18 SEVERABILITY. To the extent that the provisions of this Article
are held to be inconsistent with the provisions of Part 5 of Article 8 of the
Georgia Business Corporation Code, such provisions of such Code shall govern. In
the event that any of the provisions of this Article (including any provision
within a single section, subsection, division or sentence) is held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, the
remaining provisions of this Article shall remain enforceable to the fullest
extent permitted by law.
ARTICLE X
NOTICES; WAIVERS OF NOTICE
10.1 NOTICES. Except as otherwise specifically provided in these
bylaws, whenever under the provisions of these bylaws notice is required to be
given to any shareholder, Director or officer, it shall not be construed to mean
personal notice, but such notice may be given by personal notice or by cable,
telegraph, or facsimile transmission, or by mail by depositing the same in the
post office or letter box in a postage-paid sealed wrapper, addressed to such
shareholder, officer or Director at such address as appears on the books of the
Corporation, and such notice shall be deemed to be given at the time when the
same shall be thus sent or mailed.
10.2 WAIVERS OF NOTICE. Except as otherwise provided in these bylaws,
when any notice whatever is required to be given by law, by the Articles of
Incorporation or by these bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. In the case of a shareholder, such waiver of notice
may be signed by the shareholder's attorney or proxy duly appointed in writing.
ARTICLE XI
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<PAGE> 23
EMERGENCY POWERS
11.1 BYLAWS. The Board of Directors may adopt emergency bylaws, subject
to repeal or change by action of the shareholders, which shall, notwithstanding
any provision of law, the Articles of Incorporation or these bylaws, be
operative during any emergency in the conduct of the business of the Corporation
resulting from any catastrophic event including, without limitation, an attack
on the United States or on a locality in which the Corporation conducts its
business or customarily holds meeting of its Board of Directors or its
shareholders, or during any nuclear or atomic disaster, or during the existence
of any catastrophe, or other similar emergency condition, as a result of which a
quorum of the Board of Directors or a standing committee thereof cannot readily
be convened for action. The emergency bylaws may make any provision that may be
practical and necessary for the circumstances of the emergency.
11.2 LINES OF SUCCESSION. The Board of Directors, either before or
during any such emergency, may provide, and from time to time modify, lines of
succession in the event that during such an emergency any or all officers or
agents of the Corporation shall for any reason be rendered unavailable or
otherwise incapable of discharging their duties.
11.3 HEAD OFFICE. The Board of Directors, either before or during any
such emergency, may, effective in the emergency, change the head office or
designate several alternative head offices or regional offices, or authorize the
officers to do so.
11.4 PERIOD OF EFFECTIVENESS. To the extent not inconsistent with any
emergency bylaws so adopted, these bylaws shall remain in effect during any such
emergency and upon its termination the emergency bylaws shall cease to be
operative.
11.5 NOTICES. Unless otherwise provided in emergency bylaws, notice of
any meeting of the Board of Directors during any such emergency may be given
only to such of the Directors as it may be practical to reach at the time, and
by such means as may be practical at the time, including publication, radio or
television.
11.6 OFFICERS AS DIRECTORS PRO TEMPORE. To the extent required to
constitute a quorum at any meeting of the Board of Directors during any such
emergency, the officers of the Corporation who are present shall, unless
otherwise provided in emergency bylaws, be deemed, in order of rank and within
the same rank in order of seniority, Directors for such meeting.
11.7 LIABILITY OF OFFICERS, DIRECTORS AND AGENTS. No officer, Director,
agent or employee acting in accordance with any emergency bylaws shall be liable
except for willful misconduct. No officer, Director, agent or employee shall be
liable for any action taken by him in good faith in such an emergency in
furtherance of the ordinary business affairs of the Corporation even though not
authorized by the bylaws then in effect.
23
<PAGE> 24
ARTICLE XII
CHECKS, NOTES, DRAFTS, ETC.
Checks, notes, drafts, acceptances, bills of exchange and other orders
or obligations for the payment of money shall be signed by such officer or
officers or person or persons as the Board of Directors by resolution shall from
time to time designate.
ARTICLE XIII
AMENDMENTS
These bylaws may be altered or amended and new bylaws may be adopted by
the shareholders at any annual or special meeting of the shareholders or by the
Board of Directors at any regular or special meeting of the Board of Directors;
provided, however, that if such action is to be taken at a meeting of the
shareholders, notice of the general nature of the proposed change in the bylaws
shall be given in the notice of meeting. The shareholders may provide by
resolution that any bylaw provision repealed, amended, adopted, or altered by
them may not be repealed, amended, adopted or altered by the Board of Directors.
Action by the shareholders with respect to bylaws shall be taken by an
affirmative vote of a majority of the votes entitled to be cast by holders of
Voting Stock, and action by the Board of Directors with respect to bylaws shall
be taken by an affirmative vote of a majority of the entire Board of Directors.
ARTICLE XIV
FAIR PRICE REQUIREMENTS AND BUSINESS COMBINATIONS
WITH INTERESTED SHAREHOLDERS
14.1 FAIR PRICE REQUIREMENTS. All of the requirements of Sections
14-2-1110 through -1113, inclusive, of the Georgia Business Corporation Code, as
amended, shall apply to the business and affairs of the Corporation unless and
until this provision is repealed in accordance with the Georgia Business
Corporation Code and these Bylaws. (adopted effective 6/08/99)
14.2 BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS. All of the
requirements of Sections 14-2-1131 through -1131, inclusive, of the Georgia
Business Corporation Code, as amended, shall apply to the business and affairs
of the Corporation unless and until this provision is repealed in accordance
with the Georgia Business Corporation Code and these Bylaws. (adopted effective
6/08/99)
24
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK THIS CERTIFICATE IS TRANSFERABLE
[EMBLEM] IN NEW YORK, NEW YORK OR
[NOVA LOGO] CHARLOTTE, NORTH CAROLINA
INCORPORATED UNDER THE LAWS
OF THE STATE OF GEORGIA
CUSIP 669784 10 0
SEE REVERSE FOR
CERTAIN DEFINITIONS
NOVA CORPORATION (GEORGIA)
[NOVA CERTIFICATE]
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK
PAR VALUE $.01 PER SHARE OF
NOVA Corporation, transferable on the books of the Corporation in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed.
This Certificate and the shares of stock represented hereby are issued
and shall be held subject to all of the provisions of the Articles of
Incorporation of the Corporation and all amendments thereto (copies of
which are on file with the Transfer Agent), to all of which the holder by
acceptance hereof assents. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
COUNTERSIGNED AND REGISTERED: /s/ xxxxxxxxxxxxxxxxxxxxxxxxx
FIRST UNION NATIONAL BANK ------------------------------
(CHARLOTTE, NC) TRANSFER AGENT Chairman, President and
AND REGISTRAR Chief Executive Officer
BY /s/ xxxxxxxxxxxxxxxxxxxxxxxxx
-------------------------------
AUTHORIZED SIGNATURE Senior Vice President,
General Counsel and Secretary
<PAGE> 2
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 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.
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER, UPON REQUEST AND WITHOUT
CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND
RELATIVE RIGHTS OF THE SHARES OF EACH CLASS AUTHORIZED TO BE ISSUED AND THE
VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH
SUCH SERIES SO FAR AS THE SAME HAVE BEEN FIXED AND DETERMINED. THE ARTICLES OF
INCORPORATION OF THE CORPORATION PROVIDE THAT THE PREFERRED STOCK MAY BE ISSUED,
IN ONE OR MORE SERIES, THE RELATIVE RIGHTS AND PREFERENCES OF WHICH MAY BE FIXED
AND DETERMINED BY THE BOARD OF DIRECTORS FROM TIME TO TIME.
NOVA CORPORATION
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the entireties --------- ----------
JT TEN - as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act
--------------------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
----------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- ------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
shares of the capital stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint
- -------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
----------------------
NOTICE:
-------------------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
-------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM). PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 10.15
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of November 16, 1999
among
NOVA CORPORATION
and
NOVA INFORMATION SYSTEMS, INC.
as Borrowers and Guarantors
CERTAIN SUBSIDIARIES OF THE BORROWERS
as Guarantors
THE LENDERS IDENTIFIED HEREIN
and
BANK OF AMERICA, N.A.
as Administrative Agent
------------------------------------------------------------
BANC OF AMERICA SECURITIES LLC
as Lead Arranger and Book Manager
FIRST UNION NATIONAL BANK
as Documentation Agent
SUNTRUST BANK, ATLANTA
as Syndication Agent
and
WACHOVIA BANK, N.A.
as Co-Documentation Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 DEFINITIONS.............................................................................................1
1.1 Definitions.....................................................................................1
1.2 Computation of Time Periods....................................................................24
1.3 Accounting Terms...............................................................................24
SECTION 2 CREDIT FACILITIES......................................................................................25
2.1 Revolving Loans................................................................................25
2.2 Letter of Credit Subfacility...................................................................26
2.3 Several Obligations of the Borrowers...........................................................31
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES.........................................................32
3.1 Default Rate...................................................................................32
3.2 Extension and Conversion.......................................................................32
3.3 Prepayments....................................................................................32
3.4 Voluntary Reductions in Revolving Commitments..................................................33
3.5 Fees...........................................................................................33
3.6 Capital Adequacy...............................................................................34
3.7 Inability To Determine Interest Rate...........................................................35
3.8 Illegality.....................................................................................35
3.9 Requirements of Law............................................................................35
3.11 Indemnity......................................................................................38
3.12 Pro Rata Treatment.............................................................................39
3.13 Sharing of Payments............................................................................39
3.14 Payments, Computations, Etc....................................................................40
3.15 Evidence of Debt...............................................................................42
3.16 Replacement of Lenders.........................................................................42
SECTION 4 GUARANTY...............................................................................................43
4.1 The Guarantee..................................................................................43
4.2 Obligations Unconditional......................................................................43
4.3 Reinstatement..................................................................................45
4.4 Certain Additional Waivers.....................................................................45
4.5 Remedies.......................................................................................45
4.6 Rights of Contribution.........................................................................45
4.7 Continuing Guarantee...........................................................................46
SECTION 5 CONDITIONS.............................................................................................46
5.1 Conditions to Closing..........................................................................46
5.2 Conditions to All Extensions of Credit.........................................................48
SECTION 6 REPRESENTATIONS AND WARRANTIES.........................................................................49
6.1 Financial Condition............................................................................49
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6.2 No Changes or Restricted Payments..............................................................49
6.3 Organization; Existence; Compliance with Law...................................................49
6.4 Power; Authorization; Enforceable Obligations..................................................49
6.5 No Legal Bar...................................................................................50
6.6 No Material Litigation.........................................................................50
6.7 No Default.....................................................................................50
6.8 Ownership of Property; Liens...................................................................50
6.9 Intellectual Property..........................................................................50
6.10 No Burdensome Restrictions.....................................................................51
6.11 Taxes..........................................................................................51
6.12 ERISA..........................................................................................51
6.13 Governmental Regulations, Etc..................................................................52
6.14 Purpose of Extensions of Credit................................................................53
6.15 Environmental Matters..........................................................................53
6.16 Insurance......................................................................................54
6.17 Indebtedness...................................................................................54
6.18 VISA/MasterCard................................................................................54
6.19 Subsidiaries and Joint Ventures................................................................55
6.20 Solvency.......................................................................................55
6.21 Investments....................................................................................55
6.22 Disclosure.....................................................................................55
6.23 Labor Contracts and Disputes...................................................................55
6.24 Broker's Fees..................................................................................55
6.25 Year 2000 Compliance...........................................................................56
SECTION 7 AFFIRMATIVE COVENANTS..................................................................................56
7.1 Financial Statements...........................................................................56
7.2 Certificates; Other Information................................................................57
7.3 Notices........................................................................................57
7.4 Payment of Obligations.........................................................................59
7.5 Conduct of Business and Maintenance of Existence...............................................59
7.6 Maintenance of Property; Insurance.............................................................59
7.7 Inspection of Property; Books and Records; Discussions.........................................59
7.8 Environmental Laws.............................................................................60
7.9 Financial Covenants............................................................................61
7.10 Use of Proceeds................................................................................61
7.11 Additional Credit Parties......................................................................61
7.12 Subsidiaries...................................................................................61
7.13 Year 2000 Compatibility........................................................................62
SECTION 8 NEGATIVE COVENANTS.....................................................................................62
8.1 Indebtedness...................................................................................62
8.2 Liens..........................................................................................63
8.3 Nature of Business.............................................................................63
8.4 Consolidation, Merger, Sale or Purchase of Assets..............................................63
8.5 Advances, Investments and Loans................................................................64
8.6 Restricted Payments............................................................................64
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
8.7 Transactions with Affiliates; Modification of Documentation....................................65
8.8 Fiscal Year; Organizational Documents..........................................................65
8.9 Limitation on Restrictions.....................................................................65
8.10 No Further Negative Pledges....................................................................65
8.11 Sale of Equity Interests.......................................................................65
8.12 Infringement of Property Rights................................................................66
8.13 Affiliations...................................................................................66
8.14 Limitation on Non-Cash Charges.................................................................66
SECTION 9 EVENTS OF DEFAULT......................................................................................66
9.1 Events of Default..............................................................................66
9.2 Acceleration; Remedies.........................................................................69
SECTION 10 AGENCY PROVISIONS.....................................................................................70
10.1 Appointment....................................................................................70
10.2 Delegation of Duties...........................................................................70
10.3 Exculpatory Provisions.........................................................................70
10.4 Reliance on Communications.....................................................................71
10.5 Notice of Default..............................................................................71
10.6 Non-Reliance on Agent and Other Lenders........................................................71
10.7 Indemnification................................................................................72
10.8 Agent in its Individual Capacity...............................................................72
10.9 Successor Agent................................................................................73
SECTION 11 MISCELLANEOUS.........................................................................................73
11.1 Notices........................................................................................73
11.2 Right of Set-Off...............................................................................74
11.3 Benefit of Agreement...........................................................................75
11.4 No Waiver; Remedies Cumulative.................................................................77
11.5 Payment of Expenses, etc.......................................................................77
11.6 Amendments, Waivers and Consents...............................................................78
11.7 Counterparts...................................................................................79
11.8 Headings.......................................................................................79
11.9 Survival.......................................................................................79
11.10 Governing Law; Submission to Jurisdiction; Venue...............................................79
11.11 Severability...................................................................................80
11.12 Entirety.......................................................................................80
11.13 Binding Effect; Amendment and Restatement; Termination.........................................80
11.14 Confidentiality................................................................................81
11.15 Conflict.......................................................................................82
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
SCHEDULES
Schedule 2.1(a) Schedule of Lenders and Commitments
Schedule 6.6 Litigation
Schedule 6.16 Insurance
Schedule 6.19 Subsidiaries and Alliances
Schedule 8.1 Indebtedness
Schedule 8.2 Liens
Schedule 8.5 Investments
Schedule 11.1 Notices
EXHIBITS
Exhibit 2.1(b)(i) Form of Notice of Borrowing
Exhibit 2.1(e) Form of Revolving Note
Exhibit 3.2 Form of Notice of Extension/Conversion
Exhibit 5.1 Form of Officer's Certificate
Exhibit 7.2(b) Form of Officer's Compliance Certificate
Exhibit 7.11 Form of Joinder Agreement
Exhibit 11.3(b) Form of Assignment and Acceptance
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of November 16,
1999 (the "Credit Agreement") is by and among NOVA CORPORATION, a Georgia
corporation ("NOVA" or the "Parent"), NOVA INFORMATION SYSTEMS, INC., a Georgia
corporation ("NIS"; NOVA and NIS are hereinafter referred to individually as a
"Borrower" and collectively as the "Borrowers"), certain subsidiaries and
affiliates of the Borrowers as may from time to time become guarantors
hereunder in accordance with the provisions hereof, the lenders named herein
and such other lenders as may become parties hereto (the "Lenders"), and BANK
OF AMERICA, N.A., a national banking association (formerly known as Bank of
America National Trust and Savings Association), as Administrative Agent for
the Lenders (in such capacity, the "Agent").
WITNESSETH
WHEREAS, the Borrowers, the guarantors identified therein, the lenders
identified therein and the Agent are parties to a Credit Agreement dated as of
October 27, 1997 (as amended by an Amendment to Credit Agreement dated as of
January 30, 1998, a Second Amendment to Credit Agreement dated as of June 17,
1999 and a Third Amendment to Credit Agreement dated as of August 25, 1999 and
as otherwise modified prior to the date hereof, the "Existing Credit
Agreement");
WHEREAS, the Borrowers have requested that the Lenders amend and
restate the Existing Credit Agreement and provide a $250,000,000 credit
facility for the purposes hereinafter set forth;
WHEREAS, the Lenders have agreed to amend and restate the Existing
Credit Agreement and make the requested credit facility available to the
Borrowers on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINITIONS.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Acquisition", by any Person, means (i) the acquisition by
such Person of (a) all or a majority of the capital stock or other
equity interests of another Person, whether or not involving a merger
or consolidation with such Person, (b) all or substantially all of the
Property of another Person or (c) all or substantially all of the
Property constituting a line of business of another Person or (ii) the
formation by such Person of an Alliance.
<PAGE> 7
"Acquisition Adjustments" means all reasonable adjustments to
the operating and non-operating expenses of a CCTP Business or an
Alliance following the direct or indirect Acquisition thereof by the
Parent or any Subsidiary of the Parent, which adjustments relate to
the incurrence or elimination of certain costs or revenue items
following such Acquisition; depending on individual circumstances,
examples of adjustments may include (i) reduction of an owners' salary
from operating expenses if the owner is no longer going to work at the
CCTP Business or the Alliance after the Acquisition (this would also
apply to excessive salaries paid to other departing management and the
owner's family); (ii) addition of salaries for new managers; (iii)
savings as a result of eliminating authorization charges paid to third
party providers; (iv) reduction in redundant back-office processing
expenses; (v) addition of expenses that may have previously been
provided by a parent or an affiliated company at less than market
rates (examples: legal, accounting, etc.) and (vi) other reasonable
non-operating expenses; provided, that no such adjustments may be
utilized for more than twenty-four (24) months following consummation
of the related Acquisition.
"Acquisition Costs" means the total aggregate Investments
and/or the purchase price and reasonably related closing costs
associated with an Acquisition by the Parent or any Subsidiary of the
Parent including, without limitation, one time capital expenditures
relating to such Acquisition.
"Affiliate" means, with respect to any Person, any other
Person (i) directly or indirectly controlling or controlled by or
under direct or indirect common control with such Person or (ii)
directly or indirectly owning or holding ten percent (10%) or more of
the equity interest in such Person. For purposes of this definition,
"control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
"Agent" shall have the meaning assigned to such term in the
heading hereof, together with any successors or assigns.
"Agent's Fee Letter" means that certain letter agreement
dated as of August 27, 1999 among the Borrowers, the Agent and Banc of
America Securities LLC, as amended, modified, supplemented or replaced
from time to time.
"Aggregate Revolving Committed Amount" means the aggregate
amount of Revolving Commitments in effect from time to time, being
initially TWO HUNDRED FIFTY MILLION DOLLARS ($250,000,000) (such
aggregate maximum amount may be reduced from time to time as provided
in Section 3.4).
"Alliance" means (i) any joint venture listed on Schedule
6.19 and/or (ii) the acquisition by the Parent or a wholly-owned
Subsidiary of the Parent of a fifty percent (50%) or minority equity
interest in a CCTP Business.
2
<PAGE> 8
"Applicable Percentage" means for the Loans, Letter of Credit
Fee and the Unused Fee, the appropriate applicable percentages
corresponding to the Leverage Ratio in effect as of the most recent
determination date as shown below:
<TABLE>
<CAPTION>
Applicable Applicable Applicable Applicable
Percentage For Percentage For Margin for Base Percentage
Pricing Leverage Eurodollar For Letter of Base Rate For
Level Ratio Loans Credit Fees Loans Unused Fees
------- -------- -------------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
I < .75 to 1.0 .75% .75% 0% .20%
-
II < 1.50 to 1.0 1.00% 1.00% 0% .25%
-
but
> .75 to 1.0
III < 2.25 to 1.0 1.25% 1.25% 0% .30%
-
but
> 1.50 to 1.0
IV < 3.00 to 1.0 1.50% 1.50% .25% .40%
but
> 2.25 to 1.0
</TABLE>
The Applicable Percentages shall be determined and adjusted quarterly
on the date (each a "Calculation Date") five (5) Business Days after
the date by which the Borrowers are required to provide the officer's
certificate in accordance with the provisions of Section 7.2(b);
provided, however, that (i) the initial Applicable Percentages shall
be based on Pricing Level II until the first Calculation Date to occur
after six (6) months from the Closing Date, and, thereafter, the
Applicable Percentages shall be determined by the Leverage Ratio as of
the fiscal quarter end immediately preceding the applicable
Calculation Date, (ii) if the Borrowers fail to provide the officer's
certificate to the Agent as required by Section 7.2(b) on or before
the most recent Calculation Date, the Applicable Percentages from such
Calculation Date shall be based on Pricing Level IV until such time as
an appropriate officer's certificate is provided, whereupon the
Pricing Level shall be determined by the Leverage Ratio as of the
fiscal quarter end immediately preceding the applicable Calculation
Date and (iii) any adjustment to the Applicable Percentages based upon
the officer's certificate provided pursuant to Section 7.2(b) with
respect to the audited financial statements of the Parent and its
Subsidiaries shall be retroactive to the immediately preceding
Calculation Date. Except as set forth above, each Applicable
Percentage shall be effective from one Calculation Date until the next
Calculation Date. Any adjustment in the Applicable Percentages shall
be applicable to all existing Loans and Letters of Credit as well as
any new Loans made or Letters of Credit issued.
"Asset Disposition" means (i) the sale, lease or other
disposition of any Property by the Parent or any of its Subsidiaries,
other than any such sale permitted by clause (i), (ii) or (iii) of
Section 8.4(b), and (ii) receipt by the Parent or any of its
Subsidiaries of any cash insurance proceeds or condemnation award
payable by reason of theft, loss, physical
3
<PAGE> 9
destruction or damage, taking or similar event with respect to any of
their property or assets.
"Bank of America" means Bank of America, N.A. or its
successors.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of
the United States Code, as amended, modified, succeeded or replaced
from time to time.
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (i) a
court or governmental agency having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property
or ordering the winding up or liquidation of its affairs; or (ii)
there shall be commenced against such Person an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or any case, proceeding or other action for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of such Person or for any
substantial part of its Property or for the winding up or liquidation
of its affairs and such involuntary case or other case, proceeding or
other action shall remain undismissed for a period of sixty (60) days;
or (iii) such Person shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or make any general assignment for
the benefit of creditors; or (iv) such Person shall be unable to, or
shall admit in writing its inability to, pay its debts generally as
they become due.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (i) the Federal Funds Rate in effect on such
day plus 1/2 of 1% or (ii) the Prime Rate in effect on such day. If
for any reason the Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable after due
inquiry to ascertain the Federal Funds Rate for any reason, including
the inability or failure of the Agent to obtain sufficient quotations
in accordance with the terms hereof, the Base Rate shall be determined
without regard to clause (i) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist.
Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such
change in the Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrowers" has the meaning set forth in the preamble of this
Credit Agreement.
4
<PAGE> 10
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in San Francisco, California and
New York, New York are authorized or required by law to close, except
that, when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks in the United
States are not open for dealings in U.S. dollar deposits in the London
interbank market.
"CCTP Business" means (i) the assets or equity interests of
any Person engaged in the business of transaction processing,
including debit card, credit card, charge card, ATM and e-commerce
transaction processing, as well as any line of business reasonably
related (ancillary or complementary) thereto, or (ii) a portfolio of
agreements under which any Person provides such transaction processing
services.
"Capital Expenditures" means, as applied to any Person, all
expenditures which in accordance with GAAP are or should be accounted
for as capital expenditures in the financial statements of that
Person, including, without limitation, Capital Leases.
"Capital Lease" means, as applied to any Person, any lease of
any Property (whether real, personal or mixed) by that Person as
lessee which, in accordance with GAAP, is or should be accounted for
as a capital lease on the balance sheet of that Person.
"Capital Lease Obligation" means, as applied to any Person,
the capital lease obligations relating to a Capital Lease of such
Person determined in accordance with GAAP.
"Cash Equivalents" means (i) securities issued or directly
and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve (12) months from the date of
acquisition, (ii) U.S. dollar denominated time deposits and
certificates of deposit of (a) any Lender, or (b) any domestic
commercial bank of recognized standing (y) having capital and surplus
in excess of $500,000,000 and (z) whose short-term commercial paper
rating from S&P is at least A-1 or the equivalent thereof or from
Moody's is at least P-1 or the equivalent thereof (any such Lender
being an "Approved Lender"), in each case with maturities of not more
than two hundred seventy (270) days from the date of acquisition,
(iii) commercial paper and variable or fixed rate notes issued by any
Approved Lender (or by the parent company thereof) and maturing within
six (6) months of the date of acquisition, (iv) repurchase agreements
entered into by a Person with a bank or trust company (including any
of the Lenders) or recognized securities dealer having capital and
surplus in excess of $500,000,000 for direct obligations issued by or
fully guaranteed by the United States of America in which such Person
shall have a perfected first priority security interest (subject to no
other Liens) and having, on the date of purchase thereof, a fair
market value of at least one hundred percent (100%) of the amount of
the repurchase obligations, (v) obligations of any State of the United
States or any political subdivision thereof, the interest with respect
to which is exempt from federal income taxation under Section 103 of
the Code, having a long term rating of at least AA- or Aa-3 by S&P or
Moody's, respectively, and maturing within three (3) years from the
date of acquisition thereof, (vi) Investments in municipal auction
preferred stock (a) rated AAA (or the equivalent thereof) or better by
S&P or Aaa (or the equivalent thereof) or better by
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<PAGE> 11
Moody's and (b) with dividends that reset at least once every three
hundred sixty-five (365) days and (vii) Investments, classified in
accordance with GAAP as current assets, in money market investment
programs registered under the Investment Company Act of 1940, as
amended, which are administered by reputable financial institutions
having capital of at least $100,000,000 and the portfolios of which
are limited to Investments of the character described in the foregoing
subdivisions (i), (ii), (iii), (iv) and (v).
"Change of Control" means: (i) any Person or group of Persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act
of 1934, as amended) shall have acquired beneficial ownership,
directly or indirectly, of, or shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement that
has resulted in its or their acquisition of, or control over, voting
interests of the Parent representing 20% or more of the combined
voting power of all Voting Stock of the Parent; or (ii) during any
period of twelve (12) consecutive months, individuals who at the
beginning of such period constituted the board of directors of the
Parent (together with any new directors whose election by such board
or whose nomination for election by the shareholders of the Parent was
approved by a vote of a majority of the directors then still in office
who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) and
who were entitled to vote on such matters, cease for any reason to
constitute a majority of the board of directors of the Parent then in
office; or (iii) the Parent holds less than 100% of the fully diluted
common stock of NIS.
"Chargeback Losses" means, with respect to any fiscal period,
the losses incurred by the Parent on a Consolidated Basis arising from
transactions processed during such period.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed also to
refer to any successor sections.
"Commitment" means (i) with respect to each Lender, the
Revolving Commitment of such Lender and (ii) with respect to the
Fronting Bank and each Lender, the LOC Commitment of the Fronting Bank
or such Lender, as applicable.
"Commitment Period" means the period from and including the
Closing Date to but not including the earlier of (i) the Termination
Date, and (ii) the date on which the Revolving Commitments terminate
in accordance with the provisions of this Credit Agreement.
"Consolidated Basis" means, when used with reference to
financial statements or financial statement items of a Person, such
statements or items for such Person and its subsidiaries on a
consolidated basis in accordance with applicable principals of
consolidation under GAAP.
"Contractual Obligation" means, as to any Person, any
material agreement, instrument or undertaking, including any such
agreement, instrument or undertaking
6
<PAGE> 12
pertaining to any security issued by such Person, to which such Person
is a party or by which it or any of its property is bound.
"Credit Documents" means a collective reference to this
Credit Agreement, the Notes, the LOC Documents, the Pledge Agreement
and all other related agreements and documents issued or delivered
hereunder or thereunder or pursuant hereto or thereto.
"Credit Losses" means, with respect to any fiscal period,
credit and fraud losses during such period incurred by the Parent on a
Consolidated Basis with respect to transactions processed during such
period.
"Credit Party" means any of the Borrowers and the Guarantors.
"Credit Party Obligations" means (i) as to either NOVA or
NIS, without duplication, (a) all obligations of the other Borrower to
the Lenders and the Agent, whenever arising, under this Credit
Agreement, the Notes or the other Credit Documents (including, but not
limited to, any interest accruing after the occurrence of a Bankruptcy
Event with respect to any Credit Party, regardless of whether such
interest is an allowed claim under the Bankruptcy Code), and (b) all
liabilities and obligations, whenever arising, owing from the other
Borrower to any Lender, or any Affiliate of a Lender, arising under
any Hedging Agreement relating to the Loans or Obligations hereunder
and (ii) as to each other Guarantor, without duplication, (a) all
obligations of any of the Borrowers to the Lenders and the Agent,
whenever arising, under this Credit Agreement, the Notes or the other
Credit Documents (including, but not limited to, any interest accruing
after the occurrence of a Bankruptcy Event with respect to any Credit
Party, regardless of whether such interest is an allowed claim under
the Bankruptcy Code), and (b) all liabilities and obligations,
whenever arising, owing from any of the Borrowers to any Lender, or
any Affiliate of a Lender, arising under any Hedging Agreement
relating to the Loans or Obligations hereunder.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at
such time, (i) has failed to make an Extension of Credit required
pursuant to the terms of this Credit Agreement, (ii) has failed to pay
to the Agent or any Lender an amount owed by such Lender pursuant to
the terms of the Credit Agreement or any other of the Credit
Documents, or (iii) has been deemed insolvent or has become subject to
a bankruptcy or insolvency proceeding or to a receiver, trustee or
similar proceeding.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Domestic Subsidiary" means any Subsidiary which is
incorporated or organized under the laws of any state of the United
States or of the District of Columbia.
"EBITDA" means for any period with respect to the Parent on a
Consolidated Basis the sum of Net Income plus Interest Expense plus
all provisions for any Federal, state, local and other domestic and
foreign income taxes during the applicable period plus depreciation,
amortization and other non-cash charges in each case determined in
7
<PAGE> 13
accordance with GAAP applied on a consistent basis. Except as
expressly provided otherwise, the applicable period shall be for the
four (4) consecutive quarters ending as of the date of determination.
"EBITDAR" means, for any period, with respect to the Parent
on a Consolidated Basis, the sum of EBITDA for such period plus an
amount which in the determination of Net Income for such period has
been deducted for Rent Expense for such period, all as determined in
accordance with GAAP.
"Eligible Assignee" means (i) a Lender; (ii) (x) a lending or
financial institution controlled by, or under common control with, a
Lender or a Subsidiary of a Lender or (y) any fund that invests in
bank loans and is managed by an investment advisor to a Lender; and
(iii) any other Person approved by (a) the Agent, (b) the Fronting
Bank, and (c) unless an Event of Default has occurred and is
continuing at the time any assignment is effected in accordance with
Section 11.3, the Borrowers (such approval by the Agent or the
Borrowers not to be unreasonably withheld or delayed and such approval
to be deemed given by the Borrowers if no objection is received by the
assigning Lender and the Agent from the Borrowers within two (2)
Business Days after notice of such proposed assignment has been
provided by the assigning Lender to the Borrowers); provided, however,
that neither a Borrower nor an Affiliate of a Borrower shall qualify
as an Eligible Assignee.
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity which is under common
control with the Parent within the meaning of Section 4001(a)(14) of
ERISA, or is a member of a group which includes the Parent and which
is treated as a single employer under Sections 414(b) or (c) of the
Code.
"ERISA Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (ii) the
withdrawal by the Parent, any Subsidiary of the Parent or any ERISA
Affiliate from a Multiple Employer Plan during a plan year in which it
was a substantial employer (as such term is defined in Section
4001(a)(2) of ERISA), or the termination of a
8
<PAGE> 14
Multiple Employer Plan; (iii) the distribution of a notice of intent
to terminate or the actual termination of a Plan pursuant to Section
4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to
terminate or the actual termination of a Plan by the PBGC under
Section 4042 of ERISA; (v) any event or condition which could
reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (vi) the complete or partial withdrawal of the
Parent, any Subsidiary of the Parent or any ERISA Affiliate from a
Multiemployer Plan; (vii) the conditions for imposition of a lien
under Section 302(f) of ERISA exist with respect to any Plan; or
(viii) the adoption of an amendment to any Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is
determined), whether or not a Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time. Eurodollar Loans
shall be deemed to constitute Eurocurrency liabilities and as such
shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available
from time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" means such term as defined in Section 9.1.
"Existing Credit Agreement" has the meaning set forth in the
recitals.
"Extension of Credit" means, as to any Lender, the making of,
or participation in, a Loan by such Lender or the issuance or
extension of, or participation in, a Letter of Credit.
"Fees" means all fees payable pursuant to Section 3.5.
"Federal Funds Rate" means, for any day, the rate of interest
per annum (rounded upwards, if necessary, to the nearest whole
multiple of 1/100 of 1%) equal to the weighted
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<PAGE> 15
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day, provided that (i)
if such day is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business
Day and (ii) if no such rate is so published on such next preceding
Business Day, the Federal Funds Rate for such day shall be the average
rate quoted to the Agent on such day on such transactions as
determined by the Agent.
"Fixed Charge Coverage Ratio" means, as of the end of each
fiscal quarter of the Parent for the Parent on a Consolidated Basis
for the four (4) consecutive quarters ending on such date, the ratio
of (i) EBITDAR for the applicable period minus Capital Expenditures
for the applicable period minus provisions for Federal, state, local
and other domestic and foreign income taxes during the applicable
period to (ii) the sum of Interest Expense for the applicable period
plus Scheduled Funded Debt Payments for the applicable period plus
Rent Expense for the applicable period.
"Fronting Bank" means Bank of America.
"Fronting Bank Fees" shall have the meaning assigned to such
term in Section 3.5(b)(ii).
"Funded Debt" means, with respect to any Person, without
duplication, (i) all Indebtedness of such Person for borrowed money,
(ii) all purchase money Indebtedness of such Person, including without
limitation the principal portion of all obligations of such Person
under Capital Leases, (iii) all Guaranty Obligations of such Person
with respect to Funded Debt of another Person, (iv) the maximum
available amount of all standby letters of credit or acceptances
issued or created for the account of such Person, and (v) all Funded
Debt of another Person secured by a Lien on any Property of such
Person, whether or not such Funded Debt has been assumed, provided
that for purposes hereof the amount of such Funded Debt shall be
limited to the greater of (a) the amount of such Funded Debt as to
which there is recourse to such Person and (b) the fair market value
of the property which is subject to the Lien. The Funded Debt of any
Person shall (I) include the Funded Debt of any partnership or joint
venture in which such Person is a general partner or joint venturer,
but only to the extent to which there is recourse to such Person for
the payment of such Funded Debt, and (II) exclude advances by
Settlement Banks made pursuant to Settlement Agreements.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms
of Section 1.3 hereof.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantor" means each of (i) the Parent, (ii) NIS, (iii)
each wholly-owned Material Domestic Subsidiary of the Parent
identified as a "Guarantor" on the signature pages hereto and (iv)
each hereafter acquired or organized wholly-owned Material Domestic
Subsidiary
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<PAGE> 16
of the Parent that becomes a Guarantor hereunder by execution of a
Joinder Agreement or otherwise, in each case together with their
successors and assigns.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation,
whether or not contingent, (i) to purchase any such Indebtedness or
any Property constituting security therefor (other than purchases made
in the ordinary course of business), (ii) to advance or provide funds
or other credit support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation
keep well agreements, maintenance agreements, comfort letters or
similar agreements or arrangements) for the benefit of any holder of
Indebtedness of such other Person, (iii) to lease or purchase
Property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness, or (iv) to otherwise assure or hold
harmless the holder of such Indebtedness against loss in respect
thereof. The amount of any Guaranty Obligation hereunder shall
(subject to any limitations set forth therein including limitations as
to the amount of Indebtedness guaranteed) be deemed to be an amount
equal to the outstanding principal amount (or maximum principal
amount, if larger) of the Indebtedness in respect of which such
Guaranty Obligation is made.
"Hedging Agreements" means any interest rate protection
agreement or foreign currency exchange agreement between one or both
of the Borrowers and any Lender, or any Affiliate of a Lender.
"Indebtedness" of any Person means, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, or upon which interest payments are customarily
made (but specifically excluding obligations incurred in connection
with a Permitted Receivables Financing to the extent such obligations
are not treated as indebtedness under GAAP), (iii) all obligations of
such Person under conditional sale or other title retention agreements
relating to Property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (iv) all obligations
of such Person issued or assumed as the deferred purchase price of
Property or services purchased by such Person (other than trade
accounts payable and accrued obligations incurred in the ordinary
course of business and due within six (6) months of the incurrence
thereof) which would appear as liabilities on a balance sheet of such
Person, (v) all obligations of such Person under take-or-pay or
similar arrangements relating to inventory or under commodities
agreements, (vi) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on Property owned or acquired by
such Person, whether or not the obligations secured thereby have been
assumed (limited to the value of the Property subject to such Lien),
(vii) all Guaranty Obligations of such Person, (viii) the principal
portion of all obligations of such Person under Capital Leases, (ix)
all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements, commodity purchase
or option agreements or other interest or
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<PAGE> 17
exchange rate or commodity price hedging agreements (including, but
not limited to, the Hedging Agreements), (x) the maximum amount of all
standby letters of credit issued or bankers' acceptances facilities
created for the account of such Person and, without duplication, all
drafts drawn thereunder (to the extent unreimbursed), (xi) all
preferred stock issued by such Person and required by the terms
thereof to be redeemed in cash or Cash Equivalents, or for which
mandatory sinking fund payments are due in cash or Cash Equivalents,
prior to the Termination Date, and (xii) all obligations of such
Person to repurchase any securities which repurchase obligation is
related to the issuance thereof, including, without limitation,
obligations commonly known as residual equity appreciation potential
shares. The Indebtedness of any Person shall (a) include the
Indebtedness of any partnership or joint venture in which such Person
is a general partner or a joint venturer, but only to the extent to
which there is recourse to such Person for payment of such
Indebtedness, and (b) exclude advances by Settlement Banks made
pursuant to Settlement Agreements.
"Interbank Offered Rate" means, for the Interest Period for
each Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
(rounded upwards, if necessary, to the nearest whole multiple of 1/100
of 1%) equal to the rate of interest, determined by the Agent on the
basis of the offered rates for deposits in dollars for a period of
time corresponding to such Interest Period (and commencing on the
first day of such Interest Period), appearing on Telerate Page 3750
(or, if, for any reason, Telerate Page 3750 is not available, the
Reuters Screen LIBO Page) as of approximately 11:00 A.M. (London time)
two (2) Business Days before the first day of such Interest Period. As
used herein, "Telerate Page 3750" means the display designated as page
3750 by Dow Jones Telerate, Inc. (or such other page as may replace
such page on that service for the purpose of displaying the British
Bankers Association London interbank offered rates) and "Reuters
Screen LIBO Page" means the display designated as page "LIBO" on the
Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks).
"Interest Expense" means for any period with respect to the
Parent on a Consolidated Basis all interest expense, including (i) the
amortization of debt discount and premium and the interest component
under Capital Leases, in each case determined in accordance with GAAP
applied on a consistent basis, and (ii) the implied or imputed
interest costs associated with any Permitted Receivables Financing.
Except as expressly provided otherwise, the applicable period shall be
for the four (4) consecutive quarters ending as of the date of
determination.
"Interest Payment Date" means (i) as to any Base Rate Loan,
the last day of each calendar quarter of the Parent and the
Termination Date and (ii) as to any Eurodollar Loan, the last day of
each Interest Period for such Loan, the Termination Date and each date
on which any principal of such Loan is repaid, and in addition where
the applicable Interest Period is more than three (3) months, then
also on the date three (3) months from the beginning of the Interest
Period, and each three (3) months thereafter. If an Interest Payment
Date falls on a date which is not a Business Day, such Interest
Payment Date shall be deemed to be the next succeeding Business Day,
except that in the case of Eurodollar
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<PAGE> 18
Loans where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day.
"Interest Period" means as to any Eurodollar Loan, a period
of one (1), two (2), three (3) or six (6) month's duration, as one or
more of the Borrowers may elect, commencing in each case, on the date
of the borrowing (including conversions, extensions and renewals);
provided, however, (i) if any Interest Period would end on a day which
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day (except that in the case of Eurodollar
Loans where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day),
(ii) no Interest Period shall extend beyond the Termination Date, and
(iii) in the case of Eurodollar Loans, where an Interest Period begins
on a day for which there is no numerically corresponding day in the
calendar month in which the Interest Period is to end, such Interest
Period shall end on the last day of such calendar month.
"Investment", in any Person, means any loan or advance to
such Person, any purchase or other acquisition of any capital stock,
warrants, rights, options, obligations or other securities of, or
equity interest in, such Person, any capital contribution to such
Person or any other investment in such Person, including, without
limitation, any Guaranty Obligation incurred for the benefit of such
Person.
"Joinder Agreement" means a joinder agreement substantially
in the form of Exhibit 7.11.
"Lenders" means each of the Persons identified as a "Lender"
on the signature pages hereto, and their successors and assigns.
"Letter of Credit" means any letter of credit issued by the
Fronting Bank for the account of one or more of the Borrowers in
accordance with the terms of Section 2.3.
"Letter of Credit Fee" shall have the meaning given such term
in Section 3.5(b).
"Leverage Ratio" means, as of the last day of any fiscal
quarter of the Parent, with respect to the Parent on a Consolidated
Basis, the ratio of Funded Debt on such day to EBITDA for the period
of four (4) consecutive fiscal quarters ending as of such day.
"Lien" means, with respect to any Property, any mortgage,
pledge, collateral assignment, deposit arrangement, security interest,
encumbrance, lien (statutory or otherwise), preference, priority or
charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement,
any lien evidenced by a financing or similar statement or notice filed
under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute,
and any lease in the nature thereof) to which such Property is
subject.
"Loan" or "Loans" means the Revolving Loans (or a portion of
any Revolving Loan bearing interest at the Base Rate or the Eurodollar
Rate and referred to as a Base Rate Loan or a Eurodollar Loan),
individually or collectively, as appropriate.
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<PAGE> 19
"LOC Commitment" means the commitment of the Fronting Bank to
issue, and to honor payment obligations under, Letters of Credit
hereunder and, with respect to each Lender, the commitment of each
Lender to purchase participation interests in the Letters of Credit up
to such Lender's LOC Committed Amount as specified in Schedule 2.1(a),
as such amount may be reduced from time to time in accordance with the
provisions hereof.
"LOC Committed Amount" means, collectively, the aggregate
amount of all of the LOC Commitments of the Lenders (including the
Fronting Bank) to issue (in the case of the Fronting Bank) and
participate in Letters of Credit as referenced in Section 2.3(a) and,
individually, the amount of each Lender's LOC Commitment as specified
in Schedule 2.1(a).
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned
or at risk or (ii) any collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (ii) the aggregate amount of all drawings
under Letters of Credit honored by the Fronting Bank but not
theretofore reimbursed.
"Material Adverse Effect" means a material adverse effect on
(i) the condition (financial or otherwise), operations, business,
assets, liabilities or prospects of the Parent and its Subsidiaries
taken as a whole, (ii) the ability of the Parent and its Subsidiaries
as a whole to perform any material obligation under the Credit
Documents or (iii) the rights and remedies of the Lenders under the
Credit Documents.
"Material Domestic Subsidiary" means any Domestic Subsidiary
that is also a Material Subsidiary.
"Material Subsidiary" means, as of any date of determination,
any Subsidiary (i) the assets or liabilities of which exceed five
percent (5%) of the assets of the Parent on a Consolidated Basis
measured as of the end of the most recently ended fiscal quarter with
respect to which the Agent has received the Required Financial
Information or (ii) which represents more than two and one-half
percent (2.5%) of the Consolidated EBITDA of the Parent on a
Consolidated Basis measured (a) as of the end of the most recently
ended fiscal quarter with respect to which the Agent has received the
Required Financial Information and (b) for the four (4) consecutive
fiscal quarter period then ended.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental
14
<PAGE> 20
Laws, including, without limitation, asbestos, polychlorinated
biphenyls and urea-formaldehyde insulation.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which the Parent, any
Subsidiary of the Parent or any ERISA Affiliate and at least one
employer other than the Parent, any Subsidiary of the Parent or any
ERISA Affiliate are contributing sponsors.
"NIS" means NOVA Information Systems, Inc., a Georgia
corporation.
"Net Income" means for any period, the net income with
respect to the Parent on a Consolidated Basis as determined in
accordance with GAAP applied on a consistent basis.
"Net Proceeds" means gross cash proceeds (including any cash
received by way of deferred payment pursuant to a promissory note,
receivable or otherwise, but only as and when received) received in
connection with an Asset Disposition, net of (i) reasonable
transaction costs, including in the case of an Asset Disposition
occurring in connection with a claim under an insurance policy, costs
incurred in connection with adjustment and settlement of the claim,
(ii) estimated taxes payable in connection therewith, and (iii) any
amounts payable in respect of Funded Debt, including without
limitation principal, interest, premiums and penalties, which is
secured by, or otherwise related to, any property or asset which is
the subject thereof to the extent that such Funded Debt and any
payments in respect thereof are paid with a portion of the proceeds
therefrom.
"Non-Excluded Taxes" means such term as is defined in Section
3.10.
"Note" or "Notes" means any Revolving Note, individually or
collectively as the context may require.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Exhibit 2.1(b)(i), as required by Section
2.1(b)(i).
"Notice of Extension/Conversion" means a request by one or
more of the Borrowers in substantially the form of Exhibit 3.2, to (i)
continue an existing Eurodollar Loan to a new Interest Period or (ii)
convert to a Eurodollar Loan to a Base Rate Loan or a Base Rate Loan
to a Eurodollar Loan.
"NOVA" means NOVA Corporation, a Georgia corporation.
"Obligations" means, collectively, the Revolving Loans and
the LOC Obligations.
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"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real property, personal
property or mixed) which, in accordance with GAAP, is or should be
accounted for as an operating lease by such Person.
"Parent" means NOVA.
"Participation Interest" means the purchase by a Lender of a
participation in Letters of Credit and LOC Obligations as provided in
Section 2.2(c) and in Revolving Loans as provided in Section 3.13.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereof.
"Permitted Acquisition" means an Acquisition by the Parent or
any Subsidiary of the Parent, provided that (i) the capital stock or
Property acquired in such Acquisition relates to a CCTP Business, (ii)
in the case of an Acquisition of the capital stock of another Person,
(a) either (x) the board of directors (or other comparable governing
body) of such Person or (y) a duly authorized officer of such other
Person shall have duly approved such Acquisition and (b) such Person
shall become a Subsidiary or Alliance of the Parent, (iii) the
representations and warranties made by the Credit Parties in each
Credit Document shall be true and correct in all material respects at
and as if made as of the date of such Acquisition (after giving effect
thereto) except to the extent such representations and warranties
expressly relate to an earlier date and no Default or Event of Default
exists as of the date of such Acquisition (after giving effect
thereto), (iv) for any Permitted Acquisition, the Acquisition Costs of
which exceed $30,000,000, (a) the Parent shall have delivered to the
Agent prior to the closing of the Acquisition a Pro Forma Compliance
Certificate demonstrating that, upon giving effect to the Acquisition
on a Pro Forma Basis, and both before the inclusion of Acquisition
Adjustments and after, the Credit Parties will be in compliance with
all of the covenants set forth in Section 7.9 and including annual
financial statements for the acquired company for the three (3) prior
fiscal years, to the extent available, and quarterly financial
statements for the fiscal quarter period then most recently ended for
which financial statements are available in the ordinary course of
business, and (b) if the net Acquisition Adjustments associated with
such Permitted Acquisition exceed fifty percent (50%) of the cash flow
(calculated using the principles set forth in the definition of
EBITDA) of the CCTP Business so acquired, then such Acquisition
Adjustments shall be approved in writing by the Required Lenders, and
(v) after giving effect to such Acquisition, Acquisition Costs for all
Permitted Acquisitions consummated during the prior twelve-month
period shall not exceed $100,000,000.
"Permitted Investments" means Investments which are (i) cash
and Cash Equivalents, (ii) accounts receivable created, acquired or
made in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms, (iii) Investments consisting
of stock, obligations, securities or other property received in
settlement of accounts receivable (created in the ordinary course of
business) from defaulting obligors, (iv) Investments existing as of
the Closing Date and set forth in
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Schedule 8.5, (v) loans to employees, directors or officers in
connection with the award of convertible bonds or stock under a stock
incentive plan, stock option plan or other equity-based compensation
plan or arrangement in the aggregate not to exceed $1,000,000
(calculated on the exercise price for any such shares) in the
aggregate at any time outstanding, (vi) other advances or loans to
employees, directors, officers, shareholders or agents, including
independent sales agents, not to exceed $5,000,000 in the aggregate at
any time outstanding, (vii) Investments by one Credit Party to or into
another Credit Party, (viii) Investments made on or after the Closing
Date by a Credit Party to or into a Subsidiary that is not a Credit
Party and Investments made on or after the Closing Date in Alliances
permitted pursuant to Section 8.13 in an amount not to exceed
$115,000,000 in the aggregate at any time outstanding, (ix) Permitted
Acquisitions, (x) Investments in a Receivables Subsidiary in
connection with a Permitted Receivables Financing, and (xi) other
Investments of a nature not contemplated in the foregoing subsections
in an amount not to exceed $10,000,000 in the aggregate at any time
outstanding.
"Permitted Liens" means:
(i) Liens in favor of the Agent on behalf of the
Lenders;
(ii) Liens (other than Liens created or imposed
under ERISA) for taxes, assessments or governmental charges
or levies not yet due or Liens for taxes being contested in
good faith by appropriate proceedings for which adequate
reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on
account thereof);
(iii) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and suppliers
and other Liens imposed by law or pursuant to customary
reservations or retentions of title arising in the ordinary
course of business, provided that such Liens secure only
amounts not yet due and payable or, if due and payable, are
unfiled and no other action has been taken to enforce the
same or are being contested in good faith by appropriate
proceedings for which adequate reserves determined in
accordance with GAAP have been established (and as to which
the Property subject to any such Lien is not yet subject to
foreclosure, sale or loss on account thereof);
(iv) Liens (other than Liens created or imposed
under ERISA) incurred or deposits made by the Parent and its
Subsidiaries in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of
tenders, statutory obligations, bids, leases, government
contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment
of borrowed money);
(v) Liens in connection with attachments or
judgments (including judgment or appeal bonds) provided that
the judgments secured shall, within ninety (90) days after
the entry thereof, have been discharged or execution thereof
stayed
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pending appeal, or shall have been discharged within ninety
(90) days after the expiration of any such stay;
(vi) easements, rights-of-way, restrictions
(including zoning restrictions), minor defects or
irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use
of the encumbered Property for its intended purposes;
(vii) Liens securing purchase money Indebtedness
(including Capital Leases) to the extent permitted under
Section 8.1(c), provided that any such Lien attaches only to
the Property financed and such Lien attaches thereto
concurrently with or within ninety (90) days after the
acquisition thereof;
(viii) leases or subleases granted to others not
interfering in any material respect with the business of the
Parent or any of its Subsidiaries;
(ix) any interest of title of a lessor under, and
Liens arising from UCC financing statements (or equivalent
filings, registrations or agreements in foreign
jurisdictions) relating to, leases permitted by this Credit
Agreement;
(x) normal and customary rights of setoff upon
deposits of cash in favor of banks or other depository
institutions;
(xi) inchoate Liens arising under ERISA to secure
current service pension liabilities as they are incurred
under the provisions of any Plan;
(xii) Liens existing as of the Closing Date and set
forth on Schedule 8.2; provided that (a) no such Lien shall
at any time be extended to or cover any Property other than
the Property subject thereto on the Closing Date and (b) the
principal amount of the Indebtedness secured by such Liens
shall not be increased;
(xiii) Liens on Settlement Accounts securing
obligations of the Parent or any of its Subsidiaries under
Settlement Agreements with Settlement Banks, but only to the
extent that amounts deposited in such Settlement Accounts are
required to be so deposited by the terms of such Settlement
Agreements or requirements of VISA/MasterCard or other card
associations, if applicable;
(xiv) other Liens that do not interfere in any
material respect with the business of the Parent or any
Subsidiary on Property with a fair market value not to exceed
$5,000,000 in the aggregate; and
(xv) Liens on Receivables sold to a Receivables
Subsidiary pursuant to a Permitted Receivables Financing.
"Permitted Receivables Financing" means any financing by the
Credit Parties of Receivables in any transaction or series of
transactions that may be entered into by the Credit Parties pursuant
to which (i) one or more Credit Parties sells, conveys or otherwise
transfers Receivables to a Receivables Subsidiary and (ii) such
Receivables Subsidiary sells,
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conveys or otherwise transfers to any other Person or grants a
security interest to any Person in, any Receivables (whether now
existing or hereafter acquired) of a Credit Party, and any assets
related thereto including all collateral securing such Receivables,
all contracts and all Guaranty Obligations or other obligations in
respect of such Receivables, proceeds of such Receivables and other
assets that are customarily transferred or in respect of which
security interests are customarily granted in connection with asset
securitization transactions involving Receivables, provided that (a)
the Board of Directors of the Parent shall have determined in good
faith that such Permitted Receivables Financing is economically fair
and reasonable to the Credit Parties and the applicable Receivables
Subsidiary, (b) all sales of Receivables and Related Property to such
Receivables Subsidiary are made at fair market value (as determined in
good faith by the Parent) and (c) the aggregate fair market value (as
determined in good faith by the Parent) of the Receivables and Related
Property sold in connection with all Permitted Receivables Financings
does not exceed $125,000,000.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated) or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which the
Parent, any Subsidiary of the Parent or any ERISA Affiliate is (or, if
such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" within the meaning of Section
3(5) of ERISA.
"Pledge Agreement" means the Amended and Restated Pledge
Agreement dated of even date herewith among certain of the Credit
Parties and the Agent, as amended, modified, supplemented or replaced
from time to time.
"Prime Rate" means the rate of interest per annum publicly
announced or established from time to time by Bank of America as its
prime rate in effect at its principal office in Charlotte, North
Carolina, with each change in the Prime Rate being effective on the
date such change is publicly announced as effective (it being
understood and agreed that the Prime Rate is a reference rate used by
Bank of America in determining interest rates on certain loans and is
not intended to be the lowest rate of interest charged on any
extension of credit by Bank of America to any debtor).
"Pro Forma Basis" means, with respect to a Permitted
Acquisition, that such transaction shall be deemed to have occurred,
for purposes of calculating compliance in respect of such transaction
with each of the financial covenants set forth in Section 7.9 as of
the most recent fiscal quarter end preceding the date of such
transaction with respect to which the Agent has received the Required
Financial Information, as of the first (1st) day of the four (4)
fiscal-quarter period ending as of such fiscal quarter end. In making
such calculations (i) any Indebtedness incurred in order to consummate
such transaction (a) shall be deemed to have been incurred on the
first (1st) day of the applicable four (4) fiscal-quarter period and
(b) if such Indebtedness has a floating or formula rate, then the
implied rate of interest for such Indebtedness for the applicable
period for purposes of this definition shall be determined by
utilizing the rate which is or would be in effect with
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respect to such Indebtedness as at the relevant date of determination,
(ii) income statement items (whether positive or negative)
attributable to the Property acquired in such Permitted Acquisition
shall be included to the extent relating to the relevant period and
(iii) Acquisition Adjustments shall be deemed to have been effective
on the first day of the applicable four (4) fiscal-quarter period.
"Pro Forma Compliance Certificate" means a certificate of an
officer of the Parent delivered to the Agent under the circumstances
required in connection with a Permitted Acquisition and containing
reasonably detailed calculations, upon giving effect to the applicable
transaction on a Pro Forma Basis, of the financial covenants set forth
in Section 7.9 as of the most recent fiscal quarter end preceding the
date of the applicable transaction with respect to which the Agent
shall have received the Required Financial Information.
"Property" means any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
"Purchase Agreement" means, in connection with any
contemplated Acquisition, the purchase, merger, joint venture or other
definitive agreement executed by the parties thereto.
"Receivable" means the indebtedness and payment obligations
of any Person to any Credit Party or acquired by any Credit Party
(including obligations constituting an account or general intangible
or evidenced by a note, instrument, contract, security agreement,
chattel paper or other evidence of indebtedness or security) arising
in the ordinary course of business in accordance with GAAP by such
Credit Party or the Person from which such indebtedness and payment
obligation were acquired by any Credit Party in respect of leases,
including (i) any right to payment for leases made and (ii) the right
to payment of any interest, sales taxes, finance charges, returned
check or late charges and other obligations of such Person with
respect thereto and excluding obligations of one Credit Party in favor
of another Credit Party eliminated in consolidation in accordance with
GAAP.
"Receivables Subsidiary" means any wholly owned,
bankruptcy-remote, special purpose Subsidiary of the Parent (i) that
engages in no activities other than in connection with the financing
of Receivables, all proceeds thereof and all rights (contractual or
other), collateral and other assets relating thereto, and any business
or activities incidental or related to such business, (ii) that is
designated by the Board of Directors of the Parent (as provided below)
as a Receivables Subsidiary and (iii) of which no portion of its
Indebtedness or any other obligations (contingent or otherwise) (a) is
guaranteed by the Credit Parties or any of their Subsidiaries
(excluding guarantees of obligations (other than the principal of, and
interest on, Indebtedness) pursuant to Standard Securitization
Undertakings), (b) is recourse to or obligates the Credit Parties or
any of their Subsidiaries in any way other than pursuant to Standard
Securitization Undertakings or (c) subjects any Property of the Credit
Parties or any of their Subsidiaries, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings. Upon any such
designation, a Responsible Officer of the Parent, as applicable, shall
deliver a certificate to the Agent certifying (I) the resolution of
the Board of Directors of the Parent, as applicable, giving effect to
such designation, (II) that such designation complied with the
foregoing
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conditions, (III) that after giving effect to such designation
(including any Indebtedness permitted to exist in connection with such
designation), the Credit Parties shall be in compliance, on a pro
forma basis, with the covenants set forth in Section 7.9 and (IV)
immediately after giving effect to such designation no Default or
Event of Default shall have occurred and be continuing. For purposes
of this definition, a "bankruptcy-remote" entity shall be understood
to mean an entity (x) established with sufficient corporate
separateness to make it substantially unlikely that such entity would
be substantively consolidated with its parent, in the event of the
latter's bankruptcy and (y) with respect to which counsel to such
entity would be able at the inception of the financing to deliver a
true sale and non-consolidation opinion regarding Receivables
purchased by such entity.
"Register" shall have the meaning given such term in Section
11.3(c).
"Regulation D, O, T, U, or X" means Regulation D, O, T, U or
X, respectively, of the Board of Governors of the Federal Reserve
System as from time to time in effect and any successor to all or a
portion thereof.
"Related Property" means, with respect to each Receivable:
(i) all of the interest of the applicable Credit
Party or its Subsidiary in the goods, if any, sold and
delivered to an obligor relating to the sale which gave rise
to such Receivable,
(ii) all other security interest or Liens, and the
interest of the applicable Credit Party or its Subsidiary in
the property subject thereto, from time to time purporting to
secure payment of such Receivable, together with all
financing statements signed by an obligor describing any
collateral securing such Receivable and
(iii) all guarantees, insurance, letters of credit
and other agreements or arrangements of whatever character
from time to time supporting or securing payment of such
Receivable,
in the case of clauses (ii) and (iii), whether pursuant to the
contract related to such Receivable or otherwise or pursuant to any
obligations evidenced by a note, instrument, contract, security
agreement, chattel paper or other evidence of indebtedness or security
and the proceeds thereof.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment (including the abandonment
or discarding of barrels, containers and other closed receptacles
containing any Materials of Environmental Concern).
"Rent Expense" means, for any period, with respect to the
Parent on a Consolidated Basis, all rent payable under an Operating
Lease, as determined in accordance with GAAP.
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the
notice requirement has been waived by regulation.
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"Required Financial Information" means (i) the most recently
received financial statements of the Parent required to be delivered
pursuant to Section 7.1(a) or (b), and (ii) the officer's certificate
required by Section 7.2(b) to be delivered with the financial
statements described in clause (i) above.
"Required Lenders" means, at any time, Lenders (other than
any Defaulting Lender) holding in the aggregate at least sixty-six and
sixty-seven hundredths percent (66.67%) of (i) the Commitments, and
(ii) if the Commitments have been terminated, the outstanding Loans
and Participation Interests (including the Participation Interests of
the Fronting Bank in any Letters of Credit).
"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
as to which any of its material property is subject.
"Responsible Officer" means the Chief Financial Officer, the
Controller, the Treasurer, the Secretary, the President or other duly
authorized officer.
"Restricted Payment" means, with respect to any Person, (i)
any dividend or other distribution, direct or indirect, on account of
any shares of any class of stock of such Person now or hereafter
outstanding, except (a) a dividend payable solely in shares of that
class to the holders of that class and (b) dividends and other
distributions payable to the Parent or a wholly-owned Subsidiary of
the Parent, (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect,
of any shares of any class of stock of such Person or any warrants or
options to purchase such shares now or hereafter outstanding (other
than any such transaction in which the consideration consists solely
of equity securities of such Person), and (iii) any payment in cash or
Cash Equivalents made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any
class of stock of such Person now or hereafter outstanding.
"Revolving Commitment" means, with respect to each Lender,
the commitment of such Lender to make Revolving Loans in an aggregate
principal amount at any time outstanding of up to such Lender's
Revolving Commitment Percentage of the Aggregate Revolving Committed
Amount as specified in Schedule 2.1(a), as such amount may be reduced
from time to time in accordance with the provisions hereof.
"Revolving Commitment Percentage" means, for each Lender, a
fraction (expressed as a decimal) the numerator of which is the
Revolving Commitment of such Lender at such time and the denominator
of which is the Aggregate Revolving Committed Amount at such time. The
initial Revolving Commitment Percentages are set out on Schedule
2.1(a).
"Revolving Loans" shall have the meaning assigned to such
term in Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory
notes of each of the Borrowers in favor of each of the Lenders
evidencing the Revolving Loans in
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substantially the form attached as Exhibit 2.1(e), individually or
collectively, as appropriate, as such promissory notes may be amended,
modified, supplemented, extended, renewed or replaced from time to
time.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of
such division in the business of rating securities.
"Scheduled Funded Debt Payments" means, as of the date of
determination, for the Parent on a Consolidated Basis the sum of all
scheduled payments of principal on Funded Debt for the applicable
period ending on the date of determination (including the principal
component of payments due on Capital Leases during the applicable
period ending on the date of determination).
"Settlement Account" means any deposit account of any Credit
Party maintained in the ordinary course of business pursuant to the
terms of a Settlement Agreement (i) through which settlements are made
in accordance with a Settlement Agreement or (ii) which is used to
hold reserve funds required by such Settlement Agreement.
"Settlement Agreement" means an agreement between any Credit
Party and a Settlement Bank pursuant to which the Settlement Bank
agrees to perform clearing and settlement services for such Credit
Party in connection with the CCTP Business of such Credit Party.
"Settlement Bank" shall mean each financial institution which
is a qualified acquiring member for any credit or debit card
association and which provides clearing and settlement services to a
Credit Party.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
"Solvent" or "Solvency" means, with respect to any Person as
of a particular date, that on such date (i) such Person is able to
realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the
normal course of business, (ii) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature in their
ordinary course, (iii) such Person is not engaged in a business or a
transaction, including after giving effect to the transactions
contemplated by this Credit Agreement, for which such Person's
Property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such
Person is engaged, (iv) the fair value of the Property of such Person
is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person and (v) the present
fair saleable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured. In computing
the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount which, in light of all
the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
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"Standard Securitization Undertakings" means
representations, warranties, covenants and indemnities entered into by
a Credit Party that the Parent has determined in good faith to be
customary in receivables financing transactions similar to the
Permitted Receivables Financings, including those representations,
warranties, covenants and indemnities relating to the eligibility,
origination and servicing of assets of a Receivables Subsidiary.
"Subsidiary" means, as to any Person, (i) any corporation
more than fifty percent (50%) of whose stock of any class or classes
having by the terms thereof ordinary voting power to elect a majority
of the directors of such corporation (irrespective of whether or not
at the time, any class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency)
is at the time owned by such Person directly or indirectly through
Subsidiaries, and (ii) any partnership, limited liability company,
association, joint venture or other entity in which such Person
directly or indirectly through Subsidiaries has more than fifty
percent (50%) of the economic interest at any time.
"Termination Date" means November 16, 2004.
"Unused Fee" shall have the meaning given such term in
Section 3.5(a).
"VISA/MasterCard" has the meaning set forth in Section 6.18.
"Voting Stock" means, with respect to any Person, capital
stock issued by such Person the holders of which are ordinarily, in
the absence of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening
of such a contingency.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
1.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1
hereof (or, prior to the delivery of the first financial statements pursuant to
Section 7.1 hereof, consistent with the annual audited financial statements
referenced in Section 6.1); provided, however, if (a) the Borrowers shall
object to determining such compliance on such basis at the time of delivery of
such financial statements due to any change in GAAP or the rules promulgated
with respect thereto or (b) the Agent or the Required Lenders shall so object
in writing within thirty (30) days after delivery of such financial statements,
then such calculations shall be
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made on a basis consistent with the most recent financial statements delivered
by the Borrowers to the Lenders as to which no such objection shall have been
made.
SECTION 2
CREDIT FACILITIES
2.1 REVOLVING LOANS.
(a) Revolving Commitment. During the Commitment Period,
subject to the terms and conditions hereof, each Lender severally
agrees to make revolving credit loans each a "Revolving Loan" and
collectively (the "Revolving Loans") to each of the Borrowers from
time to time in the amount of such Lender's Revolving Commitment
Percentage of such requested Revolving Loans for the purposes
hereinafter set forth; provided that (i) with regard to the Lenders
collectively, the aggregate principal amount of Obligations
outstanding at any time shall not exceed the Aggregate Revolving
Committed Amount and (ii) with regard to each Lender individually,
such Lender's Revolving Commitment Percentage of the sum of the
Revolving Loans plus LOC Obligations outstanding at any time shall not
exceed such Lender's Revolving Commitment Percentage of the Aggregate
Revolving Committed Amount. Revolving Loans may consist of Base Rate
Loans or Eurodollar Loans, or a combination thereof, as the Borrowers
may request, and may be repaid and reborrowed in accordance with the
provisions hereof.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. By no later than 10:00 A.M.
(San Francisco time) on the Business Day of the requested
borrowing in the case of Base Rate Loans, and on the third
(3rd) Business Day prior to the date of the requested
borrowing in the case of Eurodollar Loans, one or more of the
Borrowers shall submit a written Notice of Borrowing in the
form of Exhibit 2.1(b)(i) to the Agent setting forth (A) that
a Revolving Loan is requested, (B) the date of the requested
borrowing (which shall be a Business Day), (C) the aggregate
principal amount to be borrowed and, (D) whether the
borrowing shall be comprised of Base Rate Loans, Eurodollar
Loans or a combination thereof, and if Eurodollar Loans are
requested, the Interest Period(s) therefor. If any such
Notice of Borrowing shall fail to specify (I) an applicable
Interest Period in the case of a Eurodollar Loan, then such
notice shall be deemed to be a request for an Interest Period
of one month, or (II) the type of Revolving Loan requested,
then such notice shall be deemed to be a request for a Base
Rate Loan hereunder. The Agent shall give notice to each
Lender promptly upon receipt of each Notice of Borrowing
pursuant to this Section 2.1(b)(i), the contents thereof and
each such Lender's share of any borrowing to be made pursuant
thereto.
(ii) Minimum Amounts. Each Revolving Loan shall be
in a minimum aggregate principal amount of $5,000,000, in the
case of Eurodollar Loans, or
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$1,000,000 (or the remaining Revolving Committed Amount, if
less), in the case of Base Rate Loans, and integral multiples
of $500,000 in excess thereof.
(iii) Advances. Each Lender will make its Revolving
Commitment Percentage of each Revolving Loan borrowing
available to the Agent as specified in Section 3.12(a), or in
such other manner as the Agent may specify in writing, by
12:30 P.M. (San Francisco time) on the date specified in the
applicable Notice of Borrowing in Dollars and in funds
immediately available to the Agent. Such borrowing will then
be made available to one or more of the Borrowers by the
Agent by crediting the account of the applicable Borrower(s)
on the books of such office with the aggregate of the amounts
made available to the Agent by the Lenders and in like funds
as received by the Agent.
(c) Repayment. The principal amount of all Revolving Loans
shall be due and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as
Revolving Loans shall be comprised in whole or in part of
Base Rate Loans, such Base Rate Loans shall bear interest at
a per annum rate equal to the Base Rate plus the Applicable
Percentage;
(ii) Eurodollar Loans. During such periods as
Revolving Loans shall be comprised in whole or in part of
Eurodollar Loans, such Eurodollar Loans shall bear interest
at a per annum rate equal to the Eurodollar Rate plus the
Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(e) Revolving Notes. The Revolving Loans shall be evidenced
by a duly executed Revolving Note in favor of each Lender
substantially in the form of Exhibit 2.1(e).
(f) Maximum Number of Eurodollar Loans. The Borrowers will be
limited to a maximum number of ten (10) Eurodollar Loans outstanding
at any time. For purposes hereof, Eurodollar Loans with separate or
different Interest Periods will be considered as separate Eurodollar
Loans even if their Interest Periods expire on the same date.
2.2 LETTER OF CREDIT SUBFACILITY.
(a) Issuance. During the Commitment Period, subject to the
terms and conditions hereof and of the LOC Documents, if any, and such
other terms and conditions which the Fronting Bank may reasonably
require, the Fronting Bank shall issue, and the Lenders shall
participate in, such Letters of Credit as a Borrower may request for
its own account, in a form acceptable to the Fronting Bank, for the
purposes hereinafter set forth; provided that (i) the aggregate amount
of LOC Obligations shall not exceed TWENTY-FIVE MILLION DOLLARS
($25,000,000) at any time (the "LOC Committed Amount"), (ii) with
regard to the Lenders collectively, the aggregate principal amount of
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Obligations outstanding at any time shall not exceed the Aggregate
Revolving Committed Amount and (iii) with regard to each Lender
individually, such Lender's Revolving Commitment Percentage of the sum
of Revolving Loans plus LOC Obligations outstanding at any time shall
not exceed such Lender's Revolving Commitment Percentage of the
Aggregate Revolving Committed Amount. Letters of Credit issued
hereunder shall not have an original expiry date more than one (1)
year from the date of issuance or extension, nor an expiry date,
whether as originally issued or by extension, extending beyond the
Termination Date. Each Letter of Credit shall comply with the related
LOC Documents and shall be either (A) a standby letter of credit
issued to support the obligations (including pension or insurance
obligations), contingent or otherwise, of a Borrower or (B) a
commercial letter of credit in respect of the purchase of goods or
services by a Borrower in the ordinary course of business. The
issuance date of each Letter of Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted by a Borrower to the Fronting Bank
at least three (3) Business Days prior to the requested date of
issuance (or such shorter period as may be agreed by the Fronting
Bank. The Fronting Bank will provide to the Agent at least monthly,
and more frequently upon request, a detailed summary report on its
Letters of Credit and the activity thereon, in form and substance
acceptable to the Agent. In addition, the Fronting Bank will provide
to the Agent for dissemination to the Lenders at least quarterly, and
more frequently upon request, a detailed summary report on its Letters
of Credit and the activity thereon, including, among other things, the
beneficiary, the face amount, and the expiry date. The Fronting Bank
will provide copies of the Letters of Credit to the Agent and the
Lenders promptly upon request.
(c) Participation. Each Lender, with respect to Letters of
Credit issued on or after the Closing Date, upon issuance of a Letter
of Credit, shall be deemed to have purchased without recourse a
participation from the Fronting Bank in such Letter of Credit and the
obligations arising thereunder, in each case in an amount equal to its
Revolving Commitment Percentage of the obligations under such Letter
of Credit and shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and be obligated to pay
to the Fronting Bank therefor and discharge when due, its pro rata
share of the obligations arising under such Letter of Credit. Without
limiting the scope and nature of each Lender's participation in any
Letter of Credit, to the extent that the Fronting Bank has not been
reimbursed as required hereunder or under any such Letter of Credit,
each such Lender shall pay to the Agent for further credit to the
Fronting Bank its Revolving Commitment Percentage of such unreimbursed
drawing in same day funds on the day of notification by the Agent of
an unreimbursed drawing pursuant to the provisions of subsection (d)
hereof. The obligation of each Lender to so reimburse the Fronting
Bank shall be absolute and unconditional and shall not be affected by
the occurrence of a Default, an Event of Default or any other
occurrence or event. Any such reimbursement shall not relieve or
otherwise impair the obligation of the applicable Borrower to
reimburse the Fronting Bank under any Letter of Credit, together with
interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Fronting Bank will promptly notify the Borrower
that was the applicant for such Letter of
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Credit. Unless such Borrower shall immediately notify the Fronting
Bank that it intends to otherwise reimburse the Fronting Bank for such
drawing, such Borrower shall be deemed to have requested that the
Lenders make a Revolving Loan in the amount of the drawing as provided
in subsection (e) hereof on the related Letter of Credit, the proceeds
of which will be used to satisfy the related reimbursement
obligations. Each Borrower that is the applicant under a Letter of
Credit promises to reimburse the Fronting Bank on the day of drawing
under any Letter of Credit (either with the proceeds of a Revolving
Loan obtained hereunder or otherwise) in same day funds. If such
Borrower shall fail to reimburse the Fronting Bank as provided
hereinabove, the unreimbursed amount of such drawing shall bear
interest at a per annum rate equal to the Base Rate plus two percent
(2%). Such Borrower's reimbursement obligations hereunder shall be
absolute and unconditional under all circumstances irrespective of any
rights of setoff, counterclaim or defense to payment such Borrower may
claim or have against the Fronting Bank, the Agent, the Lenders, the
beneficiary of the Letter of Credit drawn upon or any other Person,
including without limitation any defense based on any failure of such
Borrower to receive consideration or the legality, validity,
regularity or unenforceability of the Letter of Credit. The Fronting
Bank will promptly notify the Agent who will promptly notify the
Lenders of the amount of any unreimbursed drawing and each Lender
shall promptly pay to the Agent for the account of the Fronting Bank
in Dollars and in immediately available funds, the amount of such
Lender's pro rata share of such unreimbursed drawing. Such payment
shall be made on the day such notice is received by such Lender from
the Agent if such notice is received at or before 12:30 P.M. (New York
time) otherwise such payment shall be made at or before 9:00 A.M. (New
York time) on the Business Day next succeeding the day such notice is
received. If such Lender does not pay such amount to the Agent for the
account of the Fronting Bank in full upon such request, such Lender
shall, on demand, pay to the Agent for the account of the Fronting
Bank interest on the unpaid amount during the period from the date of
such drawing until such Lender pays such amount to the Agent for the
account of the Fronting Bank in full at a rate per annum equal to, if
paid within two (2) Business Days of the date that such Lender is
required to make payments of such amount pursuant to the preceding
sentence, the Federal Funds Rate and thereafter at a rate equal to the
Base Rate. Each Lender's obligation to make such payment to the Agent
for the account of the Fronting Bank, and the right of the Fronting
Bank to receive the same, shall be absolute and unconditional, shall
not be affected by any circumstance whatsoever and without regard to
the termination of this Credit Agreement or the Commitments hereunder,
the existence of a Default or Event of Default or the acceleration of
the obligations of any Borrower hereunder and shall be made without
any offset, abatement, withholding or reduction whatsoever.
Simultaneously with the making of each such payment by a Lender to the
Agent for the account of the Fronting Bank, such Lender shall,
automatically and without any further action on the part of the
Fronting Bank or such Lender, acquire a participation in an amount
equal to such payment (excluding the portion of such payment
constituting interest owing to the Fronting Bank) in the related
unreimbursed drawing portion of the LOC Obligation and in the interest
thereon and in the related LOC Documents, and shall have a claim
against such Borrower with respect thereto.
(e) Repayment with Revolving Loans. On any day on which any
Borrower shall have requested, or been deemed to have requested, a
Revolving Loan advance to reimburse a drawing under a Letter of
Credit, the Agent shall give notice to the Lenders that
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a Revolving Loan has been requested or deemed requested by such
Borrower to be made in connection with a drawing under a Letter of
Credit, in which case a Revolving Loan advance comprised of Base Rate
Loans (or Eurodollar Loans to the extent such Borrower has complied
with the procedures of Section 2.1(b)(i) with respect thereto) shall
be immediately made to such Borrower by all Lenders (notwithstanding
any termination of the Commitments pursuant to Section 9.2) pro rata
based on the respective Revolving Commitment Percentages of the
Lenders (determined before giving effect to any termination of the
Commitments pursuant to Section 9.2) and the proceeds thereof shall be
paid directly to the Fronting Bank for application to the respective
LOC Obligations. Each such Lender hereby irrevocably agrees to make
its pro rata share of each such Revolving Loan immediately upon any
such request or deemed request in the amount, in the manner and on the
date specified in the preceding sentence notwithstanding (i) the
amount of such borrowing may not comply with the minimum amount for
advances of Revolving Loans otherwise required hereunder, (ii) whether
any conditions specified in Section 5.2 are then satisfied, (iii)
whether a Default or an Event of Default then exists, (iv) failure for
any such request or deemed request for Revolving Loan to be made by
the time otherwise required hereunder, (v) whether the date of such
borrowing is a date on which Revolving Loans are otherwise permitted
to be made hereunder or (vi) any termination of the Commitments
relating thereto immediately prior to or contemporaneously with such
borrowing. In the event that any Revolving Loan cannot for any reason
be made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to a Borrower), then each such Lender
hereby agrees that it shall forthwith purchase (as of the date such
borrowing would otherwise have occurred, but adjusted for any payments
received from such Borrower on or after such date and prior to such
purchase) from the Fronting Bank such participation in the outstanding
LOC Obligations as shall be necessary to cause each such Lender to
share in such LOC Obligations ratably (based upon the respective
Revolving Commitment Percentages of the Lenders (determined before
giving effect to any termination of the Commitments pursuant to
Section 9.2)), provided that in the event such payment is not made on
the day of drawing, such Lender shall pay in addition to the Fronting
Bank interest on the amount of its unfunded Participation Interest at
a rate equal to, if paid within two (2) Business Days of the date of
drawing, the Federal Funds Rate, and thereafter at the Base Rate.
(f) Designation of Account Parties. Notwithstanding anything
to the contrary set forth in this Credit Agreement, including without
limitation Section 2.2(a), a Letter of Credit issued hereunder may
contain a statement to the effect that such Letter of Credit is issued
for the account of a Subsidiary or Alliance of a Borrower, provided
that notwithstanding such statement, in such circumstances the
Borrower requesting such Letter of Credit shall be the actual account
party for all purposes of this Credit Agreement for such Letter of
Credit and such statement shall not affect such Borrower's
reimbursement obligations hereunder with respect to such Letter of
Credit.
(g) Renewal, Extension. The renewal or extension of any
Letter of Credit shall, for purposes hereof, be treated in all
respects the same as the issuance of a new Letter of Credit hereunder.
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(h) Uniform Customs and Practices. The Fronting Bank may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP
may be incorporated therein and deemed in all respects to be a part
thereof.
(i) Indemnification; Nature of Fronting Bank's Duties.
(i) In addition to its other obligations under this
Section 2.2, each Borrower that is an applicant with respect
to a Letter of Credit hereby agrees to protect, indemnify,
pay and save the Fronting Bank harmless from and against any
and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees
actually incurred) that the Fronting Bank may incur or be
subject to as a consequence, direct or indirect, of (A) the
issuance of any Letter of Credit upon the application of such
Borrower or (B) the failure of the Fronting Bank to honor a
drawing under a Letter of Credit issued upon the application
of such Borrower as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de
facto government or governmental authority (all such acts or
omissions, herein called "Government Acts").
(ii) As between the Borrower that is the applicant
for a Letter of Credit and the Fronting Bank for such Letter
of Credit, such Borrower shall assume all risks of the acts,
omissions or misuse of any such Letter of Credit by the
beneficiary thereof. The Fronting Bank shall not be
responsible: (A) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for
and issuance of any Letter of Credit, even if it should in
fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) for errors, omissions,
interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (D) for any loss or delay
in the transmission or otherwise of any document required in
order to make a drawing under a Letter of Credit or of the
proceeds thereof; and (E) for any consequences arising from
causes beyond the control of the Fronting Bank, including,
without limitation, any Government Acts. None of the above
shall affect, impair, or prevent the vesting of the Fronting
Bank's rights or powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by the Fronting Bank, under or in
connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not
put such Fronting Bank under any resulting liability to such
Borrower. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and
indemnify the Fronting Bank against any and all risks
involved in the issuance of the Letters of Credit, all of
which risks are hereby assumed by the Borrowers, including,
without limitation, any and all
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Government Acts. The Fronting Bank shall not, in any way, be
liable for any failure by the Fronting Bank or anyone else to
pay any drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of the
Fronting Bank.
(iv) Nothing in this Section 2.2(i) is intended to
limit the reimbursement obligations of the Borrowers
contained in subsection (d) above. The obligations of the
Borrowers under this Section 2.2(i) shall survive the
termination of this Credit Agreement. No act or omissions of
any current or prior beneficiary of a Letter of Credit shall
in any way affect or impair the rights of the Fronting Bank
to enforce any right, power or benefit under this Credit
Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (i), the Borrowers shall have no
obligation to indemnify the Fronting Bank in respect of any
liability incurred by the Fronting Bank (A) to the extent
arising out of the gross negligence or willful misconduct of
the Fronting Bank, as determined by a court of competent
jurisdiction, or (B) caused by the Fronting Bank's failure to
pay under any Letter of Credit after presentation to it of a
request strictly complying with the terms and conditions of
such Letter of Credit, as determined by a court of competent
jurisdiction, unless such payment is prohibited by any law,
regulation, court order or decree.
(j) Responsibility of Fronting Bank. It is expressly
understood and agreed that the obligations of the Fronting Bank
hereunder to the Lenders are only those expressly set forth in this
Credit Agreement and that the Fronting Bank shall be entitled to
assume that the conditions precedent set forth in Section 5.2 have
been satisfied unless it shall have acquired actual knowledge that any
such condition precedent has not been satisfied; provided, however,
that nothing set forth in this Section 2.2 shall be deemed to
prejudice the right of any Lender to recover from the Fronting Bank
any amounts made available by such Lender to the Fronting Bank
pursuant to this Section 2.2 in the event that it is determined by a
court of competent jurisdiction that the payment with respect to a
Letter of Credit constituted gross negligence or willful misconduct on
the part of the Fronting Bank.
(k) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document (including any
letter of credit application), this Credit Agreement shall control.
2.3 SEVERAL OBLIGATIONS OF THE BORROWERS.
The obligations of the Borrowers, as Borrowers, are several and not
joint obligations of each of the Borrowers.
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SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 DEFAULT RATE.
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate two percent (2%)
greater than the rate which would otherwise be applicable (or if no rate is
applicable, whether in respect of interest, fees or other amounts, then two
percent (2%) greater than the Base Rate).
3.2 EXTENSION AND CONVERSION.
Subject to the terms of Section 5.2, the Borrowers shall have the
option, on any Business Day, to extend existing Loans into a subsequent
permissible Interest Period or to convert Loans into Loans of another interest
rate type; provided, however, that (a) except as provided in Section 3.8,
Eurodollar Loans may be converted into Base Rate Loans only on the last day of
the Interest Period applicable thereto, (b) Eurodollar Loans may be extended,
and Base Rate Loans may be converted into Eurodollar Loans, only if no Default
or Event of Default is in existence on the date of extension or conversion and
the conditions set forth in subsections (b) and (c) of Section 5.2 have been
satisfied, (c) Loans extended as, or converted into, Eurodollar Loans shall be
subject to the terms of the definition of "Interest Period" set forth in
Section 1.1 and shall be in such minimum amounts as provided in, Section
2.1(b)(ii), and (d) any request for extension or conversion of a Eurodollar
Loan which shall fail to specify an Interest Period shall be deemed to be a
request for an Interest Period of one (1) month. Each such extension or
conversion shall be effected by one or more of the Borrowers by giving a Notice
of Extension/Conversion, in the form of Exhibit 3.2, to the Agent prior to
10:00 A.M. (San Francisco time) on the Business Day of, in the case of the
conversion of a Eurodollar Loan into a Base Rate Loan, and on the third (3rd)
Business Day prior to, in the case of the extension of a Eurodollar Loan as, or
conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the
proposed extension or conversion, specifying the date of the proposed extension
or conversion, the Loans to be so extended or converted, the types of Loans
into which such Loans are to be converted and, if appropriate, the applicable
Interest Periods with respect thereto. Each request for extension or conversion
shall be irrevocable and shall constitute a representation and warranty by the
applicable Borrower of the matters specified in subsections (b) through (c) of
Section 5.2. In the event a Borrower fails to request extension or conversion
of any Eurodollar Loan in accordance with this Section, or any such conversion
or extension is not permitted or required by this Section, then such Eurodollar
Loan shall be automatically converted into a Base Rate Loan at the end of the
Interest Period applicable thereto. The Agent shall give each Lender notice as
promptly as practicable of any such proposed extension or conversion affecting
any Loan.
3.3 PREPAYMENTS.
(a) Voluntary Prepayments. Loans may be repaid in whole or in
part without premium or penalty; provided that (i) Eurodollar Loans
may not be prepaid other than at the end of the Interest Period
applicable thereto and only then on three (3) Business Days' prior
written notice to the Agent, (ii) any prepayment of Eurodollar Loans
will be
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subject to Section 3.11, (iii) Base Rate Loans may be prepaid by the
Borrowers by giving notice to the Agent prior to 10:00 A.M. (San
Francisco time) on the day of repayment of the requested prepayment,
and (iv) each such partial prepayment shall be in a minimum principal
amount of $5,000,000, in the case of Eurodollar Loans, and $1,000,000,
in the case of Base Rate Loans, and in integral multiples of
$1,000,000 in excess thereof. Any such voluntary prepayments shall be
applied in the manner directed by the applicable Borrower in the
notice of prepayment, or if any notice of prepayment fails to specify
the application thereof, such prepayment shall be applied first to
Base Rate Loans and then to Eurodollar Loans in direct order of their
Interest Period maturities.
(b) Mandatory Prepayments.
(i) If at any time, the aggregate principal amount
of Obligations shall exceed the Aggregate Revolving Committed
Amount as reduced from time to time, the Borrowers shall
immediately make a principal payment to the Lenders for
application to the Obligations in the manner and in an amount
necessary to be in compliance with Section 2.1. Any such
mandatory prepayment shall be applied first to Base Rate
Loans and then to Eurodollar Loans in the direct order of
their Interest Period maturities.
(ii) Asset Dispositions. The Revolving Loans
outstanding hereunder shall be prepaid in an amount equal to
one hundred percent (100%) of the Net Proceeds received from
Asset Dispositions to the extent that (A) such Net Proceeds
are not reinvested in similar property or assets within one
hundred eighty (180) days of the date of sale, lease,
disposition, casualty, theft or loss which gave rise to the
Asset Disposition, and (B) the aggregate amount of such Net
Proceeds not reinvested in accordance with the foregoing
subsection (i) shall exceed $1,000,000 in any fiscal year.
3.4 VOLUNTARY REDUCTIONS IN REVOLVING COMMITMENTS.
The Borrowers may from time to time permanently reduce the
aggregate amount of the Revolving Commitments in whole or in part
without premium or penalty except as provided in Section 3.11 upon
three (3) Business Days' prior written notice to the Agent (who shall
promptly notify each Lender), provided that (i) after giving effect to
any voluntary reduction the aggregate amount of Obligations shall not
exceed the Aggregate Revolving Committed Amount, as reduced, and (ii)
partial reductions shall be minimum principal amount of $5,000,000,
and in integral multiples of $1,000,000 in excess thereof.
3.5 FEES.
(a) Unused Fee. In consideration of the Revolving Commitments
hereunder, NIS agrees to pay to the Agent, for the ratable benefit of
the Lenders, an unused fee (the "Unused Fee") equal to the Applicable
Percentage for Unused Fees then in effect (calculated on the basis of
actual number of days elapsed in a year of three hundred sixty (360)
days) on the average daily unused portion of the Aggregate Revolving
Committed Amount for the applicable period. The Unused Fee shall be
payable quarterly in arrears
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on the fifteenth (15th) day following the last day of each calendar
quarter (as well as on the Termination Date) for the immediately
preceding quarter (or portion thereof) beginning with the first such
date to occur after the Closing Date.
(b) Letter of Credit Fees.
(i) Letter of Credit Issuance Fee. In consideration
of the issuance of Letters of Credit hereunder, each Borrower
promises to pay to the Agent, for the account of each Lender,
a fee (the "Letter of Credit Fee") on such Lender's Revolving
Commitment Percentage of the average daily maximum amount
available to be drawn under each such standby Letter of
Credit issued for the account of such Borrower computed at a
per annum rate for each day from the date of issuance to the
date of expiration equal to the Applicable Percentage for
Letter of Credit Fees then in effect. The Letter of Credit
Fee will be payable quarterly in arrears on the last Business
Day of each March, June, September and December (as well as
on the Termination Date) for the immediately preceding
quarter (or a portion thereof).
(ii) Fronting Bank Fee. In addition to the Letter of
Credit Fee payable pursuant to clause (i) above, each
Borrower promises to pay to the Fronting Bank for its own
account without sharing by the other Lenders (A) letter of
credit fronting and negotiation fees of one-eighth percent
(1/8%) per annum on the average daily maximum amount
available to be drawn under outstanding Letters of Credit
issued for the account of such Borrower payable quarterly in
arrears with the Letter of Credit Fee, and (B) customary
charges from time to time of the Fronting Bank with respect
to the issuance, amendment, transfer, administration,
cancellation and conversion of, and drawings under, such
Letters of Credit (collectively, the "Fronting Bank Fees").
(c) Administrative Fees. NIS agrees to pay to the Agent, for
its own account, an annual administrative fee and such other fees, if
any, referred to in the Agent's Fee Letter.
3.6 CAPITAL ADEQUACY.
If any Lender has determined, after the date hereof, that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or
administration of, any applicable law, rule or regulation regarding capital
adequacy, or compliance by such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Lender's capital or assets as a consequence
of its commitments or obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy), then, upon notice from such Lender to the Borrowers, the
Borrowers shall be obligated to pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction. Each determination
by any such Lender of amounts
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owing under this Section shall, absent manifest error, be conclusive and binding
on the parties hereto.
3.7 INABILITY TO DETERMINE INTEREST RATE.
If prior to the first (1st) day of any Interest Period, the Agent
shall have determined (which determination shall be conclusive and binding upon
the Borrowers) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, the Agent shall give telecopy or telephonic notice
thereof to the Borrowers and the Lenders as soon as practicable thereafter. If
such notice is given (a) any Eurodollar Loans requested to be made on the first
(1st) day of such Interest Period shall be made as Base Rate Loans and (b) any
Loans that were to have been converted on the first day of such Interest Period
to or continued as Eurodollar Loans shall be converted to or continued as Base
Rate Loans. Until such notice has been withdrawn by the Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrowers
have the right to convert Base Rate Loans to Eurodollar Loans.
3.8 ILLEGALITY.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application
thereof occurring after the Closing Date shall make it unlawful for any Lender
to make or maintain Eurodollar Loans as contemplated by this Credit Agreement,
(a) such Lender shall promptly give written notice of such circumstances to the
Borrowers and the Agent (which notice shall be withdrawn whenever such
circumstances no longer exist), (b) the commitment of such Lender hereunder to
make Eurodollar Loans, continue Eurodollar Loans as such and convert a Base
Rate Loan to Eurodollar Loans shall forthwith be canceled and, until such time
as it shall no longer be unlawful for such Lender to make or maintain
Eurodollar Loans, such Lender shall then have a commitment only to make a Base
Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
Base Rate Loans on the respective last days of the then current Interest
Periods with respect to such Loans or within such earlier period as required by
law. If any such conversion of a Eurodollar Loan occurs on a day which is not
the last day of the then current Interest Period with respect thereto, the
Borrowers shall pay to such Lender such amounts, if any, as may be required
pursuant to Section 3.11.
3.9 REQUIREMENTS OF LAW.
If, after the date hereof, the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof applicable
to any Lender, or compliance by any Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority, in each case made subsequent to the Closing Date (or,
if later, the date on which such Lender becomes a Lender):
(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit, any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof
(except for (i) Non-Excluded Taxes covered by Section 3.10 (including
Non-Excluded Taxes
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imposed solely by reason of any failure of such Lender to comply with
its obligations under Section 3.10(b)) and (ii) changes in taxes
measured by or imposed upon the net income, or franchise tax (imposed
in lieu of such net income tax), of such Lender or its applicable
lending office, branch, or any affiliate thereof));
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(c) shall impose on such Lender any other condition
(excluding any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting
into, continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrowers from such Lender,
through the Agent, in accordance herewith, the Borrowers shall be obligated to
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable,
provided that, in any such case, the Borrowers may elect to convert the
Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving the
Agent at least one (1) Business Day's notice of such election, in which case
the Borrowers shall promptly pay to such Lender, upon demand, without
duplication, such amounts, if any, as may be required pursuant to Section 3.11.
If any Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall provide prompt notice thereof to the Borrowers, through
the Agent, certifying (x) that one of the events described in this paragraph
(a) has occurred and describing in reasonable detail the nature of such event,
(y) as to the increased cost or reduced amount resulting from such event and
(z) as to the additional amount demanded by such Lender and a reasonably
detailed explanation of the calculation thereof. Such a certificate as to any
additional amounts payable pursuant to this subsection submitted by such
Lender, through the Agent, to the Borrowers shall be conclusive and binding on
the parties hereto in the absence of manifest error. This covenant shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
3.10 TAXES.
(a) Except as provided below in this subsection, all payments
made by the Borrowers under this Credit Agreement and any Notes shall
be made free and clear of, and without deduction or withholding for or
on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by
any court, or governmental body, agency or other official, excluding
taxes measured by or imposed upon the net income of any Lender or its
applicable lending office, or any branch or affiliate thereof, and all
franchise taxes, branch taxes, taxes on doing business or taxes on the
capital or net worth of any Lender or its applicable lending office,
or any branch or affiliate thereof, in each case imposed in lieu of
net income taxes, imposed: (i) by the jurisdiction under the laws of
which
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such Lender, applicable lending office, branch or affiliate is
organized or is located, or in which its principal executive office is
located, or any nation within which such jurisdiction is located or
any political subdivision thereof; or (ii) by reason of any connection
between the jurisdiction imposing such tax and such Lender, applicable
lending office, branch or affiliate other than a connection arising
solely from such Lender having executed, delivered or performed its
obligations, or received payment under or enforced, this Credit
Agreement or any Notes (collectively, "Excluded Taxes"). If any taxes,
levies, imposts, duties, charges, fees, deductions or withholdings
other than Excluded Taxes (collectively "Non-Excluded Taxes") are
required to be withheld from any amounts payable to the Agent or any
Lender hereunder or under any Notes, (A) the amounts so payable to the
Agent or such Lender shall be increased to the extent necessary to
yield to the Agent or such Lender (after payment of all Non-Excluded
Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Credit Agreement and any
Notes, provided, however, that the Borrowers shall be entitled to
deduct and withhold any Non-Excluded Taxes and shall not be required
to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state
thereof if such Lender fails to comply with the requirements of
paragraph (b) of this subsection whenever any Non-Excluded Taxes are
payable by the Borrowers, and (B) as promptly as possible thereafter
the Borrowers shall send to the Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an
original official receipt received by one or more of the Borrowers
showing payment thereof. If the Borrowers fail to pay any Non-Excluded
Taxes when due to the appropriate taxing authority or fails to remit
to the Agent the required receipts or other required documentary
evidence, the Borrowers shall indemnify the Agent and the Lenders for
any incremental taxes, interest or penalties that may become payable
by the Agent or any Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof shall:
(X)(i) on or before the date of any payment by the
Borrowers under this Credit Agreement or Notes to such
Lender, deliver to the Borrowers and the Agent (A) two (2)
duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as
the case may be, certifying that it is entitled to receive
payments under this Credit Agreement and any Notes without
deduction or withholding of any United States federal income
taxes and (B) an Internal Revenue Service Form W-8 or W-9, or
successor applicable form, as the case may be, certifying
that it is entitled to an exemption from United States backup
withholding tax;
(ii) deliver to the Borrowers and the Agent
two (2) further copies of any such form or
certification on or before the date that any such
form or certification expires or becomes obsolete
and after the occurrence of any event requiring a
change in the most recent form previously delivered
by it to the Borrowers; and
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(iii) obtain such extensions of time for
filing and complete such forms or certifications as
may reasonably be requested by the Borrowers or the
Agent; or
(Y) in the case of any such Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the
Internal Revenue Code, (i) represent to the Borrowers (for
the benefit of the Borrowers and the Agent) that it is not a
bank within the meaning of Section 881(c)(3)(A) of the
Internal Revenue Code, (ii) agree to furnish to the Borrowers
on or before the date of any payment by the Borrowers, with a
copy to the Agent two (2) accurate and complete original
signed copies of Internal Revenue Service Form W-8, or
successor applicable form certifying to such Lender's legal
entitlement at the date of such certificate to an exemption
from U.S. withholding tax under the provisions of Section
881(c) of the Internal Revenue Code with respect to payments
to be made under this Credit Agreement and any Notes (and to
deliver to the Borrowers and the Agent two (2) further copies
of such form on or before the date it expires or becomes
obsolete and after the occurrence of any event requiring a
change in the most recently provided form and, if necessary,
obtain any extensions of time reasonably requested by the
Borrowers or the Agent for filing and completing such forms),
and (iii) agree, to the extent legally entitled to do so,
upon reasonable request by the Borrowers, to provide to the
Borrowers (for the benefit of the Borrowers and the Agent)
such other forms as may be reasonably required in order to
establish the legal entitlement of such Lender to an
exemption from withholding with respect to payments under
this Credit Agreement and any Notes;
unless in any such case any change in treaty, law or regulation has
occurred after the date such Person becomes a Lender hereunder which
renders all such forms inapplicable or which would prevent such Lender
from duly completing and delivering any such form with respect to it
and such Lender so advises the Borrowers and the Agent. Each Person
that shall become a Lender or a participant of a Lender pursuant to
Section 11.3 shall, upon the effectiveness of the related transfer, be
required to provide all of the forms, certifications and statements
required pursuant to this subsection, provided that in the case of a
participant of a Lender the obligations of such participant of a
Lender pursuant to this subsection (b) shall be determined as if the
participant of a Lender were a Lender except that such participant of
a Lender shall furnish all such required forms, certifications and
statements to the Lender from which the related participation shall
have been purchased.
3.11 INDEMNITY.
The Borrowers promise to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur (other
than through such Lender's gross negligence or willful misconduct) as a
consequence of (a) any payment, prepayment, or conversion of a Eurodollar Loan
for any reason including, without limitation, in connection with any assignment
by Bank of America pursuant to Section 11.3(b) as part of the primary
syndication of the Loans during the 180-day period immediately following the
Closing Date, (b) default by any of the Borrowers in making a borrowing of,
conversion into or continuation of Eurodollar Loans after notice has been given
requesting the same in accordance with the provisions of this Credit
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Agreement, (c) default by the Borrowers in making any prepayment of a
Eurodollar Loan after notice thereof has been given in accordance with the
provisions of this Credit Agreement or (d) the making of a prepayment of
Eurodollar Loans on a day which is not the last day of an Interest Period with
respect thereto. With respect to Eurodollar Loans, such indemnification may
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed,
converted or continued, for the period from the date of such prepayment or of
such failure to borrow, convert or continue to the last day of the applicable
Interest Period (or, in the case of a failure to borrow, convert or continue,
the Interest Period that would have commenced on the date of such failure) in
each case at the applicable rate of interest for such Eurodollar Loans provided
for herein over (ii) the amount of interest (as reasonably determined by such
Lender) which would have accrued to such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
Eurodollar market. The covenants of the Borrowers set forth in this Section
3.11 shall survive the termination of this Credit Agreement and the payment of
the Loans and all other amounts payable hereunder.
3.12 PRO RATA TREATMENT.
Except to the extent otherwise provided herein:
(a) Loans. Each Extension of Credit in respect of the
Revolving Loans and LOC Obligations and payments of principal,
interest and fees (including the Unused Fee and Letter of Credit Fee)
on or in respect thereof and each reduction in Commitments, relating
thereto, and each conversion or extension of such Loans and
Obligations, shall be allocated pro rata among the Lenders in
accordance with the respective principal amounts of their outstanding
Revolving Loans and Participation Interests.
(b) Advances. Unless the Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not
make the amount that would constitute its ratable share of such
borrowing available to the Agent, the Agent may assume that such
Lender is making such amount available to the Agent, and the Agent
may, in reliance upon such assumption, make available to one or more
of the Borrowers a corresponding amount. If such amount is not made
available to the Agent by such Lender within the time period specified
therefor hereunder, such Lender shall pay to the Agent, on demand,
such amount with interest thereon at a rate equal to the Federal Funds
Rate for the period until such Lender makes such amount immediately
available to the Agent. A certificate of the Agent submitted to any
Lender with respect to any amounts owing under this subsection shall
be conclusive in the absence of manifest error.
3.13 SHARING OF PAYMENTS.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the
exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a
secured claim under Section 506 of Title 11 of the United States Code or other
security or interest arising from, or in lieu of, such secured claim, received
by such Lender under any applicable bankruptcy, insolvency or other similar law
or otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender
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shall promptly purchase from the other Lenders a participation in such Loans,
LOC Obligations and other obligations in such amounts, and make such other
adjustments from time to time, as shall be equitable to the end that all
Lenders share such payment in accordance with their respective ratable shares
as provided for in this Credit Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of a
participation theretofore sold, return its share of that benefit (together with
its share of any accrued interest payable with respect thereto) to each Lender
whose payment shall have been rescinded or otherwise restored. The Borrowers
agree that any Lender so purchasing such a participation may, to the fullest
extent permitted by law, exercise all rights of payment, including setoff,
banker's lien or counterclaim, with respect to such participation as fully as
if such Lender were a holder of such Loan, LOC Obligations or other obligation
in the amount of such participation. Except as otherwise expressly provided in
this Credit Agreement, if any Lender or the Agent shall fail to remit to the
Agent or any other Lender an amount payable by such Lender or the Agent to the
Agent or such other Lender pursuant to this Credit Agreement on the date when
such amount is due, such payments shall be made together with interest thereon
for each date from the date such amount is due until the date such amount is
paid to the Agent or such other Lender at a rate per annum equal to the Federal
Funds Rate. If under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section 3.13 applies, such Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders under this Section 3.13 to share in the benefits of any
recovery on such secured claim.
3.14 PAYMENTS, COMPUTATIONS, ETC.
(a) Except as otherwise specifically provided herein, all
payments hereunder shall be made to the Agent in dollars in
immediately available funds, without offset, deduction, counterclaim
or withholding of any kind, at the Agent's office specified in Section
11.1 not later than 12:30 P.M. (San Francisco time) on the date when
due. Payments received after such time shall be deemed to have been
received on the next succeeding Business Day. The Agent may (but shall
not be obligated to) debit the amount of any such payment which is not
made by such time to any ordinary deposit account of any of the
Borrowers maintained with the Agent (with notice to the Borrowers).
The Borrowers (or any of them) shall, at the time a payment is made
under this Credit Agreement, specify to the Agent the Loans, LOC
Obligations, Fees, interest or other amounts payable by the Borrowers
hereunder to which such payment is to be applied (and in the event
that it fails so to specify, or if such application would be
inconsistent with the terms hereof, the Agent shall distribute such
payment to the Lenders in such manner as the Agent may determine to be
appropriate in respect of obligations owing by the Borrowers
hereunder, subject to the terms of Section 3.12(a)). The Agent will
distribute such payments to such Lenders, if such payment is received
on or before 12:30 P.M. (San Francisco time) on a Business Day in like
funds as received prior to the end of such Business Day and otherwise
the Agent will distribute such payment to such Lenders on the next
succeeding Business Day. Whenever any payment hereunder shall be
stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day (subject
to accrual of interest and Fees for the period of such extension),
except that in the case of Eurodollar
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Loans, if the extension would cause the payment to be made in the next
following calendar month, then such payment shall instead be made on
the next preceding Business Day. Except as expressly provided
otherwise herein, all computations of interest and fees shall be made
on the basis of actual number of days elapsed over a year of three
hundred sixty (360) days, except with respect to computation of
interest on Base Rate Loans which (unless the Base Rate is determined
by reference to the Federal Funds Rate) shall be calculated based on a
year of three hundred sixty-five (365) or three hundred sixty-six
(366) days, as appropriate. Interest shall accrue from and include the
date of borrowing, but exclude the date of payment.
(b) Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement to the
contrary, after the occurrence and during the continuance of an Event
of Default, all amounts collected or received by the Agent or any
Lender on account of the Obligations or any other amounts outstanding
under any of the Credit Documents shall be paid over or delivered as
follows:
FIRST, to the payment of all reasonable out of
pocket costs and expenses (including without limitation,
reasonable attorney's fees actually incurred) of the Agent in
connection with enforcing the rights of the Lenders under the
Credit Documents;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable
out-of-pocket costs, fees and expenses (including without
limitation, reasonable attorneys' fees actually incurred) of
the Agent and each of the Lenders in connection with
enforcing its rights under the Credit Documents or otherwise
with respect to the Obligations owing to such Lender;
FOURTH, to the payment of all accrued interest and
fees on or in respect of the Obligations;
FIFTH, to the payment of the outstanding principal
amount of the Obligations (including the payment or cash
collateralization of the outstanding LOC Obligations);
SIXTH, to all other Obligations and other
obligations which shall have become due and payable under the
Credit Documents or otherwise and not repaid pursuant to
clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to
whoever may be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied
in the numerical order provided until exhausted prior to application
to the next succeeding category; and (ii) each of the Lenders shall
receive an amount equal to its pro rata share (based on the proportion
that the then outstanding Obligations held by such Lender bears to the
aggregate then outstanding Obligations) of amounts available to be
applied pursuant to clauses "THIRD",
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"FOURTH" "FIFTH" and "SIXTH" above; and (iii) to the extent that any
amounts available for distribution pursuant to clause "FIFTH" above
are attributable to the issued but undrawn amount of outstanding
Letters of Credit, such amounts shall be held by the Agent in a cash
collateral account and applied (A) first, to reimburse the Fronting
Bank for any drawings under such Letters of Credit and (B) then,
following the expiration or earlier cancellation of all Letters of
Credit, to all other obligations of the types described in clauses
"FIFTH" and "SIXTH" above in the manner provided in this Section
3.14(b).
3.15 EVIDENCE OF DEBT.
(a) Each Lender shall maintain an account or accounts
evidencing each Loan made by such Lender to the Borrowers from time to
time, including the amounts of principal and interest payable and paid
to such Lender from time to time under this Credit Agreement. Each
Lender will make reasonable efforts to maintain the accuracy of its
account or accounts and to promptly update its account or accounts
from time to time, as necessary, and to provide a copy of such account
or accounts to the Borrowers upon request.
(b) The Agent shall maintain the Register pursuant to Section
11.3(c) hereof, and a subaccount for each Lender, in which Register
and subaccounts (taken together) shall be recorded (i) the amount,
type and Interest Period of each such Loan hereunder, (ii) the amount
of any principal or interest due and payable or to become due and
payable to each Lender hereunder and (iii) the amount of any sum
received by the Agent hereunder from or for the account of a Borrower
and each Lender's share thereof. The Agent will make reasonable
efforts to maintain the accuracy of the subaccounts referred to in the
preceding sentence and to promptly update such subaccounts from time
to time, as necessary.
(c) The entries made in the accounts, Register and
subaccounts maintained pursuant to subsection (b) of this Section 3.15
(and, if consistent with the entries of the Agent, subsection (a))
shall be prima facie evidence of the existence and amounts of the
obligations of the Borrowers therein recorded; provided, however, that
the failure of any Lender or the Agent to maintain any such account,
such Register or such subaccount, as applicable, or any error therein,
shall not in any manner affect the obligation of the Borrowers to
repay the Loans made by such Lender in accordance with the terms
hereof.
3.16 REPLACEMENT OF LENDERS.
Upon the occurrence of (i) (x) an event that requires the
Borrowers to pay additional amounts to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 3.6, 3.9
or 3.10 and (y) a demand by a Lender for such amounts from the
Borrowers, (ii) a default by a Lender in its obligation to fund Loans
hereunder or (iii) a grant or other transfer of a participation by any
Lender of its interests and obligations hereunder pursuant to Section
11.3(d) to any bank or financial institution which (x) is engaged in a
CCTP Business, (y) could reasonably be considered a competitor of a
Borrower and (z) is objectionable to the Borrowers in the exercise of
their reasonable judgment, then, in any such case, the Borrowers may,
at their sole expense and effort, upon notice to the applicable Lender
and the Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions
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contained in Section 11.3), all its interests, rights and obligations
under this Agreement to an Eligible Assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts
such assignment); provided that (a) the Borrowers shall have received
the prior written consent of the Agent (and, if the LOC Commitment is
being assigned, the Fronting Bank), which consent shall not
unreasonably be withheld, (b) such Lender shall have received payment
of an amount equal to the outstanding principal of its Loans and
participations in Letters of Credit, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder, from the assignee
(to the extent of such outstanding principal and accrued interest and
fees) or the Borrowers (in the case of all other amounts) and (c) in
the case of any such assignment resulting from a claim for
compensation under Section 3.9, such assignment will result in a
material reduction in such compensation or payments. If a Lender
defaults, the Borrowers do not waive any of their rights against such
Lender if the Borrowers cause the defaulting Lender to assign its
position. The Borrowers agree to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or
assignment (including any break-funding costs).
SECTION 4
GUARANTY
4.1 THE GUARANTEE.
Each of the Guarantors hereby jointly and severally irrevocably
guarantees to each Lender, to each Affiliate of a Lender that enters into a
Hedging Agreement, and to the Agent as hereinafter provided the prompt payment
of the Credit Party Obligations in full when due (whether at stated maturity,
as a mandatory prepayment, by acceleration, a mandatory cash collateralization
or otherwise) strictly in accordance with the terms thereof. The Guarantors
hereby further agree that if any of the Credit Party Obligations are not paid
in full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as mandatory cash collateralization or otherwise), the Guarantors
will, jointly and severally, promptly pay the same, without any demand or
notice whatsoever, and that in the case of any extension of time of payment or
renewal of any of the Credit Party Obligations, the same will be promptly paid
in full when due (whether at extended maturity, as a mandatory prepayment, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal.
Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents or Hedging Agreements, the obligations of
each Guarantor hereunder shall be limited to an aggregate amount equal to the
largest amount that would not render its obligations hereunder subject to
avoidance under Section 548 of the Bankruptcy Code or any comparable provisions
of any applicable state law.
4.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Guarantors under Section 4.1 hereof are joint
and several, absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of any of the Credit
Documents or Hedging Agreements, or any other agreement or instrument referred
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to therein, or any substitution, release or exchange of any other guarantee of
or security for any of the Credit Party Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 4.2 that the
obligations of the Guarantors hereunder shall be absolute and unconditional
under any and all circumstances. Each Guarantor agrees that such Guarantor
shall have no right of subrogation, indemnity, reimbursement or contribution
against any of the Borrowers or any other Guarantor of the Credit Party
Obligations for amounts paid under this Guaranty until such time as the Lenders
(and any Affiliates of Lenders entering into Hedging Agreements) have been paid
in full, all Commitments under the Credit Agreement have been terminated and no
Person or Governmental Authority shall have any right to request any return or
reimbursement of funds from the Lenders in connection with monies received
under the Credit Documents or Hedging Agreements. Without limiting the
generality of the foregoing, it is agreed that, to the fullest extent permitted
by law, the occurrence of any one or more of the following shall not alter or
impair the liability of any Guarantor hereunder which shall remain absolute and
unconditional as described above:
(a) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of
the Credit Party Obligations shall be extended, or such performance or
compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any
of the Credit Documents, any Hedging Agreement or any other agreement
or instrument referred to in the Credit Documents or Hedging
Agreements shall be done or omitted;
(c) the maturity of any of the Credit Party Obligations shall
be accelerated, or any of the Credit Party Obligations shall be
modified, supplemented or amended in any respect, or any right under
any of the Credit Documents, any Hedging Agreement or any other
agreement or instrument referred to in the Credit Documents or Hedging
Agreements shall be waived or any other guarantee of any of the Credit
Party Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the Agent or any
Lender or Lenders as security for any of the Credit Party Obligations
shall fail to attach or be perfected; or
(e) any of the Credit Party Obligations shall be determined
to be void or voidable (including, without limitation, for the benefit
of any creditor of any Guarantor) or shall be subordinated to the
claims of any Person (including, without limitation, any creditor of
any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit
Documents, any Hedging Agreement or any other agreement or instrument referred
to in the Credit Documents or Hedging Agreements, or against any other Person
under any other guarantee of, or security for, any of the Credit Party
Obligations.
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4.3 REINSTATEMENT.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment
by or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit
Party Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
4.4 CERTAIN ADDITIONAL WAIVERS.
Without limiting the generality of the provisions of this Section 4,
each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat.
ss.ss. 26-7 through 26-9, inclusive, to the extent applicable. Each Guarantor
further agrees that such Guarantor shall have no right of recourse to security
for the Credit Party Obligations, except through the exercise of rights of
subrogation pursuant to Section 4.2 and through the exercise of rights of
contribution pursuant to Section 4.6.
4.5 REMEDIES.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Credit Party Obligations may be declared to be forthwith due
and payable as provided in Section 9.2 hereof (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 9.2) for purposes of Section 4.1 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing the
Credit Party Obligations from becoming automatically due and payable) as
against any other Person and that, in the event of such declaration (or the
Credit Party Obligations being deemed to have become automatically due and
payable), the Credit Party Obligations (whether or not due and payable by any
other Person) shall forthwith become due and payable by the Guarantors for
purposes of said Section 4.1.
4.6 RIGHTS OF CONTRIBUTION.
The Guarantors hereby agree, as among themselves, that if any
Guarantor shall become an Excess Funding Guarantor (as defined below), each
other Guarantor shall, on demand of such Excess Funding Guarantor (but subject
to the succeeding provisions of this Section 4.6), pay to such Excess Funding
Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below
and determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 4.6 shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Guarantor under the other provisions of this Section 4, and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations. For purposes
hereof, (a) "Excess Funding Guarantor" shall mean, in respect of
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any obligations arising under the other provisions of this Section 4
(hereafter, the "Guarantied Obligations"), a Guarantor that has paid an amount
in excess of its Pro Rata Share of the Guarantied Obligations; (b) "Excess
Payment" shall mean, in respect of any Guarantied Obligations, the amount paid
by an Excess Funding Guarantor in excess of its Pro Rata Share of such
Guarantied Obligations; and (c) "Pro Rata Share", for the purposes of this
Section 4.6, shall mean, for any Guarantor, the ratio (expressed as a
percentage) of (i) the amount by which the aggregate present fair saleable
value of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (ii) the amount by which the aggregate present fair saleable
value of all assets and other properties of the Borrowers and all of the
Guarantors exceeds the amount of all of the debts and liabilities (including
contingent, subordinated, unmatured, and unliquidated liabilities, but
excluding the obligations of the Borrowers and the Guarantors hereunder) of the
Borrowers and all of the Guarantors, all as of the Closing Date (if any
Guarantor becomes a party hereto subsequent to the Closing Date, then for the
purposes of this Section 4.6 such subsequent Guarantor shall be deemed to have
been a Guarantor as of the Closing Date and the information pertaining to, and
only pertaining to, such Guarantor as of the date such Guarantor became a
Guarantor shall be deemed true as of the Closing Date).
4.7 CONTINUING GUARANTEE.
The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Credit Party Obligations whenever arising.
SECTION 5
CONDITIONS
5.1 CONDITIONS TO CLOSING.
This Credit Agreement shall become effective, and the initial
Extensions of Credit may be made, upon the satisfaction of the following
conditions precedent:
(a) Execution of Credit Agreement and Credit Documents.
Receipt of (i) multiple counterparts of this Credit Agreement, (ii) a
Revolving Note for each Lender, and (iii) multiple counterparts of the
Pledge Agreement, executed by a duly authorized officer of each party
thereto and in each case conforming to the requirements of this Credit
Agreement.
(b) Financial Information. Receipt of financial information
regarding the Parent and its Subsidiaries, as may be requested by, and
in form and substance satisfactory to the Agent, including without
limitation, the consolidated financial statements of the Parent and
its Subsidiaries for the fiscal years 1997 and 1998, including balance
sheets and income and cash flow statements, audited by independent
certified public accountants of recognized national standing and
containing an unqualified opinion of such firm that such statements
present fairly, in all material respects, the consolidated financial
position and results of operations of the Parent and its Subsidiaries,
and are prepared in conformity with GAAP.
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(c) Absence of Legal Proceedings. The absence of any action,
suit, investigation or proceeding pending in any court or before any
arbitrator or governmental instrumentality which would reasonably be
expected to have a Material Adverse Effect.
(d) Legal Opinions. Receipt of multiple counterparts of
opinions of counsel for the Credit Parties relating to the Credit
Documents and the transactions contemplated herein, in form and
substance satisfactory to the Agent and its counsel.
(e) Corporate Documents. Receipt of the following (or their
equivalent) for each of the Credit Parties:
(i) Articles of Incorporation. Copies of the
articles of incorporation or charter documents certified to
be true and complete as of a recent date by the appropriate
governmental authority of the state of its incorporation.
(ii) Resolutions. Copies of resolutions of the Board
of Directors approving and adopting the respective Credit
Documents, the transactions contemplated therein and
authorizing execution and delivery thereof, certified by a
secretary or assistant secretary as of the Closing Date to be
true and correct and in force and effect as of such date.
(iii) Bylaws. Copies of the bylaws certified by a
secretary or assistant secretary as of the Closing Date to be
true and correct and in force and effect as of such date.
(iv) Good Standing. Copies, where applicable, of
certificates of good standing, existence or its equivalent
certified as of a recent date by the appropriate governmental
authorities of the state of incorporation and each other
state in which the failure to so qualify and be in good
standing would have a material adverse effect on the business
or operations of the Credit Parties in such state.
(f) Material Adverse Effect. There shall not have occurred a
change since June 30, 1999, that has had or would reasonably be
expected to have a Material Adverse Effect (including without
limitation matters related to litigation, tax, accounting, labor,
insurance and pension liabilities).
(g) Officer's Certificate. The Agent shall have received a
certificate or certificates in substantially the form of Exhibit 5.1,
attached hereto, executed by the chief financial officer of the Parent
as of the Closing Date stating that (A) the Parent and each of the
Parent's Subsidiaries are in compliance with all existing financial
obligations the noncompliance with which would reasonably be expected
to have a Material Adverse Effect, (B) all governmental, shareholder
and third party consents and approvals, if any, with respect to the
Credit Documents and the transactions contemplated thereby have been
obtained, (C) no action, suit, investigation or proceeding is pending
or, to such Person's knowledge, threatened in any court or before any
arbitrator or governmental instrumentality that purports to affect the
Parent, any of the Parent's Subsidiaries or any transaction
contemplated by the Credit Documents which, if adversely determined,
might be reasonably expected to have a Material Adverse Effect, and
(D) immediately after
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giving effect to this Credit Agreement, the other Credit Documents and
all the transactions contemplated herein or therein to occur on such
date, (1) each Credit Party is Solvent, (2) no Default or Event of
Default exists, (3) all representations and warranties contained
herein and in the other Credit Documents are true and correct in all
material respects, and (4) the Parent is in compliance with each of
the financial covenants set forth in Section 7.9.
(h) Fees. Receipt of all fees, if any, owing pursuant to
Section 3.5 or otherwise.
(i) Payment of Indebtedness Under Existing Credit Agreement.
The Agent shall have received evidence satisfactory to it that the
Credit Parties have paid in full any amounts outstanding under the
Existing Credit Agreement, or will pay in full such amounts with the
proceeds of the initial borrowing hereunder.
(j) Additional Matters. All other documents and legal matters
in connection with the transactions contemplated by this Credit
Agreement shall be reasonably satisfactory in form and substance to
the Agent and the Required Lenders.
5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The obligation of each Lender (including the Fronting Bank) to make
any Extension of Credit hereunder (including the initial Extension of Credit to
be made hereunder) is subject to the satisfaction of the following conditions
precedent on the date of making such Extension of Credit:
(a) Notice. The applicable Borrower shall have delivered in
the case of any new Revolving Loan, a Notice of Borrowing, duly
executed and completed, by the time specified in Section 2.1, (ii) in
the case of any Letter of Credit, to the Fronting Bank an appropriate
request for issuance in accordance with the provisions of Section 2.2.
(b) Representations and Warranties. The representations and
warranties made by the Credit Parties herein or in any other Credit
Documents or which are contained in any certificate furnished at any
time under or in connection herewith shall be true and correct in all
material respects on and as of the date of such Extension of Credit as
if made on and as of such date (except for those which expressly
relate to an earlier date).
(c) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date or after
giving effect to the Extension of Credit to be made on such date
unless such Default or Event of Default shall have been waived in
accordance with this Credit Agreement.
Each request for Extension of Credit (including extensions and
conversions) and each acceptance by any of the Borrowers of an Extension of
Credit (including extensions and conversions) shall be deemed to constitute a
representation and warranty by each of the Borrowers as of the date of such
Extension of Credit that the applicable conditions in paragraphs (b) and (c) of
this subsection have been satisfied.
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SECTION 6
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Credit Agreement and to make
Extensions of Credit herein provided for, each Credit Party hereby represents
and warrants to the Agent and to each Lender that:
6.1 FINANCIAL CONDITION.
The financial statements delivered to the Agent pursuant to Section
5.1(b) and Section 7.1 have been prepared in accordance with GAAP consistently
applied throughout the periods covered thereby, are complete and correct in all
material respects and present fairly the financial condition and results from
operations of the entities and for the periods specified, subject in the case
of interim company-prepared statements to normal year-end adjustments.
6.2 NO CHANGES OR RESTRICTED PAYMENTS.
Since June 30, 1999, (a) there has been no circumstance, development
or event relating to or affecting the Parent or any of its Subsidiaries which
has had or would be reasonably expected to have a Material Adverse Effect and
(b) except as permitted herein, no Restricted Payments have been made or
declared, or are required to be made or declared pursuant to any agreement (as
to which no conditions to the requirement to make such Restricted Payment
remain to be satisfied) entered into, by the Parent or any of its Subsidiaries.
6.3 ORGANIZATION; EXISTENCE; COMPLIANCE WITH LAW.
Each of the Parent and its Subsidiaries (a) is duly organized, validly
existing in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate or other necessary power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently
engaged, (c) is duly qualified as a foreign entity and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification, other than
in such jurisdictions where the failure to be so qualified and in good standing
would not, in the aggregate, have a Material Adverse Effect, and (d) is in
compliance with all Requirements of Law, except to the extent that the failure
to comply therewith would not, in the aggregate, be reasonably expected to have
a Material Adverse Effect.
6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each Credit Party has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party and has taken all necessary corporate action
to authorize the execution, delivery and performance by it of the Credit
Documents to which it is a party. No consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with the borrowings hereunder or with
the execution, delivery or performance of any Credit Documents by any Credit
Party (other than those which have been obtained) or with the validity or
enforceability of any Credit Document against such Credit Party (except such
filings as are necessary in connection with the perfection of the Liens created
by such Credit
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Documents). Each Credit Document to which a Credit Party is a party constitutes
a legal, valid and binding obligation of such Credit Party enforceable against
such Credit Party in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
6.5 NO LEGAL BAR.
The execution, delivery and performance of the Credit Documents, the
borrowings hereunder and the use of the Extensions of Credit will not violate
any Requirement of Law or any Contractual Obligation of any Credit Party or any
of its Subsidiaries (except those as to which waivers or consents have been
obtained), and will not result in, or require, the creation or imposition of
any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or Contractual Obligation (other than the Liens arising
under or contemplated in connection with the Credit Documents). None of the
Credit Parties nor any of their Subsidiaries are in default under or with
respect to any of their Contractual Obligations in any respect which would
reasonably be expected to have a Material Adverse Effect.
6.6 NO MATERIAL LITIGATION.
No claim, litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of
any Credit Party, threatened by or against, the Parent or any of its
Subsidiaries or against any of their respective properties or revenues which
(a) relate specifically to the Credit Documents or any of the transactions
contemplated hereby or thereby, or (b) if adversely determined, would
reasonably be expected to have a Material Adverse Effect. Set forth on Schedule
6.6 is a summary that, as of the Closing Date, describes all material claims,
litigation, investigations and proceedings pending or, to the best knowledge of
any Credit Party, threatened by or against the Parent or any of its
Subsidiaries or against any of their respective properties or revenues, and
none of such actions, individually or in the aggregate, is reasonably expected
to have a Material Adverse Effect.
6.7 NO DEFAULT.
No Default or Event of Default has occurred and is continuing.
6.8 OWNERSHIP OF PROPERTY; LIENS.
Each of the Parent and its Subsidiaries has good record and marketable
title in fee simple to, or a valid leasehold interest in, all its material real
property, and good title to, or a valid leasehold interest in, all its other
material property, and none of such property is subject to any Lien, except for
Permitted Liens.
6.9 INTELLECTUAL PROPERTY.
Each of the Parent and its Subsidiaries owns, or has the legal right
to use, all United States trademarks, tradenames, copyrights, patents,
technology, know-how and processes, if any, necessary for each of them to
conduct its business as currently conducted (the "Intellectual
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Property") except for those the failure to own or have such legal right to use
would not be reasonably expected to have a Material Adverse Effect. No claim
has been asserted and is pending by any Person challenging or questioning the
use of any such Intellectual Property or the validity or effectiveness of any
such Intellectual Property, nor does any Credit Party know of any such claim,
and the use of such Intellectual Property by the Parent or any of its
Subsidiaries does not infringe on the rights of any Person, except for such
claims and infringements that in the aggregate, would not be reasonably
expected to have a Material Adverse Effect.
6.10 NO BURDENSOME RESTRICTIONS.
No Requirement of Law or Contractual Obligation of the Parent or any
of its Subsidiaries would be reasonably expected to have a Material Adverse
Effect.
6.11 TAXES.
Each of the Parent and its Subsidiaries (a) has filed or caused to be
filed all United States federal income tax returns and all other material tax
returns which, to the best knowledge of the Credit Parties, are required to be
filed and (b) has paid (i) all taxes shown to be due and payable on said
returns, (ii) all taxes shown to be due and payable on any assessments of which
it has received notice made against it or any of its property and (c) all other
taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any (x) taxes, fees or other charges with
respect to which the failure to pay, in the aggregate, would not have a
Material Adverse Effect or (y) taxes, fees or other charges the amount or
validity of which are currently being contested and with respect to which
reserves in conformity with GAAP have been provided on the books of such
Person), and no tax Lien (other than a Permitted Lien) has been filed, and, to
the best knowledge of the Credit Parties, no claim is being asserted, with
respect to any such tax, fee or other charge.
6.12 ERISA
Except as would not reasonably be expected to have a Material Adverse
Effect:
(a) During the five (5) year period prior to the date on
which this representation is made or deemed made: (i) no ERISA Event
has occurred, and, to the best knowledge of the Credit Parties, no
event or condition has occurred or exists as a result of which any
ERISA Event could reasonably be expected to occur, with respect to any
Plan; (ii) no "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA and Section 412 of the Code, whether
or not waived, has occurred with respect to any Plan; (iii) each Plan
has been maintained, operated, and funded in compliance with its own
terms and in material compliance with the provisions of ERISA, the
Code, and any other applicable federal or state laws; and (iv) no lien
in favor of the PBGC or a Plan has arisen or is reasonably likely to
arise on account of any Plan.
(b) The actuarial present value of all "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA), whether or
not vested, under each Single Employer Plan, as of the last annual
valuation date prior to the date on which this representation is made
or deemed made (determined, in each case, in accordance with Financial
Accounting Standards Board Statement 87, utilizing the actuarial
assumptions used in such Plan's most recent actuarial
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valuation report), did not exceed as of such valuation date the fair
market value of the assets of such Plan.
(c) Neither the Parent, nor any of its Subsidiaries nor
any ERISA Affiliate has incurred, or, to the best knowledge of the
Credit Parties, could be reasonably expected to incur, any withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer
Plan. Neither the Parent, nor any of its Subsidiaries nor any ERISA
Affiliate would become subject to any withdrawal liability under ERISA
if the Parent, any of its Subsidiaries or any ERISA Affiliate were to
withdraw completely from all Multiemployer Plans and Multiple Employer
Plans as of the valuation date most closely preceding the date on
which this representation is made or deemed made. Neither the Parent,
nor any of its Subsidiaries nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization (within
the meaning of Section 4241 of ERISA), is insolvent (within the
meaning of Section 4245 of ERISA), or has been terminated (within the
meaning of Title IV of ERISA), and no Multiemployer Plan is, to the
best knowledge of the Credit Parties, reasonably expected to be in
reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) or breach of
fiduciary responsibility has occurred with respect to a Plan which has
subjected or may subject the Parent, any of its Subsidiaries or any
ERISA Affiliate to any liability under Sections 406, 409, 502(i), or
502(l) of ERISA or Section 4975 of the Code, or under any agreement or
other instrument pursuant to which the Parent, any of its Subsidiaries
or any ERISA Affiliate has agreed or is required to indemnify any
person against any such liability.
(e) Neither the Parent, nor any of its Subsidiaries, nor
any ERISA Affiliate has any material liability with respect to
"expected post-retirement benefit obligations" within the meaning of
the Financial Accounting Standards Board Statement 106. Each Plan
which is a welfare plan (as defined in Section 3(1) of ERISA) to which
Sections 601-609 of ERISA and Section 4980B of the Code apply has been
administered in compliance in all material respects of such sections.
6.13 GOVERNMENTAL REGULATIONS, ETC.
(a) No part of the proceeds of the Loans will be used,
directly or indirectly, for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation U, or for the purpose
of purchasing or carrying or trading in any securities. If requested
by any Lender or the Agent, the Borrowers will furnish to the Agent
and each Lender a statement to the foregoing effect in conformity with
the requirements of FR Form U-1 referred to in said Regulation U. No
indebtedness being reduced or retired out of the proceeds of the Loans
was or will be incurred for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation U or any "margin
security" within the meaning of Regulation T. None of the transactions
contemplated by this Credit Agreement (including, without limitation,
the direct or indirect use of the proceeds of the Loans) will violate
or result in a violation of the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, or regulations issued
pursuant thereto, or Regulation D, O, T, U or X.
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(b) Neither the Parent, nor any of its Subsidiaries, is
subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act or the Investment Company Act of 1940,
each as amended. In addition, neither the Parent, nor any of its
Subsidiaries, is (i) an "investment company" registered or required to
be registered under the Investment Company Act of 1940, as amended,
and is not controlled by such a company, or (ii) a "holding company",
or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary" of a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
(c) Each of the Parent and its Subsidiaries has obtained
all licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its respective Property and to the
conduct of its business, other than licenses, permits, franchises and
other governmental authorizations where the failure to obtain the same
would not reasonably be expected to have a Material Adverse Effect.
(d) Neither the Parent, nor any of its Subsidiaries is
in violation of any applicable statute, regulation or ordinance of the
United States of America, or of any state, city, town, municipality,
county or any other jurisdiction, or of any agency thereof (including
without limitation, environmental laws and regulations), which
violation would reasonably be expected to have a Material Adverse
Effect.
(e) Each of the Parent and its Subsidiaries is current
with all reports and documents, if any, required to be filed with any
state or federal securities commission or similar agency and is in
full compliance in all material respects with all applicable rules and
regulations of such commissions, except for noncompliance which would
not reasonably be expected to have a Material Adverse Effect.
6.14 PURPOSE OF EXTENSIONS OF CREDIT.
The Loans will be used solely (a) to refinance existing Funded Debt,
(b) for working capital, capital expenditures and other general corporate
purposes and (c) to finance authorized share repurchases and Acquisitions in
accordance with the terms of this Credit Agreement. The Letters of Credit shall
be used only for the purposes set forth in Section 2.2(a).
6.15 ENVIRONMENTAL MATTERS.
Except as would not reasonably be expected to have a Material Adverse
Effect:
(a) Each of the facilities and properties owned, leased
or operated by the Parent or any of its Subsidiaries (the
"Properties") and all operations at the Properties are in compliance
with all applicable Environmental Laws, and there is no violation of
any Environmental Law with respect to the Properties or the businesses
operated by the Parent or any of its Subsidiaries (the "Businesses"),
and there are no conditions relating to the Businesses or Properties
that could give rise to liability under any applicable Environmental
Laws.
(b) None of the Properties contains, or has previously
contained, any Materials of Environmental Concern at, on or under the
Properties in amounts or concentrations that
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constitute or constituted a violation of, or could give rise to
liability under, Environmental Laws.
(c) Neither the Parent nor any of its Subsidiaries has
received any written or verbal notice of, or inquiry from any
Governmental Authority regarding, any violation, alleged violation,
non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with
regard to any of the Properties or the Businesses, nor does the Parent
or any of its Subsidiaries have knowledge or reason to believe that
any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Properties, or generated, treated,
stored or disposed of at, on or under any of the Properties or any
other location, in each case by or on behalf of the Parent or any of
its Subsidiaries in violation of, or in a manner that would be
reasonably likely to give rise to liability under, any applicable
Environmental Law.
(e) No judicial proceeding or governmental or
administrative action is pending or, to the best knowledge of the
Credit Parties, threatened, under any Environmental Law to which the
Parent or any of its Subsidiaries is or will be named as a party, nor
are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with
respect to the Parent or any of its Subsidiaries, the Properties or
the Businesses.
(f) There has been no release or, threat of release of
Materials of Environmental Concern at or from the Properties, or
arising from or related to the operations (including, without
limitation, disposal) of the Parent or any of its Subsidiaries in
connection with the Properties or otherwise in connection with the
Businesses, in violation of or in amounts or in a manner that could
give rise to liability under Environmental Laws.
6.16 INSURANCE.
Schedule 6.16 hereto sets forth a true and correct summary, as of the
Closing Date, of all material insurance carried by the Credit Parties. The
Credit Parties maintain insurance with financially sound and reputable
insurance companies against such risks and in such amounts as are customarily
maintained by similar businesses. The Credit Parties are in compliance with all
conditions contained in such insurance policies, except for noncompliance which
would not reasonably be expected to have a Material Adverse Effect.
6.17 INDEBTEDNESS.
The Credit Parties and their wholly-owned Subsidiaries have no
Indebtedness other than (a) as provided for or disclosed in Schedule 8.1 or in
the financial statements referred to in Section 6.1 and (b) as otherwise
permitted by this Credit Agreement.
6.18 VISA/MASTERCARD.
Each Borrower (a) as of the Closing Date, is registered as a member
service provider with both VISA U.S.A. Inc. and MasterCard International
Incorporated ("VISA/MasterCard"), (b) is
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appropriately registered with VISA/MasterCard for each clearing bank with which
it conducts business and is required to be so registered, and (c) has complied
with all requirements of VISA/MasterCard necessary or desirable to the conduct
of its business, the failure to comply with which would have a Material Adverse
Effect.
6.19 SUBSIDIARIES AND JOINT VENTURES.
As of the Closing Date, the Parent has no Subsidiaries except for the
Subsidiaries listed on Schedule 6.19. As of the Closing Date, neither the
Parent nor any Subsidiary of the Parent owns any equity interest in, or
advances loans to, any joint venture, except for Subsidiaries and Alliances
listed on Schedule 6.19.
6.20 SOLVENCY.
Each Credit Party is and, after consummation of the transactions
contemplated by this Credit Agreement, will be Solvent.
6.21 INVESTMENTS.
All Investments of each Credit Party and its wholly-owned Subsidiaries
are (a) as set forth on Schedule 8.5 or (b) otherwise constitute Permitted
Investments.
6.22 DISCLOSURE.
Neither this Credit Agreement nor any financial statements delivered
to the Agent or the Lenders nor any other document, certificate or statement
furnished to the Agent or the Lenders by or on behalf of any Credit Party in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein or herein, taken as a whole, not
misleading.
6.23 LABOR CONTRACTS AND DISPUTES.
To each Credit Party's knowledge, (a) there is no collective
bargaining agreement or other labor contract covering employees of any Credit
Party; (b) no union or other labor organization is seeking to organize, or be
recognized as, a collective bargaining unit of employees of any Credit Party;
and (c) there is no pending or threatened strike, work stoppage, material
unfair labor practice claim or other material labor dispute against or
affecting any Credit Party or its employees, in each case except to the extent
such labor contract, development or dispute would not reasonably be expected to
have a Material Adverse Effect. As of the Closing Date, no Credit Party is
involved in any material labor contracts, developments and disputes of the type
described above, and none of such contracts, developments or disputes,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect.
6.24 BROKER'S FEES.
No Credit Party will pay or agree to pay, or reimburse any other
Person (other than an Agent or Lender) with respect to any finder's, broker's,
investment banking or other similar fee in connection with any of the
transactions evidenced by the Credit Documents.
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6.25 YEAR 2000 COMPLIANCE.
Each Credit Party believes that all computer applications (including
those of its suppliers, vendors and customers) that are material to its or any
of its Subsidiaries' business and operations are reasonably expected on a
timely basis to be able to perform properly date-sensitive functions for all
dates before and after January 1, 2000 (that is, be "Year 2000 compliant"),
except to the extent that a failure to do so would not reasonably be expected
to have Material Adverse Effect.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party covenants and agrees that on and after the Closing
Date, and for so long as this Credit Agreement is in effect and until the
Commitments have been terminated, no Obligations remain outstanding and all
amounts owing hereunder or in connection herewith have been paid in full, each
of the Parent and its wholly-owned Subsidiaries shall:
7.1 FINANCIAL STATEMENTS.
Furnish, or cause to be furnished, to the Agent and each of the
Lenders:
(a) Audited Financial Statements. As soon as available,
but in any event within ninety (90) days after the end of each fiscal
year, an audited consolidated balance sheet of the Parent and its
Subsidiaries as of the end of the fiscal year and the related
consolidated statements of income, retained earnings, shareholders'
equity and cash flows for the year, audited by a "Big Five" accounting
firm or another independent certified public accountants of nationally
recognized standing that is reasonably acceptable to the Agent,
setting forth in each case in comparative form the figures for the
previous year, reported without a "going concern" or like
qualification or exception, or qualification indicating that the scope
of the audit was inadequate to permit such independent certified
public accountants to certify such financial statements without such
qualification.
(b) Company-Prepared Financial Statements. As soon as
available, but in any event within forty-five (45) days after the end
of each fiscal quarter (including the fourth fiscal quarter), a
company-prepared consolidated balance sheet of the Parent and its
Subsidiaries as of the end of such quarter and related
company-prepared consolidated statements of income, retained earnings,
shareholders' equity and cash flows for such period and for the fiscal
year to date in a format and with detail satisfactory to the Agent and
sufficient to calculate the applicable financial covenants, in each
case setting forth in comparative form the consolidated figures for
the corresponding period or periods of the preceding fiscal year or
the portion of the fiscal year ending with such period, as applicable,
in each case subject to normal recurring year-end audit adjustments.
All such financial statements are to present fairly in all material respects
the consolidated financial condition and results of operations of the Parent
and its Subsidiaries for the periods presented (subject, in the case of interim
statements, to normal recurring year-end audit adjustments) and to be prepared
in reasonable detail and, in the case of the annual and quarterly financial
statements provided in accordance with subsections (a) and (b) above, in
accordance
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with GAAP applied consistently throughout the periods reflected therein and
further accompanied by a description of, and an estimation of the effect on the
financial statements on account of, any change in the application of accounting
principles as provided in Section 1.3.
7.2 CERTIFICATES; OTHER INFORMATION.
Furnish, or cause to be furnished, to the Agent for distribution to
the Lenders:
(a) Accountant's Certificate and Reports. Concurrently
with the delivery of the financial statements referred to in
subsection 7.1(a) above, a certificate of the independent certified
public accountants reporting on such financial statements stating that
in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default, except as specified in such
certificate.
(b) Officer's Certificate. Concurrently with the
delivery of the financial statements referred to in Sections 7.1(a)
and 7.1(b) above, a certificate of a Responsible Officer (i) stating
that, to the best of such Responsible Officer's knowledge and belief,
(A) the financial statements fairly present in all material respects
the financial condition of the parties covered by such financial
statements, (B) as of such date, no Default or Event of Default has
occurred and is continuing, and (C) as of such date, such Responsible
Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate and (ii) including, as of the
end of the relevant fiscal quarter, the calculations required to
indicate compliance with Section 7.9 and information as to compliance
with certain other covenants contained herein. A form of Officer's
Compliance Certificate is attached as Exhibit 7.2(b).
(c) Public Information. Promptly upon delivery, copies
of all reports (other than those otherwise provided pursuant to
subsection 7.1) and other financial information which the Parent or
any of its Subsidiaries sends to its public stockholders, generally,
and promptly after the same are filed, copies of all financial
statements and non-confidential reports which the Parent or any of its
Subsidiaries may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority.
(d) Other Information. Promptly, such additional
financial and other information as the Agent, at the request of any
Lender, may from time to time reasonably request.
7.3 NOTICES.
Give notice to the Agent (which shall promptly transmit such notice to
each Lender) of:
(a) Defaults. Immediately (and in any event within two
(2) Business Days) after any Credit Party knows thereof, the
occurrence of any Default or Event of Default.
(b) Contractual Obligations. Promptly, the initiation of
any default or event of default under any Contractual Obligation of
the Parent or any of its Subsidiaries which would reasonably be
expected to have a Material Adverse Effect.
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(c) Legal Proceedings. Promptly, any litigation, or any
investigation or proceeding (including without limitation, any
environmental proceeding) known to the Parent or any of its
Subsidiaries, or any material development in respect thereof,
affecting the Parent or any of its Subsidiaries which would reasonably
be expected to have a Material Adverse Effect.
(d) ERISA. Promptly after any Responsible Officer of any
Credit Party knows thereof, (i) any event or condition, including, but
not limited to, any Reportable Event, that constitutes, or might
reasonably lead to, an ERISA Event; (ii) with respect to any
Multiemployer Plan, the receipt of notice as prescribed in ERISA or
otherwise of any withdrawal liability assessed against any of their
ERISA Affiliates, or of a determination that any Multiemployer Plan is
in reorganization or insolvent (both within the meaning of Title IV of
ERISA); (iii) the failure to make full payment on or before the due
date (including extensions) thereof of all amounts which the Parent or
any of its Subsidiaries or any ERISA Affiliate are required to
contribute to each Plan pursuant to its terms and as required to meet
the minimum funding standard set forth in ERISA and the Code with
respect; or (iv) any change in the funding status of any Plan that
reasonably would be expected to have a Material Adverse Effect;
together with a description of any such event or condition or a copy
of any such notice and a statement by the chief financial officer of
the Credit Parties briefly setting forth the details regarding such
event, condition, or notice, and the action, if any, which has been or
is being taken or is proposed to be taken by the Credit Parties with
respect thereto. Promptly upon request, the Parent or any of its
Subsidiaries shall furnish the Agent and the Lenders with such
additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual
report/return (Form 5500 series), as well as all schedules and
attachments thereto required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section
3(39) of ERISA).
(e) VISA/MasterCard. Promptly, any event in relation to
VISA/MasterCard which may be deemed to be materially adverse to the
Parent and its Subsidiaries taken as a whole.
(f) Acquisitions. Promptly upon execution and delivery
thereof by all of the parties thereto, written notice of a Purchase
Agreement, pursuant to the terms of which any Credit Party intends to
undertake an Acquisition, the Acquisition Costs of which exceed
$30,000,000.
(g) Permitted Receivables Financing. Promptly upon any
of the Credit Parties obtaining knowledge thereof, (i) any affirmative
decision by a party to a Permitted Receivables Financing not to extend
the scheduled termination date of such Permitted Receivables Financing
or replace such Permitted Receivables Financing with another Permitted
Receivables Financing with similar terms and in a similar amount or
(ii) a termination (whether scheduled or unscheduled) of a Permitted
Receivables Financing that is reasonably likely to occur (A) within
sixty (60) days and (B) prior to being replaced with another Permitted
Receivables Financing with similar terms and in a similar amount.
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(h) Other. Promptly, any other development or event
which a Responsible Officer determines would reasonably be expected to
have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Credit Parties propose to take with respect
thereto.
7.4 PAYMENT OF OBLIGATIONS.
Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, in accordance with prudent business
practice (subject, where applicable, to specified grace periods) all material
obligations of the Parent or any of its Subsidiaries of whatever nature
(including without limitation all taxes, assessments and governmental charges
or levies) and any additional costs that are imposed as a result of any failure
to so pay, discharge or otherwise satisfy such obligations, except when the
amount or validity of such obligations and costs is currently being contested
in good faith by appropriate proceedings and reserves, if applicable, in
conformity with GAAP with respect thereto have been provided on the books of
the Parent or any of its Subsidiaries, as the case may be, or except where the
failure to so pay, discharge or contest would not be reasonably expected to
have a Material Adverse Effect.
7.5 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
Except as otherwise permitted by this Credit Agreement, continue to
(a) engage in business of the same general type as now conducted by it on the
date hereof, or business reasonably related (ancillary or complementary)
thereto, and preserve, renew and keep in full force and effect its corporate
existence and take all reasonable action to maintain all material rights,
privileges, licenses, permits and franchises necessary or desirable in the
normal conduct of its business and (b) comply with all Contractual Obligations
and Requirements of Law applicable to it except to the extent that failure to
comply therewith would not, in the aggregate, have a Material Adverse Effect.
7.6 MAINTENANCE OF PROPERTY; INSURANCE.
Except as otherwise permitted by this Credit Agreement, keep all
material property useful and necessary for the operation of the business of the
Parent and its Subsidiaries, taken as a whole, in reasonably good working order
and condition (ordinary wear and tear excepted); maintain with financially
sound and reputable insurance companies casualty, liability and such other
insurance (which may include plans of self-insurance) with such coverage and
deductibles, and in such amounts, as is consistent with prudent business
practice and in any event consistent with normal industry practice; and furnish
to the Agent, upon written request, full information as to the insurance
carried.
7.7 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
(a) Keep proper books of records and accounts in
conformity with GAAP and all Requirements of Law; and permit, during
regular business hours and upon reasonable notice by the Agent, the
Agent to visit and inspect any of its properties and examine and
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make abstracts (including photocopies) from any of its financial books
and records at any reasonable time, and to discuss the business,
operations, properties and financial and other condition of the Parent
and any of its Subsidiaries with officers and employees of the Parent
and any of its Subsidiaries and with their independent certified
public accountants. The cost of the inspection referred to in the
preceding sentence shall be for the account of the Lenders, unless an
Event of Default has occurred and is continuing, in which case the
cost of such inspection shall be for the account of the Borrowers.
(b) In addition to the foregoing subsection (a), permit
the Agent to have agents or representatives conduct, during regular
business hours and upon reasonable notice by the Agent, a "field
audit" of its inventory and financial accounts, including inspection
of the inventory and financial account records and a right to examine
and make abstracts (including photocopies) from its books and records
relating to its inventory and financial accounts on a semi-annual
basis, and more frequently after the occurrence of an Event of
Default. The cost of such field audits shall be for the account of the
Lenders, unless an Event of Default has occurred and is continuing, in
which case the cost of such audits shall be for the account of the
Borrowers.
7.8 ENVIRONMENTAL LAWS.
(a) Comply in all material respects with, and take
reasonable actions to ensure compliance in all material respects by
all tenants and subtenants, if any, with, all applicable Environmental
Laws and obtain and comply in all material respects with and maintain,
and take reasonable actions to ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and
all licenses, approvals, notifications, registrations or permits
required by applicable Environmental Laws except to the extent that
failure to do so would not reasonably be expected to have a Material
Adverse Effect;
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all material
respects with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws except to the extent that the
same are being contested in good faith by appropriate proceedings and
the failure to do or the pendency of such proceedings would not
reasonably be expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Agent and
the Lenders, and their respective employees, agents, officers and
directors, from and against any and all claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violation of,
noncompliance with or liability under, any Environmental Law
applicable to the operations of the Parent or any of its Subsidiaries
or the Properties, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without
limitation, reasonable attorney's and consultant's fees, investigation
and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of
the gross negligence or willful
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misconduct of the party seeking indemnification therefor. The
agreements in this paragraph shall survive repayment of the Loans and
all other amounts payable hereunder, and termination of the
Commitments.
7.9 FINANCIAL COVENANTS.
(a) Leverage Ratio. Maintain with respect to the Parent
on a Consolidated Basis, as of the end of each fiscal quarter, a
Leverage Ratio of less than 3.0 to 1.0.
(b) Fixed Charge Coverage Ratio. Maintain with respect
to the Parent on a Consolidated Basis, as of the end of each fiscal
quarter, a Fixed Charge Coverage Ratio of at least 1.5 to 1.0.
(c) Chargeback Losses and Credit Losses. Ensure that, as
of the end of each fiscal quarter, aggregate Chargeback Losses and
Credit Losses for the four (4) consecutive fiscal quarter period then
ended do not exceed five percent (5%) of the total revenue of the
Parent on a Consolidated Basis for such period.
7.10 USE OF PROCEEDS.
Ensure that Extensions of Credit will be used solely for the purposes
provided in Section 6.14.
7.11 ADDITIONAL CREDIT PARTIES.
At the time any Person becomes a wholly-owned Material Domestic
Subsidiary, the Parent shall so notify the Agent and, in the case of any
Subsidiary other than a Receivables Subsidiary, promptly thereafter (but in any
event within 30 days after the date thereof) shall (a) cause such Person to
execute a Joinder Agreement in substantially the same form as Exhibit 7.11, (b)
if such Person is directly owned by the Parent, execute or cause a Subsidiary
of the Parent which is the parent of such new Material Domestic Subsidiary to
execute an appropriate pledge agreement in substantially the form of the Pledge
Agreement or otherwise in a form reasonably acceptable to the Agent, which will
cause all of the capital stock of such Person to be delivered to the Agent, for
the benefit of the Lenders (together with undated stock powers, if applicable,
signed in blank), and pledged to the Agent for the benefit of the Lenders, and
(c) deliver, or cause such Person to deliver, such other documentation as the
Agent may reasonably request in connection with the foregoing, which
documentation may include, without limitation, certified resolutions and other
organizational and authorizing documents of such Person, favorable opinions of
counsel to such Person (which shall cover, among other things, the legality,
validity, binding effect and enforceability of the documentation referred to
above) and, appropriate UCC-1 financing statements, all in form, content and
scope reasonably satisfactory to the Agent.
7.12 SUBSIDIARIES.
Except as otherwise expressly permitted hereunder, ensure that the
Parent shall, directly or indirectly, own at all times the capital stock of
each of its Subsidiaries in the percentage as set forth on Schedule 6.19.
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7.13 YEAR 2000 COMPATIBILITY.
Each Credit Party will promptly notify the Agent in the event such
Credit Party discovers or determines that any computer applications (including
those of its suppliers, vendors and customers) that is material to its or any
of its Subsidiaries' business and operations will not be Year 2000 compliant
(as defined in Section 6.25), except to the extent that such failure would not
reasonably be expected to have a Material Adverse Effect.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party covenants and agrees that on and after the Closing
Date, and for so long as this Credit Agreement is in effect and until the
Commitments have been terminated, no Obligations remain outstanding and all
amounts owing hereunder or in connection herewith have been paid in full,
neither the Parent nor any of its wholly-owned Subsidiaries shall:
8.1 INDEBTEDNESS.
Contract, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness arising or existing under this Credit
Agreement and the other Credit Documents;
(b) Indebtedness existing on the Closing Date as set
forth in Schedule 8.1, (and renewals, refinancings, replacements or
extensions thereof on terms and conditions no more favorable, in the
aggregate, to such creditor than such existing Indebtedness and in a
principal amount not in excess of that outstanding as of the date of
such renewal, refinancing, replacement or extension; provided,
however, that, with respect to any Indebtedness which is being
renewed, refinanced, replaced or extended, the principal amount
thereof which is permitted to be renewed, refinanced, replaced or
extended pursuant to the terms of this clause (b) shall be an amount
less than or equal to the aggregate commitments of the lenders under
the documents evidencing the Indebtedness which is being so renewed,
refinanced, replaced or extended plus any financed fees and expenses,
including without limitation prepayment premiums and break funding
fees, incurred by the applicable Credit Party in connection with any
such renewal, refinancing, replacement or extension);
(c) Capital Lease Obligations and Indebtedness incurred,
in each case, to provide all or a portion of the purchase price or
costs of construction of an asset, provided that (i) such Indebtedness
when incurred shall not exceed the purchase price or cost of
construction of such asset, (ii) no such Indebtedness shall be
refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing, and (iii) the
total amount of all such Indebtedness shall not exceed two and
one-half percent (2.5%) of the assets of the Parent on a Consolidated
Basis measured as of the end of the most recently ended fiscal quarter
with respect to which the Agent has received the Required Financial
Information.
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(d) Indebtedness and obligations owing under interest
rate protection agreements relating to the Obligations hereunder and
under interest rate, commodities and foreign currency exchange
protection agreements entered into in the ordinary course of business
to manage existing or anticipated risks and not for speculative
purposes;
(e) Indebtedness owing by one Credit Party to another
Credit Party;
(f) Indebtedness in respect of Alliances permitted
pursuant to Section 8.13(c); and
(g) other unsecured Indebtedness in an amount not to
exceed $50,000,000 at any time outstanding.
8.2 LIENS.
Contract, create, incur, assume or permit to exist any Lien with
respect to any of its Property, whether now owned or hereafter acquired, except
for Permitted Liens.
8.3 NATURE OF BUSINESS.
Alter the character of its business in any material respect from that
conducted by any of the Credit Parties as of the Closing Date or any business
reasonably related (ancillary or complementary) thereto or engage in any
business other than the business conducted by any of the Credit Parties as of
the Closing Date or any business reasonably related (ancillary or
complementary) thereto.
8.4 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS.
(a) Dissolve, liquidate or wind up its affairs or enter
into any transaction of merger or consolidation; provided, however
that (i) the Parent may merge or consolidate with any Subsidiary so
long as the Parent shall be the continuing or surviving corporation,
(ii) any Credit Party other than the Parent may merge or consolidate
with any other Credit Party, (iii) any Subsidiary of the Parent that
is not a Credit Party may be merged with or into any other Subsidiary
of the Parent that is not a Credit Party, (iv) any Subsidiary of the
Parent that is not a Credit Party may merge or consolidate with any
Credit Party so long as the Credit Party shall be the continuing or
surviving corporation, (v) the Parent or any Subsidiary of the Parent
may merge with any other Person in connection with a Permitted
Acquisition if the Parent or such Subsidiary shall be the continuing
or surviving corporation and (vi) any Subsidiary that is not a Credit
Party may merge with any other Person in connection with a Permitted
Acquisition if, immediately following such merger, the surviving
entity is a Subsidiary or Alliance of the Parent.
(b) Sell, lease, transfer or otherwise dispose of any
Property (including without limitation pursuant to any sale/leaseback
transaction), except for (i) the sale of inventory in the ordinary
course of business for fair consideration, (ii) the sale or
disposition of machinery and equipment no longer used or useful in the
conduct of such Person's business, (iii) the sale of accounts
receivable and related rights pursuant to a Permitted Receivables
Financing and (iv) an Asset Disposition provided that, with
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respect to this clause (iv), (A) the Property subject to such Asset
Disposition shall not in any instance (including any series of related
transactions) constitute more than five (5) percent (5%) of the assets
of the Parent on a Consolidated Basis measured as of the end of the
most recently ended fiscal quarter with respect to which the Agent has
received the Required Financial Information; (B) the Property subject
to such Asset Disposition, together with the Property subject to all
other Asset Dispositions consummated in the same rolling four fiscal
quarter period, shall not in the aggregate constitute more than ten
percent (10%) of the assets of the Parent on a Consolidated Basis
measured as of the end of the most recently ended fiscal quarter with
respect to which the Agent has received the Required Financial
Information; (C) the Net Proceeds of such Asset Disposition are
applied in the manner set forth in Section 3.3(b), if applicable; and
(D) no Default or Event of Default would exist after giving effect to
such Asset Disposition on a pro forma basis.
(c) Acquire all or substantially all of the capital
stock, assets or business of any Person except (i) in connection with
a Permitted Acquisition and (ii) in connection with the Acquisition of
the capital stock of a Credit Party, or of a Subsidiary or Alliance of
a Credit Party, by another Credit Party.
8.5 ADVANCES, INVESTMENTS AND LOANS.
Lend money or extend credit or make advances to any Person, or
purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, or otherwise make an
Investment in, any Person except for Permitted Investments.
8.6 RESTRICTED PAYMENTS.
Directly or indirectly, declare, order, make or set apart any sum for
or pay any Restricted Payment, except (a) payments pursuant to stock options,
stock appreciation rights and similar rights granted and exercised in
accordance with applicable rules and regulations of the Securities and Exchange
Commission, (b) so long as no Default or Event of Default exists or shall
result therefrom, the Parent or any of its Subsidiaries may, pursuant to any
employee stock purchase plan, repurchase in any one fiscal year, shares of its
capital stock for a purchase price not to exceed $5,000,000 for all such shares
so repurchased by the Parent or any of its Subsidiaries during such fiscal year
and (c) NOVA may repurchase shares of its common stock, subject, however, to
compliance by NOVA with all of the following conditions: (i) the purchase price
of all such shares so repurchased from the Closing Date shall not exceed
$100,000,000 (the "Stock Repurchase Limit"), provided that such Stock
Repurchase Limit shall be increased on the last day of each fiscal quarter of
the Parent, beginning with the first (1st) such date to occur after the Closing
Date, by fifty percent (50%) of Net Income for the fiscal quarter then ended,
such increases to be cumulative, (ii) immediately before and after giving
effect to any such repurchase, no Default or Event of Default shall exist and
(iii) in connection with its delivery of the Required Financial Information for
the fiscal quarter in which each such repurchase occurs, 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 (i) and (ii) have been satisfied with respect to such
repurchase.
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8.7 TRANSACTIONS WITH AFFILIATES; MODIFICATION OF DOCUMENTATION.
Enter into or permit to exist any transaction or series of
transactions, whether or not in the ordinary course of business, with any
officer, director, shareholder, Subsidiary or Affiliate other than (a)
transactions between one Credit Party and another Credit Party, (b) customary
compensation paid to employees and directors and (c) where such transactions
are on terms and conditions substantially as favorable to the Parent or such
Subsidiary as would be obtainable in a comparable arm's-length transaction with
a Person other than an officer, director, shareholder, Subsidiary or Affiliate.
8.8 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.
Change its fiscal year or its articles or certificate of incorporation
or its bylaws if such action is reasonably likely to result in an adverse
effect on the rights of the Lenders.
8.9 LIMITATION ON RESTRICTIONS.
Except pursuant to any Requirement of Law, create or permit to exist
any restriction of any kind on the ability of any wholly-owned Subsidiary of
the Parent (other than a Receivables Subsidiary) to (a) pay dividends or make
any other distributions to the Parent or any of its Subsidiaries, (b) pay
Indebtedness owed to the Parent or any of its Subsidiaries, (c) make loans or
advances to the Parent or any of its Subsidiaries or (d) transfer any of its
properties or assets to the Parent or any of its Subsidiaries.
8.10 NO FURTHER NEGATIVE PLEDGES.
Except with respect to prohibitions against other encumbrances on
specific Property encumbered to secure payment of particular Indebtedness
(which Indebtedness relates solely to such specific Property, and improvements
and accretions thereto, and is otherwise permitted hereby), enter into, assume
or become subject to any agreement prohibiting or otherwise restricting the
creation or assumption of any Lien upon its properties or assets, whether now
owned or hereafter acquired, or requiring the grant of any security for such
obligation if security is given for some other obligation. Notwithstanding the
foregoing, the provisions of this Section 8.10 shall not apply to a Receivables
Subsidiary.
8.11 SALE OF EQUITY INTERESTS.
Issue, sell, transfer, pledge or otherwise dispose of any shares of
capital stock or other equity or ownership interests ("Equity Interests") in
any Subsidiary of the Parent, except (a) in connection with the sale of all of
the capital stock of a Subsidiary of the Parent pursuant to a transaction
permitted by Section 8.4(b), (b) the issuance, sale or transfer of Equity
Interests by a Subsidiary of the Parent (the "Issuing Subsidiary") to the
Parent or a Subsidiary of the Parent that owns such Issuing Subsidiary, (c) as
needed to qualify directors under applicable law and (d) as permitted herein by
Section 8.13. Notwithstanding the foregoing, any Subsidiary of the Parent may
issue shares of its capital stock or other equity interest to any Credit Party.
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8.12 INFRINGEMENT OF PROPERTY RIGHTS.
Violate any licenses, patents, patent applications, copyrights,
trademarks, tradenames or any other property rights of any Person in any manner
that would reasonably be expected to have a Material Adverse Effect.
8.13 AFFILIATIONS.
Enter into any joint venture or affiliation, except for:
(a) arrangements or marketing alliances, including
without limitation arrangements or marketing alliances 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;
(b) profit sharing arrangements with banks;
(c) Alliances as to which the aggregate Investment
(including Indebtedness) of the Credit Parties does not exceed,
together with Investments in Subsidiaries that are not Credit Parties,
$115,000,000; and
(d) Alliances listed in Schedule 6.19;
8.14 LIMITATION ON NON-CASH CHARGES.
Incur non-cash charges other than depreciation and amortization
expensed in the ordinary course of business, all as determined in accordance
with GAAP, which would exceed $100,000,000 in the aggregate with respect to the
Parent on a Consolidated Basis from and after the Closing Date.
SECTION 9
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any
principal of any of the Loans or of any reimbursement
obligations arising from drawings under Letters of Credit, or
(ii) default, and such defaults shall continue
for five (5) days, in the payment when due of any interest on
the Loans or on any reimbursement obligations arising from
drawings under Letters of Credit, or of any Fees or other
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amounts owing hereunder, under any of the other Credit
Documents or in connection herewith or therewith; or
(b) Representations. Any representation, warranty or
statement of the Parent or any of its Subsidiaries made or deemed to be made
herein, in any of the other Credit Documents, or in any statement or
certificate delivered or required to be delivered pursuant hereto or thereto
shall prove untrue in any material respect on the date as of which it was
deemed to have been made; or
(c) Covenants.
(i) default in the due performance or
observance of any term, covenant or agreement contained in
Sections 7.5 (where such default is not capable of being
cured or such default has had, or would reasonably be
expected to have, a Material Adverse Effect), 7.9, 7.10, 7.11
or 8.1 through 8.14, inclusive (where such default is not
capable of being cured or such default has had, or would
reasonably be expected to have, a Material Adverse Effect);
(ii) default in the due performance or
observance of any term, covenant or agreement contained in
Sections 7.1, 7.2(b), 7.5 (where such default is capable of
being cured and such default has not had, and would not
reasonably be expected to have, a Material Adverse Effect) or
8.1 through 8.14, inclusive (where such default is capable of
being cured and such default has not had, and would not
reasonably be expected to have, a Material Adverse Effect),
and such default shall continue unremedied for a period of at
least five (5) Business Days after the earlier of a
Responsible Officer of any Credit Party becoming aware of
such default or notice thereof by the Agent; or
(iii) default in the due performance or
observance by it of any term, covenant or agreement (other
than those referred to in subsections (a), (b), (c)(i) or
(c)(ii) of this Section 9.1) contained in this Credit
Agreement and such default shall continue unremedied for a
period of at least thirty (30) days after the earlier of a
Responsible Officer of any Credit Party becoming aware of
such default or notice thereof by the Agent; or
(d) Other Credit Documents. (i) Any Credit Party shall
default in the due performance or observance of any material term,
covenant or agreement in any of the other Credit Documents (subject to
applicable grace or cure periods, if any), or (ii) any Credit Document
shall fail to be in full force and effect or to give the Agent and/or
the Lenders any material part of the Liens, rights, powers and
privileges purported to be created thereby; or
(e) Bankruptcy, etc. Any Bankruptcy Event shall occur
with respect to the Parent or any of its Subsidiaries; or
(f) Defaults under Other Agreements.
(i) The Parent or any of its Subsidiaries shall
default in the performance or observance (beyond the
applicable grace period with respect
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thereto, if any) of any material payment obligation of any
contract or lease (specifically including any contract or
lease relating to any Permitted Receivables Financing in
which the Credit Parties have received consideration in
excess of $5,000,000 for the sale of Receivables) if the
amount in default with respect thereto is in excess of
$5,000,000; or
(ii) With respect to other Indebtedness (other
than Indebtedness outstanding under this Credit Agreement) of
the Parent or any of its Subsidiaries in an aggregate amount
in excess of $5,000,000, (A) the Parent or any of its
Subsidiaries shall default in any payment (beyond the
applicable grace period with respect thereto, if any) with
respect to any such Indebtedness; or (B) any such
Indebtedness shall be declared due and payable, or required
to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
(g) Judgments. The Parent or any of its Subsidiaries
shall fail within sixty (60) days of the date due and payable to pay,
bond or otherwise discharge any judgment, settlement or order for the
payment of money which judgment, settlement or order when aggregated
with all other such judgments, settlements or orders due and unpaid at
such time, exceeds $5,000,000 and which is not stayed on appeal (or
for which no motion for stay is pending) or is not otherwise being
executed; or
(h) ERISA. Any of the following events or conditions, if
such event or condition would reasonably be expected to have a
Material Adverse Effect: (1) any "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the
Code, whether or not waived, shall exist with respect to any Plan, or
any lien shall arise on the assets of the Parent or any of its
Subsidiaries or any ERISA Affiliate in favor of the PBGC or a Plan;
(2) an ERISA Event shall occur with respect to a Single Employer Plan,
which is, in the reasonable opinion of the Agent, likely to result in
the termination of such Plan for purposes of Title IV of ERISA; (3) an
ERISA Event shall occur with respect to a Multiemployer Plan or
Multiple Employer Plan, which is, in the reasonable opinion of the
Agent, likely to result in (i) the termination of such Plan for
purposes of Title IV of ERISA, or (ii) the Parent or any of its
Subsidiaries or any ERISA Affiliate incurring any liability in
connection with a withdrawal from, reorganization of (within the
meaning of Section 4241 of ERISA), or insolvency of (within the
meaning of Section 4245 of ERISA) such Plan; or (4) any prohibited
transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) or breach of fiduciary responsibility shall occur
which may subject the Parent or any of its Subsidiaries or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l)
of ERISA or Section 4975 of the Code, or under any agreement or other
instrument pursuant to which the Parent or any of its Subsidiaries or
any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability; or
(i) Ownership. There shall occur a Change of Control.
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(j) Settlement Agreements. There shall occur any
development in arrangements of any Credit Party with a Settlement Bank
which would reasonably be expected to have a Material Adverse Effect.
(k) VISA/MasterCard. Any Credit Party shall (i) fail to
comply with any requirement of VISA/MasterCard necessary or desirable
to the conduct of its business, the failure to comply with which would
reasonably be expected to have a Material Adverse Effect, (ii) fail to
fulfill any applicable requirement to be a registered member service
provider or member, as applicable, with VISA/MasterCard, the failure
of which would reasonably be expected to have a Material Adverse
Effect, or (iii) fail to be registered as a member service provider
with each clearing bank with which it conducts business and is
required to be so registered which failure would reasonably be
expected to have a Material Adverse Effect.
9.2 ACCELERATION; REMEDIES.
Upon the occurrence and during the continuance of an Event of Default,
the Agent shall, upon the request and direction of the Required Lenders, by
written notice to the Borrowers take any of the following actions:
(a) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(b) Acceleration. Declare the unpaid principal of and
any accrued interest in respect of all Loans, any reimbursement
obligations arising from drawings under Letters of Credit and any and
all other indebtedness or obligations of any and every kind owing by
the Credit Parties to the Agent and/or any of the Lenders hereunder to
be due whereupon the same shall be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrowers.
(c) Cash Collateral. Direct the Credit Parties to pay
(and the Credit Parties agree that upon receipt of such notice, or
upon the occurrence of an Event of Default under Section 9.1(e), it
will immediately pay) to the Agent additional cash, to be held by the
Agent, for the benefit of the Lenders, in a cash collateral account as
additional security for the LOC Obligations in respect of subsequent
drawings under all then outstanding Letters of Credit in an amount
equal to the maximum aggregate amount which may be drawn under all
Letters of Credits then outstanding.
(d) Enforcement of Rights. Enforce any and all rights
and interests created and existing under the Credit Documents and all
rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(e) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations arising from drawings under Letters of
Credit, all accrued interest in respect thereof, all accrued and unpaid Fees
and other indebtedness or obligations owing to the Agent and/or any of the
Lenders hereunder automatically shall immediately become due and payable
without presentment,
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demand, protest or the giving of any notice or other action by the Agent or the
Lenders, all of which are hereby waived by the Credit Parties.
SECTION 10
AGENCY PROVISIONS
10.1 APPOINTMENT.
Each Lender hereby designates and appoints Bank of America as
administrative agent (in such capacity, the "Agent") of such Lender to act as
specified herein and the other Credit Documents, and each such Lender hereby
authorizes the Agent as the Agent for such Lender, to take such action on its
behalf under the provisions of this Credit Agreement and the other Credit
Documents and to exercise such powers and perform such duties as are expressly
delegated by the terms hereof and of the other Credit Documents, together with
such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere herein and in the other Credit Documents,
the Agent shall not have any duties or responsibilities, except those expressly
set forth herein and therein, or any fiduciary relationship with any Lender,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Credit Agreement or any of the other Credit
Documents, or shall otherwise exist against the Agent. The provisions of this
Section are solely for the benefit of the Agent and the Lenders and the Credit
Parties shall not have any rights as a third party beneficiary of the
provisions hereof. In performing its functions and duties under this Credit
Agreement and the other Credit Documents, the Agent shall act solely as Agent
of the Lenders and does not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for the Credit Parties or
any of their Affiliates.
10.2 DELEGATION OF DUTIES.
The Agent may execute any of their respective duties hereunder or
under the other Credit Documents by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to
such duties. The Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
10.3 EXCULPATORY PROVISIONS.
The Agent and its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall not be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Credit Documents (except for
its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any of the Credit Parties contained
herein or in any of the other Credit Documents or in any certificate, report,
document, financial statement or other written or oral statement referred to or
provided for in, or received by the Agent under or in connection herewith or in
connection with the other Credit Documents, or enforceability or sufficiency
therefor of any of the other Credit Documents, or for any failure of the Credit
Parties to perform their obligations hereunder or thereunder. The Agent shall
not be responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Credit Agreement, or any
of the other Credit Documents or for any representations, warranties, recitals
or statements made herein or therein or made by the Credit
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Parties in any written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by the Agent to the Lenders
or by or on behalf of the Credit Parties to the Agent or any Lender or be
required to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained herein or
therein or as to the use of the proceeds of the Loans or the use of the Letters
of Credit or of the existence or possible existence of any Default or Event of
Default or to inspect the properties, books or records of the Credit Parties or
their Affiliates.
10.4 RELIANCE ON COMMUNICATIONS.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrowers, independent accountants and other experts
selected by the Agent with reasonable care). The Agent may deem and treat the
Lenders as the owner of their respective interests hereunder for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent in accordance with Section 11.3(b) hereof. The
Agent shall be fully justified in failing or refusing to take any action under
this Credit Agreement or under any of the other Credit Documents unless it
shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or under any of the other Credit Documents in accordance with a request of the
Required Lenders (or to the extent specifically provided in Section 11.6, all
the Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).
10.5 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or one of the Credit Parties referring to the
Credit Document, describing such Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as
shall be directed by the Required Lenders.
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that each of the Agent and its
officers, directors, employees, agents, attorneys-in-fact or affiliates has not
made any representations or warranties to it and that no act by the Agent or
any affiliate thereof hereinafter taken, including any review of the affairs of
the Credit Parties or any of their Affiliates, shall be deemed to constitute
any representation or warranty by the Agent to any Lender. Each Lender
represents to the Agent that it has, independently and without reliance upon
the Agent or any other Lender, and based on such
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documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, assets, operations, property, financial
and other conditions, prospects and creditworthiness of the Credit Parties or
their Affiliates and made its own decision to make its Loans hereunder and
enter into this Credit Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Credit Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Credit Parties and their Affiliates. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, assets, property, financial or other
conditions, prospects or creditworthiness of the Credit Parties or their
respective Affiliates which may come into the possession of the Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates.
10.7 INDEMNIFICATION.
The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Credit Parties and without limiting the
obligation of the Credit Parties to do so), ratably according to their
respective Commitments (or if the Commitments have expired or been terminated,
in accordance with the respective principal amounts of outstanding Loans and
Participation Interests of the Lenders), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including without limitation at any time following the final payment of
all of the obligations of the Credit Parties hereunder and under the other
Credit Documents) be imposed on, incurred by or asserted against the Agent in
its capacity as such in any way relating to or arising out of this Credit
Agreement or the other Credit Documents or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Agent under or in connection with
any of the foregoing; provided that no Lender shall be liable for the payment
of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
gross negligence or willful misconduct of the Agent. If any indemnity furnished
to the Agent for any purpose shall, in the opinion of the Agent, be
insufficient or become impaired, the Agent may call for additional indemnity
and cease, or not commence, to do the acts indemnified against until such
additional indemnity is furnished. The agreements in this Section shall survive
the repayment of the Loans, LOC Obligations and other obligations under the
Credit Documents and the termination of the Commitments hereunder.
10.8 AGENT IN ITS INDIVIDUAL CAPACITY.
The Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Parent, its Subsidiaries
or their respective Affiliates as though the Agent were not the Agent
hereunder. With respect to the Loans made by and all obligations of the Credit
Parties hereunder and under the other Credit Documents, the Agent shall have
the same rights and powers under this Credit Agreement as any Lender and may
exercise the same as though
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it were not the Agent, and the terms "Lender" and "Lenders" shall include the
Agent in its individual capacity.
10.9 SUCCESSOR AGENT.
The Agent may, at any time, resign upon twenty (20) days' written
notice to the Borrowers and the Lenders. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within thirty (30) days after the notice of
resignation, then the resignation of the retiring Agent shall nonetheless
thereupon be effective and the retiring Agent shall select a successor Agent
provided such successor is a Lender hereunder or a commercial bank organized
under the laws of the United States of America or of any State thereof and has
a combined capital and surplus of at least $400,000,000 (or if no such
successor shall have been so appointed by the retiring Agent and shall have
accepted such appointment, then the Lenders shall perform all obligations of
the retiring Agent hereunder and under the other Credit Documents until such
time, if any, as a successor Agent shall have been appointed and shall have
accepted such appointment as provided for above). Upon the acceptance of any
appointment as Agent hereunder by a successor, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations as Agent, as appropriate, under this Credit
Agreement and the other Credit Documents and the provisions of this Section
10.9 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Credit Agreement.
SECTION 11
MISCELLANEOUS
11.1 NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) with
receipt confirmed, to the number set out below, (c) the day following the day
on which the same has been delivered prepaid to a reputable national overnight
air courier service, or (d) the third Business Day following the day on which
the same is sent by certified or registered mail, postage prepaid, in each case
to the respective parties at the address, in the case of the Credit Parties and
the Agent, set forth below, and, in the case of the Lenders, set forth on
Schedule 11.1, or at such other address as such party may specify by written
notice to the other parties hereto:
if to any Credit Party:
c/o NOVA CORPORATION
One Concourse Parkway, Suite 300
Atlanta, Georgia 30328
Attn: Chief Financial Officer
Telephone: (770) 698-1040
Telecopy: (770) 698-1046
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with a copy to:
NOVA CORPORATION
One Concourse Parkway, Suite 300
Atlanta, Georgia 30328
Attn: General Counsel
Telephone: (770) 522-1603
Telecopy: (770) 698-1046
if to the Agent:
BANK OF AMERICA, N.A.
Agency Administrative Services
1850 Gateway Boulevard, 5th Floor
Concord, California 94520-3281
Attn: Paul Brown
Telephone: (925) 675-8375
Telecopy: (925) 675-2802
11.2 RIGHT OF SET-OFF.
In addition to any rights now or hereafter granted under applicable
law or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender is authorized at any time and
from time to time, without presentment, demand, protest or other notice of any
kind (all of which rights being hereby expressly waived), to set-off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Lender (including, without
limitation branches, agencies or Affiliates of such Lender wherever located) to
or for the credit or the account of the Credit Parties against obligations and
liabilities of such Person to such Lender hereunder, under the Notes, the other
Credit Documents or otherwise, irrespective of whether such Lender shall have
made any demand hereunder and although such obligations, liabilities or claims,
or any of them, may be contingent or unmatured, and any such set-off shall be
deemed to have been made immediately upon the occurrence of an Event of Default
even though such charge is made or entered on the books of such Lender
subsequent thereto. Any Person purchasing a participation in the Loans and
Commitments hereunder pursuant to Section 3.14 or Section 11.3(d) may exercise
all rights of set-off with respect to its participation interest as fully as if
such Person were a Lender hereunder. Notwithstanding the foregoing, no Lender
shall have a right of setoff with respect to (a) deposits of a Credit Party in
Settlement Accounts and deposits in other accounts of a Credit Party which are
being held by such Credit Party as a fiduciary on behalf of a merchant pending
resolution of a dispute in the ordinary course of business and (b) amounts held
by a Credit Party as a servicer or in any other fiduciary capacity with respect
to a Permitted Receivables Financing, to the extent such Permitted Receivables
Financing requires such amounts to be so held.
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11.3 BENEFIT OF AGREEMENT.
(a) Generally. This Credit Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided that no Credit
Party may assign or transfer any of its interests without prior
written consent of the Lenders; provided further that the rights of
each Lender to transfer, assign or grant participations in its rights
and/or obligations hereunder shall be limited as set forth in this
Section 11.3, provided however that nothing herein shall prevent or
prohibit any Lender from (i) pledging its Loans hereunder to a Federal
Reserve Bank in support of borrowings made by such Lender from such
Federal Reserve Bank, or (ii) granting assignments or selling
participations in such Lender's Loans and/or Commitments hereunder to
its parent company and/or to any Affiliate or Subsidiary of such
Lender.
(b) Assignments. Each Lender may assign all or a portion
of its rights and obligations hereunder, pursuant to an assignment
agreement substantially in the form of Exhibit 11.3(b), to any
Eligible Assignee; provided that (i) any such assignment (other than
any assignment to an existing Lender) shall be in a minimum aggregate
amount of $1,000,000 (or, if less, the remaining amount of the
Commitment being assigned by such Lender) of the Commitments and in an
integral multiple of $1,000,000 above such amount and (ii) each such
assignment shall be of a constant, not varying, percentage of all such
Lender's rights and obligations under this Credit Agreement. Any
assignment hereunder shall be effective upon delivery to the Agent of
written notice of the assignment together with a transfer fee of
$3,500 payable to the Agent for its own account from and after the
later of (i) the effective date specified in the applicable assignment
agreement and (ii) the date of recording of such assignment in the
Register pursuant to the terms of subsection (c) below. The assigning
Lender will give prompt notice to the Agent and the Borrowers of any
such assignment. Upon the effectiveness of any such assignment (and
after notice to, and (to the extent required pursuant to the terms
hereof), with the consent of, the Borrowers as provided herein), the
assignee shall become a "Lender" for all purposes of this Credit
Agreement and the other Credit Documents and, to the extent of such
assignment, the assigning Lender shall be relieved of its obligations
hereunder to the extent of the Loans and Commitment components being
assigned. Along such lines the Borrowers agree that upon notice of any
such assignment and surrender of the appropriate Note or Notes, they
will promptly provide to the assigning Lender and to the assignee
separate promissory notes in the amount of their respective interests
substantially in the form of the original Note (but with notation
thereon that it is given in substitution for and replacement of the
original Note or any replacement notes thereof). By executing and
delivering an assignment agreement in accordance with this Section
11.3(b), the assigning Lender thereunder and the assignee thereunder
shall be deemed to confirm to and agree with each other and the other
parties hereto as follows: (i) such assigning Lender warrants that it
is the legal and beneficial owner of the interest being assigned
thereby free and clear of any adverse claim; (ii) except as set forth
in clause (i) above, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this
Credit Agreement, any of the other Credit Documents or any other
instrument or document furnished pursuant hereto or thereto, or the
execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, any of the other Credit
Documents or any other instrument or document furnished pursuant
hereto
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or thereto or the financial condition of the Credit Parties or any of
their Affiliates or the performance or observance by the Credit
Parties of any of their obligations under this Credit Agreement, any
of the other Credit Documents or any other instrument or document
furnished pursuant hereto or thereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such
assignment agreement; (iv) such assignee confirms that it has received
a copy of this Credit Agreement, the other Credit Documents and such
other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such assignment
agreement; (v) such assignee will independently and without reliance
upon the Agent, such assigning Lender or any other Lender, and based
on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Credit Agreement and the other Credit
Documents; (vi) such assignee appoints and authorizes the Agent to
take such action on its behalf and to exercise such powers under this
Credit Agreement or any other Credit Document as are delegated to the
Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee agrees that it
will perform in accordance with their terms all the obligations which
by the terms of this Credit Agreement and the other Credit Documents
are required to be performed by it as a Lender.
(c) Maintenance of Register. The Agent shall maintain at
one of its offices a copy of each Lender assignment agreement
delivered to it in accordance with the terms of subsection (b) above
and a register for the recordation of the identity of the principal
amount, type and Interest Period of each Loan outstanding hereunder,
the names, addresses and the Commitments of the Lenders pursuant to
the terms hereof from time to time (the "Register"). The Agent will
make reasonable efforts to maintain the accuracy of the Register and
to promptly update the Register from time to time, as necessary. The
entries in the Register shall be conclusive in the absence of manifest
error and the Borrowers, the Agent and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the
Borrowers and each Lender, at any reasonable time and from time to
time upon reasonable prior notice.
(d) Participations. Each Lender may sell, transfer,
grant or assign participations in all or any part of such Lender's
interests and obligations hereunder; provided that (i) such selling
Lender shall remain a "Lender" for all purposes under this Credit
Agreement (such selling Lender's obligations under the Credit
Documents remaining unchanged) and the participant shall not
constitute a Lender hereunder, (ii) no such participant shall have, or
be granted, rights to approve any amendment or waiver relating to this
Credit Agreement or the other Credit Documents except to the extent
any such amendment or waiver would (A) reduce the principal of or rate
of interest on or Fees in respect of any Loans or other Obligations in
which the participant is participating, (B) postpone the date fixed
for any payment of principal (including any extension of the
Termination Date or the waiver of any mandatory prepayment), interest
or Fees in which the participant is participating or (C) release all
or substantially all of (I) the Guarantors from the Guaranty
Obligations hereunder or (II) the collateral securing the Obligations,
(iii) sub-participations by the participant (except to an affiliate,
parent company or affiliate of a parent company of the participant)
shall be prohibited and (iv) prompt written notice of such
participation shall be given to the Borrowers if the applicable
participant is engaged in a CCTP Business and
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<PAGE> 82
could reasonably be considered a competitor of a Borrower. In the case
of any such participation, the participant shall not have any rights
under this Credit Agreement or the other Credit Documents (the
participant's rights against the selling Lender in respect of such
participation to be those set forth in the participation agreement
with such Lender creating such participation) and all amounts payable
by the Borrowers hereunder shall be determined as if such Lender had
not sold such participation, provided, however, that such participant
shall be entitled to receive additional amounts under Sections 3.6,
3.8, 3.9, 3.10 and 3.11 on the same basis as if it were a Lender.
11.4 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Agent or any Lender and the
Credit Parties shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Agent or any Lender would otherwise have. No notice to or
demand on the Credit Parties in any case shall entitle the Credit Parties to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Agent or the Lenders to any other or
further action in any circumstances without notice or demand.
11.5 PAYMENT OF EXPENSES, ETC.
The Credit Parties joint and severally agree to: (i) pay all
reasonable out-of-pocket costs and expenses (A) of the Agent in connection with
the negotiation, preparation, execution and delivery and administration of this
Credit Agreement and the other Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and expenses of Moore & Van Allen, PLLC, special counsel to the Agent and
any amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by
the Credit Parties under this Credit Agreement and (B) of the Agent and the
Lenders in connection with enforcement of the Credit Documents and the
documents and instruments referred to therein (including, without limitation,
in connection with any such enforcement, the reasonable fees and disbursements
of counsel for the Agent and each of the Lenders); (ii) pay and hold each of
the Lenders harmless from and against any and all present and future stamp and
other similar taxes with respect to the foregoing matters and save each of the
Lenders harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
such Lender) to pay such taxes; and (iii) indemnify each of the Agent and each
Lender, its officers, directors, employees, representatives and agents from and
hold each of them harmless against any and all losses, liabilities, claims,
damages or expenses incurred by any of them as a result of, or arising out of,
or in any way related to, or by reason of (A) any investigation, litigation or
other proceeding (whether or not any Lender is a party thereto) related to the
entering into and/or performance of any Credit Document or the use of proceeds
of any Loans or other Extensions of Credit hereunder or the consummation of any
other transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding or (B)
the
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<PAGE> 83
presence or Release of any Materials of Environmental Concern at, under or
from any Property owned, operated or leased by the Credit Parties or any of
their Subsidiaries, or the failure by the Credit Parties or any of their
Subsidiaries to comply with any Environmental Law (but excluding, in the case
of either of clause (A) or (B) above, any such losses, liabilities, claims,
damages or expenses to the extent incurred by reason of gross negligence or
willful misconduct on the part of the Person to be indemnified).
Notwithstanding the foregoing provisions of this Section 11.5, the Credit
Parties shall not be obligated to reimburse and/or indemnify a Lender for the
fees and disbursements of counsel for such Lender to the extent such fees and
disbursements relate to legal work that would reasonably be deemed to be
redundant of legal work performed by counsel for the Agent and to serve no
reasonable, independent purpose.
11.6 AMENDMENTS, WAIVERS AND CONSENTS.
Neither this Credit Agreement nor any of the other Credit Documents,
nor any of the terms hereof or thereof may be amended, changed, waived,
discharged or terminated unless such amendment, change, waiver, discharge or
termination is in writing entered into by, or approved in writing by, the
Required Lenders and the Borrowers, provided, however, that no such amendment,
change, waiver, discharge or termination shall, without the consent of each
Lender directly affected thereby,
(a) reduce the rate or extend the time of payment of
interest (other than as a result of waiving the applicability of any
post-default increase in interest rates) on any Loan or other
Extension of Credit or Fees hereunder,
(b) extend (i) the Termination Date, (ii) the final
maturity of any Loan or otherwise postpone any other date fixed for
any payment of principal, or (iii) the time of payment of any
reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit,
(c) reduce the principal amount on any Loan or other
Extension of Credit;
(d) increase the Commitment of any Lender over the
amount thereof in effect (it being understood and agreed that a waiver
of any Default or Event of Default or of a mandatory reduction in the
total commitments shall not constitute a change in the terms of the
Commitment of any Lender),
(e) release all or substantially all of (i) the
Guarantors from the Guaranty Obligations hereunder or (ii) the
collateral securing the Obligations,
(f) amend, modify or waive any provision of this Section
11.6 or Section 3.6, 3.10, 3.11, 3.12, 3.13, 9.1(a), 11.2, 11.3, 11.5
or 11.9,
(g) reduce any percentage specified in, or otherwise
modify, the definition of "Required Lenders" or
(h) consent to the assignment or transfer by a Borrower
of any of its rights and obligations under (or in respect of) the
Credit Documents to which it is a party.
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<PAGE> 84
In addition to the foregoing, no provision of Section 2.2 may be
amended without the consent of the Fronting Bank and no provision of Section 10
may be amended without the consent of the Agent.
Notwithstanding the fact that the consent of all of the Lenders is
required in certain circumstances as set forth above, (x) each Lender is
entitled to vote as such Lender sees fit on any reorganization plan that
affects the Loans or the Letters of Credit, and each Lender acknowledges that
the provisions of Section 1126(c) of the Bankruptcy Code supercede the
unanimous consent provisions set forth herein and (y) the Required Lenders may
consent to all on a Credit Party to use cash collateral in the context of a
bankruptcy or insolvency proceeding.
11.7 COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary
in making proof of this Credit Agreement to produce or account for more than
one such counterpart.
11.8 HEADINGS.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 SURVIVAL.
All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.9, 3.11, 7.8, 10.7 and 11.5 shall survive the execution and
delivery of this Credit Agreement, the making of the Loans, the issuance of the
Letters of Credit, the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive delivery of the Notes and the making of the Loans
hereunder.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with
respect to this Credit Agreement or any other Credit Document may be
brought in the courts of the State of New York, or of the United
States for the Southern District of New York, and, by execution and
delivery of this Credit Agreement, the Credit Parties hereby
irrevocably accept for themselves and in respect of their property,
generally and unconditionally, the nonexclusive jurisdiction of such
courts. The Agent and the Credit Parties further irrevocably consent
to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to it at the address
set out for notices pursuant to Section 11.1, such service to become
effective three (3) Business
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<PAGE> 85
Days after such mailing. Nothing herein shall affect the right of any
party hereto to serve process in any other manner permitted by law or
to commence legal proceedings or to otherwise proceed against the
Credit Parties in any other jurisdiction.
(b) The Agent and the Credit Parties hereby irrevocably
waive any objection which they may now or hereafter have to the laying
of venue of any of the aforesaid actions or proceedings arising out of
or in connection with this Credit Agreement or any other Credit
Document brought in the courts referred to in subsection (a) hereof
and hereby further irrevocably waives and agrees not to plead or claim
in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT,
THE LENDERS AND THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.11 SEVERABILITY.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions; provided, however, that such Credit Documents shall be reformed in
such a manner so that they reflect, to the fullest extent permitted by law, the
intent of the parties with respect to the transactions contemplated hereby and
the relative rights and obligations of the parties hereunder.
11.12 ENTIRETY.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.13 BINDING EFFECT; AMENDMENT AND RESTATEMENT; TERMINATION.
(a) This Credit Agreement shall become effective at such
time, on or after the Closing Date, that the conditions precedent set
forth in Section 5.1 have been satisfied and when it shall have been
executed by each of the Credit Parties and the Agent, and the Agent
shall have received copies of the signature pages hereto (telefaxed or
otherwise) which, when taken together, bear the signatures of each
Lender (including the Fronting Bank), and thereafter this Credit
Agreement shall be binding upon and inure to the benefit of each
Credit Party, each Lender (including the Fronting Bank) and the Agent,
together with their permitted successors and assigns. The Credit
Parties and the Lenders (including the Fronting Bank) each hereby
agrees that, at such time as this Credit
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<PAGE> 86
Agreement shall have become effective pursuant to the terms of the
immediately preceding sentence, (i) the Existing Credit Agreement
automatically shall be deemed amended and restated in its entirety by
this Credit Agreement, and any obligations and commitments outstanding
under the Original Credit Agreement shall be governed by the terms of
this Credit Agreement (as such obligations or commitments may be
modified or amended hereunder) and (ii) all of the promissory notes
executed by the Borrowers in connection with the Existing Credit
Agreement automatically shall be substituted and replaced by the
amended and restated promissory notes executed in connection with this
Credit Agreement, and the Lenders holding such prior notes agree
promptly to return them to the Borrowers.
(b) The term of this Credit Agreement shall be until no
Loans, LOC Obligations or any other amounts payable hereunder or under
any of the other Credit Documents shall remain outstanding and until
all of the Commitments hereunder shall have expired or been
terminated.
11.14 CONFIDENTIALITY.
The Agent and the Lenders agree to keep confidential (and to cause
their respective affiliates, officers, directors, employees, agents and
representatives to keep confidential) all information, materials and documents
furnished to the Agent or any such Lender by or on behalf of the Credit Parties
(whether before or after the Closing Date) which relates to the Credit Parties
or any of their Subsidiaries (the "Information"). Notwithstanding the
foregoing, the Agent and each Lender shall be permitted to disclose Information
(i) to its affiliates, officers, directors, employees, agents and
representatives on a "need to know" basis in connection with their
participation in any of the transactions evidenced by this Credit Agreement or
any other Credit Documents or the administration of this Credit Agreement or
any other Credit Documents; (ii) to the extent required by applicable laws and
regulations or by any subpoena or similar legal process, or requested by any
Governmental Authority; provided that to the extent any such request by a
Governmental Authority is made other than in connection with banking regulatory
or oversight matters, then the Agent or such Lender shall use its reasonable
best efforts to give the Borrowers notice of such request and the opportunity
to object thereto; (iii) to the extent such Information (A) is or becomes
publicly available other than as a result of a breach (of which the Agent or
such Lender has knowledge) by any Person of a confidentiality agreement with
any Credit Party, (B) is or becomes available to the Agent or such Lender on a
non-confidential basis from a source other than the Credit Parties without a
breach (of which the Agent or such Lender has knowledge) by any Person of a
confidentiality agreement with any Credit Party or (C) was available to the
Agent or such Lender on a non-confidential basis prior to its disclosure to the
Agent or such Lender by the Credit Parties; (iv) to any assignee or participant
(or prospective assignee or participant) subject to an agreement containing
provisions substantially the same as those of this Section 11.14; or (v) to the
extent that the Borrowers shall have consented in writing to such disclosure.
Upon the request of Borrowers, following the satisfaction of all Obligations
hereunder, each Lender shall use its reasonable best efforts to either return
to the Borrowers all Information (to the extent still confidential) provided
hereunder and/or destroy all such Information and certify to the Borrowers such
destruction.
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<PAGE> 87
11.15 CONFLICT.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
[Signature Page to Follow]
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IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Credit Agreement to be duly executed and delivered as of
the date first above written.
BORROWERS
AND GUARANTORS: NOVA CORPORATION,
a Georgia corporation
By: /S/ P.J. Mazzilli
---------------------------------------------
Name: Philip Mazzilli
---------------------------------------------
Title: CFO and EVP
---------------------------------------------
NOVA INFORMATION SYSTEMS, INC.,
a Georgia corporation
By: /S/ P.J. Mazzilli
---------------------------------------------
Name: Philip Mazzilli
---------------------------------------------
Title: CFO and EVP
---------------------------------------------
OTHER
GUARANTORS: BOULDER BANKCARD PROCESSING, INC.
a Colorado corporation
By: /S/ John Perry
---------------------------------------------
Name: John M. Perry
---------------------------------------------
Title: CEO and President
---------------------------------------------
LADCO FINANCIAL GROUP,
a California corporation
By: /S/ John Perry
---------------------------------------------
Name: John M. Perry
---------------------------------------------
Title: CEO
---------------------------------------------
NOVA ASSET MANAGEMENT CO.,
a Delaware corporation
By: /S/ P.J. Mazzilli
---------------------------------------------
Name: Philip Mazzilli
---------------------------------------------
Title: CFO and EVP
---------------------------------------------
<PAGE> 89
NOVA GEORGIA SERVICES, L.P.,
a Delaware limited partnership
By: /S/ P.J. Mazzilli
---------------------------------------------
Name: Philip Mazzilli
---------------------------------------------
Title: CFO and EVP
---------------------------------------------
NOVA GA. COMMAND, INC.,
a Delaware corporation
By: /S/ P.J. Mazzilli
---------------------------------------------
Name: Philip Mazzilli
---------------------------------------------
Title: CFO and EVP
---------------------------------------------
NOVA INFORMATION SERVICES COMPANY,
a Georgia corporation
By: /S/ P.J. Mazzilli
---------------------------------------------
Name: Philip Mazzilli
---------------------------------------------
Title: CFO and EVP
---------------------------------------------
NOVA LICENSING CO.,
a Delaware corporation
By: /S/ P.J. Mazzilli
---------------------------------------------
Name: Philip Mazzilli
---------------------------------------------
Title: CFO and EVP
---------------------------------------------
NOVA TN. COMMAND, INC.,
a Tennessee corporation
By: /S/ P.J. Mazzilli
---------------------------------------------
Name: Philip Mazzilli
---------------------------------------------
Title: CFO and EVP
---------------------------------------------
<PAGE> 90
PMT ENTERPRISES, INC.,
a Delaware corporation
By: /S/ John Perry
---------------------------------------------
Name: John M. Perry
---------------------------------------------
Title: CEO and President
---------------------------------------------
PMT RESOURCES, INC.,
a Delaware corporation
By: /S/ John Perry
---------------------------------------------
Name: John M. Perry
---------------------------------------------
Title: CEO and President
---------------------------------------------
PMT SERVICES, INC.,
a Tennessee corporation
By: /S/ John Perry
---------------------------------------------
Name: John M. Perry
---------------------------------------------
Title: COO and President
---------------------------------------------
SUPERIOR BANKCARD SERVICE, INC.,
a California corporation
By: /S/ John Perry
---------------------------------------------
Name: John M. Perry
---------------------------------------------
Title: CEO
---------------------------------------------
<PAGE> 91
LENDERS: BANK OF AMERICA, N.A.,
individually in its capacity as a
Lender and in its capacity as Administrative Agent
By: /S/ Michael J. McKenny
---------------------------------------------
Name: Michael J. McKenny
---------------------------------------------
Title: Managing Director
---------------------------------------------
<PAGE> 92
FIRST UNION NATIONAL BANK,
as a Lender
By: /S/ Michael J. Romano
---------------------------------------------
Name: Michael J. Romano
---------------------------------------------
Title: Assistant Vice President
---------------------------------------------
<PAGE> 93
SUNTRUST BANK, ATLANTA,
as a Lender
By: /S/ J. Christopher Deisley
---------------------------------------------
Name: J. Christopher Deisley
---------------------------------------------
Title: Director
---------------------------------------------
<PAGE> 94
WACHOVIA BANK, N.A.,
as a Lender
By: /S/ Alyson Schattner
---------------------------------------------
Name: Alyson Schattner
---------------------------------------------
Title: Assistant Vice President
---------------------------------------------
<PAGE> 95
BANKERS TRUST COMPANY,
as a Lender
By: /S/ Susan L. Le Fevre
---------------------------------------------
Name: Susan L. Le Fevre
---------------------------------------------
Title: Director
---------------------------------------------
<PAGE> 96
FIRSTAR BANK, N.A.,
as a Lender
By: /S/ Richard W. Neltner
---------------------------------------------
Name: Richard W. Neltner
---------------------------------------------
Title: Senior Vice President
---------------------------------------------
<PAGE> 97
KEYBANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ Frank J. Jancar
---------------------------------------------
Name: Frank J. Jancar
---------------------------------------------
Title: Vice President
---------------------------------------------
<PAGE> 98
CITY NATIONAL BANK,
as a Lender
By: /S/ Kim R. Bingham
---------------------------------------------
Name: Kim R. Bingham
---------------------------------------------
Title: Senior Vice President
---------------------------------------------
<PAGE> 1
EXHIBIT 10.48
NOVA CORPORATION
DEFERRED COMPENSATION PLAN
Effective Date
November 10, 1999
<PAGE> 2
ARTICLE I
PURPOSE AND EFFECTIVE DATE
The purpose of the NOVA Corporation Deferred Compensation Plan ("Plan")
is to aid NOVA Corporation and its subsidiaries and affiliates in retaining and
attracting executive employees and outside directors by providing them with
tax-advantaged savings opportunities. To that end, the Plan provides a select
group of management and highly compensated employees with the opportunity to
elect to defer receipt of specified portions of their compensation, and to have
these deferred portions treated as if they were invested in specified
hypothetical investment vehicles. The Plan is effective (i) for Discretionary
Contributions made on or after November 10, 1999, (ii) for Base Salary Deferrals
(as defined below) beginning January 1, 2000, and (iii) for Incentive Deferrals
(as defined below) beginning with Incentive Compensation awarded to Participants
on and after January 1, 2000.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following words and phrases shall
have the meanings indicated, unless the context clearly indicates otherwise:
SECTION 2.01 ADMINISTRATIVE COMMITTEE. "Administrative Committee" means
the NOVA Corporation Compensation Committee or any other committee that it
appoints.
SECTION 2.02 BASE SALARY. "Base Salary" means the base rate of cash
compensation the Company pays to or for the benefit of a Participant for
services rendered or labor performed while a Participant, including such
compensation a Participant could have received in cash in lieu of (A) deferrals
pursuant to Section 4.02 and (B) contributions made on his behalf to any Company
tax-qualified retirement plan or to any Company cafeteria plan.
SECTION 2.03 BASE SALARY DEFERRAL. "Base Salary Deferral" means the
amount of a Participant's Base Salary that the Participant elects to have
withheld on a pre-tax basis from his Base Salary and credited to his Deferral
Account pursuant to Section 4.02.
SECTION 2.04 BENEFICIARY. "Beneficiary" means the person, persons or
entity whom the Participant designates to receive any benefits payable under the
Plan pursuant to Article IX.
SECTION 2.05 BOARD. "Board" means the Board of Directors of NOVA
Corporation.
SECTION 2.06 CHANGE OF CONTROL. "Change of Control" means the
following:
(A) The acquisition (other than from NOVA Corporation) 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 Corporation or its subsidiaries that
acquires beneficial ownership of voting securities of NOVA
-1-
<PAGE> 3
Corporation) 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 Corporation stock or the combined voting power of
NOVA Corporation's then outstanding voting securities entitled to vote generally
in the election of directors; or
(B) The consummation by NOVA Corporation of a reorganization, merger or
consolidation with respect to which the shares of NOVA Corporation voting
securities outstanding immediately prior to the 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
Corporation, or of the sale of all or substantially all of the assets of NOVA
Corporation; 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. For
this purpose, the Incumbent Board means the members of the Board as of the date
hereof and any person becoming a member of the Board hereafter whose election,
or nomination for election by NOVA Corporation'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 Corporation, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act).
SECTION 2.07 CODE. "Code" means the Internal Revenue Code of 1986, as
amended. References to any provision of the Code or any regulation thereunder
(including a proposed regulation) shall include any successor provisions or
regulations.
SECTION 2.08 COMMON STOCK. "Common Stock" means the common stock of
NOVA Corporation.
SECTION 2.09 COMPANY. "Company" means NOVA Corporation, its successors,
and any subsidiary or affiliated organizations of either that the Board or its
Compensation Committee authorizes to participate in the Plan and any
organization into which or with which NOVA Corporation may merge or consolidate
or to which all or substantially all of its assets may be transferred or sold.
SECTION 2.10 CONSIDERATION SHARES. "Consideration Shares" means shares
of Common Stock a Participant (A) acquired on the open market, (B) acquired
through exercise of a non-qualified stock option and that the Participant has
owned for six months or longer or (C) acquired through exercise of an incentive
stock option that the Participant held for at least one year.
SECTION 2.11 DATE OF EXERCISE. The "Date of Exercise" means date on
which the Participant exercises an Option.
SECTION 2.12 DEFERRAL ACCOUNT. "Deferral Account" means the account
maintained on the books of the Administrative Committee for each Participant
pursuant to Article VIII.
-2-
<PAGE> 4
SECTION 2.13 DEFERRAL PERIOD. "Deferral Period" is defined in Section
4.02.
SECTION 2.14 DEFERRED AMOUNT. "Deferred Amount" is defined in Section
4.02.
SECTION 2.15 DIRECTOR FEES. "Director Fees" means the fees the Company
pays to or for the benefit of a Participant for services rendered as a member of
the Board while a Participant.
SECTION 2.16 DIRECTOR FEES DEFERRAL. "Director Fees Deferral" means the
amount of a Participant's Director Fees that the Participant elects to have
withheld on a pre-tax basis and credited to his or her Deferral Account pursuant
to Section 4.02.
SECTION 2.17 DISABILITY. "Disability" means eligibility for disability
benefits under the terms of the Company's long-term disability insurance plan or
in the case of an Outside Director means being disabled as the term is defined
under such plan.
SECTION 2.18 DISCRETIONARY CONTRIBUTION. "Discretionary Contribution"
means the discretionary cash contribution that the Company may from time to time
make to the Plan.
SECTION 2.19 DISCRETIONARY CONTRIBUTION ACCOUNT. "Discretionary
Contribution Account" means the account maintained on the books of the
Administrative Committee for each Participant pursuant to Article VIII.
SECTION 2.20 ELIGIBLE COMPENSATION. "Eligible Compensation" means any
Base Salary or Incentive Compensation otherwise payable with respect to a Plan
Year.
SECTION 2.21 ERISA. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
SECTION 2.22 FAIR MARKET VALUE. "Fair Market Value" of a share of
Common Stock means the closing price of such a share on the New York Stock
Exchange on the most recent day on which the Common Stock was so traded which
precedes the date as of which the Fair Market Value is to be determined.
SECTION 2.23 FORM OF PAYMENT. "Form of Payment" means payment in one
lump sum or in installments of two, five or seven years.
SECTION 2.24 GAIN SHARE ACCOUNT. "Gain Share Account" means the account
maintained on the books of the Administrative Committee for each Participant
showing the number of Phantom Share Units related to Gain Shares, adjusted for
hypothetical gains, losses, earnings, dividends, distributions, withdrawals and
other similar activities.
SECTION 2.25 GAIN SHARES. "Gain Shares" means the shares of Common
Stock so determined under Section 5.05 as resulting from the exercise of any
Option pursuant to Article V.
-3-
<PAGE> 5
SECTION 2.26 HARDSHIP WITHDRAWAL. "Hardship Withdrawal" means the early
payment of all or part of the balance in a Deferral Account and all or part of
the vested balance in a Discretionary Contribution Account in the event of an
Unforeseeable Emergency.
SECTION 2.27 HYPOTHETICAL INVESTMENT VEHICLE. "Hypothetical Investment
Vehicle" shall mean the phantom investment vehicles that are used to measure the
investment return credited to a Participant's Deferral Account and Discretionary
Contribution Account.
SECTION 2.28 INCENTIVE COMPENSATION. "Incentive Compensation" means the
amount awarded to a Participant for a Plan Year under any incentive plan the
Company maintains.
SECTION 2.29 INCENTIVE DEFERRAL. "Incentive Deferral" means the amount
of a Participant's Incentive Compensation that the Participant elects to have
withheld on a pre-tax basis from his Incentive Compensation and that is credited
to his Deferral Account pursuant to Section 4.02.
SECTION 2.30 NOVA CORPORATION COMPENSATION COMMITTEE. "NOVA Corporation
Compensation Committee" means the compensation committee of the Board that
administers the Plan.
SECTION 2.31 OPTION. "Option" means an option to acquire shares of
Common Stock granted pursuant to any NOVA Corporation stock option plan or any
predecessor or successor thereto.
SECTION 2.32 OPTION EXPIRATION DATE. "Option Expiration Date" means the
date on which an Option expires under the terms of the applicable NOVA
Corporation stock option plan.
SECTION 2.33 OPTION SHARE. "Option Share" means a share of Common Stock
acquired (or deferred hereunder) pursuant to the exercise of an Option.
SECTION 2.34 OUTSIDE DIRECTOR. "Outside Director" means a member of the
Board who is not an Employee of the Company or any of its affiliates.
SECTION 2.35 PARTICIPANT. "Participant" means any individual who is
eligible to make an election to participate in this Plan and who elects to
participate by filing a Participation Agreement as provided in Article IV.
SECTION 2.36 PARTICIPATION AGREEMENT. "Participation Agreement" means
the agreement a Participant files in accordance with Article IV.
SECTION 2.37 PHANTOM SHARE UNITS. "Phantom Share Units" means units of
deemed investment in shares of Common Stock so determined under Section 5.06.
SECTION 2.38 PLAN YEAR. "Plan Year" means a twelve-month period
beginning January 1 and ending the following December 31.
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SECTION 2.39 RETIREMENT. "Retirement" means retirement of a Participant
from the Company after attaining age 65, or after attaining age 55 with at least
ten Years of Service.
SECTION 2.40 STOCK OPTION GAIN AGREEMENT. "Stock Option Gain Agreement"
means the agreement a Participant files in accordance with Article V to defer
receipt of Gain Shares from the exercise of an Option.
SECTION 2.41 TERMINATION OF EMPLOYMENT. "Termination of Employment"
means the cessation of a Participant's services as an employee of a Company for
any reason other than Retirement or Disability.
SECTION 2.42 UNFORESEEABLE EMERGENCY. "Unforeseeable Emergency" means
severe financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or a dependent of the
Participant, loss of the Participant's real property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant.
SECTION 2.43 VALUATION DATE. "Valuation Date" means the last day of
each calendar month or such other date as the NOVA Corporation Compensation
Committee in its sole discretion may determine.
SECTION 2.44 YEAR OF SERVICE. "Year of Service" means each
12-consecutive month period beginning with the month in which a Discretionary
Contribution is made and during which the Participant works at least 1,000 hours
for a Company.
ARTICLE III
ADMINISTRATION
SECTION 3.01 NOVA CORPORATION COMPENSATION COMMITTEE AND ADMINISTRATIVE
COMMITTEE DUTIES. The NOVA Corporation Compensation Committee shall administer
this Plan as its Administrative Committee. A majority of the members of the
Administrative Committee shall constitute a quorum for the transaction of
business. All resolutions or other action of the Administrative Committee shall
be by a vote of a majority of its members present at any meeting or, without a
meeting, by an instrument that the majority of its members sign. Members of the
Administrative Committee may participate in a meeting by means of a conference
telephone or similar communications equipment that enables all persons
participating in the meeting to hear each other, and such participation in a
meeting shall constitute presence in person at the meeting and waiver of notice
of such meeting.
The Administrative Committee shall be responsible for the
administration of this Plan and shall have all powers necessary to administer
this Plan, including discretionary authority to determine eligibility for
benefits and to decide claims under the terms of this Plan, except to the extent
that the Administrative Committee vests any such powers in any other person
administering this Plan. The Administrative Committee may from time to time
establish rules for the administration of this Plan, and it shall have the
exclusive right to interpret this Plan and
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to decide any matters arising in connection with the administration and
operation of this Plan. All rules, interpretations and decisions of the
Administrative Committee shall be final, conclusive and binding on the Company,
Participants and Beneficiaries.
The Administrative Committee has responsibility for performing certain
administrative and ministerial functions under this Plan. The Administrative
Committee shall be responsible for determining in the first instance issues
related to eligibility for participation and benefits, investment benchmarks,
distribution of Deferred Amounts and Discretionary Contributions, determination
of balances in Deferral Accounts and Discretionary Contribution Accounts,
crediting and debiting of hypothetical gains and losses, earnings, dividends,
distributions, withdrawals, and any other duties concerning the day-to-day
operation of this Plan. The Administrative Committee shall have discretion to
delegate such additional duties as it may determine. The Administrative
Committee may designate one of its members as a chairperson and may retain and
in such event shall supervise third party administrators, record keepers and
professionals to perform any or all of the duties delegated to it hereunder.
The Administrative Committee shall keep records of all of their
respective proceedings and shall keep records of all payments made to
Participants or Beneficiaries and payments made for expenses or otherwise.
Neither a member of the Board nor a member of the Administrative
Committee shall be liable for any act or action hereunder, whether of omission
or commission, by any other member or by any person to whom duties in connection
with the administration of this Plan have been delegated, or for anything done
or omitted to be done in connection with this Plan. NOVA Corporation shall, to
the fullest extent permitted by law, indemnify each director, officer or
employee of NOVA Corporation (including the heirs, executors, administrators and
other personal representatives of such person), and each member of the
Administrative Committee against expenses (including attorneys' fees), losses,
judgments, fine and amounts paid in settlement that any such person actually and
reasonably incurs in connection with any threatened, pending or actual suit,
action or proceeding (whether civil, criminal, administrative or investigative
in nature or otherwise) in which such person may be involved by reason of the
fact that he or she is or was serving this Plan in any capacity at the request
of NOVA Corporation, the Board or the Administrative Committee.
NOVA Corporation shall pay any of its expenses and those of the
Administrative Committee relative to the administration of this Plan, but NOVA
Corporation may charge such expenses to the Deferral Accounts and Discretionary
Contribution Accounts of the Participants if the Administrative Committee so
determines.
SECTION 3.02 CLAIM PROCEDURE. If a Participant or Beneficiary makes a
written request alleging a right to receive benefits under this Plan or alleging
a right to receive an adjustment in benefits under this Plan, such actions shall
be treated as a claim for benefits. All claims for benefits under this Plan
shall be sent to the Administrative Committee. If the Administrative Committee
determines that any individual who has claimed a right to receive benefits, or
different benefits, under this Plan is not entitled to receive all or any part
of the benefits claimed,
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the Administrative Committee shall inform the claimant in writing of such
determination and the reasons therefor in terms calculated to be understood by
the claimant. The notice shall be sent within 90 days of its receipt of its
claim unless the Administrative Committee determines that additional time, not
exceeding 90 days, is needed and so notifies the claimant. The notice shall make
specific reference to the pertinent Plan provisions on which the denial is
based, and shall describe any additional material or information that is
necessary to perfect the claim. Such notice shall, in addition, inform the
claimant of the procedure that the claimant should follow to take advantage of
the review procedures set forth below in the event the claimant desires to
contest the denial of the claim. The claimant may within 90 days thereafter
submit in writing to the Administrative Committee a notice that the claimant
contests the denial of his or her claim and desires a further review. The
Administrative Committee shall within 60 days thereafter review the claim and
authorize the claimant to review pertinent documents and submit in writing
issues and comments relating to the claim to the Administrative Committee. The
Administrative Committee will render a final decision with specific reasons
therefor in writing and will transmit it to the claimant within 60 days of the
written request for review, unless the chairperson of the Administrative
Committee determines that additional time, not exceeding 60 days, is needed, and
so notifies the claimant
ARTICLE IV
PARTICIPATION
SECTION 4.01 PARTICIPATION. Participation in the Plan shall be limited
to (A) those select group of management employees or highly compensated
employees (1) whom the Administrative Committee selects to participate, (2) who
elect to participate in this Plan by filing a Participation Agreement with the
Administrative Committee, and (3) who individually enter into a covenant not to
solicit customers or employees or to compete with a Company for a period of two
years following Termination of Employment (the "Non-Compete Agreement") and (B)
the Outside Directors who elect to participate in this Plan by filing a
Participation Agreement with the Administrative Committee. A Participation
Agreement must be filed prior to the December 31st immediately preceding the
Plan Year for which it is effective. The Administrative Committee shall have the
discretion to establish special deadlines regarding the filing of Participation
Agreements for Participants.
SECTION 4.02 CONTENTS OF PARTICIPATION AGREEMENT. Each Participation
Agreement shall at a minimum set forth: (A) the amount of Eligible Compensation
for the Plan Year to which the Participation Agreement relates that is to be
deferred under the Plan (the "Deferred Amount"), expressed as either a dollar
amount or a percentage of (i) Base Salary, (ii) Incentive Compensation or (iii)
Director Fees; provided, that the minimum amount of Base Salary Deferrals for
any Plan Year shall not be less than $2,000, and provided further that the
maximum percentage of Base Salary that a Participant can defer for any Plan Year
shall not exceed 75%; (B) the period after which payment of the Deferral Account
and the Gain Share Account is to be made or begin to be made (the "Deferral
Period"), which shall be the earlier of (i) a number of full years, not less
than three, and (ii) the period ending upon the Retirement, Disability or prior
Termination of Employment of the Participant, and (C) the Form of Payment from
the Plan.
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SECTION 4.03 MODIFICATION OR REVOCATION OF ELECTION BY PARTICIPANT. A
Participant may not change the amount of his Deferred Amount during a Plan Year.
However, a Participant may discontinue a Base Salary Deferral or a Director Fees
Deferral election at any time by filing, on such forms and subject to such
limitations and restrictions as the Administrative Committee may prescribe, a
revised Participation Agreement with the Administrative Committee. If the
Administrative Committee approves, revocation shall take effect as of the first
payroll period next following its filing. If a Participant discontinues a Base
Salary Deferral election during a Plan Year, he or she will not be permitted to
make a Base Salary Deferral election again until the later of the next Plan Year
or six months from the date of revocation. The Deferral Period may be extended
if the Participant files an amended Participation Agreement with the
Administrative Committee at least one calendar year before the Deferral Period
ends; provided, that only one such amendment may be filed with respect to each
Participation Agreement. Under no circumstances may a Participant's
Participation Agreement be made, modified or revoked retroactively, nor may a
Deferral Period be shortened or reduced.
ARTICLE V
STOCK OPTION GAIN DEFERRALS
SECTION 5.01 IN GENERAL: Subject to provisions of this Article V, a
Participant may elect to defer receipt and distribution of the potentially
taxable gain related to the exercise of an Option and resulting Gain Shares
until the end of Deferral Period by filing a Stock Option Gain Agreement with
the Administrative Committee. The Option gain deferral feature of the Plan is
effective for deferral elections made on or after January 1, 2000.
SECTION 5.02 TIMING OF FILING STOCK OPTION GAIN AGREEMENT. A
Participant must file a Stock Option Gain Agreement at least six months prior to
the Date of Exercise, prior to the calendar year in which the Date of Exercise
occurs, and no later than the day before the first day of the six month period
ending on the Option Expiration Date. An Option with respect to which a Stock
Option Gain Agreement has been filed may not be exercised prior to the dates
specified in the preceding sentence.
SECTION 5.03 CONTENTS OF STOCK OPTION GAIN AGREEMENT. Each Stock Option
Gain Agreement shall set forth: (A) the number of Options to be exercised in
connection with the deferrals hereunder; (B) the date of grant of the Options;
(C) the Deferral Period; and (D) any other item the Administrative Committee
requires. A Participant may elect to defer gain in increments of 25%, 50%, 75%
or 100% of the number of Gain Shares resulting from an Option exercised on any
Date of Exercise.
SECTION 5.04 MANNER OF EXERCISING OPTION SHARES. A Participant who
desires to exercise an Option and to defer current receipt and distribution of
the related Gain Shares must follow the procedures and requirements that are
applicable to the Option under the applicable NOVA Corporation stock option
plan, including the procedures and requirements relating to the exercise of an
Option; provided, however, that in the case of a deferral of receipt and
distribution
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of Gain Shares, the Participant shall only be permitted to tender Consideration
Shares to pay the entire exercise price for any such Option exercised.
SECTION 5.05 DETERMINATION OF GAIN SHARES. Upon exercise of the portion
of an Option described in a Stock Option Gain Agreement, the number of Gain
Shares that the Participant has elected to defer receipt and distribution
hereunder shall be determined as follows: (A) the aggregate exercise price for
all exercised Option Shares shall be determined; (B) the number of Consideration
Shares needed to pay the exercise price for such Option Shares shall be
determined; and (C) the difference between the number of exercised Option Shares
and the number of Consideration Shares shall be the number of Gain Shares
resulting from such exercise. Any fractional Gain Share that results from the
computations hereunder shall be rounded up to the nearest whole number.
SECTION 5.06 CONVERSION OF GAIN SHARES TO PHANTOM SHARE UNITS. As of
the Date of Exercise, Gain Shares shall be converted to Phantom Share Units by
dividing the amount of the aggregate Fair Market Value of the Gain Shares as of
the Date of Exercise by the Fair Market Value of one share of Common Stock as of
the Date of Exercise. The resulting number of Phantom Share Units shall be
credited to the Participant's Gain Share Account. Any fractional Phantom Share
Unit that results from the computations hereunder shall be rounded up to the
nearest whole number. In the event of a stock dividend, split-up, combination,
merger, consolidation, reorganization, recapitalization, or other change in the
corporate structure or capitalization affecting the Common Stock, such that the
Administrative Committee determines an adjustment is appropriate in order to
prevent dilution or enlargement of the benefits intended to be made available
under this Plan, then the Administrative Committee may make appropriate
adjustments to the number of Phantom Share Units credited to the Participant's
Gain Share Account.
SECTION 5.07 CHANGES TO THE STOCK OPTION GAIN AGREEMENT. A Participant
may not amend or revoke a Stock Option Gain Agreement after the day on which the
Participant files it with the Administrative Committee, except that the
Participant may extend the Deferral Period if he or she files an amended Stock
Option Gain Agreement with the Administrative Committee at least one full
calendar year before the Deferral Period ends, provided that only one such
amendment may be filed with respect to each Stock Option Gain Agreement.
SECTION 5.08 FAILURE TO PROPERLY EXERCISE. If a Participant makes a
valid election under this Article V to defer receipt and distribution of Gain
Shares and if the Option expires without a proper exercise by the Participant or
if the Participant fails to tender properly the Consideration Shares by the last
day of the Option term, the Participant shall forfeit any opportunity to
exercise the Option and the Option shall be canceled as of the end of the last
business day of the Option term, according to the terms of the applicable NOVA
Corporation stock option plan.
SECTION 5.09 DELIVER OF GAIN SHARES. NOVA Corporation shall deliver
Gain Shares for safekeeping to the trustee of a grantor trust or to such other
person or entity as the Administrative Committee may designate.
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ARTICLE VI
DEFERRED BASE SALARY AND INCENTIVE COMPENSATION
SECTION 6.01 ELECTIVE DEFERRED INCENTIVE COMPENSATION. The
Administrative Committee shall credit the Deferred Amount of a Participant for
each Plan Year to the Participant's Deferral Account as and when the Company
that employed the Participant would have been paid such Deferred Amount to the
Participant. To the extent that the Company that employed the Participant is
required to withhold any taxes or other amounts from the Deferred Amount
pursuant to any Federal, State or local law, such amounts shall be taken from
other compensation eligible to be paid to the Participant that is not deferred
under this Plan.
SECTION 6.02 VESTING OF DEFERRAL ACCOUNT. A Participant shall be 100%
vested in his or her Deferral Account at all times.
ARTICLE VII
DISCRETIONARY CONTRIBUTIONS
SECTION 7.01 AMOUNT OF DISCRETIONARY CONTRIBUTIONS. A Company may from
time to time make a Discretionary Contribution on behalf of a Participant in any
amount such Company determines. The amount of a Discretionary Contribution need
not be the same for every Participant. The Administrative Committee shall credit
the Discretionary Contribution with respect to each Plan Year to the
Participant's Discretionary Contribution Account.
SECTION 7.02 VESTING OF DISCRETIONARY CONTRIBUTION ACCOUNT. The
Discretionary Contribution Account of a Participant will vest after the
Participant has completed the number of Years of Service with a Company that the
Administrative Committee requires at the time such Company first makes a
Discretionary Contribution on behalf of the Participant. In addition, the
Discretionary Contribution Account of a Participant who has a Termination of
Employment will vest only if the Participant also complies with the terms of his
or her Non-Compete Agreement, unless the Administrative Committee determines
that a specific Discretionary Contribution on behalf of a Participant shall not
be subject to the terms of his or her Non-Compete Agreement. The Participant
shall forfeit the portion of his or her Discretionary Contribution Account in
which he or she is not vested.
ARTICLE VIII
MAINTENANCE AND INVESTMENT OF ACCOUNTS
SECTION 8.01 MAINTENANCE OF ACCOUNTS. A separate Deferral Account and
Discretionary Contribution Account shall be maintained for each Participant.
However, more than one Deferral Account and Discretionary Contribution Account
may be maintained for a Participant as necessary to reflect (A) various
investment benchmarks and (B) separate Participation Agreements specifying
different Deferral Periods and Forms of Payment. A Participant's Deferral
Account and Discretionary Contribution Account shall be utilized solely as
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a device for the measurement and determination of the amounts to be paid to the
Participant pursuant to this Plan, and shall not constitute or be treated as a
trust fund of any kind. The Administrative Committee shall determine the balance
of each Deferral Account and Discretionary Contribution Account, as of each
Valuation Date, by adjusting the balance of such Deferral Account and
Discretionary Contribution Account as of the immediately preceding Valuation
Date to reflect changes in the value of the deemed investments thereof, other
credits and debits, distributions, withdrawals and other similar activities with
respect to such Deferral Account and Discretionary Contribution Account since
the preceding Valuation Date.
SECTION 8.02 INVESTMENT BENCHMARKS. Each Participant shall be entitled
to direct the manner in which his or her Deferral Account will be deemed to be
invested, selecting among the investment benchmarks specified in Appendix A
hereto, as amended by the Administrative Committee from time to time, and in
accordance with such rules, regulations and procedures as the Administrative
Committee may establish from time to time. Unless a Participant directs
otherwise, a Participant's Discretionary Contribution Account shall be invested
(A) in the same manner in which the Participant has directed the investment of
his Base Salary Deferrals, or if the Participant has not directed the investment
of his Base Salary Deferrals, (B) in the same manner in which the Participant
has directed his Incentive Compensation Deferral, or if the Participant has not
directed the investment of Incentive Compensation Deferrals, (C) in the T. Rowe
Price Prime Investment Portfolios. Earnings and losses based on a Participant's
investment elections shall begin to accrue as of the date Deferral Amounts and
Discretionary Contributions are credited to the Deferral Account and
Discretionary Contribution Account.
SECTION 8.03 STATEMENT OF ACCOUNTS. The Administrative Committee shall
submit to each Participant quarterly statements of his or her Deferral Account,
Discretionary Contribution Account and Gain Share Account, in such form as the
Administrative Committee deems desirable, setting forth the balance to the
credit of such Participant in each of such Accounts as of the end of the most
recently completed quarter.
ARTICLE IX
BENEFITS
SECTION 9.01 TIME AND FORM OF PAYMENT OF DEFERRAL ACCOUNT AND GAIN
SHARE ACCOUNT. At the end of the Deferral Period for each Deferral Account, the
Company shall pay to the Participant the balance of the Deferral Account at the
time or times the Participant elected in the applicable Participation Agreement.
If the Participant has elected to receive payments from a Deferral Account in a
lump sum, the Company that employed the Participant shall, as soon as
practicable after the end of the Deferral Period, pay in cash the balance in the
Deferral Account, determined as of the most recent Valuation Date preceding the
end of the Deferral Period. If the Participant has elected to receive payments
from a Deferral Account in installments, such Company shall make annual cash
payments, each of which shall consist of an amount equal to (A) the balance of
the Deferral Account as of the most recent Valuation Date preceding the payment
date times (B) a fraction, the numerator of which is one and the denominator of
which is the number of remaining installments (including the installment being
paid). The first such
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installment shall be paid as soon as practicable after the end of the Deferral
Period and each subsequent installment shall be paid on or about the anniversary
of such first payment. Each such installment shall be deemed to be made on a pro
rata basis from each of the different deemed investments of the Deferral
Account.
At the end of the Deferral Period for each Gain Share Account, NOVA
Corporation shall deliver to the Participant the balance of the Gain Share
Account at the time or times the Participant elected in the applicable Stock
Option Gain Agreement in the form of shares of Common Stock, whose Fair Market
Value is equal to the value of the Gain Share Account at the end of the Deferral
Period.
If a Participant dies, has a Termination of Employment or a Disability
prior to Retirement and prior to receiving full payment of his or her Deferral
Account and Gain Share Account, the Participant or the Participant's Beneficiary
(as the case may be) shall pay the Company that employed the Participant an
annual fee in such amount as the Administrative Committee requires not to exceed
$500 annually to pay for a portion of the cost of administering such Accounts
for the Participant or Beneficiary.
SECTION 9.02 TIME AND FORM OF PAYMENT OF VESTED DISCRETIONARY
CONTRIBUTION ACCOUNT. At Retirement or Disability, the Company that employed the
Participant shall pay the Participant the balance of his vested Discretionary
Account in the Form of Payment that the Participant elected. At the death of a
Participant, such Company shall pay the Participant's Beneficiary the balance of
the Participant's vested Discretionary Contribution Account in the Form of
Payment that the Participant elected. Such Company shall pay a Participant the
balance of his vested Discretionary Contribution Account at the expiration of
the two year period following his or her Termination of Employment and
compliance with the terms of the Non-Compete Agreement in the Form of Payment
that the Participant elected. The Participant shall forfeit his or her entire
Discretionary Contribution Account if he or she does not comply with the terms
of his or her Non-Compete Agreement, provided, however, the Administrative
Committee shall have the discretion to pay a Participant all or a portion of his
or her Discretionary Contribution Account prior to compliance with the terms of
his or her Non-Compete Agreement. If the Participant has elected to receive
payments in installments, such Company shall make annual cash payments, each of
which shall consist of an amount equal to (A) the balance of the vested
Discretionary Account as of the most recent Valuation Date preceding the payment
date times (B) a fraction, the numerator of which is one and the denominator of
which is the number of remaining installments (including the installment being
paid). The first such installment shall be paid as soon as practicable at the
times described herein and each subsequent installment shall be paid on or about
the anniversary of such first payment.
If a Participant dies, has a Termination of Employment or a Disability
prior to Retirement and prior to receiving full payment of his or her vested
Discretionary Contribution Account, the Participant or the Participant's
Beneficiary (as the case may be) shall pay the Company that employed the
Participant an annual fee in such amount as the Administrative Committee
requires not to exceed $500 annually to pay for a portion of the cost of
administering such Account for the Participant or Beneficiary.
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SECTION 9.03 OTHER THAN RETIREMENT. Notwithstanding the provisions of
any Participation Agreement, if a Participant dies, has a Termination of
Employment or Disability prior to Retirement and prior to receiving full payment
of his or her Deferral Account, the Company shall pay the remaining balance
(determined as of the most recent Valuation Date preceding such event) to the
Participant or the Participant's Beneficiary in a lump sum in cash only or in
Common Stock with respect to payment of Gain Share Accounts as soon as
practicable following the occurrence of such event, unless the Administrative
Committee at its sole discretion determines otherwise.
SECTION 9.04 HARDSHIP WITHDRAWALS. A Participant shall be entitled to
early payment of all or part of his or her Deferral Accounts in the event of an
Unforeseeable Emergency, in accordance with this Section 9.04. A distribution
pursuant to this Section 9.04 may only be made to the extent reasonably needed
to satisfy the Unforeseeable Emergency, and may not be made if such need is or
may be relieved (i) through reimbursement or compensation by insurance or
otherwise, (ii) by liquidation of the Participant's assets to the extent such
liquidation would not itself cause severe financial hardship, or (iii) by
cessation of participation in the Plan. An application for an early payment
under this Section 9.04 shall be made to the Administrative Committee in such
form and in accordance with such procedures as the Administrative Committee
shall determine. The Administrative Committee shall determine whether and in
what amount a distribution will be permitted pursuant to this Section 9.04 and
the Form of Payment thereof.
SECTION 9.05 VOLUNTARY EARLY WITHDRAWAL. Notwithstanding the provisions
of Section 8.01 and any Participation Agreement, a Participant shall be entitled
to elect to withdraw all of his or her Deferral Account by filing with the
Administrative Committee such forms, in accordance with such procedures as the
Administrative Committee shall determine. As soon as practicable after receipt
of such form by the Administrative Committee, the Company that employed the
Participant shall pay to the Participant in a lump sum in cash an amount equal
to 90% of the balance in the Participant's Deferral Account, determined as of
the most recent Valuation Date preceding the date such election is filed and the
Participant shall forfeit the remainder of such Account. All Participation
Agreements a Participant previously filed shall be null and void after such
election is filed and the Participant shall not thereafter be entitled to file
any Participation Agreements for the first Plan Year that begins after such
election is made.
SECTION 9.06 CHANGE OF CONTROL. In the event of any Change of Control
all non-vested balances in the Participant's Accounts shall become vested fully;
however, no special payments shall be made to any Participant and the terms and
conditions of the Plan shall remain in full force and effect. However, if there
is Change of Control that the Board does not recommend for approval to the
shareholders, the Company that employed the Participant shall immediately pay to
each Participant in a lump sum in cash, or in Common Stock with respect to
payment of the Gain Share Account, the entire balance in his or her Accounts,
determined as of the most recent Valuation Date preceding the Change of Control.
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SECTION 9.07 WITHHOLDING OF TAXES. Notwithstanding any other provision
of this Plan, the Company that employed the Participant shall withhold from
payments made hereunder any amounts required to be so withheld by any applicable
law or regulation.
ARTICLE X
BENEFICIARY DESIGNATION
SECTION 10.01 BENEFICIARY DESIGNATION. Each Participant shall have the
right, at any time, to designate any person, persons or entity as his or her
Beneficiary or Beneficiaries. A Participant may make and amend a Beneficiary
designation by filing a written designation with the Administrative Committee,
on such form and in accordance with such procedures as the Administrative
Committee shall establish.
SECTION 10.02 NO BENEFICIARY DESIGNATION. If a Participant fails to
designate a Beneficiary as provided above, or if all designated Beneficiaries
predecease the Participant, then the Participant's Beneficiary shall be deemed
to be the Participant's estate.
ARTICLE XI
AMENDMENT AND TERMINATION OF PLAN
SECTION 11.01 AMENDMENT. The Board or the Administrative Committee may
at any time amend this Plan in whole or in part.
SECTION 11.02 RIGHT TO TERMINATE. The Board or the Administrative
Committee may at any time terminate the Plan with respect to future
Participation Agreements. The Board or the Administrative Committee may also
terminate the Plan in its entirety at any time for any reason, including without
limitation if, in its judgment, the continuance of the Plan, the tax,
accounting, securities law or other effects thereof, or potential payments
thereunder, would not be in the best interests of a Company. Upon termination,
the Company that employed the Participant shall pay him or her in accordance
with the terms and conditions of the Plan.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 UNFUNDED PLAN. This Plan is intended to be an unfunded
plan maintained primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees, within the meaning
of Sections 201, 301 and 401 of ERISA. All payments pursuant to the Plan shall
be made from the general funds of the Company and no special or separate fund
shall be established or other segregation of assets made to assure payment. No
Participant or other person shall have under any circumstances any interest in
any particular property or assets of the Company as a result of participating in
the Plan. Notwithstanding the foregoing, the Company may but shall not be
obligated to create one or
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more grantor trusts, the assets of which are subject to the claims of the
Company's creditors, to assist it in accumulating funds to pay its obligations
under the Plan.
SECTION 12.02 NONASSIGNABILITY. Except as specifically set forth in the
Plan with respect to the designation of Beneficiaries, neither a Participant nor
any other person shall have any right to commute, sell, assign, transfer,
pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or
convey in advance of actual receipt the amounts, if any, payable hereunder, or
any part thereof. No part of the amounts payable hereunder shall, prior to
actual payment, be subject to seizure or sequestration for the payment of any
debts, liabilities, judgments, alimony, separate maintenance or child support a
Participant or any other person owes, nor be transferable by operation of law in
the event of a Participant's or any other person's bankruptcy or insolvency.
SECTION 12.03 VALIDITY AND SEVERABILITY. The invalidity or
unenforceability of any provision of this Plan shall not affect the validity or
enforceability of any other provision of this Plan, and any prohibition or
unenforceability of any provision in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 12.04 GOVERNING LAW. The validity, interpretation, construction
and performance of this Plan shall in all respects be governed by the laws of
the State of Georgia, without reference to principles of conflict of law, except
to the extent preempted by federal law.
SECTION 12.05 EMPLOYMENT STATUS. This Plan does not constitute a
contract of employment or impose on the Participant or any Company any
obligation for the Participant to remain an employee of such Company or change
the status of the Participant's employment or the policies of any Company
regarding termination of employment.
SECTION 12.06 UNDERLYING INCENTIVE PLANS AND PROGRAMS. Nothing in this
Plan shall prevent any Company from modifying, amending or terminating the
compensation or the incentive plans and programs pursuant to which cash awards
are earned and which are deferred under this Plan.
IN WITNESS WHEREOF, NOVA Corporation has caused this Plan to be
executed on the ___ day of ____________, 1999.
NOVA CORPORATION
By:
----------------------------------
Title:
-------------------------------
ATTEST:
- ----------------------------
Secretary
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<PAGE> 17
APPENDIX A
T. Rowe Price Prime Reserve Fund(PRRXX)
Janus Flexible Income(JAFIX)
Dreyfus S&P 500 Index Fund(PEOPX)
Fidelity Advisor Equity Growth(EPGAX)
Janus Overseas(JAOSX)
Enterprise Small Company Value(ENSPX)
Janus Enterprise(JAENX)
T. ROWE PRICE PRIME RESERVE PORTFOLIO:
Investment Summary and Risks: The fund's prospectus states that the
fund seeks preservation of capital, liquidity, and, consistent with these, the
highest possible current income. The fund, which is managed to provide a stable
share price of $1.00, invests in high-quality, U.S. denominated money market
securities. The fund's average weighted maturity will not exceed 90 days, and
its yield will fluctuate with changes in short-term interest rates. Since the
fund is managed to maintain a constant $1.00 share price, they should have
little risk of principal loss. However, there is no assurance the fund will
avoid principal losses in the rare event that fund holdings default or interest
rates rise sharply in an unusually short period. A disclosure of the fund's
risks are contained in the fund's prospectus, which should be reviewed prior to
making an investment decision.
Investment Returns as of 12/31/98
1 Yr 5.13%
5 Yr 4.87%
Note: Past performance does not guarantee future results.
Lipper Variable Annuity Underlying Money Market Funds Average as of 12/31/98
1 Yr 4.84%
5 Yr 4.77%
Fund Holdings and Morningstar Rating N/A
JANUS FLEXIBLE INCOME:
Investment Summary and Risks: The fund's prospectus states that the
fund seeks to obtain maximum total return, consistent with preservation of
capital. The fund invests in a wide variety of income-producing securities such
as corporate bonds and notes, government securities and preferred stock. As a
fundamental policy, the Fund will invest at least 80% of its assets in
income-producing securities. The fund may own an unlimited amount of
high-yield/high-risk securities, and these securities may be a big part of the
portfolio. Although fixed-income funds
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<PAGE> 18
may be less volatile than funds that invest most of their assets in common
stocks, the fund's return and yield will vary due to interest rate and credit
risk, and you could lose money. A disclosure of the fund's risks are contained
in the fund's prospectus, which should be reviewed prior to making an investment
decision.
Investment Returns as of 6/30/99:
1 Yr 2.38%
3 Yr 8.64%
5 Yr 9.17%
Note: Past performance does not guarantee future results.
Morningstar Rating: 5 Stars
Top 5 Holdings: Charter Comm. 8.625% senior notes, Comdisco 5.95% notes,
Conseco 7.15% senior notes, Fred Meyer 7.15% senior notes, IBM Corp.
5.375% notes
Lehman Bros. Govt/Corp Bond Index as of 6/30/99:
1 Yr 2.70%
3 Yr 7.19%
5 Yr 7.76%
DREYFUS S&P 500 INDEX FUND
Investment Summary and Risks: The fund's prospectus states that the
fund seeks to match the performance of the S&P 500 Composite Stock Price Index.
To pursue this goal, the fund generally is fully invested in stocks included in
the index, and in futures whose performance is tied to the index. The fund
attempts to have a correlation between its performance and that of the index of
at least .95, before expenses. The fund generally invests in all 500 stocks in
the S&P 500 in proportion to their weighting in the index. The S&P is an
unmanaged index of 500 common stocks chosen to reflect industries of the U.S.
economy and is often considered a proxy for the stock market in general. The
fund is considered a large cap blend fund that seeks capital appreciation, with
income being a secondary objective. While stocks have historically been a
leading choice of long-term investors, they do fluctuate in price. The value of
an investment in the fund will go up and down, which means that you could lose
money. A disclosure of the fund's risks are contained in the fund's prospectus,
which should be reviewed prior to making an investment decision.
Investment Returns as of 6/30/99
1 Yr 22.14%
3 Yr 28.45%
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<PAGE> 19
5 Yr 27.15%
Note: Past performance does not guarantee future results.
Morningstar Rating: 5 Stars
Top 5 Holdings: Microsoft, General Electric, Wal Mart Stores, Intel, Merck
S&P 500 Investment Returns as of 6/30/99
1 Yr 22.76%
3 Yr 29.10%
5 Yr 27.85%
FIDELITY ADVISOR EQUITY GROWTH
Investment Summary and Risks: The fund's prospectus states that the
fund seeks to achieve capital appreciation. The fund normally invests at least
65% of total assets in common stocks that it believes to have above-average
growth potential. In buying and selling securities for the fund, the fund relies
on fundamental analysis of each issuer's financial condition, industry position,
and market and economic conditions. Please note that equity investments expose
the investor to principal investment risk, due to factors such as stock market
volatility, foreign exposure and issuer-specific changes. A disclosure of the
fund's risks are contained in the fund's prospectus, which should be reviewed
prior to making an investment decision.
Investment Returns as of 6/30/99
1 Yr 33.21%
3 Yr 27.52%
5 Yr 27.18%
Note: Past performance does not guarantee future results.
Morningstar Rating: 5 Stars
Top 5 Holdings: Philip Morris, Warner-Lambert, Cisco Systems, Microsoft,
Eli Lilly
S&P 500 Investment Returns as of 6/30/99
1 Yr 22.76%
3 Yr 29.10%
5 Yr 27.85%
JANUS OVERSEAS:
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<PAGE> 20
Investment Summary and Risks: The fund's prospectus states that the
fund seeks long-term growth of capital in a manner consistent with the
preservation of capital. The fund invests primarily in companies located outside
of the U.S. Stocks are selected on their fundamental merits, rather than by
geography, economic climate, industry sector or market capitalization, often
resulting in a broadly diversified portfolio. Janus Overseas uses a bottom-up
approach to help capitalize on the inefficiencies of foreign stock markets,
where reliable information is often at a premium. Using Janus' philosophy of
in-depth, stock-by-stock analysis, this fund looks for great companies, and
overlooked investment opportunities from around the globe. Because the fund may
invest substantially all of their assets in common stocks, the main risk is the
risk that the value of the fund's stock holdings might decrease in response to
the activities of an individual company or in response to general market and/or
economic conditions. A disclosure of the fund's risks are contained in the
fund's prospectus, which should be reviewed prior to making an investment
decision.
Investment Returns as of 6/30/99:
Janus Overseas
1 Yr 4.99%
3 Yr 18.02%
5 Yr 19.65%
Note: Past performance does not guarantee future results.
Morningstar Rating: 5 Stars
Top 5 Holdings: COLT Telecom Group; Kao Corp., Mannesmann, Nokia, NTT
Mobile Communication Network
Morgan Stanley Capital International EAFE Index as of 6/30/99
1 Yr 7.62%
3 Yr 8.81%
5 yr 8.21%
ENTERPRISE SMALL COMPANY VALUE:
Investment Summary and Risks: This fund's prospectus states that the
fund seeks maximum capital appreciation. The fund accomplishes its objective by
investing in U.S. common stocks of small capitalization companies that the
manager feels are undervalued that is, the stock's market price does not fully
reflect the company's value. This fund invests primarily in common stocks,
subjecting the investor to the risk that stock prices will fall over short or
extended periods of time. In addition, the fund invests primarily in small-sized
companies which may be more vulnerable to adverse business or economic events
than larger, more established companies. A disclosure of the fund's risks are
contained in the fund's prospectus, which should be reviewed prior to making an
investment decision.
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<PAGE> 21
Investment Returns as of 6/30/99:
1 Yr 4.44%
3 Yr 21.20%
5 Yr 16.05%
Note: Past performance does not guarantee future results.
Morningstar Rating: 4 Stars
Top 5 Holdings: Cablevision Systems Corp., Telephone and Data Systems
Inc., Liberty Corp., Media General Inc., Rollins Inc.
Russell 2000 Index as of 6/30/99
1 Yr 1.51%
3 Yr 11.22%
5 Yr 15.40%
JANUS ENTERPRISE:
Investment Summary and Risks: This fund's prospectus states that the
fund seeks long-term growth of capital. The fund invests primarily in common
stocks selected for their growth potential, and normally invests at least 50% of
its equity assets in medium-sized companies. Medium-size companies are those
whose market capitalizations fall within the range of companies in the S&P 400
MidCap 400 Index. This fund focuses on companies with dominant franchises that
are insulated from economic events and that have high barriers to entry. This
fund may invest substantially all of its assets in common stocks exposing the
investor to risk and may not be as diversified as other equity funds. A
"nondiversified" fund has the ability to take larger positions in a smaller
number of stocks. Because the appreciation or depreciation of a single stock may
have a greater impact on the share price of a nondiversified fund, its share
price can be expected to fluctuate more than a comparable diversified fund. A
disclosure of the fund's risks are contained in the fund's prospectus, which
should be reviewed prior to making an investment decision.
Investment Returns as of 6/30/99:
1 Yr 48.66%
3 Yr 22.73%
5 Yr 26.10%
Note: Past performance does not guarantee future results.
Morningstar Rating: 3 Stars
Top 5 Holdings: Amazon.com, AT&T Liberty Media Group, Cisco Systems,
-5-
<PAGE> 22
Comcast Corp., Enron Corp.
S&P Midcap 400 Index as of 6/30/99
1 Yr 17.18%
3 Yr 22.48%
5 Yr 22.28%
Note: Complete information about the fund, including management fees, charges,
and expenses is included in the fund's prospectus, which should be read
carefully before investing. Share price and return fluctuate with market
conditions and investors may experience a loss upon redemption. All information
above was obtained from sources believed to be accurate and reliable, though the
accuracy of these numbers cannot be guaranteed and no liability is assumed from
the use of this information.
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<PAGE> 1
EXHIBIT 10.49
NOVA CORPORATION
DEFERRED COMPENSATION PLAN
TRUST AGREEMENT
THIS TRUST AGREEMENT UNDER THE NOVA CORPORATION DEFERRED COMPENSATION
PLAN (this "Trust Agreement"), effective as of November 10, 1999, is made by
and among NOVA Corporation, a corporation organized and doing business under
the laws of the State of Georgia, its successors, and any subsidiary or
affiliated organization that the Board of Directors of NOVA Corporation
authorizes to participate in the Plan, if they so participate (collectively the
"Company"), and Wachovia Bank, N.A. (the "Trustee"). The defined terms used in
this Trust Agreement that are not defined herein shall have the same meanings
given to them in the NOVA Corporation Deferred Compensation Plan (the "Plan").
W I T N E S S E T H:
WHEREAS, the Company is adopting the Plan primarily to aid in
retaining and attracting employees by providing them with savings and
tax-deferral opportunities; and
WHEREAS, the Company will incur certain liabilities under the Plan
with respect to such employees; and
WHEREAS, the Company desires to establish a trust (the "Trust") into
which it can deposit amounts to finance such liabilities, which amounts are
subject to the claims of the Company's creditors in the event of insolvency of
the Company, unless sooner paid as specified in the Plan; and
WHEREAS, the Company intends that this Trust will constitute an
unfunded arrangement and will not affect the status of the Plan as an unfunded
plan maintained for the purpose of providing deferred compensation for a select
group of management or highly compensated employees for purposes of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
NOW, THEREFORE, the Company and the Trustee hereby establish the Trust
and agree that the Trust shall be administered as follows:
SECTION 1.
Establishment of Trust
1.1 Establishment. The Company at its sole discretion will from
time to time deposit in trust with the Trustee cash or other property, which
shall become the principal of the Trust and which the Trustee will hold,
administer and dispose of as this Trust Agreement provides. Neither the Trustee
nor any Participant or Beneficiary of the Plan shall have any right to compel
the Company to make any such deposits except as otherwise set forth in this
Trust Agreement.
1.2 Nonrevocable. The Company may not revoke the Trust that is
established pursuant to this Trust Agreement.
1.3 Grantor Trust. The Trust is intended to be a grantor trust,
of which the Company is the grantor, within the meaning of Subpart E, Part I,
Subchapter J, Chapter 1, Subtitle A of the Internal Revenue Code of 1986, as
amended (the "Code"), and shall be construed accordingly.
1.4 Use of Trust Assets. The principal of the Trust and any
income, gains, appreciation, losses, depreciation and expenses thereon shall be
held separate and apart from the
<PAGE> 2
other funds of the Company and shall be used exclusively for the uses and
purposes of the Plan and for the general creditors of the Company as
hereinafter set forth. No Participant or Beneficiary of the Plan shall have any
preferred claim on, or rights or beneficial ownership in, any of the assets of
the Trust. The assets of the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the event of
insolvency of the Company, as defined in Section 3 below.
SECTION 2.
Payments to Participants
and their Beneficiaries
2.1 Payments. The Administrative Committee will deliver to the
Trustee a payment schedule that indicates (i) the amounts payable under the
Plan to each Participant and Beneficiary, (ii) the form in which such amounts
are to be paid, and (iii) the time of commencement for payment of such amounts.
Except as otherwise provided herein, the Trustee shall make payments to the
Participants and their Beneficiaries in accordance with such payment schedules.
The Trustee shall withhold any federal, state or local taxes that are required
to be withheld with respect to such payments, shall pay such withheld amounts
to the appropriate taxing authorities and shall make any applicable reports.
2.2 Benefit Entitlement. The Administrative Committee shall
determine the entitlement of any Participant or Beneficiary to any benefits
under the Plan, and any claim that a Participant or Beneficiary makes for
benefits under the Plan shall be considered and reviewed under the procedures
described in the Plan.
2.3 Required Company Contributions. If the assets in the Trust
are not sufficient to make the payment of any benefits in accordance with the
terms of the Plan, the Company shall contribute to the Trust the amounts
necessary to make such payments as they fall due. The Trustee shall notify the
Company if the assets of the Trust are not sufficient to pay any benefits under
the Plan.
SECTION 3.
Trustee Responsibility
When Company is Insolvent
3.1 Payments on Company Insolvency. The Trustee shall cease
payment of benefits to Participants and their Beneficiaries under the Plan if
the Company is insolvent. The Company shall be considered insolvent for
purposes of this Trust Agreement if (i) the Company is unable to pay its debts
as they become due, or (ii) the Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
3.2 Procedure for Paying Claims of General Creditors.
(i) At all times during the continuation of this Trust, the
assets of the Trust shall be subject to the claims of the general creditors of
the Company under federal and state law as set forth herein.
(ii) The Board of Directors of the Company shall have the duty to
inform the Trustee in writing of the Company's insolvency. If a person claiming
to be a creditor of the Company alleges in writing to the Trustee that the
Company has become insolvent, the Trustee shall determine whether the Company
is insolvent and, pending such determination, the Trustee shall discontinue
payments of benefits to Participants and their Beneficiaries.
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<PAGE> 3
(iii) Unless the Trustee has actual knowledge of the Company's
insolvency, or has received notice from the Company or a person claiming to be
a creditor alleging that Company is insolvent, the Trustee shall have no duty
to inquire whether the Company is insolvent. The Trustee may in all events rely
on such evidence concerning the Company's insolvency as may be furnished to
Trustee, if such evidence provides Trustee with a reasonable basis to make a
determination concerning the Company's insolvency.
(iv) If at any time the Trustee determines that the Company is
insolvent, the Trustee shall discontinue payments to Participants and their
Beneficiaries and shall hold the assets of the Trust for the benefit of the
Company's general creditors. However, nothing in this Trust Agreement shall in
any way diminish the rights of Participants or their Beneficiaries to pursue
their rights as general creditors of the Company with respect to any benefits
due under the Plan.
(v) The Trustee shall resume the payment of benefits under the
Plan to Participants and their Beneficiaries in accordance with this Trust
Agreement only if the Trustee determines that the Company is not insolvent or
is no longer insolvent.
(vi) Provided there are sufficient assets, if Trustee discontinues
the payment of benefits from the Trust, and subsequently resumes payment, the
first payment following such discontinuance shall include the aggregate amount
of all payments due to Participants and their Beneficiaries under the Plan for
the period of such discontinuance, including any earnings that accrued during
such discontinuance.
SECTION 4.
Payments to the Company
4.1 No Company Right to Payment. Except as provided in Section 3
and Section 4.2 hereof, the Company shall have no right or power to direct the
Trustee to return to the Company or to divert to anyone other than Participants
or their Beneficiaries any of the assets of the Trust before payment of all
benefits due them have been made to the Participants and their Beneficiaries
pursuant to the terms of the Plan.
4.2 Company Right to Payment. At any point in which the assets of
the Trust exceed the liabilities to the Participants and this Beneficiaries by
125%, the Company shall at its sole discretion have the right and power to
direct the Trustee to return to the Company the portion of such assets in
excess of 125% of such liabilities.
SECTION 5.
Investment Authority
5.1 Investment Directions. The Administrative Committee from time
to time shall direct the Trustee as to how the amounts in this Trust are to be
invested, by giving written direction to the Trustee at such intervals as the
Administrative Committee deems appropriate before the proposed implementation
of such investment direction. The Trustee shall be authorized to retain assets
in cash without liability for interest, whether or not in keeping with any
investment directions, pending the purchase of investments implementing the
directions of the Administrative Committee.
5.2 Limits on Responsibility of Trustee. The Trustee shall have
no discretion with respect to the investment or disposition of any of the
assets of the Trust under the investment direction of the Administrative
Committee and shall not be liable for the investment or disposition of any such
assets, or for any acts or omissions of the Administrative Committee, or for
taking or refraining from taking any action at the direction of the
Administrative Committee,
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<PAGE> 4
or for any losses that are the direct result of the direction of the
Administrative Committee. The Trustee shall be under no duty to make any review
of or recommendations relating to the investments made at the direction of the
Administrative Committee.
5.3 Investment Authority of the Trustee. Subject to instructions
or investment guidelines agreed to in writing from time to time by the
Administrative Committee, the Trustee shall have the power to invest and
reinvest the Trust at its sole discretion:
(1) To invest and reinvest in any readily marketable
common and preferred stocks, bonds, notes,
debentures (including convertible stocks and
securities but not including any stock or security
of the Trustee other than a de minimus amount held
in a mutual fund), certificates of deposit or demand
or time deposits (including any such deposits with
the Trustee) and shares of investment companies and
mutual funds, without being limited to the classes
or property in which the Trustees are authorized to
invest by any law or any rule of court of any state
and without regard to the proportion any such
property may bear to the entire amount of the Fund.
Without limitation, the Trustee may invest the Trust
in any investment company (including any investment
company or companies for which Wachovia Bank, N.A.
or an affiliated company acts as the investment
advisor) or any insurance contract or contracts
issued by an insurance company or companies in each
case as the Trustee may determine provided that the
Trustee may at its sole discretion keep such portion
of the Trust in cash or cash balances for such
reasonable periods as may from time to time be
deemed advisable pending investment or in order to
meet contemplated payments of benefits;
(2) To commingle for investment purposes, upon direction
of the Company, all or any portion of the Trust with
assets of any other similar trust or trusts
established by the Company with the Trustee for the
purpose of safeguarding deferred compensation or
retirement income benefits of its employees and/or
directors;
(3) To retain any property at any time received by the
Trustee;
(4) To sell or exchange any property held by it at
public or private sale, for cash or credit, to grant
and exercise options for the purchase or exchange
thereof, to exercise all conversion or subscription
rights pertaining to any such property and to enter
into any covenant or agreement to purchase any
property in the future;
(5) To participate in any plan or reorganization,
consolidation, merger, combination, liquidation or
other similar plan relating to property held by it
and to consent to or oppose any such plan or any
action thereunder or any contract, lease, mortgage,
purchase, sale or other action by any person;
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<PAGE> 5
(6) To deposit any property held by it with any
protective, reorganization or similar committee, to
delegate discretionary power thereto, and to pay
part of the expenses and compensation thereof any
assessments levied with respect to any such property
to be deposited;
(7) To extend the time of payment of any obligation held
by it;
(8) To hold uninvested any moneys received by it,
without liability for interest thereof, but only in
anticipation of payments due for investments,
reinvestments, expenses or disbursements;
(9) To exercise all voting or other rights with respect
to any property held by it and to grant proxies,
discretionary or otherwise;
(10) For the purposes of the Trust, to borrow money from
others, to issue its promissory note or notes
therefor, and to secure the repayment thereof by
pledging any property held by it;
(11) To employ suitable contractors and counsel, who may
be counsel to the Company or to the Trustee, and to
pay their reasonable expenses and compensation from
the Trust to the extent not paid by the Company;
(12) To register investments in its own name or in the
name of a nominee; to hold any investment in bearer
form; and to combine certificates representing
securities with certificates of the same issue held
by it in other fiduciary capacities or to deposit or
to arrange for the deposit of such securities with
any depository, even though, when so deposited, such
securities may be held in the name of the nominee of
such depository with other securities deposited
therewith by other persons, or to deposit or to
arrange for the deposit of any securities issued or
guaranteed by the United States government, or any
agency or instrumentality thereof, including
securities evidenced by book entries rather than by
certificates, with the United States Department of
the Treasury or a Federal Reserve Bank, even though,
when so deposited, such securities may not be held
separate from securities deposited therein by other
persons; provided, however, that no securities held
in the Trust shall be deposited with the United
States Department of the Treasury or a Federal
Reserve Bank or other depository in the same account
as any individual property of the Trustee, and
provided, further, that the books and records of the
Trustee shall at all times show that all such
securities are part of the Trust;
(13) To settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the
Trust, respectively, to commence or defend suits or
legal proceedings to protect any interest of the
Trust, and to represent the Trust in all suits or
legal proceedings in any court or before any other
body or tribunal; provided, however, that the
Trustee shall not
- 5 -
<PAGE> 6
be required to take any such action unless it shall
have been indemnified by the Company to its
reasonable satisfaction against liability or
expenses it might incur therefrom;
(14) To hold or retain policies of life insurance,
annuity contracts, and other property of any kind
which policies are contributed to the Trustee by the
Company or are purchased by the Trustee;
(15) To hold any other class of assets which may be
contributed by the Company and that is deemed
reasonable by the Trustee, unless expressly
prohibited herein;
(16) Generally, to do all acts, whether or not expressly
authorized, that the Trustee may deem necessary or
desirable for the protection of the Trust.
5.4 Substitution of Trust Assets. The Company shall have the
right at any time, and from time to time at its sole discretion, to substitute
assets of equal fair market value for any asset held by the Trust. This right
is exercisable by the Company in a nonfiduciary capacity without the approval
or consent of any person in a fiduciary capacity.
SECTION 6.
Disposition of Income
6.1 During the term of this Trust, the earnings of the Trust, net
of expenses and taxes, shall be accumulated and reinvested as set forth in
Section 5 above.
SECTION 7.
Accounting
7.1 Accounting Records. The Trustee shall keep accurate and
detailed records of all investments, receipts, disbursements and other
transactions that are made, including such records as shall be agreed upon in
writing between the Company and the Trustee. Promptly following the close of
each calendar quarter, the Trustee shall deliver to the Company written
statements setting forth the balance in the Trust as of the end of such
quarter, and all investments, receipts, disbursements and other transactions of
the Trust in such quarter, including a description of all securities and other
investments purchased and sold with the cost or net proceeds of such purchases
or sales and showing all cash, securities and other investments the Trust held
at the end of such quarter. Promptly following the close of each Plan Year and
promptly after the removal or resignation of the Trustee, the Trustee shall
deliver to the Company a written account of its administration of the Trust
during such Plan Year or during the period from the close of the last preceding
Plan Year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions it effected,
including a description of all securities and other investments purchased and
sold with the cost or net proceeds of such purchases or sales and showing all
cash, securities and other investments the Trust held at the end of such Plan
Year or as of the date of such removal or resignation, as the case may be.
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<PAGE> 7
SECTION 8.
Responsibility of Trustee.
8.1 Duties of the Trustee. The Trustee shall act in accordance
with any fiduciary duty it has under applicable law, provided, however, that
the Trustee shall incur no liability to any person for any action taken
pursuant to a written direction, request or approval that the Administrative
Committee gives, and that is contemplated by, and in conformity with, the terms
of the Plan or this Trust Agreement. In the event of a dispute, the Trustee may
apply to a court of competent jurisdiction to resolve the dispute.
8.2 Power of Trustee. The Trustee shall have, without exclusion,
all powers conferred on trustees by applicable law, including but not limited
to the right to exercise voting rights of stock held as an asset of the Trust
unless expressly provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, the Trustee shall have no
power to name a beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a different form) other
than to a successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.
8.3 Indemnification. If the Trustee undertakes or defends any
litigation arising in connection with this Trust, the Company agrees to
indemnify the Trustee against Trustee's costs, expenses and liabilities
(including, without limitation, attorneys' fees and expenses) relating thereto
and to be liable for such payments.
8.4 Legal Counsel. The Trustee may consult with legal counsel
(who may also be counsel for the Company generally) with respect to any of its
duties or obligations hereunder.
8.5 Hiring. The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals to assist it
in performing any of its duties or obligations hereunder.
SECTION 9.
Compensation and Expenses of Trustee
9.1 Payment of Fees. The Trustee's compensation shall be as
agreed in writing from time to time by the Company and the Trustee. The Company
shall pay all administrative expenses and the Trustee's fees and shall promptly
reimburse the Trustee for any fees and expenses of its agents. If not so paid,
the fees and expenses shall be paid from the Trust.
SECTION 10.
Resignation and Removal of Trustee
10.1 Resignation. The Trustee may resign at any time by giving
written notice to Company, which shall be effective 30 days after receipt of
such notice.
10.2 Removal. The Company may remove the Trustee by giving written
notice to the Trustee, which shall be effective 30 days after receipt of such
notice.
10.3 Successor Trustee. If the Trustee resigns or is removed, the
Company shall appoint a successor as soon as possible. If no such appointment
has been made, the Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of the Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
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<PAGE> 8
10.4 Transfers of Assets. Upon resignation or removal of the
Trustee and the appointment of a successor Trustee, all assets of the Trust
must be transferred to the successor Trustee as soon as possible.
10.5 Power of Successor Trustee. The new Trustee shall have all of
the rights and powers of the former Trustee, including ownership rights in the
assets of the Trust. The former Trustee shall execute any instruments the
Company or the successor Trustee reasonably request to evidence the transfer.
10.6 Review of Former Trustee. The successor Trustee need not
examine the records and acts of any prior Trustee and may retain or dispose of
existing Trust assets, subject to this Trust Agreement. The successor Trustee
shall not be responsible for and the Company shall indemnify and defend the
successor Trustee from any claim or liability resulting from any action or
inaction of any prior Trustee or from any other past event or any condition
existing at the time it becomes successor Trustee.
SECTION 11.
Amendment or Termination.
11.1 Amendment. This Trust Agreement may be amended by a written
instrument that the Trustee and the Company execute. No such amendment shall
conflict with the terms of the Plan, subject to the following provisions of
this Section 11.
11.2 Termination. The Trust shall not terminate until the date on
which the Participants and their Beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan. Upon termination of the Trust, any
assets remaining in the Trust not needed for the payment of benefits shall be
returned to Company.
SECTION 12.
Miscellaneous
12.1 Miscellaneous. Any provisions of this Trust Agreement
prohibited by law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
12.2 Non-alienation. Benefits payable to Participants and their
Beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.
12.3 Situs of the Trust. The situs of the Trust shall be in the
State of Georgia.
12.4 Governing Law. This Trust Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia, except to the
extent preempted by federal law.
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<PAGE> 9
IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust
Agreement to be executed on the 10th day of November, 1999.
COMPANY:
NOVA CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
ATTEST:
- --------------------------------
TRUSTEE:
WACHOVIA BANK, N.A.
By:
----------------------------------------
Title:
-------------------------------------
ATTEST:
- --------------------------------
- 9 -
<PAGE> 1
EXHIBIT 10.50
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective this
15th day of February, 1999 (the "Effective Date") by and between CHERIE M.
FUZZELL (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 Senior Vice President and General Counsel 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 interests as he may have to
interfere with the performance of his duties hereunder. Notwithstanding
the
<PAGE> 2
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 One Hundred ninety thousand and No/100 Dollars ($190,000)
("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.
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<PAGE> 3
(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.
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<PAGE> 4
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
more than thirty-five (35) miles from Employee's current office located
at One Concourse
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<PAGE> 5
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))
(the "Severance Payment"). The Severance Payment shall be paid
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;
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
Employee the Severance Payment in one lump sum within thirty
(30) days of the Termination Date.
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<PAGE> 6
(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.
(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
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<PAGE> 7
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:
(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")
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<PAGE> 8
(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. 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
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<PAGE> 9
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 further acknowledge
and agree that nothing in this Agreement shall be construed to require
arbitration of any claim for workers' compensation or unemployment
compensation.
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<PAGE> 10
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. Section 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. 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
10
<PAGE> 11
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 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
11
<PAGE> 12
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.
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
12
<PAGE> 13
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:
Cherie M. Fuzzell
969 Moore Club Place
Atlanta, Georgia 30319
(ii) If to NOVA, to:
NOVA Corporation
One Concourse Parkway
Suite 300
Atlanta, Georgia 30328
Attention: Edward Grzedzinski
Chief Executive Officer
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
13
<PAGE> 14
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.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above shown.
"EMPLOYEE":
By:____________________________________
Cherie M. Fuzzell
"NOVA":
NOVA CORPORATION
By:_____________________________________
Edward Grzedzinski
Chairman, CEO and President
15
<PAGE> 1
EXHIBIT 10.51
219 PERIMETER CENTER PARKWAY
ATLANTA, GEORGIA
OFFICE LEASE AGREEMENT
BETWEEN
EOP-PERIMETER CENTER, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY
("LANDLORD")
AND
NOVA GEORGIA SERVICES, L.P., A GEORGIA LIMITED PARTNERSHIP
("TENANT")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. BASIC LEASE INFORMATION.................................................1
II. LEASE GRANT............................................................3
III. POSSESSION............................................................3
IV. RENT...................................................................4
V. COMPLIANCE WITH LAWS; USE..............................................10
VI. SECURITY DEPOSIT......................................................10
VII. SERVICES TO BE FURNISHED BY LANDLORD.................................11
VIII. LEASEHOLD IMPROVEMENTS..............................................12
IX. REPAIRS AND ALTERATIONS...............................................12
X. USE OF ELECTRICAL SERVICES BY TENANT...................................14
XI. ENTRY BY LANDLORD.....................................................14
XII. ASSIGNMENT AND SUBLETTING............................................15
XIII. LIENS...............................................................17
XIV. INDEMNITY AND WAIVER OF CLAIMS.......................................17
XV. INSURANCE.............................................................17
XVI. SUBROGATION..........................................................18
XVII. CASUALTY DAMAGE.....................................................18
XVIII. CONDEMNATION.......................................................19
XIX. EVENTS OF DEFAULT....................................................20
XX. REMEDIES..............................................................20
XXI. LIMITATION OF LIABILITY..............................................21
XXII. NO WAIVER...........................................................22
XXIII. QUIET ENJOYMENT....................................................22
XXIV. RELOCATION..........................................................22
XXV. HOLDING OVER........................................................22
XXVI. SUBORDINATION TO MORTGAGES; ESTOPPEL CERTIFICATE....................23
XXVII. ATTORNEYS' FEES....................................................24
XXVIII. NOTICE............................................................24
XXIX. EXCEPTED RIGHTS.....................................................24
XXX. SURRENDER OF PREMISES................................................25
XXXI. MISCELLANEOUS.......................................................25
XXXII. ENTIRE AGREEMENT...................................................27
</TABLE>
i
<PAGE> 3
OFFICE LEASE AGREEMENT
THIS OFFICE LEASE AGREEMENT (the "Lease") is made and entered into as
of the ____ day of ___________, 1999, by and between EOP-PERIMETER CENTER,
L.L.C., A DELAWARE LIMITED LIABILITY COMPANY ("Landlord") and NOVA GEORGIA
SERVICES, L.P., A GEORGIA LIMITED PARTNERSHIP ("Tenant").
I. BASIC LEASE INFORMATION.
A. "Building" shall mean the building located at 219 Perimeter
Center Parkway, Atlanta, County of DeKalb, State of Georgia,
commonly known as 219 Perimeter Center Parkway.
B. "Rentable Square Footage of the Building" is deemed to be
131,327 square feet.
C. "Premises A" and "Premises B" shall mean the areas shown on
EXHIBIT A-1 and EXHIBIT A-2, respectively. Premises A is
located on the 2nd and 3rd floors and known as suite numbers
200 and 300, and Premises B is located on the 1st, 4th and 5th
floors and known as suite numbers 110, 111, 400, 410 and 500.
The "Rentable Square Footage of Premises A" is deemed to be
46,318 square feet (Suite 200 contains 23,159 rentable square
feet and Suite 300 contains 23,159 rentable square feet) and
the "Rentable Square Footage of Premises B" is deemed to be
44,468 square feet (Suite 110 contains 6,576 rentable square
feet, Suite 111 contains 6,755 rentable square feet, Suite 400
contains 3,381 rentable square feet, Suite 410 contains 12,684
rentable square feet and Suite 500 contains 15,072 rentable
square feet). For the period beginning with the Commencement
Date (as defined in Section I.G. below) through and including
the day immediately preceding the Premises B Commencement Date
(as defined in Section I.G. below), the "Premises" shall be
defined as Premises A only. For the period on and after the
Premises B Commencement Date through the Termination Date, the
"Premises" shall be defined, collectively, as Premises A and
Premises B and, from and after the Premises B Commencement
Date, the Rentable Square Footage of the Premises is deemed to
be 90,786 square feet. Premises A and Premises B are sometimes
individually or collectively referred to as the "Premises", in
accordance with the foregoing. If the Premises include one or
more floors in their entirety, all corridors and restroom
facilities located on such full floor(s) shall be considered
part of the Premises. Landlord and Tenant stipulate and agree
that the Rentable Square Footage of the Building and the
Rentable Square Footage of the Premises are correct and shall
not be remeasured.
D. "Base Rent":
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Period in RSF in Annual Rate Base Rent Monthly
Term Premises Per Square Foot for Period Base Rent
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11/01/99 - 07/31/00 46,318 $20.25 $ 703,454.67 $ 78,161.63
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
08/01/00 - 10/31/00 90,786 $20.25 $ 459,604.14 $153,201.38
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
11/01/00 - 10/31/01 90,786 $20.66 $1,875,638.76 $156,303.23
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
11/01/01 - 10/31/02 90,786 $21.07 $1,912,861.08 $159,405.09
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
11/01/02 - 10/31/03 90,786 $21.49 $1,950,991.20 $162,582.60
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
11/01/03 - 10/31/04 90,786 $21.92 $1,990,029.12 $165,835.76
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
11/01/04 - 10/31/05 90,786 $22.36 $2,029,974.96 $169,164.58
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
11/01/05 - 10/31/06 90,786 $22.80 $2,069,920.80 $172,493.40
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
11/01/06 - 10/31/07 90,786 $23.26 $2,111,682.36 $175,973.53
---------------------------------------------------------------------------------------
</TABLE>
It is agreed that Tenant may take possession of all or a
portion of Premises B, in phases, prior to the Premises B
Commencement Date as described in Section III.C. below.
1
<PAGE> 4
E. "Tenant's Pro Rata Share" shall mean 35.2692% for the period
beginning with the Commencement Date and ending on the day
immediately preceding the Premises B Commencement Date. For
the period from and after the Premises B Commencement Date
through the Termination Date, "Tenant's Pro Rata Share" shall
mean 69.1297%.
F. "Base Year": 2000.
G. 1. "Term" and "Term for Premises A": shall mean a period
of 96 months. The Term and the Term for Premises A
shall commence on November 1, 1999 (the "Commencement
Date") and, unless terminated early in accordance
with this Lease, end on September 30, 2007 (the
"Termination Date").
2. "Term for Premises B": shall mean a period of 87
months. The Term for Premises B shall commence on
August 1, 2000 (the "Premises B Commencement Date")
and, unless terminated early in accordance with this
Lease, end on the Termination Date.
H. Tenant allowance(s): $1,906,506.00, as described in the Work
Letter attached as EXHIBIT D.
I. "Security Deposit": None.
J. "Guarantor": Nova Corporation, a Delaware corporation.
Concurrent with Tenant's execution and delivery of this Lease,
Tenant shall cause Guarantor(s) to execute and deliver to
Landlord the Guaranty in the form attached hereto as EXHIBIT
I.
K. "Broker(s)": CB Richard Ellis.
L. "Permitted Use": General office use, telephone area (to
operate 24 hours per day, 7 days a week), and a computer/data
facility for handling Tenant's day-to-day business.
M. "Notice Addresses":
Tenant:
On and after the Commencement Date, notices shall be sent to
Tenant at the Premises as follows:
Nova Georgia Services, L.P.
219 Perimeter Center
Suite 200
Atlanta, Georgia 30346
Attn: James Cash
Prior to the Commencement Date, notices shall be sent to
Tenant at the following address:
Nova Georgia Services, L.P.
c/o Nova Information Systems, Inc.
One Concourse Parkway NE, Suite 300
Atlanta, Georgia 30328
Attn: James Cash
Phone#: (770) 396-1456
Fax#: (770) 396-2117
2
<PAGE> 5
Prior to, on and after the Commencement Date, copies of any
notices whereby Landlord is notifying Tenant of option rights
or asserting a claim or defense against the Tenant based upon
the subject matter of the notice (as opposed to routine
notices concerning the operation of the Building) shall also
be sent to:
Long Aldridge & Norman LLP
303 Peachtree Street
Suite 5300
Atlanta, Georgia 30308
Attn: David Ivey, Esq.
<TABLE>
<CAPTION>
LANDLORD: WITH A COPY TO:
<S> <C>
EOP-Perimeter Center, L.L.C. Equity Office Properties
c/o Equity Office Properties Two North Riverside Plaza
219 Perimeter Center Parkway, Suite 410 Suite 2200
Atlanta, Georgia 30346 Chicago, Illinois 60606
Attention: Building Manager Attention: Regional Counsel - Southeast
</TABLE>
Rent (defined in Section IV.A) is payable to the order of
EQUITY OFFICE PROPERTIES at the following address:
EOP-Operating Limited Partnership, as agent for EOP-Perimeter
Center, L.L.C. - Group IV, Post Office Box 931650, Atlanta,
Georgia 31193-1578.
N. "Business Day(s)" are Monday through Friday of each week,
exclusive of New Year's Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, the Friday following Thanksgiving
Day, and Christmas Day ("Holidays"). Landlord may designate
additional Holidays, provided that the additional Holidays are
commonly recognized by other office buildings in the area
where the Building is located.
O. "Landlord Work" means the work, if any, that Landlord is
obligated to perform in the Premises pursuant to a separate
work letter agreement (the "Work Letter") attached as EXHIBIT
D.
P. "Law(s)" means all applicable statutes, codes, ordinances,
orders, rules and regulations of any municipal or governmental
entity.
Q. "Normal Business Hours" for the Building are 8:00 A.M. to 6:00
P.M. on Business Days and 8:00 A.M. to 1:00 P.M. on Saturdays.
R. "Property" means the Building and the parcel(s) of land on
which it is located, as described on EXHIBIT A-3, and, at
Landlord's discretion, the Building garage and/or surface
parking area servicing the Building and other improvements
serving the Building, if any, and the parcel(s) of land on
which they are located.
S. "Affiliate of Tenant" means any entity controlling, controlled
by or under common control with Tenant.
II. LEASE GRANT.
Landlord leases the Premises to Tenant and Tenant leases the Premises
from Landlord, together with the right in common with others to use any portions
of the Property that are designated by Landlord for the common use of tenants
and others, such as sidewalks, unreserved parking areas, common corridors,
elevator foyers, restrooms, vending areas and lobby areas (the "Common Areas").
III. POSSESSION.
A. Intentionally Omitted.
B. Subject to Landlord's obligations under Section IX.B. and
Landlord's obligation to complete the Landlord Lobby Work (as
described in Section F of EXHIBIT D), the Premises are
accepted by Tenant in "as is" condition and configuration. By
3
<PAGE> 6
taking possession of the Premises, Tenant agrees that the
Premises are in good order and satisfactory condition, and
that there are no representations or warranties by Landlord
regarding the condition of the Premises or the Building except
as may otherwise be expressly stated herein. If Landlord is
delayed delivering possession of the Premises or any other
space due to the holdover or unlawful possession of such space
by any party, Landlord shall use reasonable efforts to obtain
possession of the space. The Commencement Date shall be
postponed until the date Landlord delivers possession of
Premises A to Tenant free from occupancy by any party, and the
Termination Date, at the option of Landlord, may be postponed
by an equal number of days.
C. If Tenant takes possession of any portion of Premises A prior
to the Premises A Commencement Date, or if Tenant takes
possession of any portion of Premises B prior to the Premises
B Commencement Date, for purposes of conducting business
operations therein, such possession shall be subject to the
terms and conditions of this Lease and Tenant shall pay Rent
(defined in Section IV.A.) for Premises A and/or Premises B to
Landlord for each day of possession prior to the respective
Commencement Date relating to Premises A and/or Premises B.
However, notwithstanding the foregoing or anything to the
contrary contained in this Lease, it is agreed that Tenant may
take possession of Premises B, in phases, prior to the
Premises B Commencement Date for purposes of conducting
business operations therein, but each such phase of Premises B
that Tenant takes possession of shall consist of one or more
of the suites, as currently demised, comprising Premises B as
reflected on Exhibit A-2 attached hereto, and, for all
purposes, each such phase of Premises B shall be deemed to
contain the Rentable Square Footage for each such suite
comprising Premises B, as described in Section I.C. above.
Notwithstanding the foregoing, it is understood and agreed
that the portion of Premises B currently demised as Suite No.
400 is currently occupied by another tenant pursuant to a
lease scheduled to expire on February 29, 2000, and the
portion of Premises B currently demised as Suite No. 410 is
currently occupied by Landlord as its management office. It is
understood and agreed that such portion(s) of Premises B may
not be entered into by Tenant for business purposes or for any
other purpose until Landlord delivers possession of such
portion(s) of Premises B to Tenant. Landlord agrees that it
will deliver possession of Suite No. 410 no later than June 1,
2000. If Landlord is unable to tender possession of Suite No.
400 on or before June 1, 2000, Landlord shall proceed with due
diligence and take all legal action reasonably necessary to
recapture possession of Suite 400 from the existing tenant
thereunder and/or regain legal right to possession thereof.
Except for the cost of services requested by Tenant for after
Normal Business Hours (e.g. after hours HVAC), Tenant shall
not be required to pay Rent for Premises A or Premises B, as
applicable, relating to any days of possession prior to the
respective Commencement Date for Premises A or Premises B
during which Tenant, with the approval of Landlord, is in
possession of Premises A or Premises B, as applicable, for the
sole purpose of performing improvements or installing
furniture, equipment or other personal property.
IV. RENT.
A. Payments. As consideration for this Lease, Tenant shall pay
Landlord, without any setoff or deduction (except as may
otherwise be expressly stated herein), the total amount of
Base Rent and Additional Rent due for the Term. "Additional
Rent" means all sums (exclusive of Base Rent) that Tenant is
required to pay Landlord. Additional Rent and Base Rent are
sometimes collectively referred to as "Rent". Tenant shall pay
and be liable for all rental, sales and use taxes (but
excluding income taxes), if any, imposed upon or measured by
Rent under applicable Law. Base Rent and recurring monthly
charges of Additional Rent shall be due and payable in advance
on the first day of each calendar month without notice or
demand. All other items of Rent shall be due and payable by
Tenant on or before 30 days after Tenant's receipt of an
invoice for same. All payments of Rent shall be by good and
sufficient check or by other means (such as automatic debit or
electronic transfer) acceptable to Landlord. If Tenant fails
to pay any item or installment of Rent when due, Tenant shall
pay Landlord an
4
<PAGE> 7
administration fee equal to 5% of the past due Rent, provided
that Tenant shall be entitled to a grace period of 5 days for
the first 2 late payments of Rent in a given calendar year. If
the Term commences on a day other than the first day of a
calendar month or terminates on a day other than the last day
of a calendar month, the monthly Base Rent and Tenant's Pro
Rata Share of any Tax Excess (defined in Section IV.B.) or
Expense Excess (defined in Section IV.B.) for the month shall
be prorated based on the number of days in such calendar
month. Landlord's acceptance of less than the correct amount
of Rent shall be considered a payment on account of the
earliest Rent due. No endorsement or statement on a check or
letter accompanying a check or payment shall be considered an
accord and satisfaction, and either party may accept the check
or payment without prejudice to that party's right to recover
the balance or pursue other available remedies. Tenant's
covenant to pay Rent is independent of every other covenant in
this Lease.
B. Expense Excess and Tax Excess. Tenant shall pay Tenant's Pro
Rata Share of the amount, if any, by which Expenses (defined
in Section IV.C.) for each calendar year during the Term
exceed Expenses for the Base Year (the "Expense Excess") and
also the amount, if any, by which Taxes (defined in Section
IV.D.) for each calendar year during the Term exceed Taxes for
the Base Year (the "Tax Excess"). If Expenses and/or Taxes in
any calendar year decrease below the amount of Expenses and/or
Taxes for the Base Year, Tenant's Pro Rata Share of Expenses
and/or Taxes, as the case may be, for that calendar year shall
be $0. Landlord shall provide Tenant with a good faith
estimate of the Expense Excess and of the Tax Excess for each
calendar year during the Term. On or before the first day of
each month, Tenant shall pay to Landlord a monthly installment
equal to one-twelfth of Tenant's Pro Rata Share of Landlord's
estimate of the Expense Excess and one-twelfth of Tenant's Pro
Rata Share of Landlord's estimate of the Tax Excess. If
Landlord determines that its good faith estimate of the
Expense Excess or of the Tax Excess was incorrect by a
material amount, Landlord may provide Tenant with a revised
estimate. After its receipt of the revised estimate, Tenant's
monthly payments shall be based upon the revised estimate. If
Landlord does not provide Tenant with an estimate of the
Expense Excess or of the Tax Excess by January 1 of a calendar
year, Tenant shall continue to pay monthly installments based
on the previous year's estimate(s) until Landlord provides
Tenant with the new estimate. Upon delivery of the new
estimate, an adjustment shall be made for any month for which
Tenant paid monthly installments based on the previous year's
estimate(s). Tenant shall pay Landlord the amount of any
underpayment within 30 days after receipt of the new estimate.
Any overpayment shall be refunded to Tenant within 30 days or
credited against the next due future installment(s) of
Additional Rent.
As soon as is practical following the end of each calendar
year, Landlord shall furnish Tenant with a statement of the
actual Expenses and Expense Excess and the actual Taxes and
Tax Excess for the prior calendar year. If the estimated
Expense Excess and/or estimated Tax Excess for the prior
calendar year is more than the actual Expense Excess and/or
actual Tax Excess, as the case may be, for the prior calendar
year, Landlord shall apply any overpayment by Tenant against
Additional Rent due or next becoming due, provided if the Term
expires before the determination of the overpayment, Landlord
shall refund any overpayment to Tenant after first deducting
the amount of Rent due. If the estimated Expense Excess and/or
estimated Tax Excess for the prior calendar year is less than
the actual Expense Excess and/or actual Tax Excess, as the
case may be, for such prior year, Tenant shall pay Landlord,
within 30 days after its receipt of the statement of Expenses
and/or Taxes, any underpayment for the prior calendar year.
C. Expenses Defined. "Expenses" means all costs and expenses
incurred in each calendar year in connection with operating,
maintaining, repairing, and managing the Building and the
Property, including, but not limited to:
1. Labor costs, including, wages, salaries, social
security and employment taxes, medical and other
types of insurance, uniforms, training, and
retirement and pension plans, but excluding labor
costs for personnel
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above the grade of building manager or property
manager. Notwithstanding the foregoing, to the extent
management or maintenance personnel are located
off-site and perform management or maintenance
services for buildings other than the Building, the
labor costs associated with such management or
maintenance personnel shall be included in Expenses
only to the extent and in the proportion that such
management or maintenance personnel perform services
for the Building or Property, as the case may be.
2. Management fees, the cost of equipping and
maintaining a management office, accounting and
bookkeeping services, legal fees not attributable to
leasing or collection activity, and other
administrative costs. Landlord, by itself or through
an affiliate, shall have the right to directly
perform or provide any services under this Lease
(including management services), provided that the
cost of any such services shall not exceed the cost
that would have been incurred had Landlord entered
into an arms-length contract for such services with
an unaffiliated entity of comparable skill and
experience.
3. The cost of services, including amounts paid to
service providers and the rental and purchase cost of
parts, supplies, tools and equipment, but excluding
payments for rented equipment, the cost of which
would constitute a capital expenditure if the
equipment were purchased, in which event, Section
IV.C.6 below would govern the determination of
whether such costs are included in Expenses.
4. Premiums and deductibles paid by Landlord for
insurance, including workers compensation, fire and
extended coverage, earthquake, general liability,
rental loss, elevator, boiler and other insurance
customarily carried from time to time by owners of
comparable office buildings.
5. Electrical Costs (defined below) and charges for
water, gas, steam and sewer, but excluding those
charges for which Landlord is reimbursed by tenants.
"Electrical Costs" means: (a) charges paid by
Landlord for electricity; (b) costs incurred in
connection with an energy management program for the
Property; and (c) if and to the extent permitted by
Law, a fee for the services provided by Landlord in
connection with the selection of utility companies
and the negotiation and administration of contracts
for electricity, provided that such fee during any
particular calendar year shall not exceed 50% of any
savings obtained by Landlord with respect to such
calendar year. Electrical Costs shall be adjusted as
follows: (i) amounts received by Landlord as
reimbursement for above standard electrical
consumption shall be deducted from Electrical Costs;
(ii) the cost of electricity incurred to provide
overtime HVAC to specific tenants (as reasonably
estimated by Landlord) shall be deducted from
Electrical Costs; and (iii) if Tenant is billed
directly for the cost of building standard
electricity to the Premises as a separate charge in
addition to Base Rent, the cost of electricity to
individual tenant spaces in the Building shall be
deducted from Electrical Costs.
6. The amortized cost of capital improvements (as
distinguished from replacement parts or components
installed in the ordinary course of business) made to
the Property which are: (a) performed primarily to
reduce operating expense costs or otherwise improve
the operating efficiency of the Property; or (b)
required to comply with any Laws that are enacted, or
first interpreted to apply to the Property, after the
date of this Lease. The cost of capital improvements
shall be amortized by Landlord over the lesser of the
Payback Period (defined below) or 10 years. The
amortized cost of capital improvements may, at
Landlord's option, include actual or imputed interest
at the rate that Landlord would reasonably be
required to pay to finance the cost of the capital
improvement. "Payback Period" means the reasonably
estimated period of time that it takes for the cost
savings resulting from a capital improvement to equal
the total cost of the capital improvement.
Notwithstanding the foregoing, the portion of the
annual amortized costs to be included in
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Expenses in any calendar year with respect to a
capital improvement which is intended to reduce
expenses or improve the operating efficiency of the
Property or Building shall equal the lesser of: (i)
such annual amortized costs; and (ii) the actual
annual amortized reduction in expenses for that
portion of the amortization period of the capital
improvement which falls within the Term.
If Landlord incurs Expenses for the Property together with one
or more other buildings or properties, whether pursuant to a
reciprocal easement agreement, common area agreement or
otherwise, the shared costs and expenses otherwise permitted
or included in the meaning of "Expenses" shall be equitably
prorated and apportioned between the Property and the other
buildings or properties. Notwithstanding the foregoing, for
purposes of computing Tenant's Pro Rata Share of Expenses, the
Controllable Expenses (hereinafter defined) shall not increase
by more than 6% per calendar year determined for each calendar
year on a non-compounding and non-cumulative basis over the
course of the Term. In other words, Controllable Expenses for
the first calendar year after the Base Year shall not exceed
106% of the Controllable Expenses for the Base Year.
Controllable Expenses for the second calendar year after the
Base Year shall not exceed 106% of the lesser of the actual
Controllable Expenses or the limit on Controllable Expenses
for the first calendar year after the Base Year, etc. By way
of illustration, if Controllable Expenses were $10.00 per
rentable square for the Base Year, then Controllable Expenses
for the first (1st) calendar year following the Base Year
shall not exceed $10.60 per rentable square foot, and if
actual Controllable Expenses are $10.10 per rentable square
foot in such first calendar year, Controllable Expenses for
the second calendar year following the Base Year shall not
exceed $10.71 per rentable square foot. "Controllable
Expenses" shall mean all Expenses exclusive of the cost of
insurance, utilities and capital improvements.
Expenses shall not include: Taxes, the cost of capital
improvements or capital expenditures (except as set forth
above); depreciation; interest (except as provided above for
the amortization of capital improvements); principal payments
of mortgage and other non-operating debts of Landlord; the
cost of repairs or other work to the extent Landlord is
reimbursed by insurance or condemnation proceeds; costs in
connection with leasing space in the Building, including
brokerage commissions; lease concessions, including rental
abatements and construction allowances, granted to specific
tenants; costs incurred in connection with the sale, financing
or refinancing of the Building; fines, interest and penalties
incurred due to the late payment of Taxes (defined in Section
IV.D) or Expenses; organizational expenses associated with the
creation and operation of the entity which constitutes
Landlord; or any penalties or damages that Landlord pays to
Tenant under this Lease or to other tenants in the Building
under their respective leases.
Expenses shall also exclude the following:
a. Rental concessions granted to specific tenants and
expenses incurred in renovating or otherwise
improving or decorating, painting, or redecorating
space for specific tenants, other than ordinary
repairs and maintenance provided to all tenants.
b. All items (including repairs) and services for which
Tenant or other tenants pay directly to third parties
or for which Tenant or other tenants reimburse (or
are required to reimburse) Landlord (other than
through Expenses).
c. Costs, fines, interest, and penalties incurred due to
the late payments of taxes, utility bills and other
costs incurred by Landlord's failure to make such
payments when due unless such failure is due to
Landlord's good faith and reasonable efforts in
contesting the amount of such payments.
d. The cost or expense of any services or benefits
provided to other tenants in the Building and not
provided or available to Tenant.
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e. Payments for rented equipment, the cost of which
would constitute a capital expenditure if the
equipment were purchased, in which event, Section
IV.C.6 above would govern the determination of
whether such costs are included in Expenses.
f. Any fines or penalties incurred as a result of
violation by Landlord of any law, order, rule or
regulation of any governmental authority.
g. Any expenses for which Landlord has received actual
reimbursement (other than through Expenses).
h. Any cost or expense related to removal, cleaning,
abatement or remediation of "hazardous materials" in
or about the Building, Common Area or Property,
including, without limitation, hazardous substances
in the ground water or soil, except to the extent
such removal, cleaning, abatement or remediation is
related to the general repair and maintenance of the
Building, Common Area or Property.
i. All costs associated with the operation of the
business of the ownership or entity which constitutes
"Landlord" (as distinguished from the costs of
operating, maintaining, repairing and managing the
Building) including, but not limited to, Landlord's
general corporate overhead and general administrative
expenses.
j. Costs incurred by Landlord in connection with the
correction of defects in design and original
construction of the Building or other structural
defects of the Building.
k. Any fines, costs, penalties or interest resulting
from the adjudicated negligence or adjudicated
willful misconduct of the Landlord or its agents,
contractors, or employees.
l. Ground lease rental
m. Costs incurred by Landlord for the repair of damage
to the Building, to the extent that Landlord is
reimbursed for such costs by insurance proceeds,
judgments or other third party sources.
n. To the extent that parking revenues exceed parking
expenses, the costs incurred in owning (although
capital expenditures shall be excluded except to the
extent properly included pursuant to Section IV.C.6
above), operating, maintaining and repairing any
underground or above-ground parking garage and/or any
other parking facilities associated with the
Building.
If the Building is not at least 95% occupied during any
calendar year or if Landlord is not supplying services to at
least 95% of the total Rentable Square Footage of the Building
at any time during a calendar year, Expenses shall, at
Landlord's option, be determined as if the Building had been
95% occupied and Landlord had been supplying services to 95%
of the Rentable Square Footage of the Building during that
calendar year. If Tenant pays for its Pro Rata Share of
Expenses based on increases over a "Base Year" and Expenses
for a calendar year are determined as provided in the prior
sentence, Expenses for the Base Year shall also be determined
as if the Building had been 95% occupied and Landlord had been
supplying services to 95% of the Rentable Square Footage of
the Building. The extrapolation of Expenses under this Section
shall be performed by appropriately adjusting the cost of
those components of Expenses that are impacted by changes in
the occupancy of the Building. In no event shall Landlord be
entitled to a reimbursement from tenants for Expenses in
excess of 100% of the cost actually paid or incurred for
Expenses in any applicable calendar year.
D. Taxes Defined. "Taxes" shall mean: (1) all real estate taxes
and other assessments on the Building and/or Property,
including, but not limited to, assessments for special
improvement districts and building improvement
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districts, taxes and assessments levied in substitution or
supplementation in whole or in part of any such taxes and
assessments and the Property's share of any real estate taxes
and assessments under any reciprocal easement agreement,
common area agreement or similar agreement as to the Property;
(2) all personal property taxes for property that is owned by
Landlord and used in connection with the operation,
maintenance and repair of the Property; and (3) all costs and
fees incurred in connection with seeking reductions in any tax
liabilities described in (1) and (2), including, without
limitation, any costs incurred by Landlord for compliance,
review and appeal of tax liabilities. Without limitation,
Taxes shall not include any income, capital levy, franchise,
capital stock, gift, estate or inheritance tax. If an
assessment is payable in installments, Taxes for the year
shall include the amount of the installment and any interest
due and payable during that year. For all other real estate
taxes, Taxes for that year shall, at Landlord's election,
include either the amount accrued, assessed or otherwise
imposed for the year or the amount due and payable for that
year, provided that Landlord's election shall be applied
consistently throughout the Term. If a change in Taxes is
obtained for any year of the Term during which Tenant paid
Tenant's Pro Rata Share of any Tax Excess, then Taxes for that
year will be retroactively adjusted and Landlord shall provide
Tenant with a credit, if any, based on the adjustment.
Likewise, if a change is obtained for Taxes for the Base Year,
Taxes for the Base Year shall be restated and the Tax Excess
for all subsequent years shall be recomputed. Tenant shall pay
Landlord the amount of Tenant's Pro Rata Share of any such
increase in the Tax Excess within 30 days after Tenant's
receipt of a statement from Landlord.
E. Audit Rights. Tenant may, within 150 days after receiving
Landlord's statement of Expenses, give Landlord written notice
("Review Notice") that Tenant intends to review Landlord's
records of the Expenses for that calendar year. Within a
reasonable time after receipt of the Review Notice, Landlord
shall make all pertinent records available for inspection that
are reasonably necessary for Tenant to conduct its review. If
any records are maintained at a location other than the office
of the Building, Tenant may either inspect the records at such
other location or pay for the reasonable cost of copying and
shipping the records. If Tenant retains an agent to review
Landlord's records, the agent must be with a licensed CPA
firm. However, notwithstanding the foregoing, Landlord agrees
that Tenant may retain a third party agent to review
Landlord's books and records which third party agent is not a
CPA firm, so long as the third party agent retained by Tenant
shall have expertise in and familiarity with general industry
practice with respect to the operation of and accounting for a
first class office building and whose compensation shall in no
way be contingent upon or correspond to the financial impact
on Tenant resulting from the review. Tenant shall be solely
responsible for all costs, expenses and fees incurred for the
audit. Within 60 days after the records are made available to
Tenant, Tenant shall have the right to give Landlord written
notice (an "Objection Notice") stating in reasonable detail
any objection to Landlord's statement of Expenses for that
year. If Tenant fails to give Landlord an Objection Notice
within the 60 day period or fails to provide Landlord with a
Review Notice within the 150 day period described above,
Tenant shall be deemed to have approved Landlord's statement
of Expenses and shall be barred from raising any claims
regarding the Expenses for that year. If Tenant provides
Landlord with a timely Objection Notice, Landlord and Tenant
shall work together in good faith to resolve any issues raised
in Tenant's Objection Notice. If Landlord and Tenant determine
that Expenses for the calendar year are less than reported,
Landlord shall provide Tenant with a credit against the next
installment of Rent in the amount of the overpayment by
Tenant. Likewise, if Landlord and Tenant determine that
Expenses for the calendar year are greater than reported,
Tenant shall pay Landlord the amount of any underpayment
within 30 days. In addition, if Landlord and Tenant determine
that Expenses for the Building for the year in question were
less than stated by more than 5%, Landlord, within 30 days
after its receipt of paid invoices therefor from Tenant, shall
reimburse Tenant for any reasonable amounts paid by Tenant to
third parties in connection with such review by Tenant. The
records obtained by Tenant shall be treated as confidential.
In no event shall Tenant be permitted to examine Landlord's
records or to dispute any statement of Expenses unless Tenant
has paid and continues to pay all Rent when due.
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V. COMPLIANCE WITH LAWS; USE.
A. The Premises shall be used only for the Permitted Use and for
no other use whatsoever. Tenant shall not use or permit the
use of the Premises for any purpose which is illegal,
dangerous to persons or property or which, in Landlord's
reasonable opinion, unreasonably disturbs any other tenants of
the Building or interferes with the operation of the Building.
Tenant shall comply with all Laws, including the Americans
with Disabilities Act, regarding the operation of Tenant's
business and the use, condition, configuration and occupancy
of the Premises. Tenant, within 10 days after receipt, shall
provide Landlord with copies of any notices it receives
regarding a violation or alleged violation of any Laws.
Landlord, at its sole cost and expense (except to the extent
properly included in Expenses), shall be responsible for
correcting any violations of Title III of the Americans with
Disabilities Act with respect to the Common Areas of the
Building and the restroom facilities and elevator lobbies
within the Premises, provided that Landlord's obligation with
respect to the restroom facilities and elevator lobbies within
the Premises shall be limited to violations that arise out of
the Landlord Lobby Work (as described in EXHIBIT D) and/or the
condition of such portion of the Premises prior to any
improvements performed by Tenant in such portions of the
Premises and the installation of any furniture, equipment and
other personal property of Tenant within such portion of the
Premises. Notwithstanding the foregoing, Landlord shall have
the right to contest any alleged violation in good faith,
including, without limitation, the right to apply for and
obtain a waiver or deferment of compliance, the right to
assert any and all defenses allowed by law and the right to
appeal any decisions, judgments or rulings to the fullest
extent permitted by law. Landlord, after the exhaustion of any
and all rights to appeal or contest, will make all repairs,
additions, alterations or improvements necessary to comply
with the terms of any final order or judgment. Notwithstanding
the foregoing, Tenant, not Landlord, shall be responsible for
the correction of any violations that arise out of or in
connection with any claims brought under any provision of the
Americans with Disabilities Act other than Title III, the
specific nature of Tenant's business in the Premises (other
than general office use), the acts or omissions of Tenant, its
agents, employees or contractors, Tenant's arrangement of any
furniture, equipment or other property in the Premises, any
repairs, alterations, additions or improvements performed by
or on behalf of Tenant (other than the Landlord Lobby Work)
and any design or configuration of the Premises specifically
requested by Tenant after being informed that such design or
configuration may not be in strict compliance with the ADA.
B. Tenant shall comply with the rules and regulations of the
Building attached as EXHIBIT B and such other reasonable rules
and regulations adopted by Landlord from time to time. Tenant
shall also cause its agents, contractors, subcontractors,
employees, customers, and subtenants to comply with all rules
and regulations. Landlord shall not knowingly discriminate
against Tenant in Landlord's enforcement of the rules and
regulations. The rules and regulations shall be generally
applicable, and generally applied in the same manner, to all
tenants of the Building.
VI. SECURITY DEPOSIT.
The Security Deposit, if any, shall be delivered to Landlord upon the
execution of this Lease by Tenant and shall be held by Landlord without
liability for interest (unless required by Law) as security for the performance
of Tenant's obligations. The Security Deposit is not an advance payment of Rent
or a measure of Tenant's liability for damages. Landlord may, from time to time,
without prejudice to any other remedy, use all or a portion of the Security
Deposit to satisfy past due Rent or to cure any uncured default by Tenant. If
Landlord uses the Security Deposit, Tenant shall on demand restore the Security
Deposit to its original amount. Landlord shall return any unapplied portion of
the Security Deposit to Tenant within 45 days after the later to occur of: (1)
the determination of Tenant's Pro Rata Share of any Tax Excess and Expense
Excess for the final year of the Term; (2) the date Tenant surrenders possession
of the Premises to Landlord in accordance with this Lease; or (3) the
Termination Date. If Landlord transfers its interest in the Premises, Landlord
may assign the Security Deposit to the transferee and, following the assignment,
Landlord shall have no further liability for the return of
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the Security Deposit. Landlord shall not be required to keep the Security
Deposit separate from its other accounts.
VII. SERVICES TO BE FURNISHED BY LANDLORD.
A. Landlord agrees to furnish Tenant with the following services:
(1) Hot and cold water service for use in the lavatories on
each floor on which the Premises are located; (2) Heat and air
conditioning in season during Normal Business Hours in
accordance with the specifications attached hereto as EXHIBIT
F or as otherwise required by governmental authority, provided
that Landlord shall not be liable for any failure to maintain
the temperature ranges set forth in EXHIBIT F to the extent
that such failure arises out of either (a) an excess density
or electrical load within the Premises beyond any density or
load limits specified in this Lease, or (b) modifications
performed to the HVAC system by Tenant or any contractors
retained by Tenant, or (c) Tenant's failure to keep the window
covering in the Premises closed during appropriate times when
such portions of the Premises are exposed to direct sunlight,
it being agreed that Landlord and Tenant shall work
cooperatively with one another regarding a reasonable
determination as to when such window coverings should be
closed. Tenant, upon such advance notice as is reasonably
required by Landlord, shall have the right to receive HVAC
service during hours other than Normal Business Hours. Tenant
shall pay Landlord the standard charge for the additional
service as reasonably determined by Landlord from time to
time. As of the date hereof, Landlord's charge for after hours
heating and air conditioning service is $46.50 per hour for
the first floor (or portion thereof) requested by Tenant, and
$16.50 per hour for each additional floor (or portion thereof)
requested by Tenant; (3) Maintenance and repair of the
Property as described in Section IX.B.; (4) Janitor service on
Business Days in accordance with the cleaning specifications
attached hereto as EXHIBIT G, or such other reasonably
comparable specifications designated by Landlord from time to
time. If Tenant's use, floor covering or other improvements
require special services in excess of the standard services
for the Building, Tenant shall pay the additional cost
attributable to the special services; (5) Elevator service;
(6) Electricity to the Premises for general office use, in
accordance with and subject to the terms and conditions in
Article X; (7) Security to the Building, which may be provided
through a security system involving any one or a combination
of cameras, monitoring devices or guards, sign-in or
identification procedures or other comparable system; (8)
Replacement of Building standard fluorescent light bulbs/tubes
in Building standard light fixtures within the Premises; and
(9) such other services as Landlord reasonably determines are
necessary or appropriate for the Property.
B. Landlord's failure to furnish, or any interruption or
termination of, services due to the application of Laws, the
failure of any equipment, the performance of repairs,
improvements or alterations, or the occurrence of any event or
cause beyond the reasonable control of Landlord (a "Service
Failure") shall not render Landlord liable to Tenant,
constitute a constructive eviction of Tenant, give rise to an
abatement of Rent, nor relieve Tenant from the obligation to
fulfill any covenant or agreement. However, if the Premises,
or a material portion of the Premises, is made untenantable
for a period in excess of 3 consecutive Business Days as a
result of the Service Failure, then Tenant, as its sole
remedy, shall be entitled to receive an abatement of Rent
payable hereunder during the period beginning on the 4th
consecutive Business Day of the Service Failure and ending on
the day the service has been restored. If the entire Premises
has not been rendered untenantable by the Service Failure, the
amount of abatement that Tenant is entitled to receive shall
be prorated based upon the percentage of the Premises rendered
untenantable and not used by Tenant. In no event, however,
shall Landlord be liable to Tenant for any loss or damage,
including the theft of Tenant's Property (defined in Article
XV), arising out of or in connection with the failure of any
security services, personnel or equipment. Notwithstanding the
foregoing, if a Service Failure (a) continues for 60
consecutive days after the Service Failure; and (b) is not
being diligently remedied by Landlord, Tenant, as its sole
remedy, shall have the right to elect to terminate this Lease
within 10 days after the expiration of said 60 day period
without penalty, by delivering written notice to Landlord of
its election thereof; provided, however, if Landlord is
diligently pursuing the repair or restoration of the service,
Tenant shall not be
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entitled to terminate the Lease but rather Tenant's sole
remedy shall be to abate Rent as provided above.
VIII. LEASEHOLD IMPROVEMENTS.
All improvements to the Premises (collectively, "Leasehold
Improvements") shall be owned by Landlord and shall remain upon the Premises
without compensation to Tenant. However, Landlord, by written notice to Tenant
within 30 days prior to the Termination Date (or at least 90 days prior to the
Termination Date if Tenant requests in writing at least 100 days prior to the
Termination Date that Landlord provide such written notice to Tenant on or
before such 90 day period) require Tenant to remove, at Tenant's expense: (1)
Cable (defined in Section IX.A) installed by or for the exclusive benefit of
Tenant and located in the Premises or other portions of the Building; and (2)
any Leasehold Improvements that are performed by or for the benefit of Tenant
and, in Landlord's reasonable judgment, are of a nature that would require
removal and repair costs that are materially in excess of the removal and repair
costs associated with standard office improvements (collectively referred to as
"Required Removables"). Without limitation, it is agreed that Required
Removables include internal stairways, raised floors, personal baths and
showers, vaults, rolling file systems and structural alterations and
modifications of any type. The Required Removables designated by Landlord shall
be removed by Tenant before the Termination Date, provided that upon prior
written notice to Landlord, Tenant may remain in the Premises for up to 5 days
after the Termination Date for the sole purpose of removing the Required
Removables, but in no event shall any such holdover in the Premises constitute
or create a tenancy-at-will under existing applicable law. Tenant's possession
of the Premises shall be subject to all of the terms and conditions of this
Lease, including the obligation to pay Rent on a per diem basis at the rate in
effect for the last month of the Term. Tenant shall repair damage caused by the
installation or removal of Required Removables. If Tenant fails to remove any
Required Removables or perform related repairs in a timely manner, Landlord, at
Tenant's expense, may remove and dispose of the Required Removables and perform
the required repairs. Tenant, within 30 days after receipt of an invoice, shall
reimburse Landlord for the reasonable costs incurred by Landlord.
Notwithstanding the foregoing, Tenant, at the time it requests approval for a
proposed Alteration (defined in Section IX.C), including any Initial Alterations
(as defined in EXHIBIT D), may request in writing that Landlord advise Tenant
whether the Alteration or any portion of the Alteration must be removed upon
termination of this Lease. Within 10 days after receipt of Tenant's request,
Landlord shall advise Tenant in writing as to which portions of the Alteration,
if any, will be required to be removed upon termination of this Lease.
IX. REPAIRS AND ALTERATIONS.
A. Tenant's Repair Obligations. Tenant shall, at its sole cost
and expense, promptly perform all maintenance and repairs to
the Premises that are not Landlord's express responsibility
under this Lease, and shall keep the Premises in good
condition and repair, reasonable wear and tear excepted.
Tenant's repair obligations include, without limitation,
repairs to: (1) floor covering; (2) interior partitions; (3)
doors; (4) the interior side of demising walls; (5)
electronic, phone and data cabling and related equipment
(collectively, "Cable") that is installed by or for the
exclusive benefit of Tenant and located in the Premises or
other portions of the Building; (6) supplemental air
conditioning units, private showers and kitchens, including
hot water heaters, plumbing, and similar facilities serving
Tenant exclusively; and (7) Alterations performed by
contractors retained by Tenant, including related HVAC
balancing. All work shall be performed in accordance with the
rules and procedures described in Section IX.C. below. If
Tenant fails to make any repairs to the Premises for more than
20 days after notice from Landlord (although notice shall not
be required if there is an emergency), Landlord may make the
repairs, and Tenant shall pay the reasonable cost of the
repairs to Landlord within 30 days after receipt of an
invoice, together with an administrative charge in an amount
equal to 10% of the cost of the repairs.
B. Landlord's Repair Obligations. Landlord shall keep and
maintain in good repair and working order and make repairs to
and perform maintenance upon: (1) structural elements of the
Building; (2) mechanical (including HVAC), electrical,
plumbing and fire/life safety systems serving the Building in
general; (3) Common Areas; (4) the roof of the Building; (5)
exterior windows and other exterior components of the
Building; (6) elevators serving the Building; and
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(7) the surface parking area servicing the Building. Landlord
shall promptly make repairs (considering the nature and
urgency of the repair) for which Landlord is responsible.
C. Alterations. Tenant shall not make alterations, additions or
improvements to the Premises or install any Cable in the
Premises or other portions of the Building (collectively
referred to as "Alterations") without first obtaining the
written consent of Landlord in each instance, which consent
shall not be unreasonably withheld, conditioned or delayed.
However, Landlord's consent shall not be required for any
Alteration that satisfies all of the following criteria (a
"Cosmetic Alteration"): (1) is of a cosmetic nature such as
painting, wallpapering, hanging pictures and installing
carpeting; (2) is not visible from the exterior of the
Premises or Building; (3) will not affect the systems or
structure of the Building; and (4) does not require work to be
performed inside the walls or above the ceiling of the
Premises. However, even though consent is not required, the
performance of Cosmetic Alterations shall be subject to all
the other provisions of this Section IX.C. Prior to starting
work, Tenant shall furnish Landlord with plans and
specifications reasonably acceptable to Landlord; names of
contractors reasonably acceptable to Landlord (provided that
Landlord may designate specific contractors with respect to
Building systems); copies of contracts; necessary permits and
approvals; evidence of contractor's and subcontractor's
insurance in amounts reasonably required by Landlord; and any
security for performance that is reasonably required by
Landlord. Changes to the plans and specifications must also be
submitted to Landlord for its approval. Alterations shall be
constructed in a good and workmanlike manner using materials
of a quality that is at least equal to the quality designated
by Landlord as the minimum standard for the Building. Landlord
may designate reasonable rules, regulations and procedures for
the performance of work in the Building and, to the extent
reasonably necessary to avoid disruption to the occupants of
the Building, shall have the right to designate the time when
Alterations may be performed. Tenant shall reimburse Landlord
within 30 days after receipt of an invoice for all reasonable
actual sums paid by Landlord for third party examination of
Tenant's plans for non-Cosmetic Alterations. In addition,
within 30 days after receipt of an invoice from Landlord,
Tenant shall pay Landlord a fee for Landlord's oversight and
coordination of any non-Cosmetic Alterations equal to the
actual reasonable cost incurred by Landlord with respect to
any third party professionals that Landlord is required to
retain in connection with the supervision of such non-Cosmetic
Alterations plus (i) with respect to non-Cosmetic Alterations
installed as part of the Initial Alterations (described in
EXHIBIT D) in the initial Premises or installed as part of the
initial alterations in any subsequent or additional space
added to the initial Premises, $1,000.00 for the first 24
hours that Landlord's personnel spends supervising such work
and $41.66 per hour for every hour thereafter that Landlord's
personnel spends supervising such work, or (ii) 3% of the cost
of any non-Cosmetic Alterations installed subsequent to the
Initial Alterations in the initial Premises or installed
subsequent to any initial alterations in any subsequent or
additional space added to the initial Premises. Upon
completion, Tenant shall furnish "as-built" plans (except for
Cosmetic Alterations), completion affidavits, full and final
waivers of lien and receipted bills covering all labor and
materials. Tenant shall assure that the Alterations comply
with all insurance requirements and Laws. Landlord's approval
of an Alteration shall not be a representation by Landlord
that the Alteration complies with applicable Laws or will be
adequate for Tenant's use.
D. Landlord may require Tenant to install one or more
supplemental HVAC unit(s) in any portion of the Premises
(including, in particular, any telephone service or telephone
conferencing area and any computer or data room or facility)
which will generate an excessive amount of heat, whether due
to its occupancy or use or any other cause. The supplemental
HVAC units must be approved by Landlord and be installed in a
location and manner approved by Landlord and shall be subject
to the terms of Section XII of EXHIBIT E. The cost to install,
maintain, repair and remove any supplemental HVAC units shall
be paid by Tenant.
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X. USE OF ELECTRICAL SERVICES BY TENANT.
A. Electricity used by Tenant in the Premises shall, at
Landlord's option, be paid for by Tenant either: (1) through
inclusion in Expenses (except as provided in Section X.B. for
excess usage); (2) by a separate charge payable by Tenant to
Landlord within 30 days after billing by Landlord; or (3) by
separate charge billed by the applicable utility company and
payable directly by Tenant. Electrical service to the Premises
may be furnished by one or more companies providing electrical
generation, transmission and distribution services, and the
cost of electricity may consist of several different
components or separate charges for such services, such as
generation, distribution and stranded cost charges. Landlord
shall have the exclusive right to select any company providing
electrical service to the Premises, to aggregate the
electrical service for the Property and Premises with other
buildings, to purchase electricity through a broker and/or
buyers group and to change the providers and manner of
purchasing electricity. Landlord shall be entitled to receive
a fee (if permitted by Law) for the selection of utility
companies and the negotiation and administration of contracts
for electricity, provided that such fee during any particular
calendar year shall not exceed 50% of any savings obtained by
Landlord with respect to such calendar year. In addition, if
Landlord bills Tenant directly for the cost of electricity as
an inclusion in Expenses or as Additional Rent, the cost of
electricity may include (if permitted by Law) an
administrative fee to reimburse Landlord for the cost of
reading meters, preparing invoices and related costs, which
administrative fee shall not exceed 15% of "Tenant's Total
Excess Electricity Cost", which shall mean the cost of
Tenant's Excess Electricity Usage (as defined in X.B. below),
based upon Landlord's average per kilowatt hour cost for
electricity for the Building. However, in no event will
Tenant's Total Excess Electricity Cost, plus the foregoing
fee, exceed the cost which Tenant would incur for Tenant's
Excess Electricity Usage if it were a direct retail customer
of Georgia Power Company or its successors, based upon the
tariffs that have been publicly filed with the Georgia Public
Service Commission.
B. Tenant's use of electrical service shall not exceed, either in
voltage, rated capacity, use beyond Normal Business Hours or
overall load, that which Landlord deems to be standard for the
Building. Any such excess use by Tenant is referred to as
"Tenant's Excess Electricity Usage". For purposes hereof, the
"electrical standard" for the Building is: (1) a design load
of 2.3 watts per net usable square feet for 120/208 volts for
receptacle and incandescent lighting loads; (2) a design load
of 3.5 watts per net usable square feet for 277/480 volts for
lighting loads; and (3) a consumption of 5.8 watts per net
usable square feet of net usable area within the Premises at
60% of the calculated 120/208 load capacity. Landlord hereby
confirms that the foregoing standard is sufficient to support
a density of 1 person for every 150 square feet, assuming (i)
each person is utilizing no more electricity than would be
required to operate a personal computer, a personal calculator
and under-cubicle lighting during Normal Business Hours, and
(ii) such space contains only standard general office
equipment (fax machines, printers, copiers or similar
equipment) operated during Normal Business Hours in quantities
and of types and sizes as Landlord, in its reasonable
discretion, deems to be within the electrical standard for the
Building, as described above, considering the electrical usage
per item (i) above in this sentence. If Tenant requests
permission to consume excess electrical service, Landlord may
condition consent upon conditions that Landlord reasonably
elects (including, without limitation, the installation of
utility service upgrades, meters, submeters, air handlers or
cooling units), and the additional usage (to the extent
permitted by Law), installation and maintenance costs shall be
paid by Tenant. [Note: If Tenant provides Landlord with a list
describing the equipment requiring electricity that Tenant
intends to install in the Premises, including the amps and
voltage each piece of equipment draws, Landlord shall review
the list to determine whether the use of the listed equipment
is within the electrical standard for the Building.] Landlord
shall have the right to separately meter electrical usage for
the Premises and to measure electrical usage by survey or
other commonly accepted methods.
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XI. ENTRY BY LANDLORD.
A. Landlord, its agents, contractors and representatives may
enter the Premises to inspect or show the Premises, to clean
and make repairs, alterations or additions to the Premises,
and to conduct or facilitate repairs, alterations or additions
to any portion of the Building, including other tenants'
premises. Except in emergencies or to provide janitorial and
other Building services after Normal Business Hours, Landlord
shall provide Tenant with reasonable prior notice of entry
into the Premises, which may be given orally to the office
manager or other person within the Premises designated from
time to time by Tenant. If reasonably necessary for the
protection and safety of Tenant and its employees, Landlord
shall have the right to temporarily close all or a portion of
the Premises to perform repairs, alterations and additions.
However, except in emergencies, Landlord will not close the
Premises if the work can reasonably be completed on weekends
and after Normal Business Hours. Entry by Landlord shall not
constitute constructive eviction or entitle Tenant to an
abatement or reduction of Rent. Notwithstanding the foregoing,
if Landlord temporarily closes the Premises as provided above
for a period in excess of 3 consecutive days, Tenant, as its
sole remedy, shall be entitled to receive a per diem abatement
of Base Rent during the period beginning on the 4th
consecutive day of closure and ending on the date on which the
Premises are returned to Tenant in a tenantable condition. In
addition to the foregoing, if Landlord closes the Premises for
90 consecutive day(s) pursuant to this Section (and such
closure is not due to a casualty, in which case Article XVII
shall control with respect to such matter) and such repairs
necessitating such closure are not being diligently pursued by
Landlord, Tenant, as its sole remedy, shall have the right to
elect to terminate this Lease within 10 days after the
expiration of said 90 day period without penalty, by
delivering written notice to Landlord of its election thereof;
provided, however, if Landlord is diligently pursuing the
repair or restoration of the Premises, Tenant shall not be
entitled to terminate the Lease but rather Tenant's sole
remedy shall be to abate Rent as provided above. Tenant,
however, shall not be entitled to an abatement or the
termination right under this Section if the repairs,
alterations and/or additions to be performed are required as a
result of the acts or omissions of Tenant, its agents,
employees or contractors, including, without limitation, a
default by Tenant in its maintenance and repair obligations
under the Lease.
B. Notwithstanding the foregoing, Tenant, at its own expense, may
provide its own locks to an area within the Premises to be
used by Tenant as its data center, as shown on the plans for
the Initial Alterations to be approved by Landlord, as
described in EXHIBIT D ("Secured Area"). Tenant shall furnish
Landlord with a key to the Secured Area and, upon the
expiration or earlier termination of this Lease, Tenant shall
surrender all keys to the Secured Area to Landlord. If
Landlord must gain access to the Secured Area in a
non-emergency situation, Landlord shall contact Tenant and
Landlord and Tenant shall arrange a mutually agreed upon time
for Landlord to do so. Landlord shall comply with all
reasonable security measures pertaining to the Secured Area.
If Landlord determines in its sole discretion that an
emergency in the Building or the Premises, including, without
limitation, a suspected fire or flood, requires Landlord to
gain access to the Secured Area, Tenant hereby authorizes
Landlord to enter the Secured Area. In such event, Landlord
shall have no liability whatsoever to Tenant. Landlord shall
have no obligation to provide either janitorial service or
cleaning in the Secured Area.
XII. ASSIGNMENT AND SUBLETTING.
A. Except in connection with a Permitted Transfer (defined in
Section XII.E. below), Tenant shall not assign, sublease,
transfer or encumber any interest in this Lease or allow any
third party to use any portion of the Premises (collectively
or individually, a "Transfer") without the prior written
consent of Landlord, which consent shall not be unreasonably
withheld, conditioned or delayed. Without limitation, it is
agreed that Landlord's consent shall not be considered
unreasonably withheld if: (1) the proposed transferee's
financial condition does not meet the criteria Landlord uses
to select Building tenants having similar leasehold
obligations; (2) the proposed transferee's business is not
suitable for
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the Building considering the business of the other tenants and
the Building's prestige, or would result in a violation of
another tenant's rights; (3) the proposed transferee is a
governmental agency or occupant of the Building; (4) Tenant is
then in default after the expiration of the notice and cure
periods in this Lease; or (5) any portion of the Building or
Premises would likely become subject to additional or
different Laws as a consequence of the proposed Transfer. Any
attempted Transfer in violation of this Article shall, at
Landlord's option, be void. Consent by Landlord to one or more
Transfer(s) shall not operate as a waiver of Landlord's rights
to approve any subsequent Transfers. In no event shall any
Transfer or Permitted Transfer release or relieve Tenant from
any obligation under this Lease.
B. As part of its request for Landlord's consent to a Transfer,
Tenant shall provide Landlord with financial statements for
the proposed transferee, a complete copy of the proposed
assignment, sublease and other contractual documents and such
other information as Landlord may reasonably request. Landlord
shall, by written notice to Tenant as soon as reasonably
possible, but in any event within 30 days of its receipt of
the required information and documentation, consent to the
Transfer by the execution of a consent agreement in a form
reasonably designated by Landlord or reasonably refuse to
consent to the Transfer in writing. Any such termination shall
be effective on the proposed effective date of the Transfer
for which Tenant requested consent. Tenant shall pay Landlord
a review fee of $750.00 for Landlord's review of any Permitted
Transfer or requested Transfer, provided if Landlord's actual
reasonable costs and expenses (including reasonable attorney's
fees) exceed $750.00, Tenant shall reimburse Landlord for its
actual reasonable costs and expenses in lieu of a fixed review
fee.
C. Tenant shall pay Landlord 50% of all rent and other
consideration which Tenant receives as a result of a Transfer
that is in excess of the Rent payable to Landlord for the
portion of the Premises and Term covered by the Transfer.
Tenant shall pay Landlord for Landlord's share of any excess
within 30 days after Tenant's receipt of such excess
consideration. Tenant may deduct from the excess all
reasonable and customary expenses directly incurred by Tenant
attributable to the Transfer (including Landlord's review
fee), including brokerage fees, reasonable marketing expenses,
legal fees and construction costs. If Tenant is in Monetary
Default (defined in Section XIX.A. below), Landlord may
require that all sublease payments be made directly to
Landlord, in which case Tenant shall receive a credit against
Rent in the amount of any payments received (less Landlord's
share of any excess, adjusted to reflect Tenant's expenses as
provided in the immediately preceding sentence). However, by
accepting any such payments directly from the subtenant,
whether as a result of the foregoing or otherwise, Landlord
does not waive any claims against the Tenant hereunder or
release Tenant from any obligations under this Lease, nor
recognize the subtenant as the tenant under the Lease.
D. Except as provided below with respect to a Permitted Transfer,
if Tenant is a corporation, limited liability company,
partnership, or similar entity, and if the entity which owns
or controls a majority of the voting shares/rights at any time
changes for any reason (including but not limited to a merger,
consolidation or reorganization), such change of ownership or
control shall constitute a Transfer. The foregoing shall not
apply so long as Tenant is an entity whose outstanding stock
is listed on a recognized security exchange, or if at least
80% of its voting stock is owned by another entity, the voting
stock of which is so listed.
E. Tenant may assign its entire interest under this Lease to a
successor to Tenant by purchase, merger, consolidation or
reorganization without the consent of Landlord, provided that
all of the following conditions are satisfied (a "Permitted
Transfer" and any such transferee a "Permitted Transferee"):
(1) Tenant is not in default under this Lease; (2) Tenant's
successor shall own all or substantially all of the assets of
Tenant; (3) Tenant's successor shall have a net worth which is
at least equal to Tenant's net worth at the date of this
Lease; (4) the Permitted Use does not allow the Premises to be
used for retail purposes; and (5) Tenant shall give Landlord
written notice at least 30 days prior to the effective date of
the proposed purchase, merger, consolidation or
reorganization. Tenant's notice to
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Landlord shall include information and documentation showing
that each of the above conditions has been satisfied. If
requested by Landlord, Tenant's successor shall sign a
commercially reasonable form of assumption agreement.
XIII. LIENS.
Tenant shall not permit mechanic's or other liens to be placed upon the
Property, Premises or Tenant's leasehold interest in connection with any work or
service done or purportedly done by or for benefit of Tenant or Tenant's
subtenant. If a lien is so placed, Tenant shall, within 10 days after the date
Tenant becomes aware of the filing of the lien or within 10 days of notice from
Landlord of the filing of the lien, whichever is first, fully discharge the lien
by settling the claim which resulted in the lien or by bonding or insuring over
the lien in the manner prescribed by the applicable lien Law. Unless Landlord
gave Tenant notice of the lien, Tenant shall promptly give Landlord notice of
the lien after becoming aware of same. If Tenant fails to so bond, insure over
or discharge the lien, then, in addition to any other right or remedy of
Landlord, Landlord may bond or insure over the lien or otherwise discharge the
lien. Tenant shall reimburse Landlord for any amount paid by Landlord to bond or
insure over the lien or discharge the lien, including, without limitation,
reasonable attorneys' fees (if and to the extent permitted by Law) within 30
days after receipt of an invoice from Landlord.
XIV. INDEMNITY AND WAIVER OF CLAIMS.
A. Except to the extent caused by the negligence or willful
misconduct of Landlord or any Landlord Related Parties
(defined below), Tenant shall indemnify, defend and hold
Landlord, its trustees, members, principals, beneficiaries,
partners, officers, directors, employees, Mortgagee(s)
(defined in Article XXVI) and agents ("Landlord Related
Parties") harmless against and from all liabilities,
obligations, damages, penalties, claims, actions, costs,
charges and expenses, including, without limitation,
reasonable attorneys' fees and other professional fees (if and
to the extent permitted by Law), which may be imposed upon,
incurred by or asserted against Landlord or any of the
Landlord Related Parties and arising out of or in connection
with any damage or injury occurring in the Premises or any
acts or omissions (including violations of Law) of Tenant, the
Tenant Related Parties (defined below) or any of Tenant's
transferees, contractors or licensees.
B. Except to the extent caused by the negligence or willful
misconduct of Tenant or any Tenant Related Parties (defined
below), Landlord shall indemnify, defend and hold Tenant, its
trustees, members, principals, beneficiaries, partners,
officers, directors, employees and agents ("Tenant Related
Parties") harmless against and from all liabilities,
obligations, damages, penalties, claims, actions, costs,
charges and expenses, including, without limitation,
reasonable attorneys' fees and other professional fees (if and
to the extent permitted by Law), which may be imposed upon,
incurred by or asserted against Tenant or any of the Tenant
Related Parties and arising out of or in connection with the
acts or omissions (including violations of Law) of Landlord,
the Landlord Related Parties or any of Landlord's contractors.
C. Except if the loss or damage results from the negligent or
willful misconduct of Landlord, Landlord and the Landlord
Related Parties shall not be liable for, and Tenant waives,
all claims for loss or damage to Tenant's business or loss,
theft or damage to Tenant's Property or the property of any
person claiming by, through or under Tenant resulting from:
(1) wind or weather; (2) the failure of any sprinkler, heating
or air-conditioning equipment, any electric wiring or any gas,
water or steam pipes; (3) the backing up of any sewer pipe or
downspout; (4) the bursting, leaking or running of any tank,
water closet, drain or other pipe; (5) water, snow or ice upon
or coming through the roof, skylight, stairs, doorways,
windows, walks or any other place upon or near the Building;
(6) any act or omission of any party other than Landlord or
Landlord Related Parties; and (7) any causes not reasonably
within the control of Landlord. Tenant shall insure itself
against such losses under Article XV below.
XV. INSURANCE.
Tenant shall carry and maintain the following insurance ("Tenant's
Insurance"), at its sole cost and expense: (1) Commercial General Liability
Insurance applicable to the
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Premises and its appurtenances providing, on an occurrence basis, a minimum
combined single limit of $2,000,000.00; (2) All Risk Property/Business
Interruption Insurance, including flood and earthquake, written at replacement
cost value and with a replacement cost endorsement covering all of Tenant's
trade fixtures, equipment, furniture and other personal property within the
Premises ("Tenant's Property"); (3) Workers' Compensation Insurance as required
by the state in which the Premises is located and in amounts as may be required
by applicable statute; and (4) Employers Liability Coverage of at least
$1,000,000.00 per occurrence. Any company writing any of Tenant's Insurance
shall have an A.M. Best rating of not less than A-VIII. All Commercial General
Liability Insurance policies shall name Tenant as a named insured and Landlord
(or any successor), Equity Office Properties Trust, a Maryland real estate
investment trust, EOP Operating Limited Partnership, a Delaware limited
partnership, and their respective members, principals, beneficiaries, partners,
officers, directors, employees, agents, and other designees of Landlord
(including Metropolitan Life Insurance Company, as mortgagee), as the interest
of such designees shall appear, as additional insureds. All policies of Tenant's
Insurance shall contain endorsements that the insurer(s) shall give Landlord and
its designees at least 30 days' advance written notice of any change,
cancellation, termination or lapse of insurance. Tenant shall provide Landlord
with a certificate of insurance evidencing Tenant's Insurance prior to the
earlier to occur of the Commencement Date or the date Tenant is provided with
possession of the Premises for any reason, and upon renewals at least 15 days
prior to the expiration of the insurance coverage. So long as the same is
available at commercially reasonable rates, Landlord shall maintain so called
All Risk property insurance on the Building at replacement cost value, as
reasonably estimated by Landlord. Landlord also shall maintain Commercial
General Liability coverage written on an occurrence basis with a minimum
combined single limit of at least Two Million Dollars ($2,000,000.00). Except as
specifically provided to the contrary, the limits of either party's' insurance
shall not limit such party's liability under this Lease.
XVI. SUBROGATION.
Notwithstanding anything in this Lease to the contrary, Landlord and
Tenant hereby waive, and shall cause their respective insurance carriers to
waive, any and all rights of recovery, claim, action or causes of action against
the other and their respective trustees, principals, beneficiaries, partners,
officers, directors, agents, and employees, for any loss or damage that may
occur to Landlord or Tenant or any party claiming by, through or under Landlord
or Tenant, as the case may be, with respect to Tenant's Property, the Building,
the Premises, any additions or improvements to the Building or Premises, or any
contents thereof, including all rights of recovery, claims, actions or causes of
action arising out of the negligence of Landlord or any Landlord Related Parties
or the negligence of Tenant or any Tenant Related Parties, which loss or damage
is (or would have been, had the insurance required by this Lease been carried)
covered by insurance.
XVII. CASUALTY DAMAGE.
A. If all or any part of the Premises is damaged by fire or other
casualty, Tenant shall immediately notify Landlord in writing.
During any period of time that all or a material portion of
the Premises is rendered untenantable as a result of a fire or
other casualty to the Premises or Building, the Rent shall
abate for the portion of the Premises that is untenantable and
not used by Tenant. Landlord shall have the right to terminate
this Lease if: (1) the Building shall be damaged so that, in
Landlord's reasonable judgment, substantial alteration or
reconstruction of the Building shall be required (whether or
not the Premises has been damaged) and such damage cannot
reasonably be repaired within 60 days after the date of such
fire or other casualty; (2) Landlord is not permitted by Law
to rebuild the Building in substantially the same form as
existed before the fire or casualty; (3) the Premises have
been materially damaged and there is less than 18 months of
the Term remaining on the date of the casualty; (4) any
Mortgagee requires that the insurance proceeds be applied to
the payment of the mortgage debt; or (5) a material uninsured
loss to the Building occurs (other than due to Landlord's
failure to maintain the All Risk property insurance required
to be maintained by Landlord under Article XV of this Lease).
Landlord may exercise its right to terminate this Lease by
notifying Tenant in writing as soon as reasonably practicable,
but in any event within 90 days after the date of the
casualty. In addition to Landlord's rights to terminate as
provided herein, Tenant shall have the right to terminate this
Lease if: (a) all or a material portion of the Premises is
rendered untenantable as a result of a fire or other casualty
to the
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Premises or Building and such damage cannot reasonably be
repaired within 60 days after the date of such fire or other
casualty; (b) there is less than 18 months of the Term
remaining on the date of such casualty; and (c) Tenant
provides Landlord with written notice of its intent to
terminate within 20 days after the date Tenant receives
Landlord's Completion Estimate (as described in Section XVII.B
below). If neither Landlord nor Tenant terminate this Lease,
Landlord shall commence and proceed with reasonable diligence
to repair and restore the Building and the Leasehold
Improvements (excluding any Alterations that were performed by
Tenant in violation of this Lease). However, in no event shall
Landlord be required to spend more than the insurance proceeds
received by Landlord, provided that if Landlord does not have
sufficient proceeds to substantially complete the restoration
of the Leasehold Improvements in the Premises and Landlord
elects not to fund any shortfall, Landlord shall so notify
Tenant within 15 days of determination thereof, and Tenant,
within 20 days after receipt of such notice, shall have the
right to terminate this Lease by the giving of written notice
to Landlord. Landlord shall not be liable for any loss or
damage to Tenant's Property or to the business of Tenant
resulting in any way from the fire or other casualty or from
the repair and restoration of the damage. Landlord and Tenant
hereby waive the provisions of any Law relating to the matters
addressed in this Article, and agree that their respective
rights for damage to or destruction of the Premises shall be
those specifically provided in this Lease.
B. If all or any portion of the Premises shall be made
untenantable by fire or other casualty, Landlord shall, with
reasonable promptness, cause an architect or general
contractor selected by Landlord to provide Landlord and Tenant
with a written estimate of the amount of time required to
substantially complete the repair and restoration of the
Premises and make the Premises tenantable again, using
standard working methods ("Completion Estimate"). If the
Completion Estimate indicates that the Premises cannot be made
tenantable within 180 days from the date the repair and
restoration is started, then regardless of anything in Section
XVII.A above to the contrary, either party shall have the
right to terminate this Lease by giving written notice to the
other of such election within 20 days after receipt of the
Completion Estimate. Notwithstanding the foregoing, if Tenant
was entitled to but elected not to exercise its right to
terminate the Lease and Landlord does not substantially
complete the repair and restoration of the Premises within the
estimated period of time set forth in the Completion Estimate,
which period shall be extended to the extent of any
Reconstruction Delays, then Tenant may terminate this Lease by
written notice to Landlord within 15 days after the expiration
of such period, as the same may be extended. For purposes of
this Lease, the term "Reconstruction Delays" shall mean: (i)
any delays caused by the insurance adjustment process (it
being agreed that Landlord shall use reasonable efforts to
facilitate such process); (ii) any delays caused by Tenant;
and (iii) any delays caused by events of Force Majeure.
XVIII. CONDEMNATION.
Either party may terminate this Lease if the whole or any material part
of the Premises shall be taken or condemned for any public or quasi-public use
under Law, by eminent domain or private purchase in lieu thereof (a "Taking").
Landlord and Tenant shall also have the right to terminate this Lease if there
is a Taking of any portion of the Building or Property which would leave the
remainder of the Building unsuitable for use as an office building in a manner
comparable to the Building's use prior to the Taking. In order to exercise its
right to terminate the Lease, Landlord or Tenant, as the case may be, must
provide written notice of termination to the other within 45 days after the
terminating party first receives notice of the Taking. Any such termination
shall be effective as of the date the physical taking of the Premises or the
portion of the Building or Property occurs. If this Lease is not terminated, the
Rentable Square Footage of the Building, the Rentable Square Footage of the
Premises and Tenant's Pro Rata Share shall, if applicable, be appropriately
adjusted. In addition, Rent for any portion of the Premises taken or condemned
shall be abated during the unexpired Term of this Lease effective when the
physical taking of the portion of the Premises occurs. If a Taking results in
all or any portion of the Parking Area (described in Section I of EXHIBIT E)
being unavailable for use such that the parking spaces available for use by
Tenant is less than 6 parking spaces per 1000 rentable square feet in the
Premises, then Landlord will use reasonable efforts to provide Tenant with
alternative parking at other buildings owned by Landlord in the Perimeter Center
project on the west side of Perimeter Center Parkway so that
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the ratio of parking spaces available for use by Tenant in the Perimeter Center
project within such area is at least equal to the above ratio. All compensation
awarded for a Taking, or sale proceeds, shall be the property of Landlord, any
right to receive compensation or proceeds being expressly waived by Tenant.
However, Tenant may file a separate claim at its sole cost and expense for
Tenant's Property, the value of Tenant's leasehold interest, loss of business
and Tenant's reasonable relocation expenses, provided the filing of the claim
does not diminish the award which would otherwise be receivable by Landlord.
XIX. EVENTS OF DEFAULT.
Tenant shall be considered to be in default of this Lease upon the
occurrence of any of the following events of default:
A. Tenant's failure to pay when due all or any portion of the
Rent, if the failure continues for 5 days after written notice
to Tenant ("Monetary Default").
B. Tenant's failure (other than a Monetary Default) to comply
with any term, provision or covenant of this Lease, if the
failure is not cured within 20 days after written notice to
Tenant. However, if Tenant's failure to comply cannot
reasonably be cured within 20 days, Tenant shall be allowed
additional time (not to exceed 120 days) as is reasonably
necessary to cure the failure so long as: (1) Tenant commences
to cure the failure within 20 days, and (2) Tenant diligently
pursues a course of action that will cure the failure and
bring Tenant back into compliance with the Lease. However, if
Tenant's failure to comply creates a hazardous condition, the
failure must be cured immediately upon notice to Tenant. In
addition, if Landlord provides Tenant with notice of Tenant's
failure to comply with any particular term, provision or
covenant of the Lease (other than a monetary default) on 3
occasions during any 12 month period, Tenant's subsequent
violation of such term, provision or covenant shall, at
Landlord's option, be an incurable event of default by Tenant.
C. Tenant or any Guarantor becomes insolvent, makes a transfer in
fraud of creditors or makes an assignment for the benefit of
creditors, or admits in writing its inability to pay its debts
when due.
D. The leasehold estate is taken by process or operation of Law.
E In the case of any retail Tenant, Tenant does not take
possession of, or abandons or vacates all or any portion of
the Premises.
XX. REMEDIES.
A. Upon any default, Landlord shall have the right without notice
or demand (except as provided in Article XIX) to pursue any of
its rights and remedies at Law or in equity, including any one
or more of the following remedies:
1. Terminate this Lease, in which case Tenant shall
immediately surrender the Premises to Landlord. If
Tenant fails to surrender the Premises, Landlord may,
in compliance with applicable Law and without
prejudice to any other right or remedy, enter upon
and take possession of the Premises and expel and
remove Tenant, Tenant's Property and any party
occupying all or any part of the Premises. Tenant
shall pay Landlord on demand the amount of all past
due Rent and other losses and damages which Landlord
may suffer as a result of Tenant's default, whether
by Landlord's inability to relet the Premises on
satisfactory terms or otherwise, including, without
limitation, all Costs of Reletting (defined below)
and any deficiency that may arise from reletting or
the failure to relet the Premises. "Costs of
Reletting" shall include all costs and expenses
incurred by Landlord in reletting or attempting to
relet the Premises, including, without limitation,
reasonable legal fees, brokerage commissions, the
cost of alterations and the value of other
concessions or allowances granted to a new tenant.
Notwithstanding the foregoing, if Landlord relets the
Premises for a term (the "Relet Term") that extends
past the stated Termination Date hereof (without
consideration of any earlier termination pursuant to
this Article XX), the Proratable Costs of
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Reletting (hereinafter defined) shall be applied as
provided herein based on the percentage that the
length of the Term remaining hereunder on the date
Landlord terminates the Lease or Tenant's right to
possession bears to the length of the Relet Term. For
example, if there are 2 years left on the Term at the
time that Landlord terminates possession and, prior
to the expiration of such two year period, Landlord
enters into a Relet Term of 10 years with a new
tenant, 20% of the Proratable Costs of Reletting
shall be considered in determining Landlord's
damages. For purposes hereof, "Proratable Costs of
Reletting" shall mean the cost of renovating,
decorating and altering the Premises (except to the
extent that such work is necessary due to the acts of
Tenant and Tenant Related Parties), brokerage fees,
and other concessions granted to the new tenant such
as a moving allowance, lease assumption and rental
abatement.
2. Terminate Tenant's right to possession of the
Premises and, in compliance with applicable Law,
expel and remove Tenant, Tenant's Property and any
parties occupying all or any part of the Premises.
Landlord may (but shall not be obligated to except as
otherwise specifically provided below) relet all or
any part of the Premises, without notice to Tenant,
for a term that may be greater or less than the
balance of the Term and on such conditions (which may
include concessions, free rent and alterations of the
Premises) and for such uses as Landlord in its
absolute discretion shall determine. Landlord may
collect and receive all rents and other income from
the reletting. Tenant shall pay Landlord on demand
all past due Rent, all Costs of Reletting and any
deficiency arising from the reletting or failure to
relet the Premises. Landlord shall not be responsible
or liable for the failure to relet all or any part of
the Premises or for the failure to collect any Rent.
The re-entry or taking of possession of the Premises
shall not be construed as an election by Landlord to
terminate this Lease unless a written notice of
termination is given to Tenant. Landlord agrees to
use reasonable efforts to mitigate damages, provided
that such reasonable efforts shall not require
Landlord to relet the Premises in preference to any
other space in the Building or to relet the Premises
to any party that Landlord could reasonably reject as
a transferee pursuant to Section XII.A. hereof.
3. In lieu of calculating damages under Sections XX.A.1
or XX.A.2 above, Landlord may elect to receive as
damages the sum of (a) all Rent accrued through the
date of termination of this Lease or Tenant's right
to possession, and (b) an amount equal to the total
Rent that Tenant would have been required to pay for
the remainder of the Term discounted to present value
at the Prime Rate (defined in Section XX.B. below)
then in effect, minus the then present fair rental
value of the Premises for the remainder of the Term,
similarly discounted, after deducting all anticipated
Costs of Reletting.
B. Unless expressly provided otherwise in this Lease, the
repossession or re-entering of all or any part of the Premises
shall not relieve Tenant of its liabilities and obligations
under the Lease. No right or remedy of Landlord shall be
exclusive of any other right or remedy. Each right and remedy
shall be cumulative and in addition to any other right and
remedy now or subsequently available to Landlord at Law or in
equity. If Landlord declares Tenant to be in default, Landlord
shall be entitled to receive interest on any unpaid item of
Rent at a rate equal to the Prime Rate plus 4% per annum. For
purposes hereof, the "Prime Rate" shall be the per annum
interest rate publicly announced as its prime or base rate by
a federally insured bank selected by Landlord in the state in
which the Building is located. Forbearance by Landlord to
enforce one or more remedies shall not constitute a waiver of
any default.
XXI. LIMITATION OF LIABILITY.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS LEASE, THE
LIABILITY OF LANDLORD (AND OF ANY SUCCESSOR LANDLORD) TO TENANT SHALL BE LIMITED
TO THE INTEREST OF LANDLORD IN THE PROPERTY. TENANT
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SHALL LOOK SOLELY TO LANDLORD'S INTEREST IN THE PROPERTY FOR THE RECOVERY OF ANY
JUDGMENT OR AWARD AGAINST LANDLORD. NEITHER LANDLORD NOR ANY LANDLORD RELATED
PARTY SHALL BE PERSONALLY LIABLE FOR ANY JUDGMENT OR DEFICIENCY. BEFORE FILING
SUIT FOR AN ALLEGED DEFAULT BY LANDLORD, TENANT SHALL GIVE LANDLORD AND THE
MORTGAGEE(S) (DEFINED IN ARTICLE XXVI BELOW) WHOM TENANT HAS BEEN NOTIFIED HOLD
MORTGAGES (DEFINED IN ARTICLE XXVI BELOW) ON THE PROPERTY, BUILDING OR PREMISES,
NOTICE AND REASONABLE TIME TO CURE THE ALLEGED DEFAULT. SUCH CURE PERIOD SHALL
BE, FOR LANDLORD, AT LEAST 60 DAYS AFTER WRITTEN NOTICE OF DEFAULT FROM TENANT
TO LANDLORD (OR, IF THE DEFAULT CANNOT REASONABLY BE CURED WITHIN SAID 60 DAY
PERIOD, SUCH LONGER PERIOD OF TIME AS IS REASONABLY NECESSARY TO CURE SUCH
DEFAULT, PROVIDED LANDLORD COMMENCES THE CURE WITHIN SUCH 60 DAY PERIOD AND
DILIGENTLY PURSUES SAME), AND, FOR ANY MORTGAGEE, SUCH CURE PERIOD SHALL BE AT
LEAST 60 DAYS AFTER THE LATER OF (i) WRITTEN NOTICE OF DEFAULT FROM TENANT TO
SUCH MORTGAGEE, OR (ii) EXPIRATION OF THE CURE PERIOD AVAILABLE TO LANDLORD AS
PROVIDED ABOVE, (OR, IF THE DEFAULT CANNOT REASONABLY BE CURED WITHIN SAID 60
DAY PERIOD, SUCH LONGER PERIOD OF TIME AS IS REASONABLY NECESSARY TO CURE SUCH
DEFAULT, PROVIDED MORTGAGEE COMMENCES THE CURE WITHIN SUCH 60 DAY PERIOD AND
DILIGENTLY PURSUES SAME). NOTWITHSTANDING THE FOREGOING, IF TENANT AND ANY SUCH
MORTGAGEE HAVE AGREED TO A LONGER OR SHORTER PERIOD OF TIME IN ANY SEPARATE
AGREEMENT BY AND BETWEEN SUCH PARTIES, THE TERMS OF SUCH SEPARATE AGREEMENT
SHALL CONTROL AS BETWEEN TENANT AND SUCH MORTGAGEE.
XXII. NO WAIVER.
Either party's failure to declare a default immediately upon its
occurrence, or delay in taking action for a default shall not constitute a
waiver of the default, nor shall it constitute an estoppel. Either party's
failure to enforce its rights for a default shall not constitute a waiver of its
rights regarding any subsequent default. Receipt by Landlord of Tenant's keys to
the Premises shall not constitute an acceptance or surrender of the Premises.
XXIII. QUIET ENJOYMENT.
Tenant shall, and may peacefully have, hold and enjoy the Premises,
subject to the terms of this Lease, provided Tenant pays the Rent and fully
performs all of its covenants and agreements. This covenant and all other
covenants of Landlord shall be binding upon Landlord and its successors only
during its or their respective periods of ownership of the Building, and shall
not be a personal covenant of Landlord or the Landlord Related Parties.
XXIV. RELOCATION.
INTENTIONALLY OMITTED.
XXV. HOLDING OVER.
Except for any permitted occupancy by Tenant under Article VIII, if
Tenant fails to surrender the Premises at the expiration or earlier termination
of this Lease, occupancy of the Premises after the termination or expiration
shall be that of a tenancy at sufferance. Tenant's occupancy of the Premises
during the holdover shall be subject to all the terms and provisions of this
Lease. During the first 15 days of any such holdover, Tenant shall pay an amount
equal to 150% of the sum of the Base Rent and Additional Rent due for the period
immediately preceding the holdover, calculated and payable on a per day basis
for each day in such initial 15 day period that Tenant holds over in the
Premises. Thereafter, Tenant shall pay an amount (on a per month basis without
reduction for partial months during the holdover) equal to 150% of the greater
of: (1) the sum of the Base Rent and Additional Rent due for the period during
the Term immediately preceding the holdover without regard to any holdover
pursuant to the preceding sentence; or (2) the fair market gross rental for the
Premises as reasonably determined by Landlord. No holdover by Tenant or payment
by Tenant after the expiration or early termination of this Lease shall be
construed to extend the Term, to create a tenancy-at-will under applicable law,
or prevent Landlord from immediate recovery of possession of the Premises by
summary proceedings or otherwise. In addition to the payment of the amounts
provided above, if Landlord is unable to deliver possession of the Premises to a
new tenant, or
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to perform improvements for a new tenant, as a result of Tenant's holdover and
Tenant fails to vacate the Premises within 15 days after Landlord notifies
Tenant of Landlord's inability to deliver possession, or perform improvements,
Tenant shall be liable to Landlord for all damages, including, without
limitation, consequential damages, that Landlord suffers from the holdover.
Without limiting or affecting the foregoing provisions in this Article, Tenant
shall have the right to extend the Term for up to 2 months in accordance with
Section XIII of EXHIBIT E.
XXVI. SUBORDINATION TO MORTGAGES; ESTOPPEL CERTIFICATE.
A. Tenant accepts this Lease subject and subordinate to any
mortgage(s), deed(s) of trust, ground lease(s) or other
lien(s) now or subsequently arising upon the Premises, the
Building or the Property, and to renewals, modifications,
refinancings and extensions thereof (collectively referred to
as a "Mortgage"). The party having the benefit of a Mortgage
shall be referred to as a "Mortgagee". This clause shall be
self-operative, but is subject to subsection B and subsection
C below. In lieu of having the Mortgage be superior to this
Lease, a Mortgagee shall have the right at any time to
subordinate its Mortgage to this Lease. If requested by a
successor-in-interest to all or a part of Landlord's interest
in the Lease, Tenant shall, without charge, attorn to the
successor-in-interest.
B. Notwithstanding the foregoing, Landlord will use reasonable
efforts to obtain a non-disturbance, subordination and
attornment agreement from Landlord's then current Mortgagee on
such current Mortgagee's form of agreement attached hereto as
EXHIBIT H. "Reasonable efforts" of Landlord shall not require
Landlord to incur any cost, expense or liability to obtain
such agreement, it being agreed that Tenant shall be
responsible for any fee or review costs charged by the
Mortgagee. Upon request of Landlord, Tenant will execute the
Mortgagee's form of non-disturbance, subordination and
attornment agreement attached hereto as EXHIBIT H and return
the same to Landlord for execution by the Mortgagee.
Landlord's failure to obtain a non-disturbance, subordination
and attornment agreement for Tenant from Landlord's current
Mortgagee shall have no effect on the rights, obligations and
liabilities of Landlord and Tenant or be considered to be a
default by Landlord hereunder.
C. Notwithstanding Section XXVI.A. above, Landlord will use
reasonable efforts to obtain a non-disturbance, subordination
and attornment agreement in favor of Tenant from any future
Mortgagee on such Mortgagee's then current standard form of
agreement (which may contain substantially similar provisions
as those set forth in EXHIBIT H). Notwithstanding the
foregoing, Tenant shall have the right to attempt to negotiate
commercially reasonable changes to such future Mortgagee's
form of non-disturbance, subordination and attornment
agreement. Upon agreement between Tenant and such future
Mortgagee, Tenant will execute such non-disturbance,
subordination and attornment agreement and return the same to
the future Mortgagee for execution. If Tenant and any future
Mortgagee are unable to agree upon the terms and conditions of
the non-disturbance, subordination and attornment agreement,
Tenant, upon request of such future Mortgagee, agrees to enter
into a non-disturbance, subordination and attornment agreement
on the form attached hereto as EXHIBIT H. Landlord's failure
to obtain a non-disturbance, subordination and attornment
agreement for Tenant from any future Mortgagee shall have no
effect on the rights, obligations and liabilities of Landlord
and Tenant or be considered to be a default by Landlord
hereunder, provided that if such future Mortgagee is unwilling
to enter into a non-disturbance, subordination and attornment
agreement with Tenant (either on a negotiated form or the form
attached hereto as EXHIBIT H), this Lease shall not be
subordinated to the Mortgage held by the future Mortgagee. If,
however, Tenant is unwilling to enter into such
non-disturbance, subordination and attornment agreement on the
form attached hereto as EXHIBIT H, such refusal shall be
considered to be a default hereunder by Tenant and Landlord
shall have no further obligation to attempt to obtain a
non-disturbance, subordination and attornment from such future
Mortgagee.
D. Landlord and Tenant shall each, within 10 days after receipt
of a written request from the other, execute and deliver an
estoppel certificate to those parties as are
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reasonably requested by the other (including a Mortgagee or
prospective purchaser). The estoppel certificate shall include
a statement certifying that this Lease is unmodified (except
as identified in the estoppel certificate) and in full force
and effect, describing the dates to which Rent and other
charges have been paid, representing that, to such party's
actual knowledge, there is no default (or stating the nature
of the alleged default) and indicating other matters with
respect to the Lease that may reasonably be requested.
XXVII. ATTORNEYS' FEES.
If either party institutes a suit against the other for violation of or
to enforce any covenant or condition of this Lease, or if either party
intervenes in any suit in which the other is a party to enforce or protect its
interest or rights, the prevailing party shall be entitled to all of its costs
and expenses, including, without limitation, reasonable attorneys' fees.
XXVIII. NOTICE.
If a demand, request, approval, consent or notice (collectively
referred to as a "notice") shall or may be given to either party by the other,
the notice shall be in writing and delivered by hand or sent by registered or
certified mail with return receipt requested, or sent by overnight or same day
courier service at the party's respective Notice Address(es) set forth in
Article I, except that if Tenant has vacated the Premises (or if the Notice
Address for Tenant is other than the Premises, and Tenant has vacated such
address) without providing Landlord a new Notice Address, Landlord may serve
notice in any manner described in this Article or in any other manner permitted
by Law. Each notice shall be deemed to have been received or given on the
earlier to occur of actual delivery (which, in the case of hand delivery, may be
deemed "actually delivered" by posting same on the exterior door of the Premises
or Landlord's management office, as the case may be) or the date on which
delivery is refused, or, if Tenant has vacated the Premises or the other Notice
Address of Tenant without providing a new Notice Address, 3 days after notice is
deposited in the U.S. mail or with a courier service in the manner described
above. Without affecting the foregoing provisions in any manner, Landlord agrees
that, in addition to delivering any notice to Tenant in the manner permitted
hereunder, Landlord shall mail notices to Tenant that are posted on the door of
the Premises to the most recent address (outside of the Premises) that Landlord
has on file for Tenant. Either party may, at any time, change its Notice Address
by giving the other party written notice of the new address in the manner
described in this Article.
XXIX. EXCEPTED RIGHTS.
This Lease does not grant any rights to light or air over or about the
Building. Landlord excepts and reserves exclusively to itself the use of: (1)
roofs (subject to the terms of Section VI of EXHIBIT E), (2) telephone,
electrical and janitorial closets, (3) equipment rooms, Building risers or
similar areas (subject to the terms of Section VI of EXHIBIT E) that are used by
Landlord for the provision of Building services, (4) rights to the land and
improvements below the floor of the Premises, (5) the improvements and air
rights above the Premises, (6) the improvements and air rights outside the
demising walls of the Premises, and (7) the areas within the Premises used for
the installation of utility lines and other installations serving occupants of
the Building. Landlord has the right to change the Building's name; provided,
however, Landlord shall not change the Building's name to include the name of a
Tenant Competitor (as defined below) without the written consent of Tenant, so
long as: (i) Tenant is not in monetary or material non-monetary default under
this Lease beyond any applicable notice and cure period; and (ii) Tenant is
leasing and occupying at least 50% of the rentable square footage of the
Building. As used herein, a "Tenant Competitor" shall mean any entity whose
primary business is generally recognized in the marketplace to be credit card
transaction processing. Landlord has the right to change the Building's address,
provided that Landlord shall use reasonable efforts to provide Tenant with at
least 60 days prior notice with respect to a change in the Building's street
address that will prohibit Tenant from receiving mail at the current address and
in the event Landlord fails to provide Tenant with at least 60 days prior
notice, Landlord shall reimburse Tenant for the cost of replacing all business
stationery on hand (not to exceed a two month's supply) at the effective date of
such change of address. Landlord also has the right to make such other changes
to the Property and Building as Landlord deems appropriate, provided the changes
do not materially affect Tenant's ability to use the Premises for the Permitted
Use. Landlord shall also have the right (but not the obligation) to temporarily
close the Building if Landlord reasonably determines that there is an imminent
danger of significant damage to the Building or of personal injury to Landlord's
employees or
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the occupants of the Building. The circumstances under which Landlord may
temporarily close the Building shall include, without limitation, electrical
interruptions, hurricanes and civil disturbances. A closure of the Building
under such circumstances shall not constitute a constructive eviction nor
entitle Tenant to an abatement or reduction of Rent. In addition to the
foregoing, if Landlord closes the Building for 90 consecutive day(s) pursuant to
this Section (and such closure is not due to a casualty, in which case Article
XVII shall control with respect to such matter) and Landlord is not diligently
pursuing reopening the Building, Tenant, as its sole remedy, shall have the
right to elect to terminate this Lease within 10 days after the expiration of
said 90 day period without penalty, by delivering written notice to Landlord of
its election thereof; provided, however, if Landlord is diligently pursuing the
reopening of the Building, Tenant shall not be entitled to terminate the Lease
but rather Tenant's sole remedy shall be to abate Rent as provided above.
XXX. SURRENDER OF PREMISES.
At the expiration or earlier termination of this Lease or Tenant's
right of possession, Tenant shall remove Tenant's Property (defined in Article
XV) from the Premises, and quit and surrender the Premises to Landlord, broom
clean, and in good order, condition and repair, ordinary wear and tear excepted.
Tenant shall also be required to remove the Required Removables in accordance
with Article VIII. If Tenant fails to remove any of Tenant's Property within 2
Business Days after the termination of this Lease or of Tenant's right to
possession, Landlord, at Tenant's sole cost and expense, shall be entitled (but
not obligated) to remove and store Tenant's Property without liability to
Landlord. Landlord shall not be responsible for the value, preservation or
safekeeping of Tenant's Property. Tenant shall pay Landlord, upon demand, the
expenses and storage charges incurred for Tenant's Property. In addition, if
Tenant fails to remove Tenant's Property from the Premises or storage, as the
case may be, within 30 days after written notice, Landlord may deem all or any
part of Tenant's Property to be abandoned, and title to Tenant's Property shall
be deemed to be immediately vested in Landlord.
XXXI. MISCELLANEOUS.
A. This Lease and the rights and obligations of the parties shall
be interpreted, construed and enforced in accordance with the
Laws of the state in which the Building is located and
Landlord and Tenant hereby irrevocably consent to the
jurisdiction and proper venue of such state. If any term or
provision of this Lease shall to any extent be invalid or
unenforceable, the remainder of this Lease shall not be
affected, and each provision of this Lease shall be valid and
enforced to the fullest extent permitted by Law. The headings
and titles to the Articles and Sections of this Lease are for
convenience only and shall have no effect on the
interpretation of any part of the Lease.
B. Tenant shall not record this Lease or any memorandum without
Landlord's prior written consent.
C. Landlord and Tenant hereby waive any right to trial by jury in
any proceeding based upon a breach of this Lease.
D. Whenever a period of time is prescribed for the taking of an
action by Landlord or Tenant, the period of time for the
performance of such action shall be extended by the number of
days that the performance is actually delayed due to strikes,
acts of God, shortages of labor or materials, war, civil
disturbances and other causes beyond the reasonable control of
the performing party ("Force Majeure"). However, events of
Force Majeure shall not extend any period of time for the
payment of Rent or other sums payable by either party or any
period of time for the written exercise of an option or right
by either party.
E. Landlord shall have the right to transfer and assign, in whole
or in part, all of its rights and obligations under this Lease
and in the Building and/or Property referred to herein, and
upon such transfer Landlord shall be released from any further
obligations hereunder, and Tenant agrees to look solely to the
successor in interest of Landlord for the performance of such
obligations. However, notwithstanding the foregoing, Landlord
shall not be released from any obligations which arose prior
to the date of such transfer unless Landlord's successor in
interest shall have assumed such obligations of Landlord under
this
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Lease either by contractual obligation, assumption agreement
or by operation of law.
F. Tenant represents that it has dealt directly with and only
with the Broker as a broker in connection with this Lease.
Tenant shall indemnify and hold Landlord and the Landlord
Related Parties harmless from all claims of any other brokers,
agents or finders claiming to have represented Tenant in
connection with this Lease. Landlord agrees to indemnify and
hold Tenant and the Tenant Related Parties harmless from all
claims of any brokers, agents or finders claiming to have
represented Landlord in connection with this Lease. Landlord
agrees to pay a brokerage commission to Broker in accordance
with the terms of a separate written commission agreement to
be entered into by and between Landlord and Broker (the
"Commission Agreement"), provided that in no event shall
Landlord be obligated to pay a commission to Broker in
connection with any extension of the Term or in connection
with any additional space that is leased by Tenant pursuant to
the terms of this Lease except as may specifically be provided
otherwise in the Commission Agreement.
G. Tenant covenants, warrants and represents that: (1) each
individual executing, attesting and/or delivering this Lease
on behalf of Tenant is authorized to do so on behalf of
Tenant; (2) this Lease is binding upon Tenant; and (3) Tenant
is duly organized and legally existing in the state of its
organization and is qualified to do business in the state in
which the Premises are located. If there is more than one
Tenant, or if Tenant is comprised of more than one party or
entity, the obligations imposed upon Tenant shall be joint and
several obligations of all the parties and entities. Notices,
payments and agreements given or made by, with or to any one
person or entity shall be deemed to have been given or made
by, with and to all of them.
H. Time is of the essence with respect to payment of Rent and
Tenant's exercise of any expansion, renewal or extension
rights, or other option granted to Tenant. This Lease shall
create only the relationship of landlord and tenant between
the parties, and not a partnership, joint venture or any other
relationship. This Lease and the covenants and conditions in
this Lease shall inure only to the benefit of and be binding
only upon Landlord and Tenant and their permitted successors
and assigns.
I. The expiration of the Term, whether by lapse of time or
otherwise, shall not relieve either party of any obligations
which accrued prior to or which may continue to accrue after
the expiration or early termination of this Lease. Without
limiting the scope of the prior sentence, it is agreed that
Tenant's and Landlord's obligations under Sections IV.A,
IV.B., VIII, XIV, XX, XXV and XXX shall survive the expiration
or early termination of this Lease.
J. Landlord has delivered a copy of this Lease to Tenant for
Tenant's review only, and the delivery of it does not
constitute an offer to Tenant or an option. This Lease shall
not be effective against any party hereto until an original
copy of this Lease has been signed by such party and any
Mortgagee (defined in Article XXVI), if any, has approved the
terms of this Lease if required pursuant to the terms of the
mortgage loan documents relating to the Mortgage (defined in
Article XXVI) of such Mortgagee.
K. All understandings and agreements previously made between the
parties are superseded by this Lease, and neither party is
relying upon any warranty, statement or representation not
contained in this Lease. This Lease may be modified only by a
written agreement signed by Landlord and Tenant.
L. Tenant, within 15 days after request (but no more frequently
than twice annually), shall provide Landlord with a current
financial statement and such other information as Landlord may
reasonably request in order to create a "business profile" of
Tenant and determine Tenant's ability to fulfill its
obligations under this Lease. Landlord, however, shall not
require Tenant to provide such information unless Landlord is
requested to produce the information in connection with a
proposed financing or sale of the Building. Upon written
request by Tenant, Landlord shall enter into a commercially
reasonable
26
<PAGE> 29
confidentiality agreement covering any confidential
information that is disclosed by Tenant.
M. Tenant has only a usufruct, not subject to purchase or sale,
which may not be assigned by Tenant except as expressly
provided in this Lease.
XXXII. ENTIRE AGREEMENT.
This Lease and the following exhibits and attachments constitute the
entire agreement between the parties and supersede all prior agreements and
understandings related to the Premises, including all lease proposals, letters
of intent and other documents:
EXHIBIT A-1 Outline and Location of Premises A
EXHIBIT A-2 Outline and Location of Premises B
EXHIBIT A-3 Legal Description of Land on which Building is located
EXHIBIT A-4 Site Plan Showing Site of Future Building
EXHIBIT A-5 Outline and Location of Storage Space
EXHIBIT A-6 Outline and Location of Option Storage Space
EXHIBIT B Rules and Regulations
EXHIBIT C Commencement Letter (Intentionally Omitted)
EXHIBIT D Work Letter Agreement
EXHIBIT E Additional Provisions
EXHIBIT F HVAC Specifications
EXHIBIT G Cleaning Specifications
EXHIBIT H Subordination, Non-Disturbance and Attornment Agreement
EXHIBIT I Guaranty
Landlord and Tenant have executed this Lease as of the day and year
first above written.
LANDLORD:
EOP-PERIMETER CENTER, L.L.C., A DELAWARE LIMITED
LIABILITY COMPANY
By: EOP Operating Limited Partnership,
a Delaware limited partnership, its
sole member
By: Equity Office Properties Trust,
a Maryland real estate
investment trust, its managing
general partner
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
TENANT:
NOVA GEORGIA SERVICES, L.P., A GEORGIA LIMITED
PARTNERSHIP
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
27
<PAGE> 30
EXHIBIT A-1
OUTLINE AND LOCATION OF PREMISES A
This Exhibit is attached to and made a part of the Lease dated as of
_____________, 1999, by and between EOP-PERIMETER CENTER, L.L.C. ("Landlord")
and NOVA GEORGIA SERVICES, L.P. ("Tenant") for space in the Building located at
219 Perimeter Center Parkway, Atlanta, Georgia 30346.
PREMISES A - 46,318 RENTABLE SQUARE FEET
SUITES 200 AND 300
A-1
<PAGE> 31
EXHIBIT A-2
OUTLINE AND LOCATION OF PREMISES B
This Exhibit is attached to and made a part of the Lease dated as of
_____________, 1999, by and between EOP-PERIMETER CENTER, L.L.C. ("Landlord")
and NOVA GEORGIA SERVICES, L.P. ("Tenant") for space in the Building located at
219 Perimeter Center Parkway, Atlanta, Georgia 30346.
PREMISES B - 44,468 RENTABLE SQUARE FEET
SUITES 110, 111, 400, 410 AND 500
A-2
<PAGE> 32
EXHIBIT A-3
LEGAL DESCRIPTION OF THE LAND ON WHICH THE BUILDING IS LOCATED
This Exhibit is attached to and made a part of the Lease dated as of
_____________, 1999, by and between EOP-PERIMETER CENTER, L.L.C. ("Landlord")
and NOVA GEORGIA SERVICES, L.P. ("Tenant") for space in the Building located at
219 Perimeter Center Parkway, Atlanta, Georgia 30346.
ALL THAT TRACT or parcel of land lying and being in Land Lot 348 of the 18th
District of DeKalb County, State of Georgia, being more particularly described
as follows:
A-3
<PAGE> 33
EXHIBIT A-4
SITE PLAN SHOWING SITE OF POTENTIAL FUTURE BUILDING
This Exhibit is attached to and made a part of the Lease dated as of
_____________, 1999, by and between EOP-PERIMETER CENTER, L.L.C. ("Landlord")
and NOVA GEORGIA SERVICES, L.P. ("Tenant") for space in the Building located at
219 Perimeter Center Parkway, Atlanta, Georgia 30346.
A-4
<PAGE> 34
EXHIBIT A-5
OUTLINE AND LOCATION OF STORAGE SPACE
This Exhibit is attached to and made a part of the Lease dated as of
_____________, 1999, by and between EOP-PERIMETER CENTER, L.L.C. ("Landlord")
and NOVA GEORGIA SERVICES, L.P. ("Tenant") for space in the Building located at
219 Perimeter Center Parkway, Atlanta, Georgia 30346.
A-5
<PAGE> 35
EXHIBIT A-6
OUTLINE AND LOCATION OF OPTION STORAGE SPACE
This Exhibit is attached to and made a part of the Lease dated as of
_____________, 1999, by and between EOP-PERIMETER CENTER, L.L.C. ("Landlord")
and NOVA GEORGIA SERVICES, L.P. ("Tenant") for space in the Building located at
219 Perimeter Center Parkway, Atlanta, Georgia 30346.
A-6
<PAGE> 36
EXHIBIT B
BUILDING RULES AND REGULATIONS
The following rules and regulations shall apply, where applicable, to
the Premises, the Building, the parking garage (if any), the Property and the
appurtenances. Capitalized terms have the same meaning as defined in the Lease.
1. Sidewalks, doorways, vestibules, halls, stairways and other similar
areas shall not be obstructed by Tenant or used by Tenant for any
purpose other than ingress and egress to and from the Premises. No
rubbish, litter, trash, or material shall be placed, emptied, or thrown
in those areas. At no time shall Tenant permit Tenant's employees to
loiter in Common Areas or elsewhere about the Building or Property.
2. Plumbing fixtures and appliances shall be used only for the purposes
for which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed in the fixtures or appliances.
Damage resulting to fixtures or appliances by Tenant, its agents,
employees or invitees, shall be paid for by Tenant, and Landlord shall
not be responsible for the damage.
3. No signs, advertisements or notices shall be painted or affixed to
windows, doors or other parts of the Building, except those of such
color, size, style and in such places as are first approved in writing
by Landlord. All tenant identification and suite numbers at the
entrance to the Premises shall be installed by Landlord, at Tenant's
cost and expense, using the standard graphics for the Building. Except
in connection with the hanging of lightweight pictures and wall
decorations, no nails, hooks or screws shall be inserted into any part
of the Premises or Building except by the Building maintenance
personnel.
4. Landlord may provide and maintain in the first floor (main lobby) of
the Building an alphabetical directory board or other directory device
listing tenants, and no other directory shall be permitted unless
previously consented to by Landlord in writing. Landlord agrees that,
if a directory is not installed prior to the Commencement Date, then
Landlord will install a directory board or other directory device in
the main lobby of the Building as soon as reasonably possible following
the Commencement Date.
5. Subject to Section XI.B. of the Lease, Tenant shall not place any
lock(s) on any door in the Premises or Building without Landlord's
prior written consent and Landlord shall have the right to retain at
all times and to use keys to all locks within and into the Premises. A
reasonable number of keys to the locks installed by Landlord on the
entry doors in the Premises shall be furnished by Landlord to Tenant at
Tenant's cost, and Tenant shall not make any duplicate keys. All keys
shall be returned to Landlord at the expiration or early termination of
this Lease. As of the date of this Lease, Landlord provides 2 keys per
lock. Notwithstanding the foregoing, if Tenant performs the
improvements in the Premises, Tenant shall furnish Landlord with a key
for each lock to the entry doors in the Premises.
6. All contractors, contractor's representatives and installation
technicians performing work in the Building shall be subject to
Landlord's prior approval and shall be required to comply with
Landlord's standard rules, regulations, policies and procedures, which
may be revised from time to time.
7. Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by Tenant of merchandise or materials requiring the
use of elevators, stairways, lobby areas or loading dock areas, shall
be restricted to hours designated by Landlord. Tenant shall obtain
Landlord's prior approval by providing a detailed listing of the
activity. The activity shall be under the supervision of Landlord and
performed in the manner required by Landlord. Tenant shall assume all
risk for damage to articles moved and injury to any persons resulting
from the activity. If equipment, property, or personnel of Landlord or
of any other party is damaged or injured as a result of or in
connection with the activity, Tenant shall be solely liable for any
resulting damage or loss.
8. Landlord shall have the right to approve the weight, size, or location
of heavy equipment or articles in and about the Premises. Damage to the
Building by the installation,
B-1
<PAGE> 37
maintenance, operation, existence or removal of property of Tenant
shall be repaired at Tenant's sole expense.
9. Corridor doors, when not in use, shall be kept closed.
10. Tenant shall not: (1) make or permit any improper, objectionable or
unpleasant noises or odors in the Building, or otherwise interfere in
any way with other tenants or persons having business with them; (2)
solicit business or distribute, or cause to be distributed, in any
portion of the Building, handbills, promotional materials or other
advertising; or (3) conduct or permit other activities in the Building
that might, in Landlord's sole and reasonable opinion, constitute a
nuisance.
11. No animals, except those assisting handicapped persons, shall be
brought into the Building or kept in or about the Premises.
12. No inflammable, explosive or dangerous fluids or substances shall be
used or kept by Tenant in the Premises, Building or about the Property,
except for those substances as are typically found in similar premises
used for general business office purposes and are being used by Tenant
in accordance with all applicable laws, rules and regulations. Tenant
shall not, without Landlord's prior written consent, use, store,
install, spill, remove, release or dispose of, within or about the
Premises or any other portion of the Property, any asbestos-containing
materials or any solid, liquid or gaseous material now or subsequently
considered toxic or hazardous under the provisions of 42 U.S.C. Section
9601 et seq. or any other applicable environmental Law which may now or
later be in effect. Tenant shall comply with all Laws pertaining to and
governing the use of these materials by Tenant, and shall remain solely
liable for the costs of abatement and removal.
13. Tenant shall not use or occupy the Premises in any manner or for any
purpose which might injure the reputation or impair the present or
future value of the Premises or the Building. Tenant shall not use, or
permit any part of the Premises to be used, for lodging, sleeping or
for any illegal purpose.
14. Tenant shall not take any action which would violate Landlord's labor
contracts or which would cause a work stoppage, picketing, labor
disruption or dispute, or interfere with Landlord's or any other
tenant's or occupant's business or with the rights and privileges of
any person lawfully in the Building ("Labor Disruption"). Tenant shall
take the actions necessary to resolve the Labor Disruption, and shall
have pickets removed and, at the request of Landlord, immediately
terminate any work in the Premises that gave rise to the Labor
Disruption, until Landlord gives its written consent for the work to
resume. Tenant shall have no claim for damages against Landlord or any
of the Landlord Related Parties, nor shall the date of the commencement
of the Term be extended as a result of the above actions.
15. Tenant shall not install, operate or maintain in the Premises or in any
other area of the Building, electrical equipment that would overload
the electrical system beyond its capacity for proper, efficient and
safe operation as determined solely by Landlord. Tenant shall not
furnish cooling or heating to the Premises, including, without
limitation, the use of electronic or gas space heating devices, without
Landlord's prior written consent. Tenant shall not use more than its
proportionate share of telephone lines and other telecommunication
facilities available to service the Building.
16. Tenant shall not operate or permit to be operated a coin or token
operated vending machine or similar device (including, without
limitation, telephones, lockers, toilets, scales, amusement devices and
machines for sale of beverages, foods, candy, cigarettes and other
goods), except for machines for the exclusive use of Tenant's
employees, and then only if the operation does not violate the lease of
any other tenant in the Building.
17. Bicycles and other vehicles are not permitted inside the Building or on
the walkways outside the Building, except in areas designated by
Landlord.
18. Landlord may from time to time adopt systems and procedures for the
security and safety of the Building, its occupants, entry, use and
contents. Tenant, its agents,
B-2
<PAGE> 38
employees, contractors, guests and invitees shall comply with
Landlord's reasonable systems and procedures.
19. Landlord shall have the right to prohibit the use of the name of the
Building or any other publicity by Tenant that in Landlord's sole
reasonable opinion may impair the reputation of the Building or its
desirability. Upon written notice from Landlord, Tenant shall refrain
from and discontinue such publicity immediately.
20. Tenant shall not canvass, solicit or peddle in or about the Building or
the Property.
21. Neither Tenant nor its agents, employees, contractors, guests or
invitees shall smoke or permit smoking in the Common Areas, unless the
Common Areas have been declared a designated smoking area by Landlord,
nor shall the above parties allow smoke from the Premises to emanate
into the Common Areas or any other part of the Building. Landlord shall
have the right to designate the Building (including the Premises) as a
non-smoking building.
22. Landlord shall have the right to designate and approve standard window
coverings for the Premises and to establish rules to assure that the
Building presents a uniform exterior appearance. Tenant shall ensure,
to the extent reasonably practicable, that window coverings are closed
on windows in the Premises while they are exposed to the direct rays of
the sun.
23. Deliveries to and from the Premises shall be made only at the times, in
the areas and through the entrances and exits reasonably designated by
Landlord. Tenant shall not make deliveries to or from the Premises in a
manner that might interfere with the use by any other tenant of its
premises or of the Common Areas, any pedestrian use, or any use which
is inconsistent with good business practice.
24. The work of cleaning personnel shall not be hindered by Tenant after
5:30 P.M., and cleaning work may be done at any time when the offices
are vacant. Windows, doors and fixtures may be cleaned at any time.
Tenant shall provide adequate waste and rubbish receptacles to prevent
unreasonable hardship to the cleaning service.
B-3
<PAGE> 39
EXHIBIT C
COMMENCEMENT LETTER
INTENTIONALLY OMITTED
C-1
<PAGE> 40
EXHIBIT D
WORK LETTER
This Exhibit is attached to and made a part of the Lease dated as of
_____________, 1999, by and between EOP-PERIMETER CENTER, L.L.C. ("Landlord")
and NOVA GEORGIA SERVICES, L.P. ("Tenant") for space in the Building located at
219 Perimeter Center Parkway, Atlanta, Georgia 30346.
A. Tenant, following the delivery of the Premises by Landlord and
the full and final execution and delivery of this Lease and
the Guaranty required hereunder, shall have the right to
perform alterations and improvements in the Premises (the
"Initial Alterations"). Notwithstanding the foregoing, Tenant
and its contractors shall not have the right to perform
Initial Alterations in the Premises unless and until Tenant
has complied with all of the terms and conditions of Article
IX.C. of this Lease, including, without limitation, approval
by Landlord of the final plans and the contractors to be
retained by Tenant to perform such Initial Alterations.
Landlord's review of the plans shall be as soon as reasonably
possible after receiving same from Tenant, but in any event
Landlord shall approve or disapprove the plans within 5
Business Days after the date Landlord receives the plans from
Tenant or the plans shall be deemed to have been approved by
Landlord for the Initial Alterations. Tenant shall be
responsible for all elements of the design of Tenant's plans
(including, without limitation, compliance with law,
functionality of design, the structural integrity of the
design, the configuration of the premises and the placement of
Tenant's furniture, appliances and equipment), and Landlord's
approval of Tenant's plans shall in no event relieve Tenant of
the responsibility for such design. Landlord hereby approves
INTEGRA CONSTRUCTION, INC. as the general contractor to
perform the Initial Alterations. Landlord's approval of any
other contractors to perform the Initial Alterations shall not
be unreasonably withheld.
As part of Tenant's Initial Alterations, Tenant, at its cost,
shall be required to test and balance the HVAC system(s)
serving the Premises using Landlord's recommended contractor
for such purpose. Tenant shall promptly provide Landlord with
a copy of the report generated by such contractor regarding
such matter and Tenant, at its cost, shall promptly and
properly rectify all problems noted in such report resulting
from Tenant's improvement or other construction work in the
Premises and otherwise comply with the actions recommended in
such report resulting from Tenant's improvement or other
construction work in the Premises.
B. Landlord agrees to contribute the sum of $1,906,506.00 (i.e.
$21.00 per rentable square foot in the initial Premises) (the
"Allowance") toward the cost of performing the Initial
Alterations in preparation of Tenant's occupancy of the
Premises. The Allowance shall be paid in at least 2
installments, and each such payment shall be subject to the
terms of Section D below. The first installment, equal to
51.5% of the total Allowance (the "Premises A Allowance"),
shall be paid upon the later of the Commencement Date or 30
days after the date Tenant provides Landlord with all
documentation described in Section D below as it relates to
the Initial Alterations to be performed in Premises A. The
second installment, equal to 48.5% of the total Allowance (the
"Premises B Allowance"), shall be paid upon the later of (1)
the earlier of (a) Premises B Commencement Date or (b) the
date Tenant commences paying Base Rent for the entire Premises
B, and (2) 30 days after the date Tenant provides Landlord
with all documentation described in Section D below as it
relates to the Initial Alterations to be performed in Premises
B.
Notwithstanding the foregoing, if Tenant completes the Initial
Alterations in one or more of the different suites comprising
Premises B, as currently demised, then Landlord shall provide
Tenant a proportionate share of the Premises B Allowance
(based upon the rentable square footage in such suite
comprising Premises B) upon the later of (x) the date Tenant
commences paying Base Rent for such suite comprising Premises
B, and (y) 30 days after the date Tenant provides Landlord
with all documentation described in Section D below as it
relates to the Initial Alterations to be performed in such
suite comprising Premises B.
D-1
<PAGE> 41
C. The Allowance may be used for the cost of preparing design and
construction documents and mechanical and electrical plans for
the Initial Alterations and for hard costs in connection with
the Initial Alterations and for any other lawful purpose
whatsoever designated by Tenant at its discretion, including,
without limitation, cabling costs, purchase of furniture or
equipment for the Premises, or the satisfaction of any other
lease obligations of Tenant unrelated to this Lease. If Tenant
does not use the entire Allowance within 12 months after the
Premises B Commencement Date, any unused amount shall accrue
to the sole benefit of Landlord, it being understood that
Tenant shall not be entitled to any credit, abatement or other
concession in connection therewith. Tenant shall be
responsible for all applicable state sales or use taxes, if
any, payable in connection with the Initial Alterations and/or
Allowance.
D. Subject to the terms of Section B above, until such time as
the Initial Alterations have been completed and fully paid for
with respect to Premises A or Premises B, as appropriate, the
Allowance shall be paid to Tenant or, at Landlord's option, to
the order of the general contractor that performed the Initial
Alterations, within 30 days following receipt by Landlord of
(1) receipted bills covering all labor and materials expended
and used in the Initial Alterations; (2) a sworn contractor's
affidavit from the general contractor and a request to
disburse from Tenant containing an approval by Tenant of the
work done; (3) full and final waivers of lien; (4) as-built
plans of the Initial Alterations; and (5) the certification of
Tenant and its architect that the Initial Alterations have
been installed in a good and workmanlike manner in accordance
with the approved plans, and in accordance with applicable
laws, codes and ordinances. The Allowance shall be disbursed
in the amount reflected in Section B hereof. Following the
date the Initial Alterations have been completed and fully
paid for with respect to Premises A or Premises B, as the case
may be, as evidenced by the documentation described above, any
remaining portion of the Premises A Allowance or the Premises
B Allowance, as the case may be, shall be paid directly to
Tenant. Notwithstanding anything herein to the contrary,
Landlord shall not be obligated to disburse any portion of the
Allowance during the continuance of an uncured default under
the Lease, and Landlord's obligation to disburse shall only
resume when and if such default is cured.
E. Subject to Landlord's completion of the Landlord Lobby Work
(as described in Section F below),Tenant agrees to accept the
Premises in its "as-is" condition and configuration, it being
agreed that Landlord shall not be required to perform any work
or, except as provided above with respect to the Allowance,
incur any costs in connection with the construction or
demolition of any improvements in the Premises.
F. Landlord agrees, at its cost, to improve the ceilings in the
elevator lobby areas on the 2nd and 3rd floors of the Building
substantially similar to the ceilings, as previously improved
by Landlord, in the elevator lobby areas on the 4th and 5th
floors of the Building (the "Landlord Lobby Work"). Landlord
shall use reasonable efforts to complete such work on or
before the Commencement Date of this Lease and, if such work
is not completed as of such date, Landlord shall diligently
pursue completion of such work so that it is completed as soon
as possible thereafter with as minimal interruption to
Tenant's business as possible. Landlord and Tenant agree to
work cooperatively with one another in order to enable
Landlord to timely satisfy its obligations under this Section
F.
G. Tenant agrees, as part of the Initial Alterations, to improve
the elevator lobby areas and connecting corridors on the 2nd
and 3rd floors of the Building in a manner similar to, and to
a standard no less than, that reflected in the elevator
lobbies and connecting corridors on the 4th and 5th floors of
the Building, as currently improved. Any finishes to be
included in such areas of the 2nd and 3rd floors shall be
reflected on the plans for the Initial Alterations, and shall
be subject to Landlord's reasonable approval. In connection
with such work, Tenant shall receive an additional allowance
equal to $15,366.00 (the "Lobby Allowance"), which shall be
payable to Tenant within 30 days after Landlord's receipt of
the documentation described in Section D above in connection
with such work.
H. If the cost of the Initial Alterations exceeds the sum of the
Allowance and Lobby Allowance (such excess is referred to
herein as the "Excess Costs"), and
D-2
<PAGE> 42
provided Tenant is not in default under this Lease, Tenant
shall have the right to borrow up to $10.00 per rentable
square foot of the initial Premises) (the "Additional
Allowance") from Landlord in order to finance the Excess Costs
during the Term. Any Additional Allowance borrowed by Tenant
hereunder shall be repaid to Landlord as Additional Rent in
equal monthly installments throughout the initial Term at an
interest rate equal to 12% per annum. If Tenant is in default
under this Lease after the expiration of applicable cure
periods, the entire unpaid balance of the Additional Allowance
borrowed by Tenant shall become immediately due and payable
and, except to the extent required by applicable law, shall
not be subject to mitigation or reduction in connection with a
reletting of the Premises by Landlord.
I. This EXHIBIT D shall not be deemed applicable to any
additional space added to the original Premises at any time or
from time to time, whether by any options under the Lease or
otherwise, or to any portion of the original Premises or any
additions to the Premises in the event of a renewal or
extension of the original Term of this Lease, whether by any
options under the Lease or otherwise, unless expressly so
provided in the Lease or any amendment or supplement to the
Lease.
Landlord and Tenant have executed this exhibit as of the day and year
first above written.
LANDLORD:
EOP-PERIMETER CENTER, L.L.C., A DELAWARE LIMITED
LIABILITY COMPANY
By: EOP Operating Limited Partnership, a Delaware
limited partnership, its sole member
By: Equity Office Properties Trust, a Maryland
real estate investment trust, its managing
general partner
By: /s/ Mark Scully
---------------------------------
Name: Mark Scully
---------------------------------
Title: SVP - Southeast
---------------------------------
TENANT:
NOVA GEORGIA SERVICES, L.P., A GEORGIA LIMITED
PARTNERSHIP
By: /s/ David McMiller
--------------------------------------
Name: David McMiller
--------------------------------------
Title: SVP Human Resources
--------------------------------------
D-3
<PAGE> 43
EXHIBIT E
ADDITIONAL PROVISIONS
This Exhibit is attached to and made a part of the Lease dated as of
_____________, 1999, by and between EOP-PERIMETER CENTER, L.L.C. ("Landlord")
and NOVA GEORGIA SERVICES, L.P. ("Tenant") for space in the Building located at
219 Perimeter Center Parkway, Atlanta, Georgia 30346.
I. PARKING.
A. During the Term, Landlord shall make available up to 545
unreserved parking spaces (the "Spaces") in the Building
surface parking lot ("Parking Area") for the use of Tenant
and its employees. Up to 280 of such Spaces shall be
available as of the Premises A Commencement Date, and the
remaining Spaces shall be available as of the Premises B
Commencement Date or, if Tenant occupies and commences paying
Base Rent with respect to any portion of Premises B, then a
portion of the remaining Spaces (proportionate to the
rentable square footage in such portion of Premises B that
Tenant is occupying) shall be made available to Tenant as of
such date. No deductions or allowances shall be made for days
when Tenant or any of its employees does not utilize the
parking facilities or for Tenant utilizing less than all of
the Spaces. Tenant shall not have the right to lease or
otherwise use more than the number of reserved and unreserved
Spaces set forth above.
B. During the initial Term, the Spaces shall be available to
Tenant free of charge.
C. Except for particular spaces and areas designated by Landlord
for handicap, visitor or reserved parking, all parking in the
Parking Area serving the Building shall be on an unreserved,
first-come, first-served basis.
D. Landlord shall not be responsible for money, jewelry,
automobiles or other personal property lost in or stolen from
the Parking Area regardless of whether such loss or theft
occurs when the Parking Area is locked or otherwise secured.
Except as caused by the negligence or willful misconduct of
Landlord and without limiting the terms of the preceding
sentence, Landlord shall not be liable for any loss, injury
or damage to persons using the Parking Area or automobiles or
other property therein, it being agreed that, to the fullest
extent permitted by law, the use of the Spaces shall be at
the sole risk of Tenant and its employees.
E. Subject to Section K below, Landlord shall have the right
from time to time to designate the location of reserved
spaces, if any, to promulgate reasonable rules and
regulations regarding the Parking Area, the Spaces and the
use thereof, including, but not limited to, rules and
regulations controlling the flow of traffic to and from
various parking areas, the angle and direction of parking and
the like. Tenant shall comply with and cause its employees to
comply with all such rules and regulations as well as all
reasonable additions and amendments thereto.
F. Tenant shall not store or permit its employees to store any
automobiles in the Parking Area without the prior written
consent of Landlord. Except for emergency repairs, Tenant and
its employees shall not perform any work on any automobiles
while located in the Garage or on the Property. If it is
necessary for Tenant or its employees to leave an automobile
in the Parking Area overnight, Tenant shall provide Landlord
with prior notice thereof designating the license plate
number and model of such automobile.
G. Landlord shall have the right to temporarily close the
Parking Area or certain areas therein in order to perform
necessary repairs, maintenance and improvements to the
Parking Area, if any.
H. Tenant shall not assign or sublease any of the Spaces without
the consent of Landlord. Landlord shall have the right to
terminate this Parking Agreement with respect to any Spaces
that Tenant attempts to sublet or assign.
E-1
<PAGE> 44
I. Landlord may elect to provide parking cards or keys to
control access to the Parking Area. In such event, Landlord
shall provide Tenant with one card or key for each Space that
Tenant is leasing hereunder, provided that Landlord shall
have the right to require Tenant or its employees to place a
deposit on such access cards or keys and to pay a fee for any
lost or damaged cards or keys.
J. Landlord hereby reserves the right to enter into a management
agreement or lease with an entity for the Parking Area
("Parking Operator"). In such event, Tenant, upon request of
Landlord, shall enter into a parking agreement with the
Parking Operator (but shall not be required to pay the
Parking Operator any charge or fee therefor), if any,
established hereunder, and Landlord shall have no liability
for claims arising through acts or omissions of the Parking
Operator unless caused by Landlord's negligence or willful
misconduct. It is understood and agreed that the identity of
the Parking Operator may change from time to time during the
Term. Tenant hereby consents to the assignment, from time to
time, of the initial or any successor Parking Operator's
interest in the Parking to another Parking Operator.
K. Tenant is concerned that Landlord may designate all or a
significant number of the parking spaces located in the first
rows of parking on the east and west sides of the Building as
reserved parking for use by a tenant of the Building other
than Tenant. Therefore, notwithstanding anything to the
contrary contained herein, Landlord agrees that, so long as
Tenant leases and occupies at least 50% of the rentable
square footage in the Building, Landlord will always retain a
proportionate share (i.e. equal to Tenant's Pro Rata Share,
as described in Section I.E. of this Lease) of such parking
spaces in the first row of parking on the east and west sides
of the Building as non-reserved or, if reserved, such spaces
will be reserved for the benefit of Tenant or its permitted
successors or assigns. It is agreed that parking spaces
reserved for use by Landlord and its staff (up to 4 parking
spaces) or designated as handicap or visitor parking shall
not be considered "reserved" for purposes of this Section K.
II. PARKING DECK STRUCTURE. Tenant shall have the right to build a parking
deck for the use of Tenant, its employees, contractors, visitors and
invitees at any time during the Term. It is agreed that the
construction of the parking deck will be completed at Tenant's sole
cost and expense. The location, plans and specifications of the
parking deck shall comply with all laws, statutes, ordinances, rules
and regulations of any governmental authority having jurisdiction and
shall be subject to Landlord's and governmental approval. Tenant, at
its cost, shall be responsible for all taxes, maintenance, repair and
replacement of the parking deck. Tenant, at its cost, shall insure the
parking deck against casualty loss and provide evidence of same,
naming Landlord as an additional insured thereunder, as described in
Article XV of this Lease. Tenant's insurance obligations described in
Article XV of the Lease shall be equally applicable to the parking
deck. The terms and provisions of Article XIV of the Lease shall be
equally applicable with respect to the parking deck and, for such
purpose, the parking deck shall be deemed a part of the Premises. At
the expiration or earlier termination of this Lease, the parking deck
shall be deemed transferred to Landlord and, upon request of Landlord,
Tenant shall deliver a Bill of Sale or such other documents as
Landlord may require to evidence such transfer.
III. RIGHT OF FIRST OFFER/ RIGHT OF FIRST REFUSAL.
It is intended that Tenant shall have a right of first offer with
respect to any space that becomes available in the Building described
in Section I.A. of this Lease or in the Building located at 223
Perimeter Center Parkway in Atlanta, Georgia ("Building 223").
However, if Tenant fails to exercise its right of first offer with
respect to a particular space, whether because Tenant was uninterested
in such space at the time Landlord offered it to Tenant pursuant to
the right of first offer or because Tenant was unable to exercise its
right of first offer because Tenant was in violation of one or more of
the conditions described in Paragraph A of this Section III, then the
parties intend that Tenant shall nonetheless have a right of first
refusal on any portion of such space which is later desired by a
prospective tenant. The foregoing shall be in accordance with and
subject to the following provisions of this Section III.
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A. Grant of Right of First Offer.
1. Tenant shall have the one time right of first offer
(the "Right of First Offer") with respect to (a) any
space in the Building hereunder (as described in
Section I.A. of this Lease), and (b) any space in
Building 223 (as described above in this Section
III). Any space which becomes available for lease,
as described in Section III.A.2. below, whether
located in the Building hereunder or in Building
223, is referred to herein as an "Offering Space".
2. Each such Right of First Offer shall be exercised as
follows: At any time after Landlord has determined
that any particular Offering Space located in the
Building or Building 223 will become available for
lease [meaning that the existing tenant in such
space, Federated Department Stores, or its
successor, has waived its renewal rights with
respect to any particular Offering Space or the time
period for Federated Department Stores or its
successors to exercise any such renewal rights has
expired (such renewal rights are currently scheduled
to expire June 30, 2000)] (but prior to leasing such
Offering Space to a party other than the existing
tenant or occupant of such Offering Space pursuant
to the exercise of currently existing renewal or
extension rights), Landlord shall advise Tenant (the
"ROFO Advice") that such particular Offering Space
in the Building or Building 223 is available for
lease. Upon receipt of the ROFO Advice, Tenant shall
have the right to lease such Offering Space, in its
entirety, on the terms and conditions described in
Section III.C below by delivering written notice of
exercise to Landlord ("Notice of Exercise") within 7
days after Tenant's receipt of the ROFO Advice.
However, notwithstanding anything to the contrary
contained herein, Tenant shall have no such Right of
First Offer with respect to such Offering Space and
Landlord need not provide Tenant with a ROFO Advice
with respect to such Offering Space if:
a. Tenant is in default under the Lease beyond
any applicable notice and cure period at
the time Landlord would otherwise deliver
the ROFO Advice; or
b. more than 25% of the Premises is sublet at
the time Landlord would otherwise deliver
the ROFO Advice; or
c. the Lease has been assigned other than to a
Permitted Transferee (as defined in Section
XII.E of this Lease) or an Affiliate of
Tenant (as defined in Section I.S. of this
Lease) prior to the date Landlord would
otherwise deliver the ROFO Advice; or
d. Tenant or an Affiliate of Tenant is not
occupying the Premises on the date Landlord
would otherwise deliver the ROFO Advice; or
e. the Offering Space is not intended for the
exclusive use of Tenant during the Term; or
f. the existing tenant in the Offering Space
is interested in extending or renewing its
lease for the Offering Space or entering
into a new lease for such Offering Space
pursuant to the exercise of currently
existing renewal or extension rights of
such tenant.
If Tenant fails to exercise its Right of First Offer with
respect to a particular Offering Space, Tenant shall
nonetheless continue to have a Right of First Offer with
respect to any other Offering Space which becomes available
for Lease, as described in this Section 2.
B. Right of First Refusal. Notwithstanding anything herein to the
contrary, if Tenant fails to exercise its Right of First Offer
with respect to a particular Offering Space which was offered
to Tenant, whether because Tenant was uninterested in such
Offering Space at the time or because Tenant had failed to
satisfy the conditions described in Paragraph A above, Tenant
shall nonetheless have a right of first
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refusal (the "Right of First Refusal") with respect to such
particular Offering Space (or the portion which a Prospect
(as defined below) is interested in). Tenant's Right of First
Refusal shall be exercised as follows: when Landlord has a
prospective tenant ("Prospect") interested in leasing the
Offering Space (or a portion thereof), as evidenced by an
acceptable letter of intent negotiated at arms length with a
bona fide, unaffiliated party, Landlord shall advise Tenant
(the "RFR Advice") that a Prospect is interested in leasing
the Offering Space (or portion thereof) in the Building or
Building 223 (such space desired by the Prospect is also
referred to herein as "Offering Space"). Tenant shall have
the right to lease the Offering Space (or portion thereof)
desired by the Prospect, on the terms and conditions
described in Section III.C. below, by providing Landlord with
Notice of Exercise within 7 days after Tenant's receipt of
the RFR Advice, except that Tenant shall have no such Right
of First Refusal and Landlord need not provide Tenant with a
RFR Advice with respect to such Offering Space if Tenant is
in violation of one or more of the conditions set forth in
subsections III.A.2.(a) - (f) above (it being agreed that all
references to the "ROFO Advice" in subsections III.A.2.
(a) - (f) above shall instead refer to the "RFR Advice" when
it pertains to this Section III.B.).
C. Terms for Offering Space. The terms for each Offering Space,
whether added to the Premises as a result of Tenant's
exercise of the Right of First Offer or as a result of
Tenant's exercise of the Right of First Refusal, shall be as
follows:
1. The term(s) for each Offering Space shall commence
upon the commencement date stated in the ROFO Advice
or RFR Advice, as applicable, and thereupon such
space shall be considered a part of the Premises,
provided that Tenant shall not be entitled to
receive any abatements, allowances or other
financial concessions granted with respect to the
initial Premises except as specifically set forth
herein with respect to the Offering Space. The term
for each Offering Space shall end on the Termination
Date of this Lease, as same may be extended, it
being the intention of the parties that the Term for
the initial Premises and the term for each Offering
Space shall be coterminous.
2. With respect to Offering Space in Building 223:
a. Tenant shall pay Base Rent and Additional
Rent for the Offering Space in Building 223
in accordance with the terms and conditions
described in the ROFO Advice or RFR Advice,
as applicable, which terms and conditions
shall reflect the Prevailing Market rate
(described in Section III.G. below) for the
Offering Space as determined in Landlord's
reasonable judgment. Notwithstanding the
foregoing, if Tenant, in its reasonable
judgment, determines that the rate set
forth in the ROFO Advice or RFR Advice, as
applicable, does not accurately reflect the
Prevailing Market rate for the Offering
Space, Tenant shall have the right to
provide Landlord with a Notice of Exercise
that is specifically conditioned upon
Landlord's and Tenant's agreement on the
Prevailing Market rate for the Offering
Space. In such event, for a period of
fifteen (15) days after the date of
Tenant's Notice of Exercise, Landlord and
Tenant shall work together in good faith to
determine the Prevailing Market rate for
the Offering Space. If Landlord and Tenant
fail to agree upon the Prevailing Market
rate within such 15 day period, Tenant, by
written notice to Landlord (the
"Arbitration Notice") within 15 days after
the expiration of such 15 day period, shall
have the right to have the Prevailing
Market rate determined in accordance with
the following arbitration procedures
described in Subsection (b) below. If
Tenant fails to exercise its right to
arbitrate, Tenant's Right of First Offer
(or Right of First Refusal, as applicable)
with respect to such Offering Space shall
be deemed to be null and void and of no
further force and effect, subject to
Tenant's continuing Right of First Refusal
with respect to such Offering Space in
Building 223 as described in Section
III.E.2 below. Tenant's failure to
specifically condition its Notice of
Exercise as
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described above in this subsection 2 shall
be deemed an acceptance of the Prevailing
Market rate designated by Landlord.
b. Arbitration Procedure.
i. If Tenant provides Landlord with
an Arbitration Notice, Landlord
and Tenant, within 10 days after
the date of the Arbitration
Notice, shall each simultaneously
submit to the other, in a sealed
envelope, its good faith estimate
of the Prevailing Market rate for
the Offering Space (collectively
referred to as the "Estimates").
If the Estimates are the same,
then Prevailing Market rate shall
be the rate in the Estimates. If
the Prevailing Market rate is not
resolved by the exchange of
Estimates, Landlord and Tenant,
within 7 days after the exchange
of Estimates, shall each select an
appraiser meeting the
qualifications below to determine
which of the two Estimates most
closely reflects the Prevailing
Market rate for the Offering
Space.
Each appraiser so selected shall be
certified as an MAI appraiser or as
an ASA appraiser and shall have had
at least 5 years experience within
the previous 10 years as a real
estate appraiser working in the
central Perimeter submarket in
Atlanta, Georgia, with working
knowledge of current rental rates
and practices. For purposes of this
Lease, an "MAI" appraiser means an
individual who holds an MAI
designation conferred by, and is an
independent member of, the American
Institute of Real Estate Appraisers
(or its successor organization, or
in the event there is no successor
organization, the organization and
designation most similar), and an
"ASA" appraiser means an individual
who holds the Senior Member
designation conferred by, and is an
independent member of, the American
Society of Appraisers (or its
successor organization, or, in the
event there is no successor
organization, the organization and
designation most similar).
ii. Upon selection, Landlord's and
Tenant's appraisers shall work
together in good faith to agree
upon which of the two Estimates
most closely reflects the
Prevailing Market rate for the
Offering Space. The Estimate
chosen by such appraisers shall be
binding on both Landlord and
Tenant as the Base Rent rate for
the Offering Space, subject to the
terms of Subsection b.iii. below.
If either Landlord or Tenant fails
to appoint an appraiser within the
7 day period referred to above,
the appraiser appointed by the
other party shall be the sole
appraiser for the purposes hereof.
If the two appraisers cannot agree
upon which of the two Estimates
most closely reflects the
Prevailing Market within 20 days
after their appointment, then,
within 10 days after the
expiration of such 20 day period,
the 2 appraisers shall select a
third appraiser meeting the
aforementioned criteria. Once the
third appraiser has been selected
as provided for above, then, as
soon thereafter as practicable but
in any case within 14 days, the
third appraiser shall make his
determination of which of the two
Estimates most closely reflects
the Prevailing Market rate and
such Estimate shall be binding on
both Landlord and Tenant as the
Base Rent rate for the Offering
Space, subject to the terms of
Subsection b.iii below. If the
third appraiser believes that
expert advice would materially
assist him, he may retain one or
more qualified persons, to provide
such expert advice. The parties
shall share equally in the costs
of the third appraiser and of any
experts retained by the
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third appraiser. Any fees of any
appraiser, counsel or experts
engaged directly by Landlord or
Tenant, however, shall be borne by
the party retaining such appraiser,
counsel or expert.
iii. Notwithstanding anything to the
contrary contained herein, the
parties hereby agree that Landlord
shall not be obligated to accept a
Prevailing Market rate for the
Offering Space that is less than
the then current Base Rent rate for
the initial Premises, per rentable
square foot per annum (the "Minimum
Prevailing Market Rate"),
regardless of any determination of
Prevailing Market rate made by the
appraisers, as described above.
iv. If the Prevailing Market rate has
not been determined by the
commencement date of the term for
the Offering Space, Tenant shall
pay Base Rent for the Offering
Space upon the terms and
conditions in effect for the
initial Premises until such time
as the Prevailing Market rate has
been determined. Upon such
determination, the Base Rent for
the Offering Space shall be
retroactively adjusted to the
commencement of the term for the
Offering Space. If such adjustment
results in an underpayment of Base
Rent by Tenant, Tenant shall pay
Landlord the amount of such
underpayment within 30 days after
the determination thereof. If such
adjustment results in an
overpayment of Base Rent by
Tenant, Landlord shall credit such
overpayment against the next
installment of Base Rent due under
the Lease and, to the extent
necessary, any subsequent
installments until the entire
amount of such overpayment has
been credited against Base Rent.
c. The Offering Space (including improvements
and personalty, if any) shall be accepted
by Tenant in its condition and as-built
configuration existing on the earlier of
the date Tenant takes possession of the
Offering Space or as of the date the term
for such Offering Space commences, unless
the ROFO Advice or RFR Advice, as
applicable, specifies any work to be
performed by Landlord in the Offering
Space, in which case Landlord shall perform
such work in the Offering Space.
3. With respect to Offering Space in the Building:
a. The initial annual Base Rent rate per
square foot for the Offering Space shall be
the Base Rent rate per square foot for the
Premises on the date the term for the
Offering Space commences. The Base Rent
rate for the Offering Space shall increase
at such times and in such amount as Base
Rent for the Premises, it being the intent
of Landlord and Tenant that the Base Rent
rate per rentable square foot for the
Offering Space shall always be the same as
the Base Rent rate per rentable square foot
for the initial Premises.
b. Tenant shall pay Additional Rent for the
Offering Space on the same terms and
conditions as described in Article IV of
this Lease, including, without limitation,
a Base Year of 2000.
c. The Offering Space (including improvements
and personalty, if any) shall be accepted
by Tenant in its condition and as-built
configuration existing on the earlier of
the date Tenant takes possession of the
Offering Space or as of the date the term
for such Offering Space commences.
d. Tenant shall be entitled to receive an
improvement allowance (the "Work
Allowance") per rentable square foot in the
Offering Space
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<PAGE> 49
leased by Tenant in an amount determined by
multiplying $0.2188 by the number of full
calendar months remaining in the initial
Term on the commencement date for the
Offering Space. For example, if there are
48 full calendar months remaining in the
initial Term on the commencement date of
the Offering Space, Tenant shall be
entitled to receive a Work Allowance of
$10.51 per rentable square foot in the
Offering Space ($0.2188 x 48 months =
$10.51). Such Work Allowance shall be
applied toward the cost of initial
improvements to be performed in the
Offering Space (the "Improvements"),
including the cost of preparing plans,
drawings and specifications in connection
therewith. The Work Allowance shall be
disbursed, up to the cost of the
Improvements, within 30 days after delivery
to Landlord of all documentation described
in Section D of EXHIBIT D of this Lease
relating to the Improvements in the
Offering Space. Any portion of the Work
Allowance exceeding the cost of
Improvements in the Offering Space may be
used by Tenant for any lawful purpose and
shall be paid to Tenant within 30 days
following the later of (i) completion of
any Improvements in the Offering Space,
(ii) Landlord's receipt of evidence of
payment in full for all such Improvements,
and (iii) delivery to Landlord of all
documentation described in Section D of
EXHIBIT D of this Lease with respect to all
such Improvements. Landlord shall have no
obligation to disburse any portion of the
Work Allowance following the date which is
12 months after the date Tenant is
obligated to commence paying Base Rent for
such Offering Space. Notwithstanding
anything herein to the contrary, Landlord
shall not be obligated to disburse any
portion of the Work Allowance during the
continuance of an uncured Monetary or
material non-Monetary default under the
Lease, and Landlord's obligation to
disburse shall only resume when and if such
default is cured. If Landlord enters into
the general contract for the performance of
the Improvements, then Landlord shall be
entitled to deduct from the Work Allowance
a construction management fee for
Landlord's oversight of the Improvements in
an amount equal to 4.5% of the total cost
of the Improvements. If Tenant enters into
the general contract for the performance of
such work, then Landlord shall be entitled
to a fee as described in Section IX.C of
this Lease.
D. Offering Amendment.
1. If Tenant exercises its Right of First Offer or
Right of First Refusal, Landlord shall prepare an
amendment (the "Offering Amendment") adding the
applicable Offering Space to the Premises on the
terms set forth herein and reflecting the changes in
the Base Rent, Rentable Square Footage of the
Premises, Tenant's Pro Rata Share and other
appropriate terms.
2. A copy of the Offering Amendment shall be (i) sent
to Tenant within a reasonable time after receipt of
the Notice of Exercise executed by Tenant, and (ii)
executed by Tenant and returned to Landlord within
10 Business Days thereafter, but an otherwise valid
exercise of the Right of First Offer or Right of
First Refusal shall, at Landlord's option, be fully
effective whether or not the Offering Amendment is
executed.
E. Termination of Right of First Offer and Right of First
Refusal.
1. Tenant's Right of First Offer with respect to a
particular Offering Space shall terminate on the
earlier to occur of: (i) September 30, 2005; (ii)
Tenant's failure to exercise its Right of First
Offer within the 7 day period following Tenant's
receipt of the ROFO Advice, as provided in Paragraph
A above, with respect to the particular Offering
Space which was offered to Tenant, and (iii) the
date Landlord would have provided Tenant a ROFO
Advice with respect to the particular Offering Space
if Tenant had not been in violation of one or more
of the conditions set forth
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in subsections III.A.2(a)-(e) above. However, Tenant
shall continue to have a Right of First Refusal with
respect to any portion of such Offering Space which
a Prospect desires, as described in Section III.B
above, but subject to the termination of Tenant's
Right of First Refusal with respect to such Offering
Space, as described in Section III.E.2 below.
2. Tenant's Right of First Refusal with respect to a
particular Offering Space (or portion thereof)
desired by a Prospect shall terminate on the earlier
to occur of: (i) September 30, 2005; (ii) Tenant's
failure to exercise its Right of First Refusal
within the 7 day period following Tenant's receipt
of the RFR Advice, as provided in Paragraph B above,
with respect to the particular Offering Space(or
portion thereof) desired by the Prospect, and (iii)
the date Landlord would have provided Tenant a RFR
Advice with respect to the particular Offering
Space(or portion thereof) desired by the Prospect if
Tenant had not been in violation of one or more of
the conditions set forth in subsections
III.A.2(a)-(e) above. Notwithstanding the foregoing,
if (A) Tenant was entitled to exercise its Right of
First Refusal, but failed to provide Landlord with a
Notice of Exercise within the 7 day period provided
in paragraph B above, or if Tenant provided Landlord
with a Notice of Exercise but Landlord and Tenant
failed to agree upon the Prevailing Market rate for
the Offering Space in Building 223 as described in
Section III.C.2.a above, and (B) Landlord does not
enter into a lease for the Offering Space with the
Prospect which triggered the RFR Advice, or any
entity or individual affiliated with or related to
such Prospect (collectively, the "Trigger
Prospect"), then Tenant shall once again have a
Right of First Refusal with respect to such Offering
Space, and Landlord will issue a new RFR Advice to
Tenant for such Offering Space when Landlord has a
Prospect, other than the Trigger Prospect, for such
Offering Space in Building 223 as described in
Section III.B. above. In addition, if Landlord does
enter into a lease for the Offering Space, Tenant
shall have a Right of First Refusal on such Offering
Space (subject to the terms hereof) upon the
expiration of the lease with the Prospect that
leased the Offering Space.
F. Notwithstanding anything herein to the contrary, Tenant's
Right of First Offer and Right of First Refusal are subject
and subordinate to the expansion rights (whether such rights
are designated as a right of first offer, right of first
refusal, expansion option or otherwise) of Federated
Department Stores, Inc. existing on the date hereof.
G. Prevailing Market Rate. For purposes hereof, Prevailing
Market rate shall mean the annual rental rate per square foot
for space comparable to the particular Offering Space in
Building 223 and office buildings comparable to Building 223
in the central Perimeter submarket in Atlanta, Georgia under
leases and renewal and expansion amendments being entered
into at or about the time that Prevailing Market is being
determined, giving appropriate consideration to tenant
concessions, brokerage commissions, tenant improvement
allowances, and the method of allocating operating expenses
and taxes (which items, if any, shall be provided to Tenant
to the extent considered in determining Prevailing Market
rate). Notwithstanding the foregoing, space leased under any
of the following circumstances shall not be considered to be
comparable for purposes hereof: (i) the term is for less than
the term of the Offering Space, (ii) the space is encumbered
by the option rights of another tenant, or (iii) the space
has a lack of windows and/or an awkward or unusual shape or
configuration. The foregoing is not intended to be an
exclusive list of space that will not be considered to be
comparable.
H. Memorandum of Option.
1. Tenant, at its option, may execute and record a
memorandum of option, at Tenant's cost, to notice
any potential future owner of Building 223 that
Tenant holds a Right of First Offer and Right of
First Refusal affecting Building 223, as described
herein, provided such memorandum is approved by
Landlord. The memorandum shall specifically provide
that the Right of First Offer and Right of First
Refusal affecting Building 223
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shall automatically expire, and Tenant agrees to
execute and record, at its cost, a release of such
memorandum, upon the earlier of (i) expiration or
earlier termination of this Lease; (ii) Tenant's
exercise, waiver or failure to timely exercise its
Right of First Offer and Right of First Refusal with
respect to all of the Offering Space in Building
223, subject to Tenant's recurring Right of First
Refusal rights as described in Section III.E.2
above, or (iii) September 30, 2005.
2. If Landlord does not own Building 223 at the time
Tenant exercises its Right of First Offer or Right
of First Refusal with respect to a particular
Offering Space in Building 223, then Tenant and the
owner of Building 223 shall enter into a lease for
such Offering Space upon terms substantially similar
to those contained in this Lease, modified as
appropriate to reflect the terms and conditions
relating to such space as described herein.
IV. ADDITIONAL SPACE IN FUTURE BUILDING.
A. If Landlord constructs an office building on the currently
vacant site located north of the Building, as shown on the
site plan attached hereto as EXHIBIT A-4 (such future
building, if constructed, shall be referred to herein for
convenience purposes only as the "Future Building"), and such
construction was not performed as a "build to suit" for a
prospective purchaser or prospective tenant of the site,
then, prior to entering into an agreement to lease space in
the Future Building with another party other than Tenant,
Landlord shall provide Tenant with a written notice (the
"Initial Future Building Notice") that space will be
available in the Future Building and, within 30 days after
Tenant's receipt of such notice, Tenant shall have the right
to provide written notice to Landlord of its desire to lease
additional space in the Building (the "Additional Space
Notice"), which Additional Space Notice shall specify the
approximate additional square footage that Tenant desires to
lease (referred to herein as the "Additional Space").
Notwithstanding the foregoing, Landlord shall not be required
to provide Tenant with an Initial Future Building Notice nor
shall Landlord be required to respond to Tenant's Additional
Space Notice if:
1. Tenant is in default under the Lease beyond any
applicable notice and cure period at the time
Landlord would otherwise deliver the Initial Future
Building Notice; or
2. more than 25% of the Premises is sublet at the time
Landlord would otherwise deliver the Initial Future
Building Notice; or
3. the Lease has been assigned other than to a
Permitted Transferee (as defined in Section XII.E of
this Lease) or an Affiliate of Tenant (as defined in
Section I.S. of this Lease) prior to the date
Landlord would otherwise deliver the Initial Future
Building Notice; or
4. Tenant or an Affiliate of Tenant is not occupying
the Premises on the date Landlord would otherwise
deliver the Initial Future Building Notice; or
5. the Additional Space is not intended for the
exclusive use of Tenant during the Term.
B. Within a reasonable time after receiving Tenant's
Additional Space Notice (not to exceed 30 days), Landlord
shall advise Tenant in writing (the "Future Building Advice")
of the terms, determined in good faith by Landlord, under
which Landlord would be willing to lease the Additional Space
to Tenant. If Tenant does not desire to lease such Additional
Space upon the terms and conditions designated by Landlord,
Tenant shall provide Landlord with written notice of rejection
(the "Rejection Notice") and Landlord and Tenant shall work
together in good faith to agree upon mutually acceptable terms
and conditions for the Additional Space. Upon agreement
between Landlord and Tenant regarding the terms for the
Additional Space, Landlord and Tenant shall enter into an
amendment, upon such terms, to add such Additional
Space to the Premises. If Landlord and Tenant are unable to
agree upon the terms for such Additional
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Space within 30 days after Tenant's receipt of Landlord's
Future Building Advice, neither party shall have any further
obligation to the other under this Section IV and this Lease
shall continue in full force and effect with respect to the
then existing Premises.
V. RENEWAL OPTION.
A. Tenant shall have the right to extend the Term (the "Renewal
Option") for one additional period of 5 years commencing on
the day following the Termination Date of the initial Term
and ending on the 5th anniversary of the Termination Date
(the "Renewal Term"), if:
1. Landlord receives notice of exercise ("Initial
Renewal Notice") not less than 12 full calendar
months prior to the expiration of the initial Term
and not more than 15 full calendar months prior to
the expiration of the initial Term; and
2. Tenant is not in default under the Lease beyond any
applicable cure periods at the time that Tenant
delivers its Initial Renewal Notice or at the time
Tenant delivers its Binding Notice (as defined in
Section D below); and
3. No more than 25% of the Premises is sublet at the
time that Tenant delivers its Initial Renewal Notice
or at the time Tenant delivers its Binding Notice;
and
4. The Lease has not been assigned other than to a
Permitted Transferee (as defined in Section XII.E of
this Lease) or an Affiliate of Tenant (as defined in
Section I.S. of this Lease) prior to the date that
Tenant delivers its Initial Renewal Notice or prior
to the date Tenant delivers its Binding Notice.
B. The initial Base Rent rate per rentable square foot for the
Premises during the Renewal Term shall equal the Prevailing
Market (hereinafter defined) rate per rentable square foot
for the Premises.
C. Tenant shall pay Additional Rent (i.e. Tenant's Pro Rata
Share of Expense Excess and Tenant's Pro Rata Share of Tax
Excess) for the Premises during the Renewal Term in
accordance with Article IV of the Lease. Any change in the
Base Year, if any, will be properly reflected in the Renewal
Amendment (as defined below) and shall be considered when
determining the Prevailing Market rate.
D. Within 30 days after receipt of Tenant's Initial Renewal
Notice, Landlord shall advise Tenant of the applicable Base
Rent rate for the Premises for the Renewal Term. Tenant,
within 15 days after the date on which Landlord advises
Tenant of the applicable Base Rent rate for the Renewal Term,
shall either (i) give Landlord final binding written notice
("Binding Notice") of Tenant's exercise of its option, or
(ii) if Tenant disagrees with Landlord's determination,
provide Landlord with written notice of rejection (the
"Rejection Notice"). If Tenant fails to provide Landlord with
either a Binding Notice or Rejection Notice within such 15
day period, Tenant's Renewal Option shall be null and void
and of no further force and effect. If Tenant provides
Landlord with a Binding Notice, Landlord and Tenant shall
enter into the Renewal Amendment (as defined below) upon the
terms and conditions set forth herein. If Tenant provides
Landlord with a Rejection Notice, Landlord and Tenant shall
work together in good faith to agree upon the Prevailing
Market rate for the Premises during the Renewal Term. Upon
agreement, Tenant shall provide Landlord with Binding Notice
and Landlord and Tenant shall enter into the Renewal
Amendment in accordance with the terms and conditions hereof.
Notwithstanding the foregoing, if Landlord and Tenant are
unable to agree upon the Prevailing Market rate for the
Premises within 30 days after the date on which Tenant
provides Landlord with a Rejection Notice, Tenant's Renewal
Option shall be null and void and of no force and effect.
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E. If Tenant is entitled to and properly exercises its Renewal
Option, Landlord shall prepare an amendment (the "Renewal
Amendment") to reflect changes in the Base Rent, Base Year,
if any, Term, Termination Date and other appropriate terms.
The Renewal Amendment shall be sent to Tenant within a
reasonable time after receipt of the Binding Notice and
Tenant shall execute and return the Renewal Amendment to
Landlord within 15 days after Tenant's receipt of same, but
an otherwise valid exercise of the Renewal Option shall, at
Landlord's option, be fully effective whether or not the
Renewal Amendment is executed.
F. For purposes hereof, "Prevailing Market" shall mean the arms
length fair market annual rental rate per rentable square
foot under renewal leases and amendments entered into on or
about the date on which the Prevailing Market is being
determined hereunder for space comparable to the Premises in
the Building and office buildings comparable to the Building
in the central Perimeter submarket of Atlanta, Georgia. The
determination of Prevailing Market shall take into account
any material economic differences between the terms of this
Lease and any comparison lease, such as brokerage
commissions, tenant concessions, tenant improvement
allowances and other concessions and the manner, if any, in
which the landlord under any such lease is reimbursed for
operating expenses and taxes (which items, if any, shall be
provided to Tenant to the extent considered in determining
the Prevailing Market rate for the Renewal Term). The
determination of Prevailing Market shall also take into
consideration any reasonably anticipated changes in the
Prevailing Market rate from the time such Prevailing Market
rate is being determined and the time such Prevailing Market
rate will become effective under this Lease.
VI. ROOFTOP SPACE.
A. Provided Tenant selects a location on the roof of the
Building, reasonably acceptable to Landlord, for the
installation of the Dish/Antenna (defined below) (the "Roof
Space") in accordance with this Section VI within 12 months
after the Premises B Commencement Date, then Tenant shall
have the right to install and maintain the Dish/Antenna in
the Roof Space during the initial Term and any extension
thereof in accordance with this Section VI. The Roof Space
shall not exceed 40 square feet. However, if Tenant fails to
so designate the Roof Space, reasonably acceptable to
Landlord, within such 12 month period, then Tenant's rights
under this Section VI shall be subject to availability of
space on the roof of the Building for such purpose, as
reasonably determined by Landlord.
Subject to the foregoing, during the initial Term and any
extension thereof, Tenant shall have the right, in
consideration for payments of $300.00 per month (the
"Dish/Antenna Payments") commencing as of the date Tenant
installs any equipment in the Roof Space (the "Dish/Antenna
Payment Commencement Date") (upon each and every anniversary
of the Dish/Antenna Payment Commencement Date during the
initial Term and any renewal thereof, the Dish/Antenna
Payments shall increase by 5%, rounded to the nearest dollar,
from the rate in effect at the end of the immediately
preceding year), to lease space on the roof of the Building
for the purpose of installing (in accordance with Section
IX.C. of the Lease), operating and maintaining a dish/antenna
or other communication device approved by the Landlord (the
"Dish/Antenna"). The Dish/Antenna Payments shall constitute
Additional Rent under the terms of the Lease and Tenant shall
be required to make these payments, commencing as of the date
Tenant installs any equipment in the Roof Space, in strict
compliance with the terms of Section IV of the Lease.
Landlord reserves the right to relocate the Roof Space as
reasonably necessary during the Term, as same may be
extended, with at least 30 days notice. Landlord's
designation shall take into account Tenant's use of the
Dish/Antenna. Notwithstanding the foregoing, Tenant's right
to install the Dish/Antenna shall be subject to the approval
rights of Landlord and Landlord's architect and/or engineer
with respect to the plans and specifications of the
Dish/Antenna, the manner in which the Dish/Antenna is
attached to the roof of the Building and the manner in which
any cables are run to and from the Dish/Antenna. The precise
specifications and a general description of the Dish/Antenna
along with all documents Landlord reasonably requires to
review the installation of the
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Dish/Antenna (the "Plans and Specifications") shall be
submitted to Landlord for Landlord's written approval no
later than 20 days before Tenant commences to install the
Dish/Antenna. Tenant shall be solely responsible for
obtaining all necessary governmental and regulatory approvals
and for the cost of installing, operating, maintaining and
removing the Dish/Antenna. Tenant shall notify Landlord upon
completion of the installation of the Dish/Antenna. If
Landlord determines that the Dish/Antenna equipment does not
comply with the approved Plans and Specifications, that the
Building has been damaged during installation of the
Dish/Antenna or that the installation was defective, Landlord
shall notify Tenant of any noncompliance or detected problems
and Tenant immediately shall cure the defects. If the Tenant
fails to promptly cure the defects, Tenant shall pay to
Landlord upon demand the cost, as reasonably determined by
Landlord, of correcting any defects and repairing any damage
to the Building caused by such installation. If Landlord, in
its reasonable discretion, deems it reasonably necessary, and
if, at the time Landlord approves the plans and
specifications for the Dish/Antenna, or within 30 days after
installation of the Dish/Antenna, Landlord informs Tenant
that aesthetic screening will be necessary, then Tenant shall
provide and install, at Tenant's sole cost and expense,
appropriate aesthetic screening, reasonably satisfactory to
Landlord, for the Dish/Antenna (the "Aesthetic Screening").
B. Landlord agrees that Tenant, upon reasonable prior written
notice to Landlord, shall have access to the roof of the
Building and the Roof Space for the purpose of installing,
maintaining, repairing and removing the Dish/Antenna, the
appurtenances and the Aesthetic Screening, if any, all of
which shall be performed by Tenant or Tenant's authorized
representative or contractors, which shall be approved by
Landlord, at Tenant's sole cost and risk. It is agreed,
however, that only authorized engineers, employees or
properly authorized contractors of Tenant, FCC inspectors, or
persons under their direct supervision will be permitted to
have access to the roof of the Building and the Roof Space.
Tenant further agrees to exercise firm control over the
people requiring access to the roof of the Building and the
Roof Space in order to keep to a minimum the number of people
having access to the roof of the Building and the Roof Space
and the frequency of their visits. If Tenant requires access
to the Roof Space to service or otherwise deal with the
Dish/Antenna in an emergency, Tenant may obtain access by
contacting the security personnel for the Perimeter project.
C. It is further understood and agreed that the installation,
maintenance, operation and removal of the Dish/Antenna, the
appurtenances and the Aesthetic Screening, if any, is not
permitted to damage the Building or the roof thereof, or
interfere with the use of the Building and roof (other than
the Roof Space) by Landlord. Tenant agrees to be responsible
for any damage caused to the roof or any other part of the
Building which may be caused by Tenant or any of its agents
or representatives.
D. Tenant agrees to install only equipment of types and
frequencies which will not cause unreasonable interference to
Landlord or existing tenants of the Building. In the event
Tenant's equipment causes such interference, Tenant will
change the frequency on which it transmits and/or receives
and take any other steps necessary to eliminate the
interference. If said interference cannot be eliminated
within a reasonable period of time, in the reasonable
judgment of Landlord, then Tenant agrees to remove the
Dish/Antenna from the Roof Space. Landlord agrees to include
a provision similar to that contained in this Section D in
all future rooftop agreements Landlord may enter into with
respect to the Building.
E. Tenant shall, at its sole cost and expense, and at its sole
risk, install, operate and maintain the Dish/Antenna in a
good and workmanlike manner, and in compliance with all
Building, electric, communication, and safety codes,
ordinances, standards, regulations and requirements, now in
effect or hereafter promulgated, of the Federal Government,
including, without limitation, the Federal Communications
Commission (the "FCC"), the Federal Aviation Administration
("FAA") or any successor agency of either the FCC or FAA
having jurisdiction over radio or telecommunications, and of
the state, city and county in which the Building is located.
Under this Lease, the Landlord and its agents assume no
responsibility for the licensing, operation and/or
maintenance of
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Tenant's equipment. Tenant has the responsibility of carrying
out the terms of its FCC license (to the extent required to
be obtained) in all respects. The Dish/Antenna shall be
connected to Landlord's power supply in strict compliance
with all applicable Building, electrical, fire and safety
codes. Neither Landlord nor its agents shall be liable to
Tenant for any stoppages or shortages of electrical power
furnished to the Dish/Antenna or the Roof Space because of
any act, omission or requirement of the public utility
serving the Building, or the act or omission of any other
tenant, invitee or licensee or their respective agents,
employees or contractors, or for any other cause beyond the
reasonable control of Landlord, and subject to the following,
Tenant shall not be entitled to any rental abatement for any
such stoppage or shortage of electrical power. Any
interruption or termination of electrical service serving the
Roof Space due to the application of Laws, the failure of any
Building equipment, the performance of repairs, improvements
or alterations by Landlord, or the occurrence of any event or
cause beyond the reasonable control of Landlord is referred
to herein as a "Roof Top Service Failure". If Tenant is
unable to use the Dish/Antenna for a period in excess of 3
consecutive Business Days as a result of the Roof Top Service
Failure, then Tenant, as its sole remedy, shall be entitled
to receive an abatement of the Dish/Antenna Payments payable
hereunder during the period beginning on the 4th consecutive
Business Day of the Roof Top Service Failure and ending on
the day the electrical service has been restored to the Roof
Top Space. In no event, however, shall Landlord be liable to
Tenant for any loss or damage arising out of or in connection
with the Roof Top Service Failure. Neither Landlord nor its
agents shall have any responsibility or liability for the
conduct or safety of any of Tenant's representatives, repair,
maintenance and engineering personnel while in or on any part
of the Building or the Roof Space.
F. The Dish/Antenna, the appurtenances and the Aesthetic
Screening, if any, shall remain the personal property of
Tenant, and shall be removed by Tenant at its own expense at
the expiration or earlier termination of this Lease or
Tenant's right to possession hereunder. Tenant shall repair
any damage caused by such removal, including the patching of
any holes to match, as closely as possible, the color
surrounding the area where the equipment and appurtenances
were attached. Tenant agrees to maintain all of the Tenant's
equipment placed on or about the roof or in any other part of
the Building in proper operating condition and maintain same
in satisfactory condition as to appearance and safety in
Landlord's reasonable discretion. Such maintenance and
operation shall be performed in a manner to avoid any
interference with any other tenants or Landlord. Tenant
agrees that at all times during the Term, it will keep the
roof of the Building and the Roof Space free of all trash or
waste materials produced by Tenant or Tenant's agents,
employees or contractors.
G. In light of the specialized nature of the Dish/Antenna,
Tenant shall be permitted to utilize the services of its
choice for installation, operation, removal and repair of the
Dish/Antenna, the appurtenances and the Aesthetic Screening,
if any, subject to the reasonable approval of Landlord.
Notwithstanding the foregoing, Tenant must provide Landlord
with prior written notice of any such installation, removal
or repair and coordinate such work with Landlord in order to
avoid voiding or otherwise adversely affecting any warranties
granted to Landlord with respect to the roof. If necessary,
Tenant, at its sole cost and expense, shall retain any
contractor having a then existing warranty in effect on the
roof to perform such work (to the extent that it involves the
roof), or, at Tenant's option, to perform such work in
conjunction with Tenant's contractor. In the event the
Landlord contemplates roof repairs that could affect Tenant's
Dish/Antenna, or which may result in an interruption of the
Tenant's telecommunication service, Landlord shall formally
notify Tenant at least 30 days in advance (except in cases of
an emergency) prior to the commencement of such contemplated
work in order to allow Tenant to make other arrangements for
such service. If any such interruption of service lasts more
than 3 consecutive Business Days, then, beginning on the 4th
consecutive Business Day, Tenant's right to abate the
Dish/Antenna Payments as described in Section E above shall
apply.
H. Tenant shall not allow any provider of telecommunication,
video, data or related services ("Communication Services") to
locate any equipment on the roof of the Building or in the
Roof Space for any purpose whatsoever (other than equipment
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leased to Tenant by any such provider specifically for use
exclusively in connection with Tenant's business in the
Premises), nor may Tenant use the Roof Space and/or
Dish/Antenna to provide Communication Services to an
unaffiliated tenant, occupant or licensee of another
building, or to facilitate the provision of Communication
Services on behalf of another Communication Services provider
to an unaffiliated tenant, occupant or licensee of the
Building or any other building.
I. Tenant acknowledges that Landlord may at some time establish
a standard license agreement (the "License Agreement") with
respect to the use of roof space by tenants of the Building.
Tenant, upon request of Landlord, shall enter into such
License Agreement with Landlord provided that such agreement
does not materially alter the rights of Tenant hereunder with
respect to the Roof Space and in no event shall Tenant be
obligated to pay more for its use of the Roof Space than as
described in this Section VI.
J. Tenant specifically acknowledges and agrees that the terms
and conditions of Article XIV of the Lease (Indemnity and
Waiver of Claims) shall apply with full force and effect to
the Roof Space and any other portions of the roof accessed or
utilized by Tenant, its representatives, agents, employees or
contractors.
K. If Tenant defaults under any of the terms and conditions of
this Section or the Lease, and Tenant fails to cure said
default within the time allowed by Article XIX of the Lease,
Landlord shall be permitted to exercise all remedies provided
under the terms of the Lease, including removing the
Dish/Antenna, the appurtenances and the Aesthetic Screening,
if any, and restoring the Building and the Roof Space to the
condition that existed prior to the installation of the
Dish/Antenna, the appurtenances and the Aesthetic Screening,
if any. If Landlord removes the Dish/Antenna, the
appurtenances and the Aesthetic Screening, if any, as a
result of an uncured default, Tenant shall be liable for all
costs and expenses Landlord incurs in removing the
Dish/Antenna, the appurtenances and the Aesthetic Screening,
if any, and repairing any damage to the Building, the roof of
the Building and the Roof Space caused by the installation,
operation or maintenance of the Dish/Antenna, the
appurtenances, and the Aesthetic Screening, if any.
VII. STORAGE SPACE.
A. During the initial Term and any renewal thereof, Landlord
agrees to lease to Tenant and Tenant accepts the space
containing approximately (a) 800 square feet on the ground
floor of the Building, (b) 400 square feet on the ground
floor of the Building, and 65 square feet on the ground floor
of the Building, as shown on EXHIBIT A-5 attached hereto
(collectively, the "Storage Space"). However, notwithstanding
the foregoing, the portion of the Storage Space described
above containing approximately 400 rentable square feet shall
not be leased to Tenant until such space becomes available,
which is scheduled to occur on or about February 1, 2000.
Further, the portion of the Storage Space containing 65
square feet described above is available for lease to Tenant
only if Tenant pays Landlord the reasonable cost to install a
demising wall and door to separately demise such space. In
addition to the Storage Space described above, Tenant shall
have an option to lease an additional approximately 800
square feet of storage space, located on the ground floor of
the Building as shown on EXHIBIT A-6 attached hereto (the
"Option Storage Space") when such Option Storage Space
becomes available. Tenant shall exercise the foregoing option
as follows: When Landlord informs Tenant that the Option
Storage Space is available for lease by Tenant (but prior to
leasing the Option Storage Space to any party other than the
current occupant of such space or its successors or assigns),
Tenant may elect to lease such space, upon the terms and
conditions contained in this Section VII (in which event, the
Option Storage Space shall be included within the definition
of Storage Space hereunder), by providing written notice to
Landlord within 7 days after Tenant's receipt of the notice
from Landlord. Failure to provide such written notice to
Landlord within the 7 day period shall be deemed a waiver of
Tenant's option rights with respect to the Option Storage
Space. The Storage Space shall be used by Tenant for the
storage of equipment, inventory or other non-perishable items
normally used in Tenant's business, and for no other purpose
whatsoever. Tenant
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agrees to keep the Storage Space in a neat and orderly
fashion and to keep all stored items in cartons, file
cabinets or other suitable containers. All items stored in
the Storage Space shall be elevated at least 6 inches above
the floor on wooden pallets, and shall be at least 18 inches
below the bottom of all sprinklers located in the ceiling of
the Storage Space, if any. Tenant shall not store anything in
the Storage Space which is unsafe or which otherwise may
create a hazardous condition, or which may increase
Landlord's insurance rates, or cause a cancellation or
modification of Landlord's insurance coverage. Without
limitation, Tenant shall not store any flammable, combustible
or explosive fluid, chemical or substance nor any perishable
food or beverage products, except with Landlord's prior
written approval. Landlord reserves the right to adopt and
enforce reasonable rules and regulations governing the use of
the Storage Space from time to time. Upon expiration or
earlier termination of this Lease or Tenant's rights under
this Section, Tenant shall completely vacate and surrender
the Storage Space to Landlord in accordance with the terms of
this Lease. Without limitation, Tenant shall leave the
Storage Space in the condition in which it was delivered to
Tenant, reasonable wear and tear excepted, broom-clean and
empty of all personalty and other items placed therein by or
on behalf of Tenant.
B. Tenant shall pay rent for the Storage Space ("Storage Rent")
in the sum of $12.00 per square foot, per month, payable in
advance on or before the first day of each month of the Term.
Any partial month shall be appropriately prorated. Upon each
and every anniversary of the Commencement Date during the
initial Term and any renewal thereof, the Storage Rent shall
increase by 2%, rounded to the nearest dollar, from the rate
in effect at the end of the immediately preceding year. All
Storage Rent is deemed Rent under this Lease. The Storage
Rent shall be payable in the same manner that Base Rent is
payable under the Lease.
C. All terms and provisions of the Lease shall be applicable to
this Agreement, including, without limitation, Article XIV
(Indemnity and Waiver of Claims) Article XV (Tenant's
Insurance), and Article XXI (Limitation of Liability) except
that Landlord need not supply air-cooling, heat, water,
janitorial service, cleaning, passenger elevator service,
window washing or electricity (other than electricity for
standard storage space overhead lighting) to the Storage
Space and Tenant shall not be entitled to any work
allowances, rent credits, expansion rights or renewal rights
with respect to the Storage Space unless such concessions or
rights are specifically provided for herein with respect to
the Storage Space. Other than in connection with, and to the
extent of, Landlord's gross negligence and willful
misconduct, Landlord shall not be liable for any theft or
damage to any items or materials stored in the Storage Space,
it being understood that Tenant is using the Storage Space at
its own risk. Any default by Tenant under the Lease remaining
uncured for a period extending beyond the expiration of any
applicable cure period shall be a default under this Section
VII; any default by Tenant under this Section VII shall be a
default under this Lease; and the provisions of the Lease
with respect to Tenant defaults shall apply to any default by
Tenant hereunder. The Storage Space shall not be included in
the determination of Tenant's Pro Rata Share under the Lease
nor shall Tenant be required to pay Expenses or Taxes in
connection with the Storage Space.
D. Tenant agrees to accept the Storage Space in its condition
and "as-built" configuration existing on the earlier of the
date Tenant takes possession of the Storage Space or the
Commencement Date.
E. At any time and from time to time, Landlord shall have the
right to relocate the Storage Space to a new location which
shall be no smaller than the square footage of the Storage
Space. Landlord shall pay the direct, out-of-pocket,
reasonable expenses of such relocation.
F. If Tenant assigns the Lease or sublets all or any part of the
Premises other than to a Permitted Transferee (as described
in Article XII of this Lease), Landlord, at its option, may
cancel Tenant's rights under this Section VII effective as of
30 days after notice to Tenant. Additionally, notwithstanding
anything set forth in Article XII of the Lease to the
contrary, Tenant shall not, without the prior written consent
of Landlord, which consent may be withheld in Landlord's sole
discretion, assign, sublease, transfer or encumber the
Storage Space or grant any license,
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concession or other right of occupancy or permit the use of
the Storage Space by any party other than Tenant or a
Permitted Transferee.
VIII. SIGNAGE.
A. During the initial Term and any extension thereof, and
provided that Tenant is leasing and occupying at least 50% of
the rentable square feet in the Building, Tenant, at Tenant's
sole cost (subject to the Allowance, as described in EXHIBIT
D), shall have the following signage rights for its corporate
name:
1. Subject to governmental approval, Tenant may install
an unlighted sign on the exterior Building facade
(the "Facade Sign") at the top of the Building, at a
location to be determined by Landlord, provided
Tenant installs the Facade Sign within 6 months
after the Commencement Date. Tenant shall be
responsible for all maintenance and repair costs of
the Facade Sign. The design, size and color of the
Facade Sign and the manner in which it is attached
to the Building shall be subject to the approval of
Landlord and all applicable governmental
authorities. Upon termination of this Lease or
Tenant's right to possession of the Premises, Tenant
shall remove the Facade Sign, at Tenant's cost, and
restore the facade of the Building to the condition
it was in prior to installation of the Facade Sign,
ordinary wear and tear excepted. During the initial
Term and any extension thereof, but subject to the
currently existing rights of any tenant under any
currently existing leases, and provided Tenant is
leasing and occupying at least 50% of the rentable
square footage in the Building, Landlord agrees
that, unless otherwise required by law, it will not
permit any other entity to install its name on the
exterior Building facade. However, it is agreed that
the foregoing shall not limit Landlord's right to
install the names of other entities or individuals
on a plaque or similar signage on the Building
[i.e., plaques or similar signage which can be read
only within a few feet of the signage plaque].
2. Subject to governmental approval, and provided
Tenant installs such signage on the Monument Signs
within 6 months after the Commencement Date, Tenant
may install its name on one or both of (a) the
Building monument sign located in front of the
Building and (b) the building monument sign located
at the roadway entrance on Perimeter Center Parkway
(collectively, the "Monument Signs"). The design,
size and color of Tenant's name on the Monument
Signs shall be subject to Landlord's reasonable
approval, and Landlord shall have the right to
require that all names on the Monument Signs be of
the same size and style. Tenant's right to place its
name on the Monument Signs, and the location of
Tenant's name on the Monument Signs, shall be
subject to the existing rights of existing tenants
in the Building. Federated Department Stores, the
other tenant of the Building, does not have the
exclusive rights to include its name or sign on the
Monument Signs. Although the Monument Signs will be
maintained by Landlord, Tenant shall pay its
proportionate share of the cost of any maintenance
and repair associated with the Monument Signs. Upon
termination of this Lease or Tenant's right to
possession of the Premises, Tenant shall remove its
name and logo from the Monument Signs, at Tenant's
cost, and restore the Monument Signs to the
condition they were in prior to installation of
Tenant's name and logo thereon, ordinary wear and
tear excepted. During the initial Term and any
extension thereof, provided Tenant is leasing and
occupying at least 50% of the rentable square
footage in the Building, Landlord agrees that,
unless otherwise required by law, it will not permit
more than one other tenant's name to be included on
the Monument Signs (i.e. other than Tenant and
Landlord) and such other tenant's name shall be
included only if such other tenant occupies at least
one (1) full floor (whether by size or actual
location) in the Building. However, it is agreed
that nothing contained herein shall restrict
Landlord's ability to comply with any signage
requirements or obligations contained in any
currently existing leases affecting the Building.
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Landlord has ordered new Monument Signs to replace the
existing Monument Signs. Landlord is willing to work with
Tenant to coordinate the installation of Tenant's name on the
Monument Signs so that Tenant may avoid the cost of
installing its name on the old Monument Signs prior to
replacement of same with the new Monument Signs.
B. If Tenant leases or occupies less than 50% of the rentable
square feet in the Building, Landlord shall have the right
(i) to require Tenant to remove the Facade Sign, at Tenant's
cost (or if Tenant fails to remove such signage within 30
days after written request from Landlord, then Landlord may
remove such signage and Tenant shall pay Landlord all costs
related thereto, as Additional Rent, within 30 days after
demand therefor), and (ii) to remove Tenant's name from the
Monument Signs, at Tenant's cost, payable as Additional Rent,
within 30 days after demand therefor.
C. The rights provided in this Section VIII shall be
non-transferable unless otherwise agreed by Landlord in
writing.
IX. ENVIRONMENTAL MATTERS
A. Landlord represents, to the best of its knowledge, that the
Premises are free of Hazardous Materials (as defined below)
in amounts and conditions which pose danger to human beings
or in violation of applicable environmental laws.
B. Tenant shall not use, generate, manufacture, store or dispose
of, on or about the Premises, or transport to or from the
Premises, any flammable explosives, radioactive materials,
hazardous wastes, toxic substances, or any related materials
or substances, including, without limitation, any substance
defined as or included in the definition of "hazardous
substances" under any applicable federal, state or local law,
regulation or ordinance (collectively, "Hazardous
Materials").
C. Notwithstanding the provisions of this Section IX, Tenant and
Landlord shall have the right to use, generate and store on
the Premises and the Building, and transport to and from the
Premises and the Building, those Hazardous Materials which
are generally used in the ordinary course in first class
office buildings; provided, however, that Tenant's and
Landlord's use, generation, storage and transport thereof is
in compliance with all applicable federal, state and local
laws, regulations and ordinances.
D. Promptly, upon either Landlord's or Tenant's obtaining actual
knowledge thereof, such party shall immediately notify the
other party in writing of (i) any and all enforcement,
cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened with respect to Hazardous
Materials pursuant to any applicable federal, state or local
law, ordinance or regulation, and (ii) all claims made or
threatened by any third party against Landlord, Tenant, or
the Premises relating to any damage, loss or injury, whether
to person or property, resulting from the Hazardous
Materials.
X. ASBESTOS DISCLOSURE. Tenant acknowledges that it has previously been
informed by Landlord that asbestos containing materials are located in
the Building and, prior to performing any improvements or alterations
in the Premises or any other portion of the Building, Tenant must
comply with Landlord's operations and maintenance plan and manual and
the procedures contained therein regarding the containment or removal
of any asbestos containing materials from the Building. A copy of the
"Report of Survey, Sampling and Evaluation for Asbestos-Containing
Materials" for the Building dated February, 1999, prepared by Law
Engineering and Environmental Services, Inc., as Law Project No.
50140-8-2166-01-606 (the "Asbestos Report") has previously been
delivered to Tenant. The Asbestos Report contains a summary of the
location of the asbestos containing materials in the Building.
XI. GENERATOR.
A. During the initial Term and any renewal thereof, Tenant shall
have the right to install a supplemental generator (the
"Generator") to provide emergency
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additional electrical capacity to the Premises. The Generator
shall be placed at a location at the Property designated by
Landlord (the Generator Location"). However, Tenant's right to
install the Generator shall be subject to Landlord's
reasonable approval of the manner in which the Generator is
installed, the manner in which any cables are run to and from
the Generator to the Premises and the measures that will be
taken to eliminate any vibrations or sound disturbances from
the operation of the Generator. Landlord shall have the right
to require (at the time Landlord approves the plans for the
Generator and installation thereof or within 30 days after
installation of the Generator) an acceptable enclosure (e.g.
wood fencing and landscaping) to hide or disguise the
existence of the Generator and to minimize any adverse effect
that the installation of the Generator may have on the
appearance of the Building and Property. Tenant shall be
solely responsible for obtaining all necessary governmental
and regulatory approvals and for the cost of installing,
operating, maintaining and removing the Generator. Tenant
shall also be responsible for the cost of all utilities
consumed in the operation of the Generator. Notwithstanding
anything herein to the contrary, if Tenant does not install
the Generator on or before 6 months after the Commencement
Date or if Tenant, after installation, removes the Generator
from the Generator Location for reasons other than the repair
and replacement of the Generator, Tenant's right to install
the Generator and to use the Generator Location shall be null
and void.
B. Tenant shall be responsible for assuring that the
installation, maintenance, operation and removal of the
Generator will in no way damage the Building or Property.
Tenant agrees to be responsible for any damage caused to the
Building or Property in connection with the installation,
maintenance, operation or removal of the Generator and, in
accordance with the terms of Article XIV of the Lease, to
indemnify, defend and hold Landlord, its trustees, members,
principals, beneficiaries, partners, officers, directors,
employees, agents and mortgagees (collectively, the "Landlord
Related Parties") harmless from all liabilities, obligations,
damages, penalties, claims, costs, charges and expenses,
including, without limitation, reasonable architects' and
attorneys' fees (if and to the extent permitted by law), which
may be imposed upon, incurred by, or asserted against Landlord
or any of the Landlord Related Parties in connection with the
installation, maintenance, operation or removal of the
Generator and its appurtenances, including, without
limitation, any environmental and hazardous materials claims.
C. Tenant shall be responsible for the installation, operation,
cleanliness, maintenance and removal of the Generator and
appurtenances, all of which shall remain the personal property
of Tenant, and shall be removed by Tenant at its own expense
at the termination of the Lease. Tenant shall repair any
damage caused by such removal, including the patching of any
holes to match, as closely as possible, the color surrounding
the area where the Generator and appurtenance were attached.
Such maintenance and operation shall be performed in a manner
to avoid any unreasonable interference with any other tenants
or Landlord. Tenant agrees to maintain the Generator,
including without limitation, any enclosure installed around
the Generator, in good condition and repair. Tenant shall be
responsible for performing any maintenance and improvements to
any enclosure surrounding the Generator so as to keep such
enclosure in good condition.
D. Tenant, upon prior notice to Landlord and subject to the
reasonable rules and regulations enacted by Landlord, shall
have unlimited access to the Generator and its surrounding
area for the purpose of installing, operating, repairing,
maintaining and removing the Generator.
E. Tenant shall only test the Generator before or after Normal
Business Hours and upon prior notice to Landlord.
XII. SUPPLEMENTAL HVAC UNITS.
A. Tenant, as part of the Initial Alterations, shall install one
or more (as required pursuant to Section IX.D. or other
provisions of this Lease) air-cooled stand alone package
heating, ventilation and air conditioning system in the
Premises (the
<PAGE> 61
"Package Unit(s)"). Alternatively, or in addition to the
foregoing, Tenant may utilize any existing supplemental HVAC
units currently located in the Premises, although Landlord
makes no representation or warranty as to the condition of
any such existing units and Tenant acknowledges that such
units are being made available in their "as is" condition and
Tenant will be using any such existing units solely at its
own risk. The Package Unit(s) installed by Tenant and any
existing supplemental HVAC units utilized by Tenant
collectively are called the "Supplemental HVAC Units". The
type and design of any Package Units to be installed by or on
behalf of Tenant shall be subject to the prior approval of
Landlord. Also, the location of the Supplemental HVAC Units
within the Premises, the manner in which the Supplemental
HVAC Units will be vented, and the manner in which the
Supplemental HVAC Units will access outside air shall also be
subject to Landlord's prior approval.
B. Tenant shall be responsible for the cost of all electricity
consumed in connection with the operation of such
Supplemental HVAC Units and for the cost of installing a
submeter to measure such electrical consumption. Tenant, at
its sole cost and expense, shall procure and maintain in full
force and effect, a contract (the "Service Contract") for the
service, maintenance, repair and replacement of the
Supplemental HVAC Units with a HVAC service and maintenance
contracting firm reasonably acceptable to Landlord. Tenant
shall follow all reasonable recommendations of said
contractor for the maintenance, repair and replacement of the
Supplemental HVAC Units. The Service Contract shall provide
that the contractor shall perform inspections of the
Supplemental HVAC Units at intervals of not less than 3
months and that having made such inspections, said contractor
shall furnish a complete report of any defective conditions
found to be existing with respect to the Supplemental HVAC
Units, together with any recommendations for maintenance,
repair and/or replacement thereof. Said report shall be
furnished to Tenant with a copy to Landlord. Upon the
expiration or earlier termination of this Lease, Tenant shall
have the right to remove the Supplemental HVAC Units
purchased by Tenant, and, to the extent required by Landlord
pursuant to Article VIII of this Lease, Tenant shall be
obligated to remove all such Supplemental HVAC Units
purchased by Tenant from the Premises in accordance with
Article VIII of this Lease.
XIII. SHORT TERM RENEWAL OPTION.
A. Tenant, provided it is not in default beyond any applicable
notice and cure periods, and has not sublet the Premises or
assigned this Lease other than to a Permitted Transferee,
shall have the one time right to extend the Term (the "Short
Term Renewal Option"), as such Term may have been previously
extended, for a period of up to 2 months. Such Short Term
Renewal Option shall be exercised by providing written notice
(the "Short Term Renewal Notice") to Landlord on or before
120 days prior to the Termination Date, as same may have been
previously extended. Tenant's Short Term Renewal Notice must
specify the number of days that Tenant desires to extend the
Term (the "Desired Short Term Extension Period"), but shall
be no more than the permitted maximum extension period
described above in this Section XIII.A.
B. If Tenant properly exercises its Short Term Renewal Option,
then the Term shall be deemed extended commencing on the day
following the Termination Date, as same previously may have
been extended, and ending on the last day of the Desired
Short Term Extension Period (the "Short Term Renewal Term").
The Base Rent rate per rentable square foot for the Premises
during the Short Term Renewal Term shall equal 102% of the
Base Rent rate per rentable square foot for the Premises in
effect during the month of the Term immediately preceding the
commencement of the Short Term Renewal Term.
C. Tenant shall pay Additional Rent for the Premises during the
Short Term Renewal Term in accordance with the terms of this
Lease.
D. If Tenant is entitled to and properly exercises its Short
Term Renewal Option, Landlord, at its option, shall prepare
an amendment (the "Short Term Renewal Amendment") to reflect
changes in the Base Rent, Term, Termination Date and other
appropriate terms. Tenant shall execute and return such Short
Term
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<PAGE> 62
Renewal Amendment to Landlord within 15 days after Tenant's
receipt thereof from Landlord, but an otherwise valid
exercise of the Short Term Renewal Option shall be fully
effective whether or not the Short Term Renewal Amendment is
executed.
XIV. MISCELLANEOUS.
A. Health Club Facility. Subject to governmental approval, and
provided no zoning changes are required to accommodate same,
subject to the following regarding zoning matters, Tenant, at
its cost, shall be permitted to install a health club
facility in the Premises for the sole and exclusive use of
Tenant, its permitted successors and assigns, and the
employees of Tenant, and its permitted successors and
assigns. All plans and specifications for the health club
facility shall be subject to Landlord's approval. Tenant
shall be responsible for any additional charges or costs
incurred by Landlord or the Building charges as a result of
the health club facility, including, without limitation, any
increase in energy costs, Taxes or insurance. All zoning
variances or special use permits required to enable Tenant to
install a health club facility as described herein shall be
subject to Landlord's reasonable approval. Landlord agrees to
reasonably cooperate with Tenant, at no cost to Landlord, in
connection with any zoning variances or special use permits
which Tenant may be required to obtain in order to install
the health club facility. However, in no event shall Landlord
be required to consent to any zoning changes, variances,
special use permits or any other zoning modifications which,
in Landlord's judgment, may adversely impact the current
zoning classification of the Building or Landlord's ability
to operate the Building as an office building.
B. Food Service. Currently, another tenant in Building 223
(defined in Section III of this EXHIBIT E) has contracted
separately with a food service provider to operate a food
service facility in Building 223. Currently, the food service
facility is open to the public. If the quality of the food
service in such facility decreases such that it is less than
what Tenant deems satisfactory, Landlord agrees, upon request
of Tenant, to discuss with the tenant that contracted with
the food service provider possible ways (without cost or
liability to Landlord or such other tenant) in which the
quality of the food service available to the public may be
increased or otherwise improved. Landlord shall keep Tenant
informed of discussions.
XV. SELF HELP AND SET OFF RIGHTS.
A. Required Action. Except in the case of fire or other casualty
(in which case Article XVII of the Lease will control) and in
addition to, and not in lieu or reduction of, Tenant's rights
and remedies hereunder, if (i) Tenant provides written notice
(the "Repair Notice") to Landlord of a water leak in the
Premises caused by a problem with the roof of the Building or
leakage around the windows in the Premises, (ii) such leakage
is to such a degree that Tenant is unable to use (and
actually is not using) a substantial portion of its Premises
(which in the case of a roof leakage, shall mean that Tenant
is unable to use, at a minimum, a substantial portion of the
floor of the Premises closest to the roof), or such leakage
is substantially disrupting the use of a substantial portion
of the Premises or threatening damage to Tenant's computer or
data facilities in the Premises, (iii) the leakage is a
problem falling within Landlord's repair obligations under
this Lease, as more specifically described in Section IX.B.
of this Lease) (a "Required Action"), and (iv) Landlord fails
to cure the leakage problem within 60 days after Landlord's
receipt of the Repair Notice from Tenant (or within such
additional time thereafter as may be required to cure such
leak if such leak cannot be cured within such 60 day period
so long as Landlord commences such cure within the 60 day
period and diligently pursues all necessary steps required
for such cure and periodically provides Tenant with evidence
that Landlord is diligently pursuing such cure), then Tenant
may (but shall not be obligated to) proceed to take the
Required Action, pursuant to the terms of this Lease, and, at
least 10 days prior to commencing any such Required Action,
shall deliver a second written notice to Landlord specifying
that Tenant is about to take the Required Action (the "Second
Notice").
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<PAGE> 63
B. Restrictions on Action.
1. Any such Required Action taken by Tenant in
accordance with this Section shall be contracted for
only through Landlord's contractors that provided
any then outstanding warranties with respect to the
roof or windows in the Building, as applicable, or,
if none, then through contractors that will not
adversely impact any warranties affecting the
Building. Any work performed by Tenant or its
contractors in connection with the Required Action
shall be performed in a manner so as to impact as
little as possible any warranties affecting the
Building. If any such work by Tenant or its
contractors will void any warranties affecting the
Building, then Tenant shall not be permitted to take
the Required Action, unless approved by Landlord in
writing, which approval shall not be unreasonably
withheld, conditioned or delayed.
2. To the extent any Required Action by Tenant
adversely affects the warranties affecting any
portion of the Building, including any warranties
affecting the roof or windows in the Building, then
Tenant shall be directly responsible for any
increased costs Landlord may actually incur in
connection therewith.
3. If any Required Action will affect the Common Areas
of the Building, any structure of the Building
(other than the roof or the windows, and then only
to the extent absolutely necessary for Tenant to
carry out the Required Action in order to cure the
leak in the roof or in the windows), the main
Building systems that service other occupants of the
Building (specifically including fire and life
safety systems) as opposed to merely the
distribution of such main Building systems within
Tenant's Premises, the structural integrity of the
Building, the exterior appearance of the Building,
or any other tenant's leased space, Tenant shall not
be permitted to take the Required Action.
C. Not Applicable to Original Landlord. The rights of Tenant
described in this Section XV shall not be available so long
as the Landlord originally named hereunder, any affiliates of
such Landlord, or any successor to such Landlord by merger or
purchase of Landlord (as opposed to purchase of the assets of
Landlord) is acting as the Landlord hereunder. As used
herein, "an affiliate of Landlord" shall mean any entity
controlling, controlled by or under common control with
Landlord.
D. Reimbursement for Action. If any Required Action is taken by
Tenant pursuant to the terms of this Section XV, then
Landlord shall reimburse Tenant for its reasonable and
documented third party out of pocket costs and expenses
incurred in taking the Required Action, up to a maximum sum
equal to two month's Base Rental for the Premises at the then
current rate under this Lease, within 30 days after receipt
by Landlord of an invoice from Tenant which sets forth a
reasonably particularized breakdown of its costs and expenses
in connection with taking the Required Action on behalf of
Landlord (the "Repair Invoice"). If Landlord does not
reimburse Tenant for a properly presented Repair Invoice
within 30 days of receipt, then Tenant may deduct from the
next Rent payable by Tenant under this Lease, the amount set
forth in the Repair Invoice, up to the maximum amount
permitted under this Section XV.D (the "Offset Right").
Tenant shall provide such backup materials and access to
books and records as Landlord shall reasonably require to
verify Tenant's actual costs of taking the Required Action.
Notwithstanding the foregoing provisions of this paragraph to
the contrary, if Landlord delivers to Tenant within 30 days
after receipt of the Repair Invoice, a written objection to
the payment of such invoice, setting forth with reasonable
particularity Landlord's reason for its claim that the
Required Action did not have to be taken by Landlord pursuant
to the terms of this Lease or that Tenant breached the terms
of this Section XV or that the charges are excessive (in
which case Landlord shall pay the amount it contends would
not have been excessive), then Tenant shall not be entitled
to deduct such amount from Rent, but the dispute may be
submitted to a court of competent jurisdiction in accordance
with the terms of this Lease for resolution and, if resolved
in Tenant's favor, Tenant shall be entitled to deduct such
amount, plus
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<PAGE> 64
any reasonable court costs and expenses and attorneys' fees
allowable under this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this exhibit as
of the day and year first above written.
LANDLORD:
EOP-PERIMETER CENTER, L.L.C., A DELAWARE LIMITED
LIABILITY COMPANY
By: EOP Operating Limited Partnership, a Delaware
limited partnership, its sole member
By: Equity Office Properties Trust, a Maryland
real estate investment trust, its managing
general partner
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
TENANT:
NOVA GEORGIA SERVICES, L.P., A GEORGIA LIMITED
PARTNERSHIP
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
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<PAGE> 65
EXHIBIT F
HVAC SPECIFICATIONS
PERIMETER 219 HVAC DESIGN CRITERIA:
The HVAC equipment maintains conditions based upon Georgia Energy Code and the
local conditions specified in the 1981 edition of ASHRAE Handbook of
Fundamentals:
SUMMER: 78(degree)F at 50% relative humidity interior, based upon
outside conditions of 92(Degree)F dry bulb and 74(Degree)F wet
bulb.
WINTER: 68(degree)F interior based upon outside conditions of 17(Degree)F
dry bulb.
This criteria is based upon the building standard usage of electricity and
lighting and is based upon a maximum of 150 square feet occupied per person.
F-1
<PAGE> 66
EXHIBIT G
CLEANING SPECIFICATIONS
I. NIGHT CLEANING SPECIFICATIONS.
A. TENANT SPACES.
1. Daily - five nights each week.
a. Waste Baskets - empty and wipe clean. Only
trash placed in waste baskets or clearly
marked "Trash" removed.
b. Desk and Table Tops - remove dust with
treated cloth or lambswool duster. Dry wipe
glass tops. Do not use furniture polish.
Desk must be reasonably clear or all
personal articles to be dusted. No personal
article will be moved to dust around.
c. Non-Carpeted Floors - sweep and damp mop.
d. Carpeted Floors - vacuum/spot clean.
e. Wash Basins - clean and sanitize.
f. Drinking Fountains - clean, polish and
sanitize. Scrub spout with wire brush.
g. Breakrooms - Damp wipe counter tops,
cabinets, fronts of appliances and sink.
Spot clean walls. Damp mop floors. Reset
furniture.
h. Conference Room Tables - Dry wipe for
fingerprints and dust.
2. Semi-Weekly - two nights each week.
a. Files and Shelves - dust.
b. Interior Building Surfaces - dust within
reach of attendant with lambswool extension
duster.
c. Interior Glass Panels and Door Frames -
spot clean, wash overall as often as
needed.
d. Interior Vertical Walls and Woodwork - spot
clean.
e. Vinyl or Plastic Chair Pads - dust.
3. Weekly - one night each week.
a. Pictures/Wall Hangings - dust.
b. Louvered Doors/Interior Shutters - dust.
c. Office Furniture - dust within reach.
d. Carpeted Floors - detail vacuum (edge).
e. Vinyl Tile Floors - spray buff.
f. Cove Base - damp wipe.
g. Light Switches - remove fingerprints.
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h. Dust chairs including chair legs. Re-set
chairs under tables.
i. Deskside and intermediate recycling
containers - empty.
4. Monthly - one night each month.
a. Blinds - remove dust with treated cloth.
b. Vinyl Tile Floors - strip and re-wax.
c. Ceiling and Corners - dust within reach of
telescopic duster.
5. Quarterly - one night every three months.
a. Drapes - dust within reach.
b. Ceiling Vents, Vertical Surface, High
Moldings, Cornice and Overhead Pipes vacuum
and remove dust within reach.
c. Upholstered Furniture - remove dust and
debris.
6. Annual - one night every twelve months.
a. Light Fixture (fluorescent, flush type) -
dust.
b. Recessed Light - dust and wipe lens down.
c. Waste Receptacles - metal and plastic
receptacles washed and sanitized; wood
receptacles sprayed with disinfectant and
wiped clean.
B. CORRIDORS.
1. Daily - five nights a week.
a. Carpets - vacuum.
b. Non-carpeted Floors - sweep and damp mop.
Remove spills.
c. Janitor Sinks - clean and sanitize.
d. Doors - clean. Wipe down push plates, pull
plates and kick plates.
e. Damp Mopping - in areas of construction or
elsewhere, if needed.
f. Ash Urn/Trash Receptacles - remove waste.
Wipe interior and exterior surfaces.
g. Drinking Fountains - clean and sanitize.
h. Building Surfaces - spot clean.
2. Semi-Weekly - two nights a week.
a. Vertical Surfaces - dusted within reach of
telescopic duster.
b. Elevator and Standard Doors - wipe down.
3. Weekly - one night each week.
a. Cove Base - damp wipe down.
b. Carpeted Floors - detail vacuum (edge).
c. Vinyl Tile Flooring - spray buff.
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4. Monthly - one night each month.
a. Janitor Closets - sweep and mop.
b. Mechanical Rooms - sweep and mop.
c. Waste Receptacles - wash and sanitize.
d. Vinyl Tile Flooring - strip and re-wax.
5. Quarterly - one night every three months.
a. Fabric Walls - spot clean with dry powder
or extract.
C. RESTROOMS.
1. Daily - five nights each week.
a. Trash - remove waste and clean receptacle.
b. Tile Floors - sweep and mop with germicidal
disinfectant.
c. Carpeted Floors - vacuum area including
vestibule.
d. Wash Basin/Urinals/Commodes - clean,
sanitize and descale.
e. Shelving/Dispensers/Chrome
Dispensers/Chrome Fixtures - damp wipe.
f. Sanitary Napkin Receptacles - empty, clean
and disinfect. Replace liner.
g. Partitions - dust tops and sides. Damp wipe
clean.
h. Towel/Tissue Receptacles - replenish with
materials specified by property management.
Replace towels or tissues when receptacle
is 3/4 empty. Rolls should feed over the
top. No extra rolls left in stall.
i. Fitting/Supply Pipes/Brightwork - clean and
polish.
j. Walls - spot clean with germicidal
disinfectant.
k. Mirrors - clean.
l. All Surfaces - remove dust.
m. Doors - clean and wipe down push plates,
pull plates and kick plates.
2. Weekly - one night each week.
a. Floor Drains - flush with water and
disinfectant.
b. Exhaust Fan - remove dust.
c. Doors - dust frames.
d. Partitions - clean and polish hinges.
e. Light Switches - remove fingerprints.
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3. Monthly - one night each month.
a. All Floors - machine scrub tiles and grout.
b. Walls - wash with a germicidal
disinfectant.
4. Quarterly - one night every three months.
a. White Grout Floors - bleach with sodium
hydrochloric solution.
D. ELEVATORS.
1. Daily - five nights each week.
a. Carpets - detail vacuum (edge).
b. Walls/Trim/Doors - wipe clean, remove dust
and fingerprints from interior and exterior
surfaces.
c. Floor Tracks - vacuum and wipe clean; brush
and polish tracks and saddles.
d. Call Panel - wipe clean, remove
fingerprints.
2. Weekly - one night each week.
a. Clean ceilings and lamps.
b. Clean exterior doors.
E. LOBBY.
1. Daily - five nights each week.
a. Carpets - vacuum. Spot clean.
b. Stairs - at building entrances - sweep and
spot clean.
c. Non-Carpeted Floors - sweep and damp mop.
Vacuum and shake out mats.
d. Doors - clean. Wipe down pull plates, push
plates and kick plates.
e. Handrails - damp wipe.
f. Interior and Exterior Ash Urn/Trash
Receptacles - remove waste. Wipe interior
and exterior surfaces.
g. Building Surfaces and Furniture - remove
dust with lambswool duster.
h. Directory Boards/Kiosks - remove dust and
fingerprints.
2. Weekly - one night each week.
a. Janitor Closets - sweep and mop.
b. Vinyl Tile flooring - spray buff.
c. Formica Surfaces - damp wipe.
d. Cove Base - damp mop.
e. Carpets - detail clean (edge).
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<PAGE> 70
f. Building Entrance - clean threshold.
3. Monthly - one night each month.
a. Waste Receptacles - clean/sanitize interior
and exterior.
b. Vinyl Tile Flooring - strip and re-wax.
c. Clean marble surface as directed by
property management.
F. BUILDING STAIRWAYS AND LANDINGS.
1. Daily - five nights each week.
a. Stairs - remove trash.
b. Stairway Landings - sweep/vacuum.
c. Doors - clean. Wipe down push plates, pull
plates and kick plates.
2. Weekly - one night each week.
a. Stairs - scrub stairs and stair corners
and/or mop surfaces.
3. Monthly - one night each month.
a. Stairs - scrub stairs and stair corners.
G. RETAIL. Night staff will make best efforts to clean space
prior to tenants close of business.
H. PATIOS/SIDEWALKS.
1. Daily - five nights each week.
a. Police for trash - all areas including
planting beds and along curbs.
b. Empty trash receptacles and ash urns.
c. Straighten furniture.
d. Remove gum.
e. Services performed as necessary.
f. Steam and/or pressure wash pavers.
g. Clean/wash fountains, chairs and trash
receptacles.
I. LOADING DOCK AREA.
1. Daily - five nights each week.
a. Keep dumpster and surrounding area free of
debris, water and oil.
b. Maintain all ramps and stairs free of
debris and spills.
2. Weekly - one night each week.
a. Hand or machine scrub dock, ramps and
stairs.
b. Clean handrails.
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3. Monthly - one night each month.
a. Machine scrub or pressure wash parking
area.
b. Remove gum.
J. SECURITY CONSOLE/CONTROL CENTER (IF APPLICABLE).
1. Daily - five nights each week.
a. Area to be kept clean and spotless at all
times.
b. All furniture, fixtures, glass, doors,
thresholds, etc. to be cleaned and
polished.
c. Computer equipment and alarm boards are not
to be touched without approval of property
management and only with the supervision of
building engineer.
II. DAYPORTER RESPONSIBILITIES.
A. DAILY.
1. Pick up trash throughout grounds, including parking
lots, park entrances and picnic areas. Clean trash
from tree grates and planters.
2. Police stairtowers, corridors and loading dock for
trash, debris, cigarette butts, door props, etc.
3. Police all restrooms, stairtowers, vacant spaces,
lobbies and corridors for burned out bulbs (fixtures
and exit lights) and for stained ceiling tiles.
4. Sweep/vacuum all entrance plazas, exterior
stairwells, garages, etc.
5. Inspect restrooms. Re-stock supplies as necessary.
Clean counters. Compact trash or replace trash bags
as necessary.
6. Clean perimeter door glass, inside and out; polish
door handles.
7. On all floors, remove cigarette butts and trash from
elevator lobby ashtrays. Replace sand as necessary.
8. At all building entrances, remove cigarette butts
and trash from ashtrays. Replace sand as necessary.
9. Wipe off equipment and mirrors in health clubs and
pick up trash.
10. Check and clean conference rooms twice daily. Clean
kitchen area including dishes (if applicable).
11. Clean smoking room (if applicable) and empty trash
cans and ashtrays (if applicable).
12. Clean janitorial closets and organize their contents
as necessary.
13. Add or replace air freshener products as needed,
with product to be supplied by property manager.
B. WEEKLY.
1. Check stairwells inside once each week and parking
deck stairwell twice each week. Dust and pick up
trash as needed.
C. MONTHLY.
G-6
<PAGE> 72
1. Pressure wash (equipment provided by property
manager) sidewalks, entrance plazas, parking garage
areas, exterior stairs, etc., as required by
property manager.
2. Inspect all restrooms. Test all fixtures and
dispensers and make repair list for faucets, soap
dispensers, toilet tissue dispensers, toilets, wall
covering, door closures, etc.
D. AS NEEDED.
1. Respond to tenant calls or work-orders, particularly
for the following typical requests: lock-outs; extra
trash/recycling pick-up; toilet/sink clogs and
related clean-ups; light bulb replacements (when
property manager's staff is not available); special
vacuuming for meetings; follow-up on items not
finished by night cleaners; errand-running; memo
delivery.
2. Lay calcium chloride on sidewalks (foul weather
only).
3. Perform special projects as directed by property
manager from time to time.
4. Vacuum lobby and elevator carpets and walk-off mats;
put out "Caution: Wet Floor" signs when it rains.
Clean entrance doors, side glass and ash urns. Shine
all metal surfaces as necessary.
5. Sweep and/or damp mop granite, ceramic and other
non-carpeted common area flooring as necessary,
particularly after it rains.
6. Remove trash, debris and dead leaves from planter
bed areas in lobbies.
7. Clean glass on lobby directory.
8. Remove fingerprints from and polish as necessary all
brushed or polished chrome and brass finishes on
doors, around elevators, and inside elevators on
lobby level; polish lobby handrails.
9. On all floors, spot vacuum corridor carpets.
10. Perform special projects as directed by property
manager or Contractor from time to time.
E. WINDOW WASHING.
1. Exterior Windows: Twice each calendar year.
2. Interior Windows: Once each calendar year.
G-7
<PAGE> 73
EXHIBIT H
NON-DISTURBANCE, ATTORNMENT AND SUBORDINATION AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of ______,
19__, by and among METROPOLITAN LIFE INSURANCE COMPANY, A NEW YORK CORPORATION
(hereinafter called the "Lender"), NOVA GEORGIA SERVICES, L.P., A GEORGIA
LIMITED PARTNERSHIP (hereinafter called the "Tenant") and EOP-PERIMETER CENTER,
L.L.C., A DELAWARE LIMITED LIABILITY COMPANY (hereinafter called the
"Landlord").
WITNESSETH
WHEREAS, on ________________ Landlord entered into and delivered that
certain Deed to Secure Debt and Security Agreement in favor of Lender recorded
in Deed Book ______, Page ______ Records of ______________ County, Georgia
(said Deed to Secure Debt and Security Agreement being hereinafter called the
"Security Deed"), conveying the property described therein, which is located at
_____________________________________, ________________ County, Georgia and
commonly known as _________________________, to secure the payment of the
indebtedness described in the Security Deed;
WHEREAS, Landlord and Tenant made and entered into that certain Lease,
dated _________________________, 19__, with respect to certain premises therein
described, known as __________________ (said Lease being hereinafter called the
"Lease"; said premises being hereinafter called the "Leased Premises"); and
WHEREAS, the parties hereto desire to enter into this Non-Disturbance,
Attornment and Subordination Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants
hereinafter set forth, Lender, Tenant and Landlord hereby covenant and agree as
follows:
1. Non-Disturbance. So long as no default exists, nor any event
has occurred which has continued to exist for such period of
time (after notice, grace or cure periods, if any, required
by the Lease) as would entitle the lessor under the Lease to
terminate the Lease or would entitle such lessor to
dispossess the lessee thereunder, the Lease shall not be
terminated, nor shall such lessee's use, possession or
enjoyment of the Leased Premises be interfered with nor shall
the leasehold estate granted by the Lease be affected in any
other manner, in any exercise of the power of sale contained
in the Security Deed, or by any foreclosure or any action or
proceeding instituted under or in connection with the
Security Deed or in case the Lender takes possession of the
property described in the Security Deed pursuant to any
provisions thereof, unless the lessor under the Lease would
have had such right if the Security Deed had not been made,
except that the person or entity acquiring the interest of
the lessor under the Lease as a result of any such action or
proceeding, and the successors and assigns thereof
(hereinafter called the "Purchaser") shall not be (a) liable
for any act or omission of any prior lessor under the Lease
of which Lender has not received notice and the opportunity
to cure from Tenant; or (b) subject to any offsets or
defenses which the lessee under the Lease might have against
any prior lessor under the Lease of which Lender has not
received notice and the opportunity to cure from Tenant; or
(c) bound by any base rent, percentage rent or any other
payments which the lessee under the Lease might have paid for
more than the current month to any prior lessor under the
Lease; or (d) bound by any amendment or modification of the
Lease made without Lender's prior written consent, if such
consent is required pursuant to the terms of the Security
Deed; or (e) bound by any consent by any lessor under the
Lease to any assignment of the lessee's interest in the Lease
made without also obtaining Lender's prior written consent
(to the extent such consent may be required under the Lease),
if such consent is required pursuant to the terms of the
Security Deed.
2. Attornment. If the interests of the lessor under the Lease
shall be transferred by reason of the exercise of the power
of sale contained in the Security Deed, or by
H-1
<PAGE> 74
any foreclosure or other proceeding for enforcement of the
Security Deed, the lessee thereunder shall be bound to the
purchaser under all of the terms, covenants and conditions of
the Lease for the balance of the term thereof and any
extensions or renewals thereof which may be effected in
accordance with any option therefor in the Lease, with the
same force and effect as if the Purchaser were the lessor
under the Lease, and Tenant, as lessee under the Lease, does
hereby attorn to the Purchaser, including the Lender if it be
the Purchaser, as its lessor under the Lease. Said attornment
shall be effective and self-operative without the execution
of any further instruments upon the succession by Purchaser
to the interest of the lessor under the Lease. The respective
rights and obligations of Purchaser and of the lessee under
the Lease upon such attornment, to the extent of the then
remaining balance of the term of the Lease and any such
extensions and renewals, shall be and are the same as now set
forth in the Lease except as otherwise expressly provided
herein.
3. Subordination. Subject in all respects to the provisions of
Paragraph 1 hereof, Tenant hereby subordinates all of its
right, title and interest as lessee under the Lease to the
right, title and interest of the Lender under the Security
Deed and Tenant further agrees that the Lease now is and
shall at all times continue to be subject and subordinate in
each and every respect to the Security Deed and to any and
all increases, renewals, modifications, extensions,
substitutions, replacements and/or consolidations of the
Security Deed.
4. Notice of Default by Lessor. Tenant, as lessee under the
Lease, hereby covenants and agrees to give Lender written
notice properly specifying wherein the lessor under the Lease
has failed to perform any of the covenants or obligations of
the lessor under the Lease, simultaneously with the giving of
any notice of such default to the lessor under the provisions
of the Lease. Tenant agrees that Lender shall have the right,
but not the obligation, within 30 days after receipt by
Lender of such notice (or within such additional time as is
reasonably required to correct such default not to exceed 120
days) to correct or remedy or cause to be corrected or
remedied, each such default before the lessee under the Lease
may take any action under the Lease by reason of such
default. Such notices to Lender shall be delivered in
duplicate to:
Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010
Attn: Executive Vice President Real Estate Investments
and
Metropolitan Life Insurance Company
303 Perimeter Center North
Suite 600
Atlanta, Georgia 30346
Attn: Vice President
or to such other address as the Lender shall have designated
to Tenant by giving written notice to Tenant at the Leased
Premises or to such other address as may be designated by
written notice from Tenant to Lender.
5. No Further Subordination. Landlord and Tenant covenant and
agree with Lender that there shall be no further
subordination of the interest of lessee under the Lease to
any Lender or to any other party without first obtaining the
prior written consent of Lender. Any attempt to effect a
further subordination of lessee's interest under the Lease
without first obtaining the prior written consent of Lender
shall be null and void.
6. As to Landlord and Tenant. As between Landlord and Tenant,
Landlord and Tenant covenant and agree that nothing herein
contained nor anything done pursuant to the provisions hereof
shall be deemed or construed to modify the Lease.
7. As to Landlord and Lender. As between Landlord and Lender,
Landlord
H-2
<PAGE> 75
and Lender covenant and agree that nothing herein contained
nor anything done pursuant to the provisions hereof shall
be deemed or construed to modify the Security Deed.
8. Title of Paragraph. The titles of the paragraphs of this
agreement are for convenience and reference only, and the
words contained therein shall in no way be held to explain,
modify, amplify or aid in the interpretation, construction or
meaning of the provisions of this agreement.
9. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of
Georgia.
10. Provisions Binding. The terms and provisions hereof shall be
binding upon and shall inure to the benefit of the heirs,
executors, administrators, successors and permitted assigns,
respectively, of Lender, Tenant and Landlord. The reference
contained to successors and assigns of Tenant is not intended
to constitute and does not constitute a consent by Landlord
or Lender to an assignment by Tenant, but has reference only
to those instances in which the lessor under the Lease and
Lender shall have given written consent to a particular
assignment by Tenant thereunder.
IN WITNESS WHEREOF, the parties have hereunto set their respective
hands and seals as of the day, month and year first above written.
As to Tenant: TENANT:
Signed, sealed and delivered -------------------------------------
in the presence of:
-------------------------------------
- ------------------------------------- By:
Unofficial Witness ----------------------------------
Its:
---------------------------------
- ------------------------------------
Notary Public
[NOTARIAL SEAL]
Commission Expiration Date:
- -------------------------------
H-3
<PAGE> 76
As to Landlord: LANDLORD:
Signed, sealed and delivered -------------------------------------
in the presence of:
-------------------------------------
- ------------------------------------- By:
Unofficial Witness ----------------------------------
Its:
---------------------------------
- ------------------------------------
Notary Public
[NOTARIAL SEAL]
Commission Expiration Date:
- -------------------------------
As to Lender: LENDER:
Signed, sealed and delivered METROPOLITAN LIFE INSURANCE
in the presence of: COMPANY, A NEW YORK CORPORATION
- ------------------------------------ -------------------------------------
Unofficial Witness By: Robert P. Edwards
Its: Assistant Vice President
- ------------------------------------
Notary Public
[NOTARIAL SEAL]
Commission Expiration Date:
- --------------------------------
H-4
<PAGE> 77
EXHIBIT I
GUARANTY OF LEASE
FOR VALUE RECEIVED and in consideration for and as an inducement to
EOP-PERIMETER CENTER, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY ("Landlord")
to lease certain real property to NOVA GEORGIA SERVICES, L.P., A GEORGIA
LIMITED PARTNERSHIP, as tenant ("Tenant"), pursuant to a lease dated ________,
_____ (the "Lease") by and between Landlord and Tenant, the undersigned, NOVA
CORPORATION, A DELAWARE CORPORATION ("Guarantor"), does hereby unconditionally
and irrevocably guarantee to Landlord the punctual payment of all Rent (as such
term is defined in the Lease) payable by Tenant under the Lease throughout the
term of the Lease and any and all renewals and extensions thereof in accordance
with and subject to the provisions of the Lease, and the full performance and
observance of all other terms, covenants, conditions and agreements therein
provided to be performed and observed by Tenant under the terms of the Lease,
for which the undersigned shall be jointly and severally liable with Tenant. If
any default on the part of Tenant shall occur under the Lease, the undersigned
does hereby covenant and agree to pay to Landlord in each and every instance
such sum or sums of money and to perform each and every covenant, condition and
agreement under the Lease as Tenant is and shall become liable for or obligated
to pay or perform under the Lease, together with the costs reasonably incurred
by Landlord in connection therewith, including, without limitation, reasonable
attorneys' fees. Such payments of Rent and other sums shall be made monthly or
at such other intervals as the same shall or may become payable under the
Lease, including any accelerations thereof, all without requiring any notice
from Landlord (other than any notice required by the Lease) of such non-payment
or non performance, all of which the undersigned hereby expressly waives.
The maintenance of any action or proceeding by Landlord to recover any
sum or sums that may be or become due under the Lease and to secure the
performance of any of the other terms, covenants and conditions of the Lease
shall not preclude Landlord from thereafter instituting and maintaining
subsequent actions or proceedings for any subsequent default or defaults of
Tenant under the Lease. The undersigned does hereby consent that without
affecting the liability of the undersigned under this Guaranty and without
notice to the undersigned, time may be given by Landlord to Tenant for payment
of Rent and such other sums and performance of said other terms, covenants and
conditions, or any of them, and such time extended and indulgence granted, from
time to time, or Tenant may be dispossessed or Landlord may avail itself of or
exercise any or all of the rights and remedies against Tenant provided by law
or by the Lease, and may proceed either against Tenant alone or jointly against
Tenant and the undersigned or against the undersigned alone without first
prosecuting or exhausting any remedy or claim against Tenant. The undersigned
expressly waives the right to require Landlord to take action against Tenant as
provided for in O.C.G.A. 10-7-24 (Michie 1981, as amended or hereafter
amended). The undersigned does hereby further consent to any subsequent change,
modification or amendment of the Lease in any of its terms, covenants or
conditions, or in the Rent payable thereunder, or in the premises demised
thereby, or in the term thereof, and to any assignment or assignments of the
Lease, and to any subletting or sublettings of the premises demised by the
Lease, and to any renewals or extensions thereof, all of which may be made
without notice to or consent of the undersigned and without in any manner
releasing or relieving the undersigned from liability under this Guaranty.
The undersigned does hereby agree that the bankruptcy of Tenant shall
have no effect on the obligations of the undersigned hereunder. The undersigned
does hereby further agree that in respect of any payments made by the
undersigned hereunder, the undersigned shall not have any rights based on
suretyship, subrogation or otherwise to stand in the place of Landlord so as to
compete with Landlord as a creditor of Tenant, unless and until all claims of
Landlord under the Lease shall have been fully paid and satisfied.
Neither this Guaranty nor any of the provisions hereof can be
modified, waived or terminated, except by a written instrument signed by
Landlord. The provisions of this Guaranty shall apply to, bind and inure to the
benefit of the undersigned and Landlord and their respective heirs, legal
representatives, successors and assigns. The undersigned, if there be more than
one, shall be jointly and severally liable hereunder, and for purposes of such
several liability the word "undersigned" wherever used herein shall be
construed to refer to each of the undersigned parties separately, all in the
same manner and with the same effect as if each of them had signed separate
instruments, and this Guaranty shall not be revoked or impaired as to any of
such parties by the death of another party or by revocation or release of any
obligations hereunder of any other party. If Landlord should retain counsel
and/or institute any
I-1
<PAGE> 78
suit against Guarantor to enforce this Guaranty or any covenants or obligations
hereunder, then Guarantor shall pay to Landlord, upon demand, all reasonable
attorneys' fees, costs and expenses, including, without limitation, court
costs, filing fees, recording costs, and all other costs and expenses incurred
in connection therewith (all of which are referred to herein as "Enforcement
Costs"), in addition to all other amounts due hereunder. This Guaranty shall be
governed by and construed in accordance with the internal laws of the state
where the premises demised by the Lease are located. For the purpose solely of
litigating any dispute under this Guaranty, the undersigned submits to the
jurisdiction of the courts of said state.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of
the date of the Lease.
ATTEST/ WITNESS: GUARANTOR:
NOVA CORPORATION, A DELAWARE CORPORATION
By:
- -------------------------------- -------------------------------------
Name (print): Name:
-------------------- -----------------------------------
Title:
- -------------------------------- ----------------------------------
Name (print):
-------------------
STATE OF )
-----------------
) SS
COUNTY OF )
----------------
BE IT REMEMBERED, that on the ____ day of ___________, 19__, before
me, a Notary Public in and for said County personally appeared
__________________________ _____________________________, by
__________________, its ___________ President, the GUARANTOR in the foregoing
GUARANTY who acknowledged that the signing thereof was the duly authorized act
and deed of said corporation and his free and voluntary act and deed as said
officer for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal on the day and year first above written.
-------------------------------
Notary Public
My Commission Expires:
------------------------
I-2
<PAGE> 1
EXHIBIT 13
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues $ 1,466,639 $ 1,145,664 $ 680,872 $ 529,279 $ 292,698
Net income (loss) 82,468 (12,779) 37,899 19,148 11,265
Total assets 734,011 622,533 426,432 341,323 150,153
Total long-term debt 238,253 23,025 52,001 22,175 50,176
Per common share:
Earnings-Basic 1.16 (0.18) 0.60 0.32 0.25
Diluted 1.14 (0.18) 0.58 0.32 0.25
Cash dividends declared
</TABLE>
This summary unaudited combined condensed financial information reflects
the September 1998 PMT Merger which was accounted for as a pooling-of-interests;
accordingly, the separate historical financial results of NOVA and PMT have been
combined in this table and throughout the Annual Report.
<PAGE> 2
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Since the incorporation of NOVA's predecessor, NOVA Information Systems, in
February 1991, NOVA Corporation has grown in dollar volume processed to the
third largest integrated transaction processor in the United States, leading to
significant increases in revenues and improved operating efficiencies. This
growth has been fueled by NOVA's marketing programs, the merger with PMT
Services, Inc. (PMT) in September 1998, and through a series of strategic
merchant portfolio purchases and acquisitions, joint venture agreements, and
long-term banking alliances that provide a channel for merchant portfolio
purchases, as well as long-term exclusive marketing arrangements.
NOVA's merger with PMT, portfolio purchases, joint venture investments, and
marketing alliances provide significant strategic and financial benefits
including: (1) enhanced distribution channels to facilitate growth in
transaction volume, (2) expansion of the number of merchant locations served,
(3) further geographic diversification of NOVA's portfolio, and (4) economies of
scale derived from substantial increases in transaction processing volume.
The PMT merger in September 1998, enabled NOVA to integrate two unique
sales channels, PMT's ISO relationships and NOVA's traditional bank channel,
while leveraging NOVA's existing in-house technologies. Following the PMT
merger, NOVA has continued to focus on the processing sector comprised primarily
of small to medium-sized merchants, who historically have been overlooked and
could benefit from the advantages of value-added services usually offered only
to large merchants. From its origin, NOVA has invested significant capital to
develop, expand and enhance an integrated technology platform of hardware,
software applications and network telecommunications infrastructure to process
large volumes of transactions.
During 1999 NOVA focused significant efforts on consolidating and
integrating PMT's numerous operational and administrative functions into NOVA's
centralized structure. This process, which was substantially completed during
1999, not only eliminated future duplication of costs, but also streamlined all
aspects of managing NOVA. An integral component of this consolidation process
was the conversion of PMT's merchant base onto the NOVA Network. While the
conversion of the PMT merchants enabled consolidation by facilitating a uniform
approach and methodology for all functional areas of the Company, the primary
benefit of conversion results from the economies of scale and operating
efficiencies achieved by further utilizing the NOVA Network.
Another significant factor influencing 1999 operating results is the
realization of the benefits from 1998 conversion efforts. During 1998 and late
1997, NOVA completed four major merchant portfolio purchases: Key Merchant
Services, LLC (KMS) in January 1998, a joint venture with KeyBank, N.A.; Elan
Merchant Services, LLC (Elan) in October 1997, a joint venture with Firstar
Bank, U.S.A, N.A.; the CoreStates portfolio (CoreStates) in October 1998,
purchased from First Union National Bank of Delaware; and the MBNA portfolio
(MBNA) in December 1997, purchased from MBNA American Bank, N.A. KMS, Elan,
CoreStates and MBNA represented $5.1 billion, $3.0 billion, $3.1 billion and
$1.0 billion, respectively, in annualized credit and debit card processing
volume at the times of the transactions. During 1998 and early 1999, NOVA
completed the conversions to the NOVA Network of merchants represented by these
investments.
MERGER AND CONSOLIDATION CHARGES
As a result of NOVA's merger with PMT and other mergers completed during
1998, the Company recorded a $90.7 million charge in 1998. This charge was
primarily related to direct merger transaction costs, charges associated with
the consolidation and closure of PMT's corporate headquarters and certain
operating
2
<PAGE> 3
subsidiaries, contract termination costs related to unfavorable third party
processing contracts, and the decision to exit certain of PMT's sales
distribution channels. Beginning in 1998 and continuing throughout 1999,
management executed substantially all parts of the plan for PMT's integration
and consolidation, making refinements to the plan as additional facts and
circumstances became available. During 1999, revisions to the plan resulted in
the reversal of approximately $6.5 million in charges accrued in 1998 that were
not needed under the revised plan and additional costs of approximately $6.7
million to recognize the costs of executing revised elements of the plan. The
consolidation and integration charges recorded in 1999 exceeded the reversal of
1998 charges by approximately $180,000, with such excess charges reflected in
the operating results for 1999.
The following is a summary of the activity recorded relating to merger and
consolidation charges:
<TABLE>
<CAPTION>
BALANCE REVERSAL BALANCE
1998 PAYMENTS AT OF 1999 PAYMENTS AT
CHARGES APPLIED 12/31/98 ACCRUALS CHARGES APPLIED 12/31/99
------- -------- -------- -------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Direct transaction
costs.............. Cash $15,515 $(11,412) $ 4,103 $ -- $ 241 $ (4,344) $ --
Severance packages... Cash 14,050 (1,404) 12,646 (2,149) 1,591 (8,297) 3,791
Lease abandonment.... Cash 4,658 -- 4,658 (280) 2,968 (2,324) 5,022
Contract termination
charges............ Cash 35,506 (13,689) 21,817 (3,621) -- (18,196) --
Asset write-down..... Non-cash 7,121 (7,121) -- -- 1,863 (1,863) --
Costs to exit a
distribution
channel............ Non-cash 11,370 (11,370) -- -- -- -- --
Costs to exit a
distribution
channel............ Cash 2,500 -- 2,500 (434) -- (2,066) --
------- -------- ------- ------- ------ -------- ------
$90,720 $(44,996) $45,724 $(6,484) $6,663 $(37,090) $8,813
======= ======== ======= ======= ====== ======== ======
</TABLE>
The primary costs associated with 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 result from the
elimination of overlapping functions, primarily customer service, accounting,
and administrative areas.
Direct Transaction Costs. Direct merger transaction costs primarily
consisted of investment banking commissions, professional fees, and regulatory
filing expenses. During 1999, approximately $241,000 of merger related
professional fees were incurred in excess of amounts accrued in 1998.
Severance Packages. During 1998, management developed and began
implementing plans to close PMT's corporate headquarters, as well as downsize
certain of PMT's operating subsidiaries. As of December 31, 1998, the only
significant employee group notified of such plans was at the corporate
headquarters and certain executives. Accordingly, the costs associated with
these terminations were the only severance costs included in the 1998 charge.
The total number of employees terminated from this group was approximately 275,
with 210 having received severance packages as of December 31, 1998. Of these
employees, certain executives' severance is being paid over two years. The
remaining employees in this group were displaced during the first quarter of
1999, with all severance benefits paid at that time. During 1999, management was
able to settle termination related benefits associated with certain executives
at amounts less than originally agreed, accounting for substantially all of the
reversal in this merger charge category.
During 1999, decisions were made to close or downsize additional facilities
to further streamline the operating and administrative functions. These actions
resulted in the termination of approximately 183 employees, of which 179
received severance packages totaling approximately $1.4 million as of December
31, 1999. The remaining four individuals, with total severance payments due of
approximately $160,000, were notified of their termination during 1999, but
received their severance payments in January 2000. The
3
<PAGE> 4
remaining severance accrued in the December 31, 1999 merger reserve balance
relates to executives whose terminations were effective and accrued for during
1998 and whose severance will be fully paid by mid-2001.
Lease Abandonment. The Company began the process of moving PMT's
operations from Nashville, Tennessee to other locations in December 1998, and
completed this process in the first quarter of 1999, at which time the premises
in Nashville were completely vacated. The 1998 charge included the estimated
unrecoverable future lease obligations for primarily PMT's Nashville
headquarters. By December 1999 the facility was fully subleased, facilitating an
accurate assessment of future unrecoverable lease obligations. Based on the
updated assessment, approximately $280,000 of the original merger and
consolidation charge was reversed. During 1999, plans were made to close or
downsize additional facilities. These decisions resulted in additional accruals
of approximately $3.0 million covering ten locations, eight of which have been
closed or downsized during 1999. The remaining two facilities will be closed or
downsized during 2000. Obligations under leases included in the reserve balance
will not be fully paid out until August 2007.
Contract Termination Charges. 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 NOVA Network. As a result of this plan, in
1998 the Company negotiated the termination of long-term processing contracts
with third parties. The majority of these terminations were finalized and paid
in 1998. During 1999, management was able to successfully terminate one of the
contracts without incurring the $2.0 million penalty recognized in 1998. Based
on new facts and circumstances arising in 1999, management also determined that
the economic benefits of terminating another contract did not outweigh the early
termination costs. Accordingly, approximately $3.9 million of contract
termination charges were reversed to appropriately reflect these events.
Asset Write-Down. Capital asset write-downs are substantially attributable
to the 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. Charges recorded in 1998 were
associated primarily with PMT's corporate office in Nashville. Additional
charges of approximately $1.9 million were recognized during 1999 in connection
with the revised facility consolidation plan.
Costs to Exit a Distribution Channel. 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 this distribution channel included 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 final negotiated termination fee was approximately
$434,000 less than accrued in 1998, resulting in a reversal of the excess charge
during 1999.
During 1998, NOVA also recorded approximately $14.2 million in unusual
selling, general and administrative charges associated with the PMT Merger. Such
charges primarily result from changes in management estimates pertaining to
collectibility of accounts receivable ($6.2 million), merchant credit and fraud
loss reserves ($4.7 million), and state sales and use tax reserves ($2.0
million). The remainder of the results of operations discussion will exclude the
impacts of merger related charges, as the Company believes that this will
provide for more meaningful comparisons.
COMPONENTS OF REVENUES AND EXPENSES
Revenues
NOVA derives revenues principally from electronic processing of credit,
charge and debit card transactions that are authorized and captured through the
NOVA Network and through third-party networks prior to conversion. Typically
merchants are charged for these processing services at a bundled rate that is a
percentage of the dollar amount of each transaction and, in some instances,
additional fees per transaction.
4
<PAGE> 5
These charges, referred to as "merchant discount," are negotiated with each
merchant and, in the aggregate, represent in excess of 90% of NOVA's revenues.
Certain merchant customers are charged a flat fee per transaction, while others
may also be charged miscellaneous fees, including fees for handling chargebacks,
monthly minimums, equipment rentals, sales or leasing, and other miscellaneous
services. Revenues are reported net of amounts paid to ISO's, agent banks and
merchant associations under revenue sharing agreements pursuant to which such
parties receive payments based primarily on processing volume for particular
groups of merchants.
Expenses
Cost of service includes costs directly attributable to the furnishing of
transaction processing and other services to NOVA's merchant customers. The most
significant components of cost of service include interchange and assessment
fees, which are charged by the credit card associations for clearing services,
advertising and other expenses. Interchange and assessment fees are billed
primarily as a percent of dollar volume processed and, to a lesser extent, as a
per-transaction fee. Cost of service also includes charges paid to third parties
for POS network service (for merchant customers acquired but not yet converted
to the NOVA Network), merchant accounting and settlement fees, cost of equipment
leased, rented or sold, NOVA Network costs and other direct operating expenses.
Conversion costs include expenses incurred to convert acquired portfolios
from existing processing platforms to the NOVA Network and operating systems.
Such costs are expensed as incurred and these costs include expenses related to
reprogramming POS terminals at merchant locations, duplicate costs to process
transactions prior to conversion, unfavorable contract payments for transaction
authorizations, and independent contractor fees.
Selling, general and administrative expenses include salaries and wages,
commissions, employee benefits, travel and entertainment, telecommunications,
and other costs of the operations and marketing centers, subsidiary offices, and
corporate headquarters. Depreciation and amortization costs are related to
NOVA's capital expenditures, merchant portfolio purchases and business
acquisitions.
RESULTS OF OPERATIONS
The following table for the years ended December 31, 1999, 1998, and 1997
sets forth the percentage of revenues represented by certain items on NOVA's
consolidated statements of operations:
PERCENTAGE OF TOTAL REVENUES
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Revenue..................................................... 100.0% 100.0% 100.0%
Cost of service............................................. 76.4 77.3 76.3
Conversion costs............................................ 1.8 0.9 0.4
Selling, general and administrative......................... 7.5 10.5 11.2
Depreciation and amortization............................... 3.9 3.9 3.5
Merger and consolidation expenses........................... 0.0 7.9 0.3
Operating income (loss)..................................... 10.4 (0.5) 8.4
Interest income............................................. 0.2 0.6 0.9
Interest expense............................................ (0.5) (0.5) (0.6)
Minority interest in income of subsidiaries................. (1.1) (0.9) (0.1)
Other income................................................ 0.0 0.0 0.0
Income (loss) before provision (benefit) for income taxes... 9.0 (1.3) 8.6
Provision (benefit) for income taxes........................ 3.4 (0.2) 3.0
Net income (loss)........................................... 5.6 (1.1) 5.6
</TABLE>
5
<PAGE> 6
YEAR ENDED DECEMBER 31, 1999, COMPARED WITH YEAR ENDED DECEMBER 31, 1998
Revenues
NOVA's revenue increased $321.0 million, or 28.0%, to $1.5 billion for the
year ended December 31, 1999, compared with $1.1 billion for the same period in
1998. This revenue growth is primarily attributable to a 20.4% increase in
merchant sales processing volume to $57.2 billion from $47.5 billion in 1998. Of
the total increase, approximately $1.2 billion in volume and $39.3 million in
revenues are attributable to individually insignificant purchases. The
pass-through of higher interchange rates from the credit card associations in
the form of higher discount rates accounts for approximately $66.5 million of
the increased revenues. The remaining increase is primarily due to internal
growth and bank marketing relationships.
Cost of Service
Cost of service increased $235.1 million, or 26.5%, to $1.1 billion for the
year ended December 31, 1999, from $885.6 million for the same period in 1998.
The increase resulted from additional interchange and assessment fees and other
operating costs associated with the higher merchant sales volume processed.
Incremental increases were also recognized for interchange expenses as a result
of credit card association rate increases. Cost of service as a percentage of
revenue decreased to 76.4% from 77.3% because a substantial portion of the
volume from recent portfolio purchases and merger and acquisitions transactions
has been converted to the NOVA Network and therefore reducing the number of
transactions being processed by higher cost third party vendors.
Conversion Costs
Conversion costs increased $16.3 million over 1998 levels to $26.3 million
in 1999. This increase relates to the increased conversion efforts in 1999 as
compared to 1998, including the conversions of portfolios relating to the
acquisition of PMT.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $109.7 million in 1999,
an increase of $3.7 million, or 3.5%, over 1998 expenditures of $106.0 million.
As a percentage of revenue, selling, general and administrative expenses
decreased in 1999 to 7.5% from 9.2% in 1998. The low growth in such expenses
relative to revenue growth illustrates the significant economies of scale
achieved through processing higher credit and debit card processing volume and
the consolidation of operating and administrative functions. For purposes of
comparison, 1998 costs exclude approximately $14.2 million in unusual charges
associated with the PMT merger.
Depreciation and Amortization
Depreciation and amortization expenses increased 27.9% to $57.3 million in
1999 compared to $44.8 million in 1998 due primarily to amortization expenses
associated with recent portfolio purchases, investments in joint ventures and
depreciation related to new operating infrastructure placed into service during
1999 and late 1998.
Operating Income
NOVA's consolidated operating income for 1999 was $152.3 million, as
compared to operating income of $99.3 million during 1998 (excluding
non-recurring merger and consolidation charges of $90.7 million and $14.2
million in unusual selling, general and administrative costs). The increase in
operating income of $53.0 million, or 53.4%, is due to the factors noted above.
6
<PAGE> 7
Interest Income and Expense
Interest income decreased 56.1% to $2.9 million in 1999, compared to $6.6
million in 1998. Interest expense increased 18.3% to $7.1 million in 1999
compared to $6.0 million in 1998. NOVA had lower average cash balances during
1999 and higher average debt obligations outstanding primarily due to the stock
repurchase program and expenditures resulting from the PMT consolidation.
Minority Interest in Income of Subsidiaries
Minority interest in income of subsidiaries increased 63.4% to $16.5
million in 1999 from $10.1 million in 1998. This increase reflects the improved
profitability of Elan and KMS resulting from their conversion during 1998.
Income Taxes
NOVA's effective tax rate for 1999 was approximately 37.4%, compared with
an effective income tax rate of 15.6% for 1998. The increase in the effective
rate primarily reflects the inclusion in 1998 of Subchapter S corporation income
which is not subject to income tax. Partially offsetting this benefit in 1998
was the impact of the non-deductible portion of the merger costs incurred in
connection with the PMT Merger. Excluding the effect of the non-deductible
charges and the effect of Subchapter S corporation income, the effective tax
rate for 1998 would be 40.4%. The decrease from 40.4% to 37.4% relates to the
effect of decreasing income apportionment from high tax states through both
facility and personnel relocations and incorporating PMT's businesses into
NOVA's state tax planning structure.
Net Income
Net income of $82.5 million, or $1.14 per share, in 1999 compares to net
income in 1998 of $57.9 million, or $0.80 per share (excluding non-recurring
merger and consolidation charges of $90.7 million and $14.2 million in unusual
selling, general and administrative costs) due to the factors noted above.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Revenues
NOVA's revenue increased $464.8 million, or 68.3%, to $1.1 billion for the
year ended December 31, 1998, compared with $680.9 million for the same period
in 1997. This revenue growth is primarily attributable to a 61.7% increase in
merchant sales processing volume to $47.5 billion from $29.4 billion in 1997. Of
the total increase, approximately $8.1 billion in volume and $195.8 million in
revenues are attributable to the Elan joint venture and the KMS joint venture.
Other purchases, in the aggregate, contributed approximately $4.7 billion in
volume and $109.2 million in revenues over 1997 levels. The pass-through of
higher interchange rates from the credit card associations in the form of higher
discount rates accounts for approximately $40 million of the increased revenues.
The remaining increase is primarily due to internal growth and bank marketing
relationships.
Cost of Service
Cost of service increased $366.2 million, or 70.5%, to $885.6 million for
the year ended December 31, 1998, from $519.4 million for the same period in
1997. The increase resulted from additional interchange and assessment fees and
other operating costs associated with the higher merchant sales volume
processed.
Incremental increases were also recognized for interchange expenses as a
result of credit card association rate increases. Cost of service as a
percentage of revenue increased to 77.3% from 76.3% because a substantial
portion of the volume from recent portfolio purchases, investments in joint
ventures, and merger and acquisitions transactions had not been converted to the
NOVA Network and therefore were being processed by third party vendors at a
higher cost.
7
<PAGE> 8
Conversion Costs
Conversion costs increased $7.4 million over 1997 levels to $10.0 million
in 1998. This increase relates to the increased conversion efforts in 1998 as
compared to 1997, including the conversions of portfolios relating to the KMS
joint venture and the Elan joint venture, and the MBNA and CoreStates merchant
portfolios. Conversion activity for 1999 is expected to exceed 1998 levels due
to the significance of the conversion of PMT's portfolios.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $106.0 million in 1998
(prior to approximately $14.2 million in unusual charges associated with the PMT
merger), an increase of $30.0 million, or 39.3%, over 1997 expenditures of $76.0
million. Selling, general and administrative expenses as a percentage of revenue
decreased in 1998 to 9.2% from 11.2% in 1997.
These increases are attributable to (i) the costs paid to sellers for
operating and managing merchant portfolios during transition and conversion of
the portfolios to the NOVA Network and (ii) an expanded sales force associated
with marketing arrangements entered into, in each case, in conjunction with
recent portfolio purchases and joint venture transactions. In addition, during
the third and fourth quarters of 1998, NOVA incurred additional personnel and
facilities costs in anticipation of beginning the transition of all operational
functions for the PMT merchant portfolios beginning in October 1998. Many of
these costs were duplicative of costs incurred in connection with the then
existing PMT operations.
Depreciation and Amortization
Depreciation and amortization expenses increased 90.0% to $44.8 million in
1998 compared to $23.6 million in 1997 due primarily to amortization expenses
associated with recent portfolio purchases and investments in joint ventures.
Operating Income
NOVA's consolidated operating income for 1998 was $99.3 million (excluding
non-recurring merger and consolidation charges of $90.7 million and $14.2
million in unusual SG&A costs), as compared to operating income of $59.2 million
during 1997, an increase of $40.1 million, or 67.7%, due to the factors noted
above. The 1997 operating income included a $1.9 million merger related charge
incurred by PMT.
Interest Income and Expense
Interest income increased 4.8% to $6.6 million in 1998, compared to $6.3
million in 1997. NOVA had higher average cash balances during 1998 due to a
public offering of common stock in April 1998 that yielded net proceeds of
$142.6 million.
Interest expense increased 36.4% to $6.0 million in 1998 compared to $4.4
million in 1997 due to higher average debt obligations outstanding in 1998.
Average borrowings increased due to draws against NOVA's bank credit facility in
late 1997 and early 1998 to fund the Elan and KMS investments and the MBNA
portfolio purchase. In addition, NOVA recorded deferred purchase obligations in
January 1998 related to the KMS investment. Although all bank borrowings were
repaid during the second quarter using a portion of the offering proceeds, NOVA
continued to incur interest expense throughout the year related to the deferred
purchase obligation.
Minority Interest in Income of Subsidiaries
Minority interest in income of subsidiaries increased to $10.1 million in
1998 from $776,000 in 1997. This increase reflects the ten month incremental
inclusion of Elan and approximately eleven months incremental inclusion of KMS.
8
<PAGE> 9
Income Taxes
NOVA's effective tax rate for 1998 was approximately 15.6%, compared with
an effective income tax rate of 35.2% for 1997. The decrease in the effective
rate primarily reflects the impact of the inclusion in 1998 of Subchapter S
corporation income which is not subject to income tax. Partially offsetting the
benefit in 1998 was the impact of the non-deductible portion of the merger costs
incurred in connection with the PMT Merger. Excluding the effect of the
non-deductible charges and the effect of Subchapter S corporation income which
is not subject to income tax, the effective tax rate for 1998 would be 40.4%.
The increase from the 1997 comparable rate of 38.2% is due to an increase in
state tax rates.
Net Loss
A net loss of $12.8 million, or $0.18 per share, in 1998 compares to net
income in 1997 of $37.9 million, or $0.58 per share. Excluding both years'
merger related charges and the unusual selling, general and administrative
charges recognized during 1998, net income for 1998 of $57.9 million represented
an increase of approximately 45.5% over net income of $39.8 million in 1997 due
to the factors noted above.
Other Matters
As discussed in Note 1 to the 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
NOVA/PMT merger that were not accrued for 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
general inefficiencies resulting from consolidation plans and efforts.
LIQUIDITY AND CAPITAL RESOURCES
NOVA's primary uses of its capital resources include the purchase of
merchant portfolios, investments in joint ventures, capital expenditures and
working capital requirements.
NOVA produces significant cash flow from operating activities, amounting to
$92.4 million in 1999, $42.8 million in 1998 and $42.2 million in 1997. Cash
flow is generated primarily from operating earnings, after considering the
effect of depreciation and amortization and, for 1998, the non-cash portion of
the merger and consolidation charge. These cash flows are significantly impacted
by increases in trade receivables directly attributable to the increases in
processing volume and revenues. During 1998, deferred tax assets resulting from
merger related timing differences also had a significant unfavorable affect on
cash flows from operating activities. Cash flows from operations in 1999 were
also unfavorably impacted from the payment of merger charges accrued in 1998.
Investing activities utilized a net $150.1 million in 1999, compared to $108.0
million cash in 1998 and $182.1 million in 1997. Significant 1999 investments
include $103.1 million for portfolio purchases, $28.2 million in enhancing and
improving the technology platforms and operating centers, and $33.2 million to
fund equipment leases. The nature of these uses is consistent with historical
uses.
Net cash provided by financing activities was $39.2 million, $89.4 million,
and $15.9 million for the years ended December 31, 1999, 1998, and 1997,
respectively. During 1999, NOVA's primary financing source was bank borrowings
of $232.9 million, of which $159.1 million was used to purchase treasury shares.
NOVA's financing sources during 1998 relate primarily to a stock offering
completed in April 1998, which provided $142.6 million, net of expenses, and
bank borrowings totaling $21.8 million. Subsequent to the public offering, NOVA
used $53.1 million of the net proceeds to repay amounts outstanding under its
bank credit facilities. Net cash provided in 1997 consists primarily of proceeds
received from short-term and long-term debt obligations, offset for cash outlays
for the issuance of a note receivable of $8.8 million.
NOVA has available credit facilities of $250.0 million. At December 31,
1999, $213.0 in borrowings were outstanding under this facility. See Note 8 to
the Consolidated Financial Statements.
9
<PAGE> 10
NOVA typically has relatively low working capital requirements because
merchant discount fees charged are collected in an average of thirty days, while
normal vendor payables are paid in thirty days or longer. In addition,
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 to NOVA. Because of the
seasonality of NOVA's business, capital requirements may be greater in certain
months.
NOVA anticipates that it will incur approximately $18.3 million in capital
expenditures during 2000 for upgrading and expanding existing facilities and the
expansion and enhancement of its information systems. Since electronic
transaction processing is virtually all technology based, NOVA expects to
continue the trend in capital investments in its technology infrastructure and
solutions for the foreseeable future. However, there can be no assurances that
NOVA will not incur higher capital expenditures in 2000 and 2001 to support the
business.
NOVA believes its existing cash and cash equivalents, cash generated from
operations, and available credit facilities are sufficient to fund future
merchant portfolio purchases, capital investment needs, and working capital
requirements for the foreseeable future.
YEAR 2000 IMPACT
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. Beginning in 1997 and throughout 1998 and 1999, the
Company completed its remediation and testing of systems. As a result of those
planning and implementation efforts, the Company experienced no significant
disruptions in its critical systems, applications, computing platforms and
merchant terminals and believes those systems successfully responded to the Year
2000 date change. The Company is not aware of any material problems resulting
from Year 2000 issues, either with its internal systems or the products and
services of third parties. The Company will continue to monitor its critical
computer applications and those of its suppliers and vendors throughout the year
2000 to ensure that any latent Year 2000 matters that may arise are addressed
promptly.
10
<PAGE> 11
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1999 1998
----------- ----------
(IN THOUSANDS,
EXCEPT SHARES)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 32,574 $ 51,131
Trade receivables, less allowance for doubtful accounts of
$11,191 and $8,466 at December 31, 1999 and December
31, 1998, respectively................................. 137,016 85,245
Current portion of net investment in finance leases....... 15,611 11,775
Inventory................................................. 11,255 8,460
Deferred income taxes..................................... 20,114 31,884
Other current assets...................................... 8,935 22,638
--------- --------
Total current assets.............................. 225,505 211,133
--------- --------
Merchant and customer contracts............................. 331,933 263,992
Long-term portion of investment in finance leases........... 42,145 33,910
Property, equipment and software, net....................... 76,963 65,732
Excess cost of businesses acquired.......................... 14,033 14,707
Long-term note receivable................................... 13,618 13,781
Other non-current assets.................................... 29,814 19,278
--------- --------
$ 734,011 $622,533
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 21,574 $ 30,365
Accounts payable to affiliate............................. 465 827
Settlement obligations.................................... -- 9,263
Accrued liabilities....................................... 19,635 18,989
Credit and fraud loss reserve............................. 17,728 12,777
Accrued merger and consolidation charges.................. 8,813 45,724
Long-term debt obligations due within one year............ 16,066 31,534
--------- --------
Total current liabilities......................... 84,281 149,479
--------- --------
Deferred income taxes....................................... 11,928 1,057
Long-term debt.............................................. 238,253 23,025
Minority interest in subsidiaries........................... 8,680 7,754
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.01 par value, 200,000,000 shares
authorized, 73,710,755 and 72,597,045 shares
outstanding at December 31, 1999 and 1998,
respectively........................................... 737 726
Additional paid in capital................................ 435,345 422,499
Treasury stock, at cost, 5,432,163 shares................. (145,329) --
Retained earnings......................................... 100,116 17,993
--------- --------
Total shareholders' equity........................ 390,869 441,218
--------- --------
$ 734,011 $622,533
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE> 12
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
------------ ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES.................................................... $1,466,639 $1,145,664 $680,872
Operating Expenses:
Cost of service........................................... 1,120,733 885,606 519,387
Conversion costs.......................................... 26,337 9,991 2,595
Selling, general and administrative....................... 109,722 120,154 76,038
Depreciation and amortization............................. 57,332 44,839 23,603
Merger and consolidation expenses......................... 180 90,720 1,889
---------- ---------- --------
Total operating expenses.......................... 1,314,304 1,151,310 623,512
---------- ---------- --------
OPERATING INCOME (LOSS)..................................... 152,335 (5,646) 57,360
Other income (expense):
Interest income........................................... 2,946 6,560 6,265
Interest expense.......................................... (7,083) (5,999) (4,388)
Minority interest in income of subsidiaries............... (16,487) (10,056) (776)
---------- ---------- --------
(20,624) (9,495) 1,101
---------- ---------- --------
Income (loss) before provision (benefit) for income taxes... 131,711 (15,141) 58,461
Provision (benefit) for income taxes........................ 49,243 (2,362) 20,562
---------- ---------- --------
NET INCOME (LOSS)........................................... $ 82,468 $ (12,779) $ 37,899
========== ========== ========
Per Share Amounts:
Basic earnings (loss) per share........................... $ 1.16 $ (0.18) $ 0.60
Diluted earnings (loss) per share......................... $ 1.14 $ (0.18) $ 0.58
Shares used in per share calculations:
Weighted averages shares -- basic......................... 71,154 70,061 63,571
Weighted averages shares -- diluted....................... 72,561 70,061 65,668
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 13
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
--------------- ADDITIONAL RETAINED ------------------
SHARES AMOUNT PAID IN CAPITAL EARNINGS (DEFICIT) SHARES AMOUNT TOTAL
------ ------ --------------- ------------------ ------ --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 (AS
RESTATED)............................. 62,923 $630 $266,352 $ 3,251 557 $ (2,093) $ 268,140
------ ---- -------- --------- ------ --------- ---------
Issuance of common stock.............. 1 -- 14 -- -- -- 14
Stock options exercised............... 574 5 1,440 -- -- -- 1,445
Income tax benefit from stock options
exercises........................... -- -- 1,986 -- -- -- 1,986
Cancellation of treasury stock........ (557) (6) (74) (2,013) (557) 2,093 --
Distribution of Subchapter S
Corporations prior to poolings...... -- -- -- (6,756) -- -- (6,756)
Pooling of interests transactions..... 2,074 21 1,072 239 -- -- 1,332
Minority shareholders' contribution... -- -- 524 -- -- -- 524
Net and comprehensive income.......... -- -- -- 37,899 -- -- 37,899
------ ---- -------- --------- ------ --------- ---------
BALANCE AT DECEMBER 31, 1997............ 65,015 $650 $271,314 $ 32,620 -- $ -- $ 304,584
------ ---- -------- --------- ------ --------- ---------
Issuance of common stock related to
NOVA secondary offering, net of
expenses............................ 5,000 50 142,539 -- -- -- 142,589
Stock options exercised............... 615 6 6,614 -- -- -- 6,620
Income tax benefit from stock options
exercises........................... -- -- 1,057 -- -- -- 1,057
Subsidiary fiscal year conversion..... 307 3 163 5,506 -- -- 5,672
Pooling of interests transactions..... 1,660 17 812 (2,593) -- -- (1,764)
Distribution of Subchapter S
Corporations prior to poolings...... -- -- -- (4,761) -- -- (4,761)
Net and comprehensive net loss........ -- -- -- (12,779) -- -- (12,779)
------ ---- -------- --------- ------ --------- ---------
BALANCE AT DECEMBER 31, 1998............ 72,597 $726 $422,499 $ 17,993 -- $ -- $ 441,218
------ ---- -------- --------- ------ --------- ---------
Stock options exercised............... 1,114 11 9,344 -- -- -- 9,355
Income tax benefit from stock options
exercises........................... -- -- -- -- -- -- 9,540
Subsidiary fiscal year conversion..... -- -- -- (345) -- -- (345)
Treasury stock acquired............... -- -- -- -- (5,972) (159,144) (159,144)
Treasury stock issued for stock
options............................. -- -- (6,038) -- 540 13,815 7,777
Net and comprehensive net income...... -- -- -- 82,468 -- -- 82,468
------ ---- -------- --------- ------ --------- ---------
BALANCE AT DECEMBER 31, 1999............ 73,711 $737 $435,345 $ 100,116 (5,432) $(145,329) $ 390,869
====== ==== ======== ========= ====== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 14
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................... $ 82,468 $ (12,779) $ 37,899
Subsidiary fiscal year conversion........................... 2,547 4,820 --
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Non-cash portion of merger and consolidation charges...... -- 18,491 --
Depreciation and amortization............................. 57,332 44,839 23,603
Deferred income taxes..................................... 3,210 (30,429) 1,376
Loss on disposal of equipment............................. -- 265 12
Minority interest......................................... 16,605 10,193 776
Interest on debt obligations.............................. 1,161 2,062 --
Changes in assets and liabilities, net of the effects of
business acquisitions:
Trade receivables....................................... (41,993) (32,179) (22,351)
Inventory............................................... (2,795) (4,503) (613)
Other assets............................................ (8,160) (21,674) (9,944)
Accounts payable........................................ (7,235) 11,131 9,177
Accrued liabilities..................................... (10,781) 52,608 2,309
--------- --------- ---------
Net cash provided by operating activities.......... 92,359 42,845 42,244
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of merchant portfolios and customer contracts..... (102,218) (91,125) (108,804)
Purchase of property and equipment.......................... (28,199) (46,385) (20,576)
Purchase of equipment for leasing........................... (33,220) (27,906) (19,297)
Amounts placed in escrow related to business purchase
transactions.............................................. (8,700) -- --
Purchase of investments..................................... -- -- (49,168)
Proceeds from sale of investments........................... -- 39,123 --
Amounts received on leases.................................. 22,192 18,329 14,650
Other....................................................... -- -- 1,076
--------- --------- ---------
Net cash used in investing activities.............. (150,145) (107,964) (182,119)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings and notes payable,
net....................................................... -- 1,496 32,800
Proceeds from the issuance of long-term debt................ 232,928 20,353 34,189
Payments on long-term debt and capital leases............... (36,008) (70,074) (38,657)
Proceeds from public offerings, net of offering expenses.... -- 142,589 14
Proceeds from stock options exercised....................... 17,132 6,620 1,445
Purchase of treasury stock.................................. (159,144) -- --
Issuance of note receivable................................. -- (1,785) (8,773)
Distribution of minority interest........................... (15,679) (5,011)
Distributions of Subchapter S Corporations.................. -- (4,761) (5,083)
--------- --------- ---------
Net cash provided by financing activities.......... 39,229 89,427 15,935
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ (18,557) 24,308 (123,940)
--------- --------- ---------
Cash and cash equivalents, beginning of the year............ 51,131 26,823 150,763
--------- --------- ---------
Cash and cash equivalents, end of the year.................. $ 32,574 $ 51,131 $ 26,823
========= ========= =========
Supplementary information
Income taxes paid......................................... $ 31,896 $ 28,181 $ 19,763
Interest paid............................................. $ 6,753 $ 6,944 $ 3,866
Notes payable issued in connection with business
acquisition............................................. $ -- $ 33,758 $ 433
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 15
EXHIBIT 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND ORGANIZATION
NOVA Corporation (the "Company" or "NOVA") is an integrated service
provider of transaction processing services, related software applications and
value-added services primarily to small to medium-sized business enterprises.
The Company provides merchants with transaction processing support for all major
credit and charge cards, including VISA, MasterCard, American Express, Discover,
Diners Club and JCB, and also provides access to debit card processing and check
verification services. NOVA provides merchants a broad range of transaction
processing services, including authorizing card transactions at the
point-of-sale ("POS"), capturing and transmitting transaction data, payment
settlement and assisting in resolving billing disputes with customers.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of NOVA
Corporation and its majority-owned subsidiaries. All significant intercompany
transactions have been eliminated.
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. In addition to the PMT merger, PMT completed various mergers prior to
the merger with NOVA. These mergers were 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
combine the financial results of NOVA and PMT. Although prior to the merger PMT
reported on the fiscal year ended July 31 basis, PMT changed their 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 statement of operations and
cash flows for the year ended December 31, 1998, has been combined with the PMT
statement of operations and cash flows for the twelve months ended October 31,
1998. The NOVA statements of operations and cash flows for the year ended
December 31, 1997, have been combined with the PMT statements of operations and
cash flows for the fiscal year ended July 31, 1997. The results of operations of
PMT for the period November 1, 1998 through December 31, 1998 was a net loss of
$345,000 and is recorded as a decrease in shareholders' equity for the year
ended December 31, 1999. Revenues for this interim period were $90.8 million and
expenses, including income tax benefits, were $91.1 million. The results of
operations of PMT for the period August 1, 1997, through October 31, 1997 of
$7.6 million have been recorded as an increase to shareholders' equity for the
year ended December 31, 1998. Revenues for this interim period were $101.1
million and expenses, including income taxes, were $93.5 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.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
15
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE AND COST OF SERVICE RECOGNITION
Revenues derived principally from the electronic processing of transactions
(principally merchant discount) are recognized, net of revenue sharing amounts,
at the time the merchant's transactions are processed. Directly related cost of
service is also recognized at the time of processing and include interchange
fees paid to the credit card issuing bank, VISA and MasterCard assessments,
telecommunications expenses, and merchant accounting processing fees.
When the Company purchases merchant portfolios, it typically enters into
revenue sharing agreements with the sellers. The revenue sharing amounts are
determined primarily on sales volume processed for a particular group of
merchants. The revenue sharing agreements generally have an initial term of at
least three years with renewal provisions. Revenue is shown in the accompanying
statements of operations net of revenue sharing amounts of $47.8 million, $35.3
million, and $16.3 million for the years ended December 31, 1999, 1998, and
1997, respectively.
Additional revenue sources include the sale, lease and rental of POS
processing equipment. Revenues related to direct financing leases are recognized
over the term of the lease using the effective interest method. Equipment sales
revenues are recorded when the equipment is shipped. Rental income is recognized
as earned.
CONVERSION COSTS
The cost of converting purchased merchant portfolios from the seller's
processing platform and telecommunications network to the NOVA Network is
expensed as incurred.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, NOVA considers
all highly liquid debt instruments with original maturities of three months or
less to be cash equivalents.
RESTRICTED CASH
Restricted cash represents funds held-on-deposit with certain processing
banks pursuant to agreements to cover potential merchant losses, and funds held
by lending institutions pursuant to loan agreements to provide additional
collateral. These amounts are classified as "Other Non-current Assets" for
financial statement purposes, and total $11.5 million and $8.2 million at
December 31, 1999, and 1998, respectively.
ACCOUNTS RECEIVABLE
Accounts receivable are primarily comprised of amounts due from the
Company's clearing and settlement banks and represent the discount earned, after
related interchange fees on transactions processed during the month ending on
the balance sheet date. Such balances are typically received from the clearing
and settlement banks within thirty days following the end of each month.
The Company's merchant customers have liability for charges disputed by
cardholders. However, in the case of merchant insolvency, bankruptcy or other
nonpayment, the Company may be liable for any such charges disputed by
cardholders. NOVA believes that the diversification of its merchant portfolio
among industries and geographic regions reduces its risk of loss. Based on
historical loss experience, the Company has established reserves for estimated
credit losses on transactions processed.
FINANCING LEASES
The Company provides direct financing leases and sales-type leases to its
customers. The significant difference between the two types of leases is dealer
profit recognized in a sales-type lease. At inception of a POS equipment lease,
the Company records an investment in direct financing leases which is equal to
the total
16
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of future lease rentals and the estimated residual value of the leased equipment
less unearned income. The unearned income is the difference between the cost of
the equipment and the total of future lease payments plus the estimated residual
value of the leased equipment. Residual value is based upon the estimated
proceeds from the sale or lease of the asset at the end of the lease term.
Amortization of unearned income is recorded using the effective interest method.
The investment in financing leases is reduced by an allowance for rental
payments that are expected to be uncollectable.
INVENTORY
Inventory, which consists of electronic POS equipment held for sale or
rental to merchants, is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
PROPERTY, EQUIPMENT, AND SOFTWARE
Property, equipment and software is stated at cost less accumulated
depreciation. Depreciation is calculated using the straight-line method for
financial reporting purposes and primarily accelerated methods for tax purposes.
For financial reporting purposes, equipment is depreciated over three to seven
years and buildings are depreciated over thirty years. Leasehold improvements
and property acquired under capital leases are amortized over the useful life of
the asset or the lease term, whichever is shorter. Direct costs associated with
the development of software for internal use are capitalized and depreciated
over the useful life of the software, up to ten years. Maintenance and repairs
are charged to expense as incurred. Expenditures for renewals and improvements
that extend the useful life are added to the property and equipment accounts.
The Company rents POS equipment to merchants under operating leases. The rented
equipment is capitalized and depreciated over three years.
FINANCIAL INSTRUMENTS
Management believes the carrying amounts of financial instruments at
December 31, 1999 and 1998, including cash, accounts and notes receivable,
accounts payable, accrued expenses and loans payable to financial and lending
institutions approximates fair value. The Company's financial instruments at
December 31, 1999, and 1998 consist primarily of cash and cash equivalents and
loans payable to financial and lending institutions. Due to the short maturities
of the cash and cash equivalents, carrying amounts approximate the respective
fair values. The loans payable are primarily variable rate instruments at terms
the Company believes would be available if similar financing were obtained from
another third party. As such, their carrying amounts also approximate their fair
value.
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable
and cash investments. Concentrations of credit risk with respect to trade
accounts receivable are limited, due to the large number of entities comprising
the customer base and the ongoing credit evaluations conducted to monitor the
status of a customer's financial condition. Cash investments are held by
numerous financial institutions and present minimal risk to the Company.
INTANGIBLES
The excess cost of businesses acquired is amortized on the straight-line
basis over thirty years. Accumulated amortization at December 31, 1999, and 1998
was $3.3 million and $2.6 million, respectively. Amortization expense was
approximately $661,000, $573,000 and $500,000 for the years ended December 31,
1999, 1998 and 1997, respectively.
Amortization of merchant portfolios is provided on a straight-line basis
over a ten-year life, based on the Company's estimates of future merchant sales
volumes. Accumulated amortization of portfolios was $100.1 million and $63.1
million at December 31, 1999, and 1998, respectively. Amortization expense was
approximately $37.2 million, $30.0 million, and $14.0 million for the years
ended December 31, 1999, 1998, and 1997, respectively.
17
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Management periodically evaluates intangibles for indications of impairment
based on the operating results of the related business or merchant portfolio
purchased. If this evaluation indicates that the intangible asset will not be
recoverable, as determined based on the undiscounted cash flows over the
remaining life of the asset, the carrying value and remaining amortization
period of the related intangible asset will be adjusted to reflect fair value.
INCOME TAXES
The Company accounts for income taxes pursuant to the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). Under this method, deferred tax assets and liabilities are
recorded to reflect the future tax consequences attributable to the effects of
differences between the carrying amounts of existing assets and liabilities for
financial reporting and their respective amounts used for income tax purposes.
SETTLEMENT OBLIGATIONS
Settlement obligations result from timing differences in the Company's
settlement processes with merchants. During 1999 the company changed its
settlement process to eliminate such timing differences.
STOCK COMPENSATION
NOVA has elected under the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") to
continue to use the intrinsic-value method of accounting for employee
stock-based compensation in accordance with Accounting Principles Board Opinion
Number 25, "Accounting for Stock Issued to Employees" ("APB 25"). Refer to Note
12 regarding pro forma net income (loss) and earnings per share information.
EARNINGS PER SHARE
Basic earnings per common share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
common share is computed using the weighted average number of common shares
outstanding during the period and reflects any dilutive effects of options,
warrants and convertible securities outstanding during the period.
RECENT PRONOUNCEMENT
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.
PRESENTATION
Certain 1997 and 1998 amounts have been reclassified to conform to the 1999
presentation.
NOTE 2. BUSINESS COMBINATIONS
In September 1998, NOVA completed the acquisition of PMT Services, Inc., in
a merger transaction by exchanging 37,651,000 shares of its common stock for all
of the outstanding common stock of PMT. Each share of PMT was exchanged for
0.715 of one share of NOVA common stock. In addition, outstanding PMT options
and warrants were converted at the same exchange factor of NOVA common stock.
See Note 12.
18
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The combined results below reflect reclassifications to conform financial
statement presentation:
<TABLE>
<CAPTION>
1997
----------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C>
Revenues:
NOVA...................................................... $335,625
PMT....................................................... 355,010
Reclassification to conform financial presentation........ (9,763)
Combined.................................................. $680,872
========
Net income:
NOVA...................................................... $ 17,385
PMT....................................................... 20,514
--------
Combined.................................................. $ 37,899
========
Net income per share (on a diluted basis):
NOVA...................................................... $ 0.58
PMT(1).................................................... $ 0.58
Combined.................................................. $ 0.58
</TABLE>
- ---------------
(1) Adjusted for effect of exchange ratio of 0.715 shares of NOVA common stock
for each share of PMT common stock.
As previously stated, PMT completed various business combinations in the
year ended October 31, 1998, and the year ended July 31, 1997, by issuing common
stock in exchange for all of the outstanding common stock of the companies
acquired. These transactions were accounted for as poolings of interests. The
consolidated accompanying financial statements have been prepared to reflect the
restatement of all periods presented. Eight of these transactions were
considered material for restatement of prior period consolidated financial
statements and are summarized below:
<TABLE>
<CAPTION>
COMPANY ACQUIRED DATE SHARES ISSUED(1)
- ---------------- ----------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Fairway Marketing Group (Fairway).................. December 23, 1996 304
Bancard Systems, Inc. (BSI)........................ January 27, 1997 2,239
Retail Payment Services, Inc. (RPS)................ January 30, 1997 406
Eric Krueger, Inc. (Krueger)....................... June 3, 1997 414
LADCO Financial Group (LFG)........................ July 14, 1997 1,046
Bancard, Inc. (BCI)................................ October 2, 1997 2,768
MBN National, Inc. (MBN)........................... May 14, 1998 706
Superior Bankcard Service, Inc. (Superior)......... July 30, 1998 2,660
</TABLE>
- ---------------
(1) Adjusted for effect of exchange ratio of 0.715 shares of NOVA common stock
for each share of PMT common stock.
Separate revenues and net income (loss) of the acquired operating
businesses for the periods prior to each of the mergers are presented in the
following table. In addition, the table includes unaudited pro forma net income,
which reflects pro forma adjustments to present income taxes on the basis on
which they will be reported in future periods.
19
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1997
-----------------
(IN THOUSANDS)
<S> <C>
Revenues:
PMT..................................................... $240,756
Fairway................................................. 7,125
BSI..................................................... 12,218
LFG..................................................... 12,882
BCI..................................................... 40,827
MBN..................................................... 12,651
Superior................................................ 17,319
Other................................................... 11,232
--------
Revenues, as reported..................................... $355,010
========
Net income (loss):
PMT..................................................... $ 13,806
Fairway................................................. 183
BSI..................................................... 746
LFG..................................................... 1,319
BCI..................................................... 2,656
MBN..................................................... (1,041)
Superior................................................ 2,500
Other................................................... 345
--------
Net income, as reported......................... 20,514
Pro forma tax effect of Subchapter S Corporations......... (1,798)
--------
Pro forma net income............................ $ 18,716
========
</TABLE>
Fairway, RPS, Krueger, Bancard, MBN and Superior were Subchapter S
Corporations for income tax purposes; therefore, these entities did not pay U.S.
federal income taxes. These entities are included in the Company's U.S. federal
income tax return effective from the date of each merger.
In addition to these transactions, PMT completed five separate operating
business acquisitions during the year ended October 31, 1998 and the year ended
July 31, 1997, with five unrelated entities. PMT issued an aggregate of
3,577,914 shares of common stock, on a converted basis, in exchange for all the
outstanding stock of the five entities. On an individual basis these
transactions, which were accounted for as poolings of interests, were not
considered material for retroactive restatement of the consolidated financial
statements. Retroactive restatement would have increased total assets by 1% as
of December 31, 1997. Retroactive restatement would have increased revenue by
2.98% and net income by 0.80% during 1997.
NOTE 3. MERCHANT PORTFOLIO PURCHASES AND JOINT VENTURES
MERCHANT PORTFOLIOS
NOVA purchases various merchant portfolios, whereby servicing rights for
electronic authorization and payment processing to specific merchants under
contract to processing banks are acquired. The Company's operating results
reflect each of these purchases from the effective dates of the transactions.
Significant portfolio purchases are summarized below.
On February 15, 1999, NOVA acquired the assets of American National Bancard
Company ("ANC"), an independent sales organization ("ISO"), through NOVA's
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
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"
20
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
January 31, 2000. This amount was due subject to ANC's achieving certain
performance thresholds as set forth in the purchase agreement. During 2000, ANC
met the required performance thresholds, resulting in the release of these funds
to ANC. At December 31, 1999 the escrow funds are recorded in "Other non-current
assets" for financial statement purposes. An additional payment of up to $2.1
million may be required in fiscal 2000 based upon future performance of the
portfolio.
Effective November 4, 1998, the Company completed a transaction with First
Union Bank of Delaware, successor by merger to CoreStates Bank of Delaware, N.A.
("CoreStates"), whereby NOVA acquired all rights, title, and interest in, and
assumed certain liabilities of the CoreStates merchant processing portfolio. An
initial non-refundable payment of $25.0 million was made at the time of the
purchase. In December 1999, an additional $23.0 million was paid based on
achieving certain minimum performance levels. An additional payment of up to
$23.0 million may be required in fiscal 2000 based upon future performance of
the portfolio.
Significant 1997 merchant portfolio purchases include the Crestar Bank
merchant portfolio effective May 29, 1997, and the MBNA America Bank, N.A.
merchant portfolio effective December 31, 1997. Purchase price consideration
paid approximated $21.7 million and $20.3 million, respectively.
JOINT VENTURES
In addition to merchant portfolio purchases, the Company has also entered
into joint venture agreements with certain financial institutions for the
purpose of expanding and strengthening its merchant processing base. On January
21, 1998, NOVA consummated a transaction with KeyBank National Association
("KeyBank") whereby the Company purchased a 51% membership interest in Key
Merchant Services, LLC ("KMS"). NOVA provides transaction processing and other
services to the merchant contracts KeyBank initially contributed to the venture.
The purchase price of the membership interest was payable over a three-year
period. The original purchase price recorded was $51.0 million, for which the
last installment of $18.5 million, including interest, was paid as of December
31, 1999. During 1999, the Company paid an additional $12.4 million to KeyBank
based on achieving certain performance thresholds. Additional consideration of
up to $6.2 million may be required during fiscal 2000 based upon future
performance of the portfolio.
Effective December 29, 1999, KMS acquired the merchant processing portfolio
of First American National Bank. The total purchase price was $14.5 million.
Effective October 31, 1997, the Company entered into a joint venture with
Firstar Bank, U.S.A., N.A. ("Firstar") whereby NOVA purchased a 51% interest in
Elan Merchant Services, LLC ("EMS") for $24.0 million. Effective May 1, 1999,
Firstar contributed the merchant processing portfolio of Star Banc to EMS. NOVA
paid Firstar $6.2 million in cash, representing 51% of the value of the merchant
processing portfolio contributed by Firstar. The Company performs the
transaction processing services for the joint venture's merchant contracts.
21
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes the allocation of the aggregate purchase price to
the major categories of assets acquired and liabilities assumed resulting from
all portfolio purchases and joint venture investments made by the Company in
each year:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Merchant contracts.......................................... $103,073 $122,814 $109,247
Property and equipment...................................... 398 2,069 --
Non-compete agreement....................................... -- 932 250
-------- -------- --------
103,471 125,815 109,497
Liabilities assumed......................................... (1,253) -- --
Notes payable to seller..................................... -- (33,758) (443)
-------- -------- --------
Net cash paid...................................... $102,218 $ 92,057 $109,054
======== ======== ========
</TABLE>
NOTE 4. MERGER AND CONSOLIDATION CHARGES
As a result of NOVA's merger with PMT and other mergers completed during
1998, the Company recorded a $90.7 million charge in 1998. This charge was
primarily related 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. Beginning in 1998 and continuing throughout 1999,
management executed substantially all parts of the plan for PMT's integration
and consolidation, making refinements to the plan as additional facts and
circumstances became available. During 1999, revisions to the plan resulted in
the reversal of approximately $6.5 million in charges accrued in 1998 that were
not needed under the revised plan and additional costs of approximately $6.7
million to recognize the costs of executing revised elements of the plan. The
consolidation and integration charges recorded in 1999 exceeded the reversal of
1998 charges by approximately $180,000, with such excess charges reflected in
the operating results for 1999.
The following is a summary of the activity recorded relating to merger and
consolidation charges:
<TABLE>
<CAPTION>
BALANCE REVERSAL BALANCE
1998 PAYMENTS AT OF 1999 PAYMENTS AT
CHARGES APPLIED 12/31/98 ACCRUALS CHARGES APPLIED 12/31/99
------- -------- -------- -------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Direct transaction costs..... Cash $15,515 $(11,412) $ 4,103 $ -- $ 241 $ (4,344) $ --
Severance packages........... Cash 14,050 (1,404) 12,646 (2,149) 1,591 (8,297) 3,791
Lease abandonment............ Cash 4,658 -- 4,658 (280) 2,968 (2,324) 5,022
Contract termination
charges.................... Cash 35,506 (13,689) 21,817 (3,621) -- (18,196) --
Asset write-down............. Non-cash 7,121 (7,121) -- -- 1,863 (1,863) --
Costs to exit a distribution
channel.................... Non-cash 11,370 (11,370) -- -- -- -- --
Costs to exit a distribution
channel.................... Cash 2,500 -- 2,500 (434) -- (2,066) --
------- -------- ------- ------- ------ -------- ------
$90,720 $(44,996) $45,724 $(6,484) $6,663 $(37,090) $8,813
======= ======== ======= ======= ====== ======== ======
</TABLE>
The primary costs associated with 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 result from the
elimination of overlapping functions, primarily customer service, accounting,
and administrative areas.
Direct Transaction Costs. Direct merger transaction costs primarily
consisted of investment banking commissions, professional fees, and regulatory
filing expenses. During 1999, approximately $241,000 of merger related
professional fees were incurred in excess of amounts accrued in 1998.
22
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Severance Packages. During 1998, management developed and began
implementing plans to close PMT's corporate headquarters, as well as downsize
certain of PMT's operating subsidiaries. As of December 31, 1998, the only
significant employee group notified of such plans was at the corporate
headquarters and certain executives. Accordingly, the costs associated with
these terminations were the only severance costs included in the 1998 charge.
The total number of employees terminated from this group was approximately 275,
with 210 having received severance packages as of December 31, 1998. Of these
employees, certain executives' severance is being paid over two years. The
remaining employees in this group were displaced during the first quarter of
1999, with all severance benefits paid at that time. During 1999, management was
able to settle termination related benefits associated with certain executives
at amounts less than originally agreed, accounting for substantially all of the
reversal in this merger charge category.
During 1999, decisions were made to close or downsize additional facilities
to further streamline the operating and administrative functions. These actions
resulted in the termination of approximately 183 employees, of which 179
received severance packages totaling approximately $1.4 million as of December
31, 1999. The remaining four individuals, with total severance payments due of
approximately $160,000, were notified of their termination during 1999, but
received their severance payments in January 2000. The remaining severance
accrued in the December 31, 1999 merger reserve balance relates to executives
whose terminations were effective and accrued for during 1998 and whose
severance will be fully paid by mid-2001.
Lease Abandonment. The Company began the process of moving PMT's
operations from Nashville, Tennessee to other locations in December 1998, and
completed this process in the first quarter of 1999, at which time the premises
in Nashville were completely vacated. The 1998 charge included the estimated
unrecoverable future lease obligations for primarily PMT's Nashville
headquarters. By December 1999 the facility was fully subleased, facilitating an
accurate assessment of future unrecoverable lease obligations. Based on the
updated assessment, approximately $280,000 of the original merger and
consolidation charge was reversed. During 1999, plans were made to close or
downsize additional facilities. These decisions resulted in additional accruals
of approximately $3.0 million covering ten locations, eight of which have been
closed or downsized during 1999. The remaining two facilities will be closed or
downsized during 2000. Obligations under leases included in the reserve balance
will not be fully paid out until October 2007.
Contract Termination Charges. 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 NOVA Network. As a result of this plan, in
1998 the Company negotiated the termination of long-term processing contracts
with third parties. The majority of these terminations were finalized and paid
in 1998. During 1999, management was able to successfully terminate one of the
contracts without incurring the $2.0 million penalty recognized in 1998. Based
on new facts and circumstances, arising in 1999, management also determined that
the economic benefits of terminating another contract did not outweigh the early
termination costs. Accordingly, approximately $3.9 million of contract
termination charges were reversed to appropriately reflect these events.
Asset Write-Down. Capital asset write-downs are substantially attributable
to the 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. Charges recorded in 1998 were
associated primarily with PMT's corporate office in Nashville. Additional
charges of approximately $1.9 million were recognized during 1999 in connection
with the revised facility consolidation plan.
Costs to Exit a Distribution Channel. 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 this distribution channel included 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
23
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
final negotiated termination fee was approximately $434,000 less than accrued in
1998, resulting in a reversal of the excess charge during 1999.
NOTE 5. PROPERTY, EQUIPMENT, AND SOFTWARE
Property, equipment and software at December 31, 1999 and 1998 consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land and building........................................... $ 12,316 $ 10,680
Equipment................................................... 44,836 35,525
Credit card terminals held for rent......................... 24,007 22,610
Software, internally developed.............................. 23,776 5,686
Furniture and fixtures...................................... 6,264 6,019
Leasehold improvements...................................... 2,730 2,414
Work-in-progress, including software development............ 6,510 11,446
-------- --------
120,439 94,380
Less accumulated depreciation and amortization.............. (43,476) (28,648)
-------- --------
$ 76,963 $ 65,732
======== ========
</TABLE>
Depreciation expense for the years ended December 31, 1999, 1998, and 1997
was approximately $17.0 million, $12.6 million, and $6.6 million, respectively.
NOTE 6. NET INVESTMENT IN DIRECT FINANCE LEASES
The components of the investment in direct financing leases for POS
equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Minimum lease payments...................................... $ 72,884 $ 60,383
Residual values -- unguaranteed............................. 12,799 9,700
Allowance for doubtful accounts............................. (3,594) (3,217)
-------- --------
Net minimum lease payments receivable....................... 82,089 66,866
Unearned income............................................. (24,333) (21,181)
-------- --------
Net investment in direct financing leases......... $ 57,756 $ 45,685
======== ========
</TABLE>
Changes in the allowance for doubtful accounts at December 31, 1999, 1998,
and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year.............................. $ 3,217 $ 2,482 $ 1,659
Subsidiary fiscal year conversion......................... (39) 78 --
Provision for bad debt expense............................ 3,278 2,987 2,390
Charged off lease contracts............................... (3,262) (2,776) (2,043)
Bad debt recoveries....................................... 400 446 476
------- ------- -------
Balance at end of year.......................... $ 3,594 $ 3,217 $ 2,482
======= ======= =======
</TABLE>
24
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1999, minimum lease payments receivable, including
estimated residual values receivable, are due as follows:
<TABLE>
<CAPTION>
MINIMUM LEASE UNGUARANTEED
PAYMENTS RESIDUAL VALUES
YEAR ENDED DECEMBER 31: RECEIVABLE RECEIVABLE
- ----------------------- ------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
2000..................................................... $28,879 $ 2,342
2001..................................................... 22,849 2,462
2002..................................................... 15,131 3,642
2003..................................................... 5,634 3,988
Thereafter............................................... 391 365
------- -------
$72,884 $12,799
======= =======
</TABLE>
The Company's experience indicates a portion of the leases will terminate
at dates other than the end of the contractual period. Accordingly, the
foregoing table should not be regarded as a forecast of future collections.
NOTE 7. NOTE RECEIVABLE
In March 1997, PMT entered into a ten year lease agreement for a portion of
office space available in a building that served as its corporate headquarters.
PMT granted a mortgage loan to an independent developer and advanced funds for
the purchase and renovation of the building. The outstanding loan amount of
$13.6 million bears interest at 5%, with principal and interest of $80,673 due
monthly in arrears. The loan principal was issued in various draws based upon
completion of certain stages of renovation. The outstanding balance is payable
in full in October 2007. The mortgage loan is secured by a first lien on the
property. An independent appraisal of the property determined its fair value for
the purpose of classifying the related leasing transaction in accordance with
Statement of Financial Accounting Standards No. 13, "Accounting for Leases." The
lease is classified as an operating lease, and the minimum lease commitment is
included in Note 11.
NOTE 8. LONG-TERM DEBT OBLIGATIONS
<TABLE>
<CAPTION>
DECEMBER 31,
WEIGHTED -------------------
INTEREST RATE MATURITIES 1999 1998
------------- ---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revolving credit facility............................ 7.25% 2004 $213,000 $ --
Variable Rate Secured Notes:
Equipment lease-backed notes......................... 6.35 2003 37,612 24,879
Equipment lease-backed notes......................... 7.22 2002 1,886 9,401
Equipment lease-backed notes......................... 8.50 2001 216 640
Equipment lease-backed notes......................... 1999 -- 31
Deferred merchant portfolio purchase price
installment........................................ 7.88 1999 -- 17,362
Other................................................ -- -- 1,605 2,246
-------- --------
Total long-term debt obligations..................... 254,319 54,559
Less amounts due within one year..................... (16,066) (31,534)
-------- --------
Long-term obligations................................ $238,253 $ 23,025
======== ========
</TABLE>
25
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The maturities of long-term obligations at December 31, 1999, are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
2000........................................................ $ 16,066
2001........................................................ 13,370
2002........................................................ 8,551
2003........................................................ 3,062
2004........................................................ 213,270
--------
$254,319
========
</TABLE>
In November 1999, NOVA amended its revolving credit agreement. The amended
agreement, secured by substantially all of the company's assets, expires on
November 16, 2004, and provides for borrowings up to $250.0 million. This
agreement amended an earlier, five-year, $80.0 million agreement entered into on
October 27, 1997. At the Company's option under the terms of the agreement,
borrowings bear interest at a spread of up to 1.5% over either the bank's base
rate, or the prevailing Eurodollar rate, as determined from certain financial
ratios. On August 25, 1999, the Company entered into a bridge loan for $70.0
million at the prevailing Eurodollar rate plus 1%. The bridge loan was repaid
from proceeds drawn from the amended credit facility upon completion of the
amendment. The Company also maintains a standby letter of credit facility for up
to $25.0 million. A commitment fee is assessed on the average daily unused
portion of the revolving loans and the standby letter of credit. The fee ranges
from .20% to .40%, depending on certain leverage ratios, adjusted quarterly.
NOVA's policy is to classify revolving credit facility borrowings under
long-term debt since it has the ability under the credit agreement, and the
intent, to maintain these obligations for longer than one year.
The revolving credit facility contains certain financial covenants. NOVA
was in compliance with all covenants under the amended agreement at December 31,
1999.
The Variable Rate Secured Notes ("Notes") are secured by the remaining
payment stream of pledged equipment leases. The Notes bear a variable rate of
interest based on indices determined by each lender, either the one month
commercial paper rate then in effect, prime rate, or two year treasury
securities, as the case may be.
NOTE 9. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1999 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Property and equipment.................................... $ 9,520 $ 7,757
Gross lease receivable.................................... 32,674 23,489
Residual values, including portfolios..................... 5,934 4,495
Mark-to-market accounting for accounts receivable......... 284 1,052
Other..................................................... -- 1,467
------- -------
Total deferred tax liabilities.................... $48,412 $38,260
======= =======
</TABLE>
26
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1999 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSETS:
Leased equipment.......................................... $20,710 $14,870
Merger related costs...................................... 3,591 18,663
Unearned income........................................... 10,908 8,659
Allowance for doubtful accounts and merchant loss
reserve................................................ 15,504 10,463
Accrued liabilities....................................... 1,303 3,588
Book over tax amortization................................ 1,879 12,619
Net operating loss carryforwards.......................... 1,778 332
Other..................................................... 925 225
------- -------
Total deferred tax assets......................... 56,598 69,419
Valuation allowance......................................... -- (332)
------- -------
Net deferred tax assets .................................... $ 8,186 $30,827
======= =======
</TABLE>
In assessing the likelihood of utilizing existing net deferred tax assets,
management considered its current operating environment, future ability to
generate sufficient taxable income and the excess of its appreciated asset
values over the related tax basis. At this time, management believes it is more
likely than not that the deferred tax assets will be realized based on its
assessment of current financial condition.
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................ $42,034 $ 25,735 $16,878
State.................................................. 4,331 2,332 2,308
Deferred:
Federal................................................ 2,676 (26,681) 1,214
State.................................................. 534 (3,748) 162
Change in valuation allowance............................ (332) -- --
------- -------- -------
$49,243 $ (2,362) $20,562
======= ======== =======
</TABLE>
The provision (benefit) for income taxes differs from the amount computed
by applying the federal statutory rate to income before provision for income
taxes for the following reasons:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
----- ------ -----
(IN THOUSANDS)
<S> <C> <C> <C>
Federal statutory rate..................................... 35% (35.0)% 35.0%
State income taxes, net of federal tax benefit............. 2.3 (6.1) 2.8
Non-deductible merger-related charges...................... -- 32.2 --
Amortization of excess cost of businesses acquired......... -- 0.5 0.1
Subchapter S Corporations income tax not subject to tax.... -- (7.4) (2.9)
Other...................................................... 0.1 0.2 0.2
----- ------ -----
Effective tax rate......................................... 37.4% (15.6)% 35.2%
===== ====== =====
</TABLE>
The Company has approximately $4.7 million of federal and state net
operating loss carryforwards available to offset future taxable income of
certain subsidiaries. These cumulative net operating loss carryforwards expire
in varying amounts through fiscal 2014.
27
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. CAPITALIZATION
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of Preferred Stock in
one or more series with such designations, powers, preferences, rights,
qualifications, limitations and restrictions as may be fixed by the Board of
Directors.
COMMON STOCK
On April 21, 1998, NOVA completed a public offering in which the Company
sold 5,000,000 shares of common stock for a purchase price to the public of
$30.00 per share. The net proceeds received from the sales of the shares of
common stock were approximately $142.6 million after deducting underwriting
discounts and commissions and estimated expenses. The Company used its net
proceeds to repay all amounts outstanding under its bank credit facility and to
purchase various merchant portfolios.
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 privately negotiated transactions price levels the
Company deems attractive. The shares may be used to meet funding requirements
for benefit plans and other business purposes. As of December 31, 1999, NOVA had
acquired 5,972,172 shares at an aggregate cost of $159.1 million. The purchase
of the shares was funded primarily through the draw down of funds from the
existing credit facility.
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
earnings. 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
28
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
redemption of the Rights, the Rights will terminate and the only right of the
holders will be to receive the $.01 redemption price.
NOTE 11. COMMITMENTS, CONTINGENCIES, AND LEASE OBLIGATIONS
CONTINGENCIES
NOVA is involved in ordinary and routine litigation incidental to its
business. The Company is not party to any pending legal proceedings that, in the
opinion of management, would have a material adverse effect on the results of
operations or financial position.
OPERATING LEASE OBLIGATIONS
The Company has leases for various real property and equipment that expire
at various dates. The future minimum rental commitments, net of future sublease
income, for all non-cancelable leases at December 31, 1999, are payable as
follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31, (IN THOUSANDS)
- ------------------------- --------------
<S> <C>
2000........................................................ $ 6,114
2001........................................................ 5,475
2002........................................................ 4,217
2003........................................................ 3,744
2004........................................................ 3,482
Thereafter.................................................. 11,478
--------
Total future minimum lease payments............... $ 34,510
Less future sublease income................................. $(10,479)
--------
$ 24,031
========
</TABLE>
Rental expense, net of sublease income, for the years ended December 31,
1999, 1998 and 1997 was approximately $4.8 million, $4.9 million and $3.3
million respectively.
NOTE 12. STOCK OPTION PLANS
The Company applies APB 25 and related interpretations in accounting for
its employee stock options. Under APB 25, if the exercise price of NOVA's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized. As discussed below, the
alternative fair value accounting provided for under SFAS 123 requires the use
of option valuation models that were not developed for use in valuing employee
stock options.
Pro forma disclosures of net income (loss) and earnings per share pursuant
to SFAS 123 require that the information be determined as if the Company has
accounted for its employee stock options granted subsequent to December 31,
1994, under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Risk free interest rate............................ 4.7%-6.3% 4.5%-5.7% 5.7%-6.9%
Dividend yield..................................... 0% 0% 0%
Expected volatility of stock price................. 0.577 0.577 0.544
Expected life in years............................. 7 7 7
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models
29
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
require the input of highly subjective assumptions, including the expected stock
price volatility. In management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options because the stock options have characteristics significantly
different from those of traded options, and changes in the subjective
assumptions can materially affect the fair value estimate.
The pro forma amounts are indicated below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
------- -------- -------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net Income (Loss):
As reported.......................................... $82,468 $(12,779) $37,899
Pro forma............................................ 64,708 (20,789) 34,452
Basic Earnings Per Share:
As reported.......................................... $ 1.16 $ (0.18) $ 0.60
Pro forma............................................ 0.91 (0.30) 0.54
Diluted Earnings Per Share:
As reported.......................................... $ 1.14 $ (0.18) $ 0.58
Pro forma............................................ 0.89 (0.30) 0.52
</TABLE>
The pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period, and additional options may be granted in future years. The
Company sponsors seven stock option plans whereby the Company has reserved for
issuance upon exercise of stock options a maximum of 11,540,610 shares of NOVA
common stock, and 550,000 shares related to stock appreciation rights.
The 1991 Employees Stock Option and Stock Appreciation Rights Plan ("1991
Plan"), the 1996 Employees Stock Incentive Plan ("1996 Employees Plan"), and the
NOVA Corporation 1996 Directors Stock Option Plan ("1996 Directors Plan") are
available to grant options. These plans are administered by a committee of the
Board of Directors that determines the number of shares to be granted and the
option price per share. Under these plans, the options expire no later than ten
years from the grant date.
The 1991 Plan option awards may be exercised in 20% increments annually,
beginning on March 1 following the date of grant. No options or rights shall be
granted under the Plan after November 2, 2001. No appreciation rights have been
granted.
Under the 1996 Directors Plan options granted are exercisable in 25%
increments at the end of each of the four years subsequent to the date of grant,
and at a purchase price per share no less than the market value per share on the
grant date.
The 1996 Employees Plan allows for the grants of incentive stock options,
non-qualified stock options, stock appreciation rights, and restricted stock
awards. On September 24, 1998, shareholders approved an amendment to increase
the number of shares issuable under the Plan from 2,000,000 shares to 6,000,000
shares to facilitate future grants to all employees of NOVA after the PMT
Merger. Under the 1996 Employees Plan, options may be exercised in 25%
increments at the end of each of the four years subsequent to the grant date.
The administrative committee under the plan may amend or alter the vesting
schedule of the outstanding options. Incentive stock options cannot be granted
at a per share price less than the fair market value of the common stock on the
grant date.
In connection with the PMT merger, each outstanding option or warrant to
purchase PMT common stock became fully vested and was automatically converted
into an option or warrant to purchase the number of shares of NOVA common stock
in an amount and per share price equal to the exchange ratio of .715. Each
assumed option contains terms and provision similar to those terms, conditions,
and provisions contained in
30
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the original grant. The PMT plans are no longer available for option grants.
Approximately 2,300,000 shares of NOVA common stock have been reserved for
issuance upon the exercise of such options and warrants. Information contained
in the tables presents the option activity as if PMT shares had been converted
from December 31, 1996.
A summary of option activity is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------
WEIGHTED
NUMBER AVERAGE EXERCISE
OUTSTANDING PRICE PER SHARE
----------- ----------------
(SHARE AMOUNTS IN THOUSANDS)
<S> <C> <C>
Balance at December 31, 1996................................ 3,191 $ 6.98
Granted and assumed......................................... 803 17.11
Exercised................................................... (587) 3.02
Terminated.................................................. (195) 14.67
------- ------
Balance at December 31, 1997................................ 3,212 9.74
Granted and assumed......................................... 4,507 27.14
Exercised................................................... (722) 12.61
Terminated.................................................. (198) 18.20
------- ------
Balance at December 31, 1998................................ 6,799 20.73
Granted..................................................... 1,430 25.56
Exercised................................................... (1,654) 10.79
Terminated.................................................. (580) 28.28
------- ------
Balance at December 31, 1999................................ 5,995 $23.46
======= ======
</TABLE>
The following table summarizes information concerning outstanding and
exercisable options at December 31, 1999 (Share amounts in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------- ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL LIFE EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
- --------------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 1.18 339 4.4 $ 1.18 339 $ 1.18
$ 3.73 182 4.6 3.73 182 3.73
$12.28 - $16.78 421 7.1 13.75 233 13.85
$18.53 - $22.03 742 7.4 19.52 563 19.49
$22.94 - $27.45 1,817 9.2 25.40 221 24.37
$27.50 - $31.12 2,416 8.7 29.24 583 29.30
$32.00 - $33.06 78 8.9 32.35 18 32.33
----- --- ------ ------ ------
Total 5,995 8.2 $23.46 2,139 $17.92
===== === ====== ====== ======
</TABLE>
The weighted-average grant date fair value of options granted is $16.25,
$17.08 and $9.62 for the years ended December 31, 1999, 1998 and 1997,
respectively. The Company realizes income tax benefits from the
31
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exercise of certain stock options. This benefit results in a decrease in current
income taxes payable and an increase in additional paid in capital.
NOTE 13. 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":
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
------- -------- -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Numerator for basic and diluted earnings per share.......... $82,468 $(12,779) $37,899
Denominator:
Denominator for basic earnings per share
Weighted average shares................................ 71,154 70,061 63,571
Effect of dilutive employee stock options and
warrants(1)............................................ 1,407 -- 2,097
------- -------- -------
Denominator for diluted earnings per share.................. 72,561 70,061 65,668
======= ======== =======
Basic earnings per share.................................... $ 1.16 $ (0.18) $ 0.60
======= ======== =======
Diluted earnings per share.................................. $ 1.14 $ (0.18) $ 0.58
======= ======== =======
</TABLE>
- ---------------
(1) 1998 excludes approximately 2,127,000 stock options and warrants which were
anti-dilutive for diluted earnings per share calculations.
NOTE 14. RELATED PARTIES
The Company has entered into a multi-year agreement with a shareholder that
provides telecommunications service and support, primarily for the Company's
transaction processing network. The amounts paid were approximately $6.6
million, $7.0 million and $3.8 million for the years ended December 31, 1999,
1998 and 1997, respectively.
The Company paid another of its shareholders approximately $2.7 million,
$3.0 million and $3.3 million in the years ended December 31, 1999, 1998 and
1997, respectively, primarily for transaction processing fees. Additionally, the
Company received approximately $0.5 million, $1.5 million, and $0.9 million of
interest income in the years ended December 31, 1999, 1998 and 1997,
respectively.
As discussed in Note 3, the Company purchased the CoreStates merchant
processing portfolio in November 1998. First Union, a shareholder of the
Company, acquired CoreStates prior to NOVA's acquisition of the portfolio.
32
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Previously reported quarterly financial information for the year ended
December 31, 1998, has been restated below to reflect the acquisition of the PMT
in pooling of interests business combination.
<TABLE>
<CAPTION>
1999 1998
----------------------------------------- -----------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... 311,765 379,344 387,471 388,059 240,542 275,186 307,209 322,727
-------- -------- -------- -------- -------- -------- -------- --------
Cost of service.................... 238,442 291,295 294,764 296,232 183,313 210,579 238,697 253,017
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) before income
taxes............................ 22,275 32,847 38,046 38,543 16,258(1) 20,600(2) 13,496(3) (65,495)(4,5)
-------- -------- -------- -------- -------- -------- -------- --------
Provision (benefit) for income
taxes............................ 8,257 12,323 14,248 14,415 5,571 7,649 8,281 (23,863)
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss).................. $ 14,018 $ 20,524 $ 23,798 $ 24,128 $ 10,687 $ 12,951 $ 5,215 $(41,632)
-------- -------- -------- -------- -------- -------- -------- --------
Earnings per share -- basic........ $ 0.19 $ 0.28 $ 0.34 $ 0.35 $ 0.16 $ 0.18 $ 0.07 $ (0.58)
-------- -------- -------- -------- -------- -------- -------- --------
Earnings per share -- diluted...... $ 0.19 $ 0.28 $ 0.33 $ 0.35 $ 0.16 $ 0.18 $ 0.07 $ (0.58)
-------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
- ---------------
(1) Net income and earnings per share include a pre-tax charge of $2.5 million
associated with merger activities.
(2) Net income and earnings per share include a pre-tax charge of $1.6 million
associated with merger activities.
(3) Net income and earnings per share include a pre-tax charge of $11.2 million
associated with merger activities.
(4) Net income and earnings per share include a pre-tax charge of $75.4 million
associated with merger activities.
(5) Includes $14.2 million of unusual charges for collectibility of accounts
receivable, increase allowance for doubtful accounts, merchant credit and
fraud losses reserves, and sales and use tax reserves.
See notes 2 and 4 to the consolidated Financial Statements for additional
information on the above transactions.
The Company has experienced, and expects to continue to experience,
significant seasonality in its business. The Company typically realizes higher
revenues in the fourth calendar quarter and lower revenues in the first calendar
quarter, reflecting increased transaction volumes during the summer months and a
significant decrease in transaction volume during the period immediately
following the holiday season. Quarterly results are also affected by the timing
of merchant portfolio purchases and the timing and magnitude of expenses for
merchant portfolio conversions. Therefore, the results reported in the table
above do not necessarily indicate the Company's normal seasonal trends.
33
<PAGE> 34
EXHIBIT 13
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
We have audited the accompanying consolidated balance sheets of NOVA
Corporation (and subsidiaries) as of December 31, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We did not audit the 1997 financial statements or schedule of PMT
Services, Inc. ("PMT"), a wholly-owned subsidiary, and certain of its
subsidiaries which statements reflect total revenues of 45% of the consolidated
total for the year ended December 31, 1997. Those statements and schedule were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the 1997 data included for PMT, is based
solely on the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of NOVA Corporation and
subsidiaries at December 31, 1999 and 1998, and the consolidated results of
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, based on our audits and the report
of the other auditors, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Atlanta, Georgia
February 22, 2000
34
<PAGE> 35
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF PMT SERVICES, INC.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows (not presented separately herein) present fairly, in all material
respects, the financial position of PMT Services, Inc. and its subsidiaries at
July 31, 1997 and the results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting principles in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Nashville, Tennessee
September 25, 1998
<PAGE> 1
Exhibit 21
Subsidiaries of Registrant
Elan Merchant Services, LLC
Key Merchant Services, LLC
LADCO Financial Group
LADCO Finance Corp. IV
LADCO Funding Corp. V
NOVA Asset Management Company
NOVA GA Command, Inc.
NOVA Georgia Services, L.P.
NOVA Information Services Company
NOVA Information Systems, Inc.
NOVA Licensing Company
NOVA TN Command, Inc.
PMT Services, Inc.
<PAGE> 1
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorpration by reference in the Registration Statement (Form
S-8 No. 333-04351) pertaining to the NOVA Corporation 1991 Employees Stock
Option and Stock Appreciation Rights Plan and the NOVA Corporation 1996
Employees Stock Incentive Plan, the Registration Statement (Form S-8 No.
333-64683) pertaining to the NOVA Corporation 1996 Employees Stock Incentive
Plan and NOVA Corporation Directors Stock Option Plan and the Registration
Statement (Form S-8 No. 333-64681) pertaining to the PMT Services, Inc. 1997
Nonqualified Stock Option Plan, 1994 Non-Employee Director Stock Option Plan and
1994 Incentive Stock Plan of our report dated February 22, 2000 with respect to
the consolidated financial statements and schedule of NOVA Corporation included
in its Annual Report (Form 10-K) for the year ended December 31, 1999.
Ernst & Young LLP
Atlanta, Georgia
March 27, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 333-04351, 333-64681 and 333-64683) of NOVA
Corporation of our report dated September 25, 1998, relating to the
consolidated financial statements of PMT Services, Inc., which appears in the
Annual Report to Shareholders, which is incorporated in this Annual Report on
Form 10-K of NOVA Corporation. We also consent to the incorporation by
reference of our report dated September 25, 1998 related to the financial
statement schedule for the year ended July 31, 1997.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Nashville, Tennessee
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF NOVA CORPORATION FOR THE YEAR ENDED DECEMBER 31, 1999
AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 32,574
<SECURITIES> 0
<RECEIVABLES> 148,207
<ALLOWANCES> 11,191
<INVENTORY> 11,255
<CURRENT-ASSETS> 225,505
<PP&E> 120,439
<DEPRECIATION> 43,476
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0
0
<COMMON> 737
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