<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(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 FOR THE TRANSITION PERIOD FROM TO
TO
COMMISSION FILE NUMBER 1-13333
DBT ONLINE, INC.
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER.
PENNSYLVANIA 85-0439411
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5550 W. FLAMINGO ROAD, SUITE B-5
LAS VEGAS, NEVADA 89103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING
AREA CODE 702-257-1112
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS: NAME OF EACH EXCHANGE ON WHICH
REGISTERED:
Common Stock, par value $.10 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
(TITLE OF CLASS)
Check whether the Registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained in this form, and no disclosure will 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. [ ]
As of March 1, 2000, the aggregate market value of the voting stock of
the Registrant held by non-affiliates of the Registrant was $ 213,302,770.
As of March 1, 2000, the number of outstanding shares of Common Stock, par value
$.10 per share, of the Registrant was 20,145,094.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I
<S> <C> <C>
Item 1. Business ....................................................................................... 4
Item 2. Properties ..................................................................................... 13
Item 3. Legal Proceedings............................................................................... 14
Item 4. Submission of Matters to a Vote of Security Holders............................................. 15
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........................... 16
Item 6. Selected Financial Data ........................................................................ 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ...................................................................... 19
Item 7a. Quantitative and Qualitative Disclosures about Market Risk...................................... 25
Item 8. Financial Statements and Supplementary Data..................................................... 28
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. ...................................................................... 43
PART III
Item 10. Directors and Executive Officers of the Registrant.............................................. 44
Item 11. Executive Compensation ......................................................................... 47
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................. 52
Item 13. Certain Relationships and Related Transactions.................................................. 53
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K......................................................................... 54
Signatures ..................................................................................... 56
</TABLE>
-2-
<PAGE> 3
FORWARD-LOOKING STATEMENTS
Information included or incorporated by reference in this report may contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. This information may involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from the future
results, performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," "intend" or "project" or the negative of these words or other
variations on these words or comparable terminology.
This report contains forward-looking statements that address, among other
things, the integration of acquisitions, limited experience with Internet
business, growth strategy, computer system capabilities, availability of data
and customer demand. These statements may be found under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as in this Form 10-K generally. Actual events or results may
differ materially from those discussed in forward-looking statements as a result
of various factors, including, without limitation, the risks outlined under
"Factors Affecting our Business Condition" and matters described in this Form
10-K generally.
-3-
<PAGE> 4
PART I
ITEM 1. BUSINESS
We are a leading nationwide provider of organized online public records data
and other information. We believe that our database is one of the country's
largest depositories of public records and other public information, containing
more than 5 billion records with more than 25 terabytes of data storage
capacity. Our customers are able to access and search our database 24 hours a
day, 365 days a year through our Internet websites or over a modem connection.
Our files store various kinds of information on individuals, businesses and
assets, including:
INFORMATION ON INDIVIDUALS INFORMATION ON BUSINESSES AND ASSETS
o first and last names o corporation records
o current and past addresses o real property records
o known associates and relatives o motor vehicles records
o telephone numbers o liens, judgments and bankruptcies
o professional licenses o UCC filings
o other assets
Our proprietary software tools allow our customers to quickly and
cost-effectively search our large database for information. Starting with very
little information, such as a name or address, our customers can locate and
build an extensive profile which we are able to generate into comprehensive,
easy-to-read reports.
We currently have more than 15,000 customers utilizing our AutoTrack
services and products, consisting primarily of insurance companies, law firms,
private investigators, law enforcement and government agencies. Our customers
use our online information services to detect fraudulent activity, assist law
enforcement efforts, locate people and assets and verify information and
identities. From 1996 to 1999, our revenues from our Electronic Information
Group increased from $22.6 million to $72.8 million, representing a compound
annual growth rate of 48%, and our EBITDA increased from $3.9 million to $12.5
million, also representing a compound annual growth rate of 48%. Since 1996, we
have successfully introduced new services and technologies to our customers and
have completed several complementary acquisitions.
In September 1999, we acquired KnowX.com and Informed from Information
America, Inc. KnowX.com is a leading Internet-based public record research tool
for consumers and small office users. Informed offers qualified users, including
commercial lending and leasing companies, access to public information through
the Internet or dial-up modems. We believe our acquisition of KnowX.com and
Informed will expand and diversify our customer base and allow us to further
market our products to the rapidly growing population of Internet users.
MARKET OVERVIEW
The market for public information includes both public records and publicly
available information. Public records primarily include information from
governmental entities or agencies, such as names and addresses of individuals
and corporations, driving records, court records, bankruptcy filings, lien
filings and real property records. Publicly available information includes data
such as professional licenses and residence directories. As the sources of this
information are often geographically dispersed and the information is available
in many different forms, locating and aggregating this information is a
time-consuming, costly and challenging task. Moreover, verifying the data and
organizing it into a useful format presents additional difficulty. We believe
that, given the fragmented nature of public records and other publicly available
information, the ability to effectively aggregate the data and generate easy to
read reports in a timely manner represents a high value-added service.
Historically, the primary users of public records have been law enforcement
and other governmental agencies, law firms, insurance companies and licensed
investigation companies. These entities use public records to assist them to
investigate fraudulent and criminal activity, locate individuals and research
businesses and assets. As an example of the significant amount of fraud that
occurs each year, according to a 1996 survey by The Conning Company, more than
$120 billion is lost through insurance fraud each year in the United States,
including $20 billion in property, casualty and life insurance fraud and $95
billion in healthcare insurance fraud. We believe that businesses will expand
their efforts to combat fraud, increasing the demand for public information
services in these markets and continuing to represent a significant growth
opportunity.
-4-
<PAGE> 5
In recent years, additional types of customers, including small businesses,
consumers and larger corporate customers, have been using online public records
in the ordinary course of their business to verify personal information and to
search for information related to individuals or businesses. We believe these
new market opportunities will create additional demand for online public
information search and retrieval services.
We also believe that providers of online information services are well
positioned to participate in the significant growth associated with Internet
commerce. The growth of the Internet as a global medium for communication and
information exchange is expected to continue to increase demand for content and
services that are accessed and delivered through web-based media. According to
International Data Corporation, the number of Internet users worldwide is
expected to grow from 159 million at the end of 1998 to an estimated 510 million
in 2003. International Data Corporation also estimates that the total value of
goods and services purchased over the Internet worldwide will grow from
approximately $50.4 billion in 1998 to approximately $1.3 trillion by the end of
2003. This growth is due in part to a user's ability to efficiently and rapidly
search the Internet to access and manipulate information from a wide variety of
sources. Through electronic commerce, these information services can be accessed
and delivered online in a quick, easy, and inexpensive manner. We believe that
the growth in web-based activity combined with the increasing demand for public
records from both new and existing markets will support significant growth for
comprehensive and organized on-line methods for accessing public information.
STRATEGY
Our business objective is to be the leading provider of organized online
public information to the corporate, consumer and governmental markets, while
enhancing proprietary customer data with public information in our database. To
achieve this objective, we intend to continue to develop long-term customer
relationships and maintain a high level of customer satisfaction, which we
believe will result in additional recurring revenues from our existing products
and an enhanced ability to introduce new products. Key elements of our strategy
are to:
DEVELOP NEW PRODUCTS AND APPLICATIONS UTILIZING OUR LARGE INFORMATION
DATABASE
We believe that we maintain one of the largest databases of public
information in the United States, which is enhanced by proprietary technology
that makes data retrieval fast and efficient. Our existing database of public
records and information, which we continually update and expand, presents
opportunities to develop new products and services at a relatively low
incremental cost. We will seek to capitalize on our relatively fixed investment
in our existing database by continuing to develop new applications that use this
data to tailor services to the needs of particular customers. For example, the
Los Angeles County Sheriff's Department asked us to develop a tool for finding
up-to-date addresses of individuals who were the subject of arrest warrants. In
response, we developed the CLAWS(sm) system, which performs daily searches of
our large databases. We are currently marketing the CLAWS system to our other
law enforcement customers. Similarly, we recently completed a large project
designed to detect voter fraud for the state of Florida and are currently
marketing this service to other states. We will pursue similar additional
opportunities to fully utilize our existing database. In addition to developing
new applications, we believe that we can supply public records and information
on a wholesale basis to Internet-based businesses. For example, we recently
entered into an agreement to supply a minimum of $20 million of data to US
SEARCH over the term of the five and one half year agreement.
EXPAND OUR CUSTOMER BASE BY ENTERING NEW MARKETS
We believe our existing product portfolio, including those products obtained
through recent acquisitions, will allow us to aggressively pursue new market
opportunities. We have specifically identified and intend to pursue growth
opportunities within the consumer, lending/leasing and pre-employment screening
markets. We believe that our acquisition of KnowX.com gives us a significant
presence in the large and rapidly growing consumer and small office markets.
KnowX.com provides these customers with a low cost method of researching
important purchases, such as checking the history and ownership of a home,
before making a purchase decision. We are also currently introducing online
screening and selection services to these markets which will allow customers to
instantly verify the identity of individuals with whom they are conducting
business on the Internet. Our acquisition of Informed provides us with an
established relationship with commercial lending and leasing companies. Lastly,
through our acquisition of Insight, we intend to vigorously pursue customers in
the pre-employment screening market, providing both detailed verification and
screening and selection services. We will continue to seek additional
opportunities to deliver our existing product offerings to new markets.
-5-
<PAGE> 6
DEVELOP MORE EFFICIENT DELIVERY METHODS TO FURTHER PENETRATE EXISTING MARKETS
We continually seek to enhance our relationships with existing customers by
developing more efficient methods for the delivery and presentation of our
products. We recently introduced AutoTrackXP(sm) Online Services, a Windows
compatible product with an HTML-based interface. AutoTrackXP allows customers to
access our products using off-the-shelf web browser technology commonly found on
today's personal computers. We believe that the improved efficiency and ease of
access to our products afforded by AutoTrackXP will significantly expand the
number of customers using our products in industries we presently serve. In
addition to utilizing our browser technology, we expect to utilize our
recently-acquired CaseLINK technology to enhance the presentation of our
reports. CaseLINK converts our data into graphic illustrations that helps users
visualize relationships among people, businesses, vehicles and other assets,
creating user-friendly reports that we believe will contribute to increased use
of our products. We intend to continue to focus on improving the delivery and
presentation of our products, which we believe will increase usage of our
services by our customers.
DEVELOP DECISIONING TOOLS TO HELP CUSTOMERS EVALUATE DATA
We are currently working to develop technologies that qualitatively and
quantitatively evaluate the records and information retrieved by our customers,
particularly in the insurance and health care industries. We believe that these
tools will assist customers in predicting patterns of behavior, which will allow
them to more effectively prevent fraudulent activity. We expect to use this
technology to link our products with customers' specific claims files or
databases to develop decision-making templates to identify potential fraudulent
claims before any payments are made with respect to those claims. We believe
these product development efforts will allow us to provide customized,
comprehensive solutions to our customers, complementing our current product
offerings and significantly increasing the value-added nature of our products.
PURSUE STRATEGIC ACQUISITIONS OF COMPLEMENTARY BUSINESSES
We continuously monitor and consider opportunities to expand our customer
base and acquire new products and technologies through acquisitions of
complementary businesses or assets. We recently completed an acquisition of
WinSHAPES, through which we obtained the CaseLINK technology, and a merger with
IRSC, which provided us with pre-employment screening capabilities. We also
recently acquired KnowX.com and Informed, which we believe will enable us to
establish a significant presence in the consumer, small office and commercial
lending and leasing markets. We intend to continue to pursue additional
strategic acquisitions that enhance our products and technologies and expand our
customer base.
DATABASES AND OPERATIONS
DATABASES
With 25 terabytes of data storage capacity and over 5 billion records, our
databases contain public records, publicly available information and other
non-public information gathered from governmental and private data sources. The
information stored in our files includes first and last names, current and past
addresses, known associates and relatives, telephone numbers, professional
licenses, corporation records, liens, judgments, bankruptcies, UCC filings and
records for real estate, motor vehicles, and other assets. While each file or
source may contain information that is geographically or topically unique, we
have created proprietary software that links the files to each other. Our
proprietary software tools allow customers to perform searches starting with
very little information, and by cross-referencing our databases, generate an
extensive profile built into one comprehensive, easy-to-read report. Customers
conduct searches through all files, or through topical or geographical files, to
retrieve possible matches to the subject of the search. For example, in order to
perform a nationwide search for an individual who has a driver's license, our
databases would search each state's driver's license file, matching similar
names in a matter of seconds. Our software then is able to combine the retrieved
information into an extensive profile on the subject of the search by
cross-referencing data received from the initial search with other records
regarding the same individual in our databases.
Customers can customize their search results in any number of ways. Some of
our customers provide us with their own proprietary data for the retrieval of
cross-referenced or similar data in our databases. Our software is able to build
a profile with information tailored to the customer's request. Using our
software, our databases will retrieve persons or assets associated with the
subject of the search, such as persons living at the same address, and add
associated information to a profile. Our software also has the ability to sort
through a comprehensive profile and generate a report which identifies, in
graphics or in writing, the relationships between people, assets or other
information which appears in a report. We have bundled many of our software
tools into specific products to facilitate frequently run searches. The
following represent our larger, more frequently accessed files, which we also
intend to use in conjunction with products we may acquire in the future.
-6-
<PAGE> 7
o RECORDS ON INDIVIDUALS. We maintain information on millions of
individuals throughout the United States, including current and previous
addresses, neighbors, dates of birth, and other information.
o RECORDS ON CORPORATIONS. We maintain information on active and inactive
businesses, based on Secretary of State filings in 43 states, including
officers, directors, registered agents, corporate status and federal
employment identification numbers.
o PROPERTY RECORDS. Our property records include information on real
property from over 1,100 counties located in 43 states and the U.S.
Virgin Islands, such as mailing address, parcel number, assessed values,
recent and prior sales prices and property narratives.
o VEHICLE RECORDS. Our vehicle records include information on vehicle
registrations in 32 states, including the owner's name and address,
description, title information, vehicle identification number,
lienholder information, and historical data.
o RECORDS ON DRIVERS. We maintain information on drivers' licenses issued
in 18 states, including drivers' license numbers, addresses, dates of
birth and zip codes.
o RECORDS ON LIENS, JUDGMENTS AND BANKRUPTCIES. We maintain information on
business and consumer bankruptcies in all 50 states and we maintain
files on federal and state tax liens and civil judgments in 31 states.
o UCC FILINGS. We maintain UCC lien filing information for 44 states,
including debtor, secured party, address, state, assignee, collateral,
filing number and filing date.
o PROFESSIONAL LICENSES. We maintain professional licensing records from
46 states, including license categories, license numbers, business and
licensee names and addresses. We also have FAA pilots licenses and
DEA-controlled substance licenses in all 50 states.
o TELEPHONE NUMBERS. We maintain listings from all white page and yellow
page directories published nationwide, including the name, address,
city, state, zip, metropolitan statistical area (MSA) and for business
listings the US Government Standard Industrial Classification code
(SIC). We also provide gateway access to each of the regional Bell
electronic directory assistance databases.
We believe that the size and diversity of our databases are unmatched in the
industry and, combined with our ability to quickly cross-reference between them,
provide us with significant competitive advantages in the market place. We
believe we are the only major online public information provider that maintains
and continually refreshes historical information provided to us by our data
suppliers. In many cases, we have archives of data dating back more than 10
years. We also believe that we maintain superior database quality in part
because, while we do not revise data contents, we format each data file we
receive in order to make it useable on our databases.
HARDWARE CONFIGURATION
We designed and built our existing proprietary computer configuration to
create a mass-storage file system. While we currently use our proprietary
hardware configuration, we recently purchased an open-architecture, complete
mass-storage hardware and software system file system which we are in the
process of implementing. Our new configuration will feature database software
designed by Oracle that will run on a central processing unit produced by Sun
Microsystems. EMC will provide the mass storage file system to store the
libraries of information contained in our databases.
We will phase in our new hardware configuration throughout the year 2000 in
order to minimize the risk of service disruption. The implementation of our new
hardware configuration will increase the speed of our data retrieval, the
storage capacity of our databases and the long-term serviceability of our
hardware, all of which will expand our capabilities to continue to service our
growing customer base. Our new computer configuration will continue to offer our
customers fast-index retrieval and real-time redundant fault tolerances.
-7-
<PAGE> 8
DATA SOURCES
We obtain our data from the federal and state governments and from third
party data aggregators. Many of our data suppliers send us computer diskettes,
tapes or other mediums for data storage. We convert and format all of these data
storage mediums for use with our products. We currently receive data from over
300 vendors, which include information from all 50 states, over 3,000 counties
and approximately 1,500 government agencies. Leading domestic credit bureaus are
our largest data suppliers. We also obtain site licenses and pay variable fees
based on the frequency of our customers' access to our suppliers' databases. Our
data costs are comprised of both fixed fee and variable fee arrangements.
In order to protect our databases and to minimize the risk of service
disruptions, we create daily back-up files of the raw data in our databases, our
customers' offline search inquiries and results, saved reports and logged
transactions. We also operate a second system that is redundant to our primary
data retrieval system. In addition, we house our primary and secondary databases
in separate buildings. Our building planners have advised us that our buildings
are substantially hurricane and tsunami proof. We protect our databases from
intruders with a state of the art active security system, and we record the
entry and exit of all employees and visitors at all times with a key card
system.
PRODUCTS
We currently have four principal products:
AUTOTRACK
Our AutoTrack(sm) products provide online access, from a customer's
computer, 24 hours a day, seven days a week, to our databases. AutoTrack is able
to search a multitude of databases for information on specific search items and
combine the data into a single, easy to read report. As hundreds of databases
can be searched to build a report, we simultaneously compile information over
several internal distributed processes, which speed report compilation time
dramatically. Comprehensive database searches and in-depth report compilation
are made possible by our proprietary indexing techniques. We have implemented a
pricing plan that seeks to attract new subscribers and increase usage. The
primary components of the AutoTrack pricing structure are search and report
fees, which cost $2.00 per search and range from $7.00 to $18.00 per report. We
offer AutoTrack through two main products, AutoTrackXP(sm) and
AutoTrackPlus(sm).
AutoTrackXP is our new Windows(R) compatible product that allows access to
our database warehouse using off-the-shelf Web browser technology commonly found
on today's personal computers. With an Internet browser such as Netscape
Navigator(R) or Microsoft Internet Explorer(R), customers can access our
database using Windows point-and-click technology. Customers connect to our
www.autotrackxp.com website using a modem and any standard dial-up software
designed for connecting to the Internet. In addition to the standardized
interface, the multi-tasking Windows environment permits browsing and running of
multiple reports simultaneously, as well as allowing the customer to cut and
paste information from the browser directly into other open documents. With its
HTML-based interface, we believe that anyone familiar with Internet browsers can
easily learn to use AutoTrackXP in just minutes. Introduced on May 1, 1999,
AutoTrackXP represented approximately 48% of our monthly AutoTrack revenue in
December 1999.
AutoTrackPlus is our original data retrieval product. Qualified subscribers
access AutoTrackPlus over a modem connection and are able to search either
national or state-specific databases. We are currently in the process of
converting our AutoTrackPlus customers to AutoTrackXP.
Our AutoTrack products are used by law enforcement, property and casualty
insurance companies and law firms in their day to day business. For example, an
investigator can run a search using AutoTrack to determine whether there is a
relationship between parties in an auto accident for which an insurance claim
has been filed to determine the likely validity of the claim. Similarly, an
investigator could research a suspected criminal's current and former addresses
as well as known associates and their addresses to assist in the apprehension of
a criminal.
-8-
<PAGE> 9
KNOWX.COM
KnowX.com is a market leader of Internet-based public record research
targeting consumers and small office users. Its core product, Ultimate People
Finder(sm), provides a low-cost way to locate individuals through public
records, while its other products provide summary and detailed public record
information on individuals and businesses. KnowX.com provides access to public
records databases that allow users to locate and research people, assets and
companies. We did not purchase any data in connection with the KnowX.com
acquisition, but we have entered into a transition services agreement with the
seller which allows us to use its databases for up to one year. Following this
transition period, we intend to use our databases to supply the public records
and other information for the KnowX.com products.
Reported instantaneously through its web interface, KnowX.com performs
searches on a real-time basis. The KnowX.com website generates its revenue
through transactions, as opposed to advertising, and enjoys repeat customer
usage of nearly 50% of all its traffic. The KnowX.com products have experienced
significant growth as Internet-accessed small businesses and consumers discover
the service and recognize its usefulness.
We acquired KnowX.com in September 1999 as a part of our purchase of
selected businesses from Information America. KnowX.com currently charges
customers up to $1.50 per database search and up to $ 84.00 for a detailed
search. Consumers and small office customers use KnowX.com for a variety of
purposes. For example, a consumer may use KnowX.com to access information to
locate a missing relative or to research the history of a home which the
consumer is thinking of purchasing.
INSIGHT
InSight(TM) is a Windows(R) based software, obtained in May 1999 when we
merged with IRSC, that provides access to public and publicly available records
and permits users to order manual searches such as searches of court records and
employment, education and professional license verifications. Its flexible
interface enables users to create custom menus and custom combined searches. The
custom menu ability helps customers to focus on the specific services most often
used while the custom combined feature saves customers time in entering search
information. Using InSight's profile feature, customers can create subject
profiles, save them and use them at a later date to obtain updated reports.
InSight also allows users to capture information for integration into other
files and reports. InSight Plus(TM) , which is currently under development, is
an enhanced browser-based version of InSight specifically designed for the human
resources market. Features of InSight Plus will include integrated reports,
flexible billing and the ability to obtain status information on orders through
the Internet. An important feature of Insight Plus is the back-end processing
system which we expect will improve turnaround time, reduce costs and increase
quality.
Through InSight, customers can conduct a Signal(TM) search, which is an
instant verification tool that analyzes subject data and produces warnings based
on inconsistencies in that data. For example, a warning would be issued if a
social security number was issued prior to a date of birth or if a telephone
number prefix did not match the city provided. An enhanced version of Signal is
in development, which will take advantage of data hosted by us and provided
through AutoTrack. Users of InSight are charged on a transaction basis with
prices ranging from $3.00 to $20.00 per search or verification.
While InSight is used for a variety of purposes, including loan evaluation
and vendor due diligence, nearly 50% of IRSC's revenues in 1999 were generated
from pre-employment screening. For example, an employer could verify the
accuracy of the information contained on an applicant's employment application,
as well as review or investigate criminal records, driving history or education
credentials. InSight is subject to regulation under the Fair Credit Reporting
Act.
INFORMED
The Informed product line uses publicly available information and high-speed
search and retrieval technology to identify relationships between people, assets
and businesses. Customers use the product for a variety of purposes, including
lending and leasing transactions. The Informed software platform enables users
to access multiple databases and create easy-to-read reports with a web-like
interface. This platform simplifies the search process for the customer,
encouraging more frequent use. Currently, there are three "packaged" Informed
products: Informed Investigator(R), Informed Lender(sm), and Informed Credit
Manager(R). We acquired the Informed product line in September 1999 as part of
our purchase of selected businesses of Information America.
Typical Informed users include banks and leasing companies, in addition to
insurance companies and corporate clients. For example, a loan officer may
verify the background information provided to him by a potential borrower using
the Informed product. The pricing structure for Informed products ranges from
$5.00 for relatively simple searches to $50.00 for more complex searches that
are national in scope.
-9-
<PAGE> 10
RESEARCH AND DEVELOPMENT
We continually work to develop new products and services that respond to our
customers' needs. Our recent research and development efforts currently include,
among other things, the development of products designed to quantitatively and
qualitatively evaluate data to meet the needs of new and existing customers.
As of December 31, 1999, our research and development staff included
personnel with special programming capabilities, including 53 people engaged in
product development and engineering, 6 people engaged in advanced technology
applications, 5 people engaged in quality assurance and testing, and 13 people
in purchasing, administrative and supporting functions.
SALES AND MARKETING
We believe that substantial opportunities exist to attract new customers and
increase our revenues from existing customers. Our marketing objective is to
stimulate demand for our products by targeting the needs of various market
segments, including law enforcement, governmental agencies, insurance companies,
banks, consumers, small businesses and leasing companies. We have divided our
sales and marketing staff into groups that concentrate on one or two industries
in order to focus our efforts. We also are expanding our sales and marketing
department in order to provide more individualized attention to our customers
and to monitor the quality and reliability of our products. Our current sales
force includes 43 people, an increase of 33 employees since 1996. We generally
target customers with higher spend profiles with the goal of entering into
long-term agreements to provide industry specific products to these customers.
In addition, we continue to solicit new customers through trade show
advertisements, direct mail and trade publications.
We have made significant investments in the advertising of the KnowX.com
brand to rapidly increase our consumer customer base.
CUSTOMER SUPPORT AND TECHNICAL ASSISTANCE
Our customer support staff provides technical assistance to all of our
customers, at no charge, 24 hours a day, 365 days per year. We dedicate
specialized operators to first-time users requiring log-in assistance, repeat
users with technical problems, such as connectivity or printing malfunctions,
and customers requiring additional or new products. Our sales and marketing
personnel have trained the customer support staff to offer customers products
that other customers in their industry use.
REGULATION
GOVERNMENT REGULATION
Regulation of access to information for public use varies from state to
state. Therefore, the amount of information available in particular states may
vary. In many states, all government records are specifically made public by law
unless excluded by a specific statutory exception. These exceptions exist
primarily with respect to private criminal history information, such as arrest
records, which generally may only be provided to law enforcement agencies for
specific purposes. The continued availability of public record data is also
subject to federal legislation. For example, the Driver's Privacy Protection Act
of 1994 places certain restrictions on the release and use of personal data
included in state motor vehicle records. Though legislators and consumers appear
to be increasingly scrutinizing privacy laws, we cannot predict whether state
regulation in any particular state will change, nor whether the federal
government will implement new regulations with respect to access to specific
information.
The Fair Credit Reporting Act obligates our IRSC subsidiary to provide
information to users only for permissible purposes, including credit, insurance
or employment purposes. If a creditor, insurer or employer denies an individual
credit, insurance or employment based in whole or in part on our report, then
the consumer must be notified of the basis for denial. Under the FCRA, the
consumer can ask for an opportunity to correct any inaccurate information in the
report. We are obligated to investigate any alleged inaccuracies in our reports
and correct them if necessary. In addition, along with other resellers of public
information, our IRSC subsidiary signed a consent decree with the Federal Trade
Commission. The consent decree regulates our customers' use of information. As a
result, we require that our customers specify their intended use of the
information sought from us.
-10-
<PAGE> 11
SELF-REGULATION
Together with 13 other leading information industry companies, we formed the
Individual Reference Services Group, or IRSG, which worked closely with the
Federal Trade Commission and recently adopted self-regulatory principles
governing the dissemination and use of data that help identify, verify or locate
individuals. The IRSG Principles adopted by the IRSG members in December 1997
impose significant restrictions on the access and distribution of non-public
information. In addition, the IRSG Principles require that information from
non-public sources about persons identifiable as minors are not to be
disseminated to either the public, commercial or professional markets. The IRSG
Principles provide the enforcement mechanisms, including yearly compliance
reviews by qualified independent third party auditors. In the first quarter of
1999, PricewaterhouseCoopers reviewed our Database Technologies, Inc.
subsidiary's operations and certified our compliance with the IRSG Principles.
Also, in the first quarter of 1999, Corbin & Wertz certified our IRSC
subsidiary's compliance with the IRSG Principles, and PricewaterhouseCoopers LLP
certified Information America's business as compliant with the IRSG Principles.
We screen potential customers, process orders and verify the credentials and
references of each potential customer in accordance with the IRSG Principles. We
reserve the right to refuse, or withdraw without notice, access to our products,
and have established procedures designed to restrict access to our system and
certain products to qualified individuals. Once we approve an application, the
customer signs a subscription agreement and use certification which governs the
use of and access to our products. A standard subscription agreement includes a
disclaimer of any warranties on the data and, except for law enforcement and
other government customers, an indemnification for liabilities resulting from
the customer's use of the data.
COMPETITION
The electronic information industry is competitive, and is characterized by
rapid technological change and the entry into the field of large, well
capitalized companies, and smaller, niche competitors. Competition within our
markets is intense and based mainly on price, speed, the comprehensiveness of
data and the ability to provide information in an easy-to-read form. We
currently compete in the investigative, pre-employment and consumer markets.
o In the investigative market, we compete with local, regional and
national private investigation firms, such as LEXIS-NEXIS, West
Publishing, ChoicePoint, Kroll-O'Gara Company, the Pinkerton division of
Securities AB, the Proudfoot Reports Division of ASI Solutions, Inc.,
and a significant number of companies operating on either a national
scale or a local or regional basis.
o In the pre-employment market, we compete with firms offering
comprehensive public record information, such as ChoicePoint and Avert.
o In the consumer market, we compete with free individual locator and
information services, including services offered by Internet search
engines, telephone companies and other third parties who publish free
printed or electronic directories. We also compete with companies that
offer products similar to ours, such as US SEARCH.
Our competitors in these markets often offer a wide variety of information
services, ranging from news to legal databases, that allow them to offer their
products to similar customer bases.
PATENT EXPLOITATION AND ENFORCEMENT BUSINESS
In addition to our online public records business, we operate in the patent
exploitation and enforcement business through our Patlex subsidiary, which
exploits and enforces two partially owned laser patents. These laser patents
include a Gas Discharge Laser Patent and a Brewster Angle Window Patent.
Patlex's patent exploitation and enforcement business involves the
identification of laser products and laser applications that infringe the laser
patents, the execution of licensing agreements with third parties and the
enforcement of the laser patents. The Gas Discharge Laser Patent generates
substantially all of Patlex's revenues and expires in November 2004. The
Brewster Angle Window Patent expires in May 2005. Upon the expiration of the
laser patents, Patlex will lose its right to prevent others from exploiting
these inventions and to receive royalty payments. We do not expect to derive any
revenues from the patent exploitation and enforcement business following the
expiration of the laser patents.
-11-
<PAGE> 12
PATENT EXPLOITATION
Substantially all of Patlex's revenues consist of royalty income derived
from the licensing of the laser patents. As the exclusive licensing agent,
Patlex actively monitors the laser industry to identify manufacturers and users
who exploit the laser patents without Patlex's authorization. Patlex then enters
into agreements that compel the unauthorized manufacturers and users to report
and pay royalties. Generally, these agreements are either licensing agreements
or settlement agreements. The licensing agreements allow users and manufacturers
to use the laser patents on an ongoing basis. By contrast, settlement agreements
require payment of a lump sum of money for past infringement, but do not permit
the continued manufacture and /or use of the laser patents. Manufacturers and
sellers of products that incorporate the laser patent technology typically enter
into licensing agreements while licensees that use, but do not manufacture or
sell, the Laser Patent technology, tend to enter into settlement agreements.
As of December 31, 1999, Patlex had agreements with a total of 182 laser
manufacturers and users representing a wide cross-section of industries. Of such
agreements, 176 were licensing agreements and the remaining six were settlement
agreements.
The market for Patlex's licensing agreements prior to the expiration of the
laser patents depends on the state of the commercial laser industry. Factors
contributing to fluctuation in the number of laser patent license agreements
include Patlex's execution of license agreements with new commercial entities,
spin-offs creating new entities from existing licensees, business failures,
combinations between existing licensees and termination of existing agreements
for cause or by mutual consent. We believe that the majority of the commercial
laser manufacturers in the United States, as well as a majority of manufacturers
importing lasers into the United States, have been licensed to use the laser
patents. In addition, as a result of licensing efforts to date, royalties from
past infringement are expected to be minimal in the future.
PATENT ENFORCEMENT
Patlex's ability to exploit the laser patents through its licensing program
has been directly tied to its successes in litigating the validity of the laser
patents, both in the courts and before the United States Patent and Trademark
Office. We believe that the major period of litigating the validity and
enforceability of the laser patents has passed. However, the laser patents may
be subject to subsequent challenges.
EMPLOYEES
As of December 31, 1999, we had 399 full-time employees. We consider our
relationships with our employees to be good. None of our employees are covered
by collective-bargaining agreements.
-12-
<PAGE> 13
ITEM 2. PROPERTIES
PROPERTY AND EQUIPMENT
We currently lease approximately 150,000 square feet of office space in Boca
Raton, Florida, to conduct our online public records business. Our patent
enforcement business currently leases approximately 3,000 square feet in Las
Vegas, Nevada. Our IRSC subsidiary currently leases 19,674 square feet of office
space in Brea, California. Our WinSHAPES subsidiary currently leases 2,350
square feet of office space in Bainbridge Island, Washington. Our KnowX.com
business currently leases 9,000 square feet of office space in Atlanta, Georgia.
We believe that these facilities are adequate for our current needs.
-13-
<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS
Along with our IRSC subsidiary, its former chairman and principal
shareholder, we were party to a lawsuit against a group of eight companies that
formerly conducted business with IRSC. These eight companies alleged that IRSC
was obligated to enter into a merger agreement with them and that the former
chairman of IRSC was obligated to work for the company surviving the merger. The
companies also alleged that we interfered with the obligations of IRSC and its
former chairman by acquiring IRSC. When these companies threatened to sue, we
filed a lawsuit against them in state court in May 1999 to establish
jurisdiction of the action in Florida. Discovery was conducted from June 1999
until October 1999 at which time the parties entered into settlement
negotiations. A settlement agreement was entered into in January 2000. Pursuant
to a March 2, 2000 court order, the Company paid $250,000 as its portion of the
settlement.
From time to time, we are involved in litigation in the ordinary course of
business, including litigation in connection with non-competition agreements our
employees sign and the alleged infringement of intellectual property rights.
Except for litigations discussed above, we are not currently involved in, and do
not know of, any material litigation against us.
Due to the nature of Patlex's business, and especially its involvement in
the enforcement of patent rights, Patlex is from time to time involved in
litigation with alleged infringers of the Laser Patents. Patlex regards all such
lawsuits as occurring in the ordinary course of business. Furthermore, as a
result of the involvement of the United States Patent and Trademark Office in
granting and denying patent applications and in conducting reexaminations of
patents, Patlex has in the past been required to prosecute appeals to the United
States District Court from Patent and Trademark Office rulings adverse to
Patlex's interest. No such appeals are pending at this time, and Patlex does not
anticipate such appeals will be necessary in the future with regard to the Laser
Patents. In connection with suits filed against alleged patent infringers to
enforce a patent, defendants often file counterclaims seeking payment by the
plaintiffs of any damages suffered by the defendants on account of the lawsuit
and reimbursement by the plaintiffs of the defendant's costs and attorney's
fees. While such counterclaims have been filed against Patlex, to date Patlex
has not incurred liability with regard to such counterclaims. Patlex may also be
required to file suits to enforce collection and compliance under its patent
license agreements with its current licensees.
-14-
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1999.
-15-
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock began trading on the Nasdaq National Market on August
20, 1996 under the symbol "DBTO," until September 17, 1997 when the stock was
listed on the New York Stock Exchange under the symbol "DBT".
The following table sets forth the high and low sales prices of a share for the
Company's common stock, for the indicated quarters of 1998, 1999 and 2000 as
reported on the New York Stock Exchange.
HIGH LOW
1998
First Quarter .......................... $ 33.38 $ 21.50
Second Quarter ......................... 28.25 21.25
Third Quarter .......................... 28.50 12.38
Fourth Quarter ......................... 25.94 12.63
1999
First Quarter .......................... $ 25.25 $ 18.75
Second Quarter ......................... 39.94 22.75
Third Quarter .......................... 33.56 24.50
Fourth Quarter ......................... 26.38 17.38
2000
First Quarter (through March 1, 2000)... $ 23.81 $ 16.75
The number of record holders of the Company's common stock as of March 1,
2000 was 490. The Company believes that a larger number of beneficial owners
hold such shares of common stock in depository or nominee form.
The Company has not paid cash dividends on its common stock and does not
anticipate paying any cash dividends in the foreseeable future.
-16-
<PAGE> 17
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following selected consolidated financial and other data should be read
in conjunction with our consolidated financial statements and notes thereto
included elsewhere in this report and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The consolidated financial data
presented below as of December 31, 1999 and 1998 and for the fiscal years ended
December 31, 1999, 1998 and 1997 have been derived from our audited consolidated
financial statements, which are included elsewhere in this report. The
consolidated financial data presented below as of December 31, 1997 and 1996 and
for the year ended December 31, 1996 have been derived from audited financial
statements which are not presented in this report. The consolidated financial
data presented below for the fiscal year ended December 31, 1995 have been
derived from our consolidated financial statements prior to the merger with
IRSC and unaudited financial statements of IRSC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1999(3) 1998 1997 1996(2) 1995(1)
---------- --------- -------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $ 72,773 $ 54,103 $ 37,777 $ 22,607 $ 13,142
Royalties........................ 6,219 6,636 6,670 2,382 --
-------- -------- --------- -------- --------
Total revenues and
royalties.............. 78,992 60,739 44,447 24,989 13,142
-------- -------- --------- -------- --------
Cost of revenues................. 32,298 26,152 17,957 11,418 3,372
Sales and marketing.............. 13,234 6,508 4,367 2,434 1,026
Research and development......... 5,567 3,078 2,364 2,052 1,017
General and administrative....... 24,407 17,317 11,978 8,273 6,870
Loss on IRB transaction.......... -- -- -- -- 1,660
Merger and acquisition costs..... 817 -- -- -- --
-------- -------- --------- -------- --------
Total expenses........... 76,323 53,055 36,666 24,177 13,945
-------- -------- --------- -------- --------
Income (loss) from operations.... 2,669 7,684 7,781 812 (803)
Interest (expense) income, net... 1,656 2,330 1,491 (174) (76)
-------- -------- --------- -------- --------
Income (loss) before income taxes 4,325 10,014 9,272 638 (879)
Provision for income taxes....... 1,517 3,118 3,171 198 239
-------- -------- --------- -------- --------
Net income (loss)................ $ 2,808 $ 6,896 $ 6,101 $ 440 $ (1,118)
======== ======== ========= ======== ========
Net income (loss) per common share:
Basic.......................... $ 0.15 $ 0.36 $ 0.35 $ 0.04 $ (0.12)
======== ======== ========= ======== =======
Diluted........................ $ 0.14 $ 0.35 $ 0.33 $ 0.03 $ (0.12)
======== ======== ========= ======== =======
Weighted average shares
outstanding:
Basic.......................... 19,221 18,900 17,568 12,561 9,268
======== ======== ========= ======== =======
Diluted........................ 20,199 19,612 18,495 12,835 9,268
======== ======== ========= ======== =======
OTHER DATA:
Cash flows from operating activities.... $ 22,108 $ 9,170 $ 9,599
Cash flows from investing activities.... (37,935) 4,069 (53,542)
Cash flows from financing activities.... 27,519 172 44,707
EBITDA(4)............................... 12,481 15,706 13,583
Capital expenditures.................... 20,560 14,537 6,949
</TABLE>
-17-
<PAGE> 18
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $33,016 $21,324 $ 7,913 $ 7,149 $ 1,826
Short term investments. 16,500 25,840 44,207 -- --
Working capital........ 47,394 53,922 53,638 4,497 712
Total assets........... 136,488 92,371 86,355 30,821 7,663
Total debt............. -- -- -- 3,073 2,859
Shareholders' equity... 116,398 83,893 76,583 18,932 3,074
</TABLE>
- ----------
(1) Our results for 1995 were adversely affected by a loss of $1,660 relating
to our acquisition and disposition of International Research Bureau, Inc.
(2) Our 1996 statement of operations data includes the results of Patlex, our
patent enforcement business, from August 20, 1996, the date of our
reorganization with Patlex, through December 31, 1996.
(3) Our 1999 statement of operations data includes the results of the online
records business of Information America from September 24, 1999, the date
of our acquisition of such businesses, through December 31, 1999.
(4) EBITDA represents earnings before interest and financial charges, income
taxes, depreciation and amortization. We have included information
concerning EBITDA (which is not a measure of financial performance under
generally accepted accounting principles) because we believe that it is
used by certain investors as one measure of financial performance. EBITDA
should not be construed as an alternative to operating income (as
determined in accordance with generally accepted accounting principles) or
as a measure of liquidity. EBITDA as measured by us may not be comparable
to similarly titled measures reported by other companies.
-18-
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following should be read in conjunction with the consolidated
financial statements and the notes thereto contained in the Company's 1999 Form
10-K. This information contains certain statements regarding future trends, the
accuracy of which is subject to many risks and uncertainties. Such trends, and
their anticipated impact upon the Company, could differ materially from those
presented in this Form 10-K.
OVERVIEW OF THE COMPANY
We are a leading nationwide provider of online public records data and
other publicly available information operating through our Electronic
Information Group (EIG). We also operate in the patent exploitation and
enforcement business through our Patent Enforcement Group (PEG). EIG provides
online integrated database services and related reports to law enforcement and
other government agencies, law firms, insurance companies, and licensed
investigation companies. PEG exploits and enforces two laser patents, generating
its revenues through patent royalties.
FACTORS AFFECTING OUR BUSINESS CONDITION
In addition to the factors discussed in the Overview and Liquidity and
Capital Resources sections of this Management's Discussion and Analysis of
Financial Condition and Results of Operations, the following additional factors
may affect our business condition and future results:
WE RELY HEAVILY ON ONE PRODUCT. WE MAY NOT BE ABLE TO DEVELOP NEW
PRODUCTS OR ENHANCE OUR EXISTING PRODUCTS.
We rely heavily on AutoTrack(sm), our primary investigative search
product. For the year ended December 31, 1999, AutoTrack accounted for
approximately 69% of our revenues. AutoTrack competes in markets characterized
by rapidly changing technology, evolving industry standards and frequent new
product introductions. Our success will depend to a substantial degree upon our
ability to develop in a timely fashion enhancements to AutoTrack and to
introduce new products that meet changing customer requirements and emerging
industry standards. In order to meet these demands, we continuously evaluate
opportunities to enhance AutoTrack and to develop or acquire new products that
would utilize our supply of public records information. We may not be able to
identify, develop, produce, acquire, market or support new products, or these
new products may not gain market acceptance. In addition, some of our new
product introductions or enhancements may shorten the life cycle of existing
products, including AutoTrack. Failure to introduce new products or product
enhancements effectively and on a timely basis could have a material adverse
effect on our business, results of operations and financial condition.
Furthermore, the development by our competitors of products that would make
AutoTrack obsolete could materially adversely affect our business, results of
operations and financial condition.
DURING THE FIRST HALF OF 1999, SOME OF OUR LAW ENFORCEMENT CUSTOMERS
SUSPENDED USE OF OUR PRODUCTS AND SERVICES. THOUGH ONE OF THESE LAW
ENFORCEMENT CUSTOMERS RECENTLY LIFTED ITS SUSPENSION, FURTHER
SUSPENSION OF USE OF OUR PRODUCTS AND SERVICES COULD MATERIALLY
ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND REPUTATION.
During the first half of 1999, the Drug Enforcement Administration (DEA)
and the Federal Bureau of Investigations (FBI) suspended their use of DBT's
products and services. These agencies expressed concern about whether the target
and content of their searches on our databases were accessible by current or
former DBT employees. After completing an analysis of our databases and
operating procedures, the DEA recently lifted its suspension of our products and
services. However, the DEA has not yet returned to its customary level of use
prior to the suspension. The FBI continues to analyze our databases and
operating procedures. The failure of these agencies to resume full use of our
services, or any additional suspensions of use by other customers, could have a
material adverse effect on our business, results of operations and reputation.
EFFICIENT USE OF OUR DATABASES DEPENDS ON OUR ACCESS TO SOCIAL SECURITY
NUMBERS.
Social security numbers are the primary organizing principles that we use
to generate our reports. Social security numbers could become unavailable to us
in the future because of changes in the law or because our data suppliers decide
not to supply them to us. If we cannot obtain social security numbers in the
future, our ability to generate reports efficiently will be reduced. We can and
do use names, addresses and dates of birth to generate our reports. However,
without the use of social security numbers, we believe that those reports would
not be as complete or accurate as reports generated with social security
numbers. We also would incur significant expense to revise the software we use
to generate reports. Less complete or less accurate reports could adversely
affect our business, results of operations and financial condition.
-19-
<PAGE> 20
WE RELY ON TWO SUPPLIERS FOR THE CREDIT HEADER DATA IN OUR DATABASE.
We obtain the credit header data in our database from two consumer credit
reporting agencies. The data consists of names, addresses, social security
numbers and dates of birth. The two consumer credit agencies are Experian
Information Solutions, Inc. and Trans Union Corporation. One or both of these
suppliers could stop supplying this data to us or could substantially increase
their prices. This would materially adversely affect our business, results of
operations and financial condition.
LEGISLATORS AND CONSUMERS ARE INCREASINGLY SCRUTINIZING EXISTING
FEDERAL AND STATE LAWS RELATING TO PRIVACY AND THE USE OF PERSONAL
INFORMATION AND PROPOSING NEW PRIVACY LAWS. IF THESE LAWS BECOME MORE
RESTRICTIVE, WE COULD HAVE LESS INFORMATION TO SUPPLY TO CUSTOMERS AND
OUR BUSINESS COULD BE HARMED.
Many privacy and consumer advocates and federal regulators have become
increasingly concerned with public access to or use of personal information,
particularly social security numbers and dates of birth. We use personal
information to search our databases and to access information in databases of
others. Various federal regulators and organized groups have lobbied and are
expected to continue to lobby for the adoption of new or additional federal and
state legislation to regulate the widespread dissemination or commercial use of
personal information. If federal or state laws are amended or enacted in the
future to further restrict access and use of personal information, we could have
less information to provide to our customers and our business and results of
operations could be adversely affected.
OUR ARRANGEMENTS WITH DATA SUPPLIERS ARE NON-EXCLUSIVE, WHICH MAKES US
VULNERABLE TO COMPETITION, AND GENERALLY SHORT-TERM, WHICH MAKES US
SUSCEPTIBLE TO PRICE INCREASES OR NON-RENEWAL.
The ability of others to obtain the same data as us or our failure to
obtain the data necessary for our products at commercially reasonable costs or
at all could materially adversely affect our business and results of operations.
We obtain the raw data that we provide to customers from credit reporting
agencies, government agencies, data aggregators, competitors and other sole
source third party suppliers on a non-exclusive basis. Due to the non-exclusive
nature of these relationships, we cannot prevent others from making publicly
available the same information that we offer to our customers. Our agreements
with our suppliers are generally short-term agreements and some of our suppliers
directly compete with us, both of which make us vulnerable to unpredictable
price increases or non-renewal. Increases in the cost of obtaining information
from suppliers could force us to find alternative sources of information which
may not be available on suitable terms. Non-renewal of existing agreements by
suppliers, or our failure after non-renewal to enter into new agreements with
alternative third party suppliers, could decrease the amount of information we
can offer to customers and, consequently, reduce customer use of our products.
In addition, some of the data we receive from governmental sources is not
available from other sources and therefore cannot be replaced.
OUR MARKETS ARE HIGHLY COMPETITIVE AND HAVE RELATIVELY LOW BARRIERS TO
ENTRY. OUR INABILITY TO RESPOND SUCCESSFULLY TO THE EFFORTS OF OUR
COMPETITORS MAY ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF
OPERATIONS.
Competition within our markets is intense and based mainly on price,
speed, the comprehensiveness of data and our ability to provide information in
an easy-to-read format. Although we believe that we maintain more historical
information than our competitors, our markets are highly fragmented and have
relatively few barriers to entry. As a result, new companies may enter into
direct competition with us, and existing competitors could increase their market
share within our customer markets. Either of these developments could adversely
affect our business and results of operations.
In addition, many of our competitors have greater financial and marketing
resources than we do. Our competitors may gain significant competitive
advantages by increasing efforts to further penetrate their existing client
bases and business relationships. These competitors and other potential
competitors may undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and devote more resources to developing public
record search services for individual or corporate clients than we are willing
or able to accomplish. Our competitors or potential competitors may develop
services that are superior to or less expensive than ours or create products
that achieve greater market acceptance than ours. In response to these
competitive pressures, we may make service or marketing decisions, such as
reducing our prices or increasing our advertising, which may affect our
operating results. If we are unsuccessful in responding to our competitors, our
business and results of operations may be materially adversely affected.
WE FACE SECURITY RISKS RELATED TO OUR ELECTRONIC TRANSMISSION OF
CONFIDENTIAL INFORMATION. FRAUDULENT USE OF CREDIT CARD DATA COULD
ADVERSELY AFFECT OUR BUSINESS.
We rely on encryption and other technologies to verify customers'
identities and to effect secure transmission of confidential information.
Advances in computer capabilities, new discoveries in the field of cryptography,
or other events or developments may result in a compromise or breach of the
-20-
<PAGE> 21
security measures used by us to protect customer transaction data. Breaches of
our security could harm our reputation and customers' willingness to use our
services. Security breaches could also cause interruptions in our operations and
force us to expend significant money and other resources to alleviate any
resulting problems. Security breaches involving the storage and transmission of
our customers' proprietary information, including credit card numbers, could
expose us to risk of loss or litigation. We may also suffer losses as a result
of online customer orders placed with fraudulent credit card data even though
the associated financial institution approved payment of the orders. Under
current credit card practices, a merchant is liable for fraudulent credit card
transactions where, as is the case with transactions processed by KnowX.com,
that merchant does not obtain a cardholder's signature. We maintain business
interruption insurance to mitigate losses associated with operational
interruptions caused by any security breaches. Any breach of our security or
fraudulent use of credit card data could have a material adverse effect on our
business and results of operations.
WE MAY NOT BE SUCCESSFUL IN EXPANDING OUR INFRASTRUCTURE AND RECRUITING
QUALIFIED PERSONNEL, BOTH OF WHICH WE NEED TO MANAGE OUR RAPID GROWTH.
We are experiencing periods of rapid growth associated with the
implementation of our growth strategy. Rapid growth could significantly strain
our communication and networking infrastructure, management team and financial
resources. To manage our growth effectively, we will need to continuously
enhance our information and operational systems, including our operating
systems, database software and our financial systems and controls. We will also
need to attract, train and retain additional senior managers, technical
professionals, including programmers, and other employees. As we offer new
services and pursue new customer markets, such as the consumer, banking and
health care markets, we will need to increase our executive and sales and
support personnel. Our business and results of operations may be adversely
affected if we are unable to expand and continually improve our operational
infrastructure or to recruit and integrate appropriate personnel.
OUR SERVICES ARE SUBJECT TO VARIOUS FEDERAL AND STATE LAWS AND
LICENSING REQUIREMENTS.
In connection with some services we provide, particularly pre-employment
background checks by IRSC, we are considered a "consumer reporting agency," as
this term is used in the Fair Credit Reporting Act. We are therefore required to
comply with the various consumer credit disclosure requirements of the Fair
Credit Reporting Act. Noncompliance with the Fair Credit Reporting Act can
result in enforcement actions and fines by both the Federal Trade Commission and
state attorneys general. Willful or negligent noncompliance could result in
civil liability. Similarly, there are a number of states that have laws similar
to the Fair Credit Reporting Act. Further, many state laws limit the type of
information that can be made available to the public. In addition, some state
laws may require us to be licensed in order to conduct pre-employment background
checks. Customers in these states can access our websites, which may subject us
to the laws of those states. Although we believe we have obtained the necessary
licenses in each state where appropriate for our business, any failure to
maintain required licenses could have a material adverse effect on our business
and results of operations. In the event we are determined to have violated these
federal or state laws, we could be subject to substantial civil and criminal
liability which could have a material adverse effect on our business and results
of operations.
WE HAVE A LIMITED OPERATING HISTORY ON THE INTERNET. BECAUSE OF OUR
RELATIVE NEWNESS TO THE INTERNET, ITS RAPIDLY CHANGING MARKETPLACE AND
THE UNPREDICTABLE GROWTH OF THE ELECTRONIC INFORMATION MARKET, IT IS
DIFFICULT TO EVALUATE OUR BUSINESS AND PROSPECTS.
We have recently launched and acquired Internet products and,
consequently, do not have a long operating history on the Internet. We may be
unable to effectively use Internet technology or adapt to its rapid changes.
Furthermore, we may be unable to accurately forecast customer behavior and
recognize or respond to emerging trends, changing preferences or competitive
factors on the Internet. Any evaluation of our business and prospects must be
made in light of the risks and difficulties frequently encountered by companies
offering services in new and rapidly evolving markets such as the Internet. The
Internet marketplace is characterized by rapidly changing consumer preferences,
low barriers to entry for competitors and rapidly changing technologies. Failure
to recognize or respond to these factors may result in a material adverse effect
on our business and prospects. Expanding the KnowX.com and AutoTrack Internet
products and increasing the market awareness of our Internet services may be
complicated, time-consuming and expensive. In addition, it is difficult to
predict the size and future growth rate, if any, of the electronic information
market. The market for electronic information services may not continue to
develop or may become unprofitable. New and evolving trends, including the trend
toward low-cost and enhanced access to public information on the Internet, may
hinder the growth of our market.
WE MAY HAVE DIFFICULTY IDENTIFYING, COMPLETING AND INTEGRATING
ACQUISITIONS, WHICH COULD DECREASE OUR EARNINGS.
Our growth depends in part on our ability to identify complementary
acquisition candidates and to effectively combine the operations of acquired
companies with our own. Complementary acquisition candidates may not be
available, or may be unwilling to complete acquisitions on suitable terms. We
-21-
<PAGE> 22
may be unable to finance acquisitions. Using cash to finance acquisitions may
reduce the funds we have available for other corporate purposes. The issuance of
common stock to finance acquisitions could be substantially dilutive to existing
shareholders. Once we have acquired a business, the integration process may
require changes in the operating technologies and strategies of the acquired
business. For example, we could have difficulty integrating KnowX.com and
Informed into our current business, including linking our databases to the newly
acquired products. The integration of acquired businesses may also divert
management's attention from its day to day responsibilities. Any difficulties we
encounter in the integration process could reduce the earnings we generate from
acquired businesses, which may have a material adverse effect on our business
and results of operations.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
REVENUES
EIG's revenues increased 34.5% to $72,773 for the year ended December 31,
1999, from $54,103 for the year ended December 31, 1998. The increase in EIG's
revenues was attributable to increased revenue from existing customers and
revenue from new products. PEG's revenues decreased 6.3% to $6,219 for the year
ended December 31, 1999, from $6,636 for the year ended December 31, 1998. Total
consolidated revenues increased 30.1% to $78,992 for year ended December 31,
1999, from $60,739 for the year ended December 31, 1998.
COST OF REVENUES
EIG's cost of revenues increased 25.1% to $30,591 for year ended December
31, 1999, from $24,444 for the year ended December 31, 1998. The increase in
EIG's cost of revenues was due primarily to increases in both data purchase
costs and depreciation expense as EIG continued to invest both in its computer
facilities and in the expansion of its databases. As a percentage of EIG's
revenues, cost of revenues decreased to 42.0% for the year ended December 31,
1999, from 45.2% for year ended December 31, 1998. The decrease in cost of
revenues as a percentage of EIG's revenues was due to the scale benefits
associated with our accelerated revenue growth. PEG's cost of revenues remained
substantially constant at $1,707 for the year ended December 31, 1999, compared
to $1,708 for the year ended December 31, 1998, and consisted solely of the
amortization of costs associated with the purchase of PEG's patents. Total
consolidated cost of revenues increased 23.5% to $32,298 for year ended December
31, 1999, from $26,152 for the year ended December 31, 1998.
SALES AND MARKETING
EIG's sales and marketing expenses increased 103.3% to $13,234 for year
ended December 31, 1999, from $6,508 for the year ended December 31, 1998. The
increase was primarily due to increases in advertising expenses and sales and
marketing personnel. As a percentage of EIG's revenues, sales and marketing
expenses increased to 18.2% for the year ended December 31, 1999, from 12.0% for
the year ended December 31, 1998. This increase was attributable to a greater
emphasis on utilizing sales and marketing campaigns to increase revenue growth.
PEG did not have sales and marketing expenses.
RESEARCH AND DEVELOPMENT
EIG's research and development expenses increased 80.9% to $5,567 for year
ended December 31, 1999, from $3,078 for the year ended December 31, 1998. As a
percentage of EIG's revenues, research and development expenses increased to
7.6% for the year ended December 31, 1999, from 5.7% for the year ended December
31, 1998. The increase was primarily due to an increase in both salaries and
personnel associated with our new product development efforts. PEG did not have
research and development expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
EIG's general and administrative expenses increased 43.5% to $23,378 for
the year ended December 31, 1999, from $16,292 for the year ended December 31,
1998. This increase was due to increases in occupancy expenses, payroll, and
other expenses related to the reorganization of our administrative
infrastructure and special charges from severance agreements and related stock
compensation expense in connection with the resignation of our former CEO and a
Director. As a percentage of EIG's revenues, general and administrative expenses
increased to 32.1% for the year ended December 31, 1999, from 30.1% for the year
ended December 31, 1998. PEG's general and administrative expenses remained
substantially constant at $1,029 for the year ended December 31, 1999, compared
to $1,025 for the year ended December 31, 1998. Total consolidated general and
administrative expenses increased 40.9% to $24,407 for the year ended December
31, 1999, from $17,317 for the year ended December 31, 1998.
-22-
<PAGE> 23
OPERATING PROFIT
EIG reported an operating loss of $814 for the year ended December 31, 1999,
compared to an operating profit of $3,781 for the year ended December 31, 1998.
This decrease was attributable to special charges of $817 for merger-related
costs and $2,492 for stock compensation expense and severance agreements in
1999, along with an increase in both sales and marketing and research and
development expenses. PEG's operating profit decreased 10.8% to $3,483 for the
year ended December 31, 1999, from $3,903 for the year ended December 31, 1998,
due to a decrease in PEG's revenues. Total consolidated operating profit
decreased 65.3% to $2,669 for the year ended December 31, 1999, from $7,684 for
the year ended December 31, 1998. Excluding the special charges, total
consolidated operating profit decreased 22% to $5,986 for the year ended
December 31, 1999.
INTEREST INCOME
Net interest income was $1,656 the year ended December 31, 1999, compared to
$2,330 for the year ended December 31, 1998. The decrease was due to lower cash
and investment balances as a result of cash used for acquisitions and capital
expenditures, which increased significantly throughout 1998 and 1999.
INCOME TAXES
Our effective income tax rate was 35% for the year ended December 31, 1999,
compared to 31% for the year ended December 31, 1998. The 1998 effective tax
rate was favorably impacted by the effects of non-taxable investment income, a
reduction in our valuation allowance, and a research and development tax credit
offset by state income taxes. The 1999 effective tax rate was adversely impacted
by non-deductible stock compensation expenses.
NET INCOME
Our net income decreased 59.3% to $2,808 for the year ended December 31,
1999, from $6,896 for the year ended December 31, 1998. The decrease was
primarily due to the decrease in operating profit of EIG and PEG, reduced
interest income during the period, the occurrence of non-recurring,
merger-related, severance and stock compensation expenses, and an
increase in the effective tax rate.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
REVENUES
EIG's revenues increased 43.2% to $54,103 for the year ended December 31,
1998, from $37,777 for the year ended December 31, 1997. The increase in EIG's
revenues was attributable to new products released by EIG. PEG's revenues
remained constant at $6,636 for the year ended December 31, 1998, compared to
$6,670 for the year ended December 31, 1997. Total consolidated revenues
increased 36.7% to $60,739 for the year ended December 31, 1998, from $44,447
for the year ended December 31, 1997.
COST OF REVENUES
EIG's cost of revenues increased 50.3% to $24,444 for the year ended
December 31, 1998, from $16,259 for the year ended December 31, 1997. The
increase was due primarily to increases in both data purchase costs and
depreciation expense as EIG continued to invest both in its computer facilities
and in the expansion of its databases. The increase in cost of revenues was also
due in part to the full year effect of our acquisition of ICON. As a percentage
of EIG's revenues, cost of revenues increased to 45.2% for the year ended
December 31, 1998, from 43.0% for the year ended December 31, 1997. PEG's cost
of revenues remained substantially constant at $1,708 for the year ended
December 31, 1998, compared to $1,698 for the year ended December 31, 1997, and
consisted solely of the amortization of costs associated with the purchase of
PEG's patents. Total consolidated cost of revenues increased 45.6% to $26,152
for the year ended December 31, 1998, from $17,957 for the year ended December
31, 1997.
SALES AND MARKETING
EIG's sales and marketing expenses increased 49.0% to $6,508 for the year
ended December 31, 1998, from $4,367 for the year ended December 31, 1997. The
increase was primarily due to our acquisition of ICON and increases in
advertising, trade-show expenses and costs related to the expansion of our sales
force. As a percentage of EIG's revenues, sales and marketing expenses increased
to 12.0% for the year ended December 31, 1998, from 11.6% for the year ended
December 31, 1997. PEG did not have sales and marketing expenses.
-23-
<PAGE> 24
RESEARCH AND DEVELOPMENT
EIG's research and development expenses increased 30.2% to $3,078 for the
year ended December 31, 1998, from $2,364 for the year ended December 31, 1997.
The increase was primarily due to an increase in payroll and related expenses.
As a percentage of EIG's revenues, research and development expenses decreased
to 5.7% for the year ended December 31, 1998, from 6.3% for the year ended
December 31, 1997. PEG did not have research and development expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
EIG's general and administrative expenses increased 49.0% to $16,292 for the
year ended December 31, 1998, from $10,934 for the year ended December 31, 1997.
This increase was due to increases in rent, public company expenses, goodwill
amortization and payroll and related expenses. As a percentage of EIG's
revenues, general and administrative expenses increased to 30.1% for the year
ended December 31, 1998, from 28.9% for the year ended December 31, 1997. PEG's
general and administrative expenses decreased to $1,025 for the year ended
December 31, 1998, from $1,044 for the year ended December 31, 1997. Total
consolidated general and administrative expenses increased 44.6% to $17,317 for
the year ended December 31, 1998, from $11,978 for the year ended December 31,
1997.
OPERATING PROFIT
EIG's operating profit was $3,781 for the year ended December 31, 1998,
compared to $3,853 for the year ended December 31, 1997. PEG's operating profit
remained constant at $3,903 for the year ended December 31, 1998, compared to
$3,928 for the year ended December 31, 1997. Total consolidated operating profit
modestly decreased to $7,684 for the year ended December 31, 1998, from $7,781
for the year ended December 31, 1997.
INTEREST INCOME
Net interest income increased to $2,330 for the year ended December 31,
1998, from $1,491 for the year ended December 31, 1997. The net interest income
in 1998 and 1997 resulted from investment earnings on proceeds from the sale of
our common stock in May 1997.
INCOME TAXES
Our effective income tax rate was 31% for the year ended December 31, 1998,
compared to 34% for the year ended December 31, 1997. The 1998 effective tax
rate was favorably impacted by the effects of non-taxable investment income, a
reduction in our valuation allowance, and a research and development tax credit
offset by state income taxes. The 1997 effective tax rate was favorably affected
by a research and development tax credit.
NET INCOME
Our net income increased 13.0% to $6,896 for the year ended December 31,
1998, from $6,101 for the year ended December 31, 1997. The increase in net
income was primarily due to a significant increase in investment income and a
reduction in the effective tax rate in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations were $22,108 for the year ended December 31,
1999, compared to $9,170 for the year ended December 31, 1998. We had working
capital at December 31, 1999 of $47,394 (including cash, cash equivalents and
marketable securities of $49,516) compared to $53,922 (including cash, cash
equivalents and marketable securities of $47,164) at December 31, 1998. We
expect to fund future working capital requirements with our existing cash and
short-term investment balances and with cash generated from operations.
Net cash used in investing activities was $37,935 for the year ended
December 31, 1999, compared to net cash provided by investing activities of
$4,069 for the year ended December 31, 1998. This was due to an increase in
capital spending in 1999 and cash used in the acquisitions of Informed and
KnowX.com.
-24-
<PAGE> 25
Net cash provided by financing activities was $27,519 for the year ended
December 31, 1999, compared to $172 for the year ended December 31, 1998. This
was due mostly from $24,081 of proceeds from the issuance of common stock.
Capital expenditures were $20,560 for the year ended December 31, 1999,
compared to $14,537 for the year ended December 31, 1998. These expenditures
were primarily attributable to the acquisition of computer equipment and, in
1998, to leasehold improvements of our new facility in Boca Raton, Florida. We
anticipate additional capital expenditures during the next two fiscal years of
approximately $25,000 related to the upgrade of our database capabilities, which
we intend to fund through our cash flows from operations and existing
cash and short-term investment balances.
We currently have no debt and believe that our existing cash and short-term
investment balances together with our cash flows from both EIG and PEG
operations will be sufficient to meet our anticipated cash and capital
requirements through 2000.
INFLATION
The rate of inflation has not had a material impact on our operations.
Moreover, if inflation remains at its recent levels, it is not expected to have
a material impact on our operations for the foreseeable future.
YEAR 2000 ISSUES
The Year 2000 ("Y2K") issue is the result of computer programs written using
two digits (rather than four) to define the applicable year. Without corrective
actions, programs with date-sensitive logic may recognize "00" as 1900 rather
than 2000. This could result in miscalculations or system failures,
significantly impacting our business operations.
The Company's work on the Y2K compliance program officially began in 1998. A
Corporate project team, working with outside consultants, developed a process to
identify and correct Y2K issues on all information technology (IT) platforms and
non-IT systems. In addition, all operating units have undertaken Y2K initiatives
with direction from the Corporate project team. As a result of this process, the
Company inventoried and assessed all systems and developed remediation programs
where necessary for all business-critical information technology applications. A
similar program was also developed for non-IT systems. The Company completed its
remediation and testing work in 1999.
In order to mitigate the risk of internal business-critical computer systems
failure, the Company conducted extensive testing, verification and validation
efforts. These efforts, which included program and systems testing, simulated
operations in the year 2000. In addition, a review of the remediation process
and program code by independent third parties was completed, and contingency
plans, including system continuity plans, were developed in 1999.
In order to mitigate the risk of noncompliance external system failure, the
Company identified and contacted critical suppliers, customers and other third
parties to determine their stage of Y2K readiness. For certain third parties
with key system connections, interface testing was performed. The Company
developed contingency plans to mitigate potential disruptions to the Company's
operations. These included action plans to address system failures by third
parties, such as securing alternate sources of materials and developing backup
systems to ensure internal communications were not impacted by external
disruptions affecting voice and data transmission. The Company completed its
contingency plans in the fourth quarter of 1999.
Since the compliance program began, the Company has incurred approximately
$1.9 million in expenses, including consulting fees, internal staff costs and
other expenses. The Company has also procured replacement systems that, in
addition to being Y2K compliant, provide enhanced capability to benefit future
operations.
The Company has not experienced significant Y2K issues subsequent to 1999's
fiscal year end. Although the Company believes it has taken the appropriate
steps to address Y2K readiness, there is no guarantee that the Company's efforts
will prevent a material adverse impact on the results of operations and
financial condition.
ITEM 7 A. QUANTITATIVE AND QUALITATIVE DISLOSURES ABOUT MARKET RISK
The Company's exposure to market risk through derivative financial instruments
and other financial instruments, such as investments in short-term marketable
securities, is not material.
-25-
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of DBT Online, Inc.
and subsidiaries:
We have audited the consolidated balance sheets of DBT Online, Inc. and
subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. 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. The consolidated financial statements give retroactive effect to
the merger of the Company and I.R.S.C., Inc. and subsidiaries ("IRSC"), which
has been accounted for as a pooling of interests as described in Note 3 to the
consolidated financial statements. We did not audit the balance sheet of IRSC
as of December 31, 1998, or the related statements of operations, changes in
stockholders' equity, and cash flows of IRSC for the years ended December 31,
1998 and 1997, which statements reflect total assets constituting 2% of
consolidated total assets as of December 31, 1998 and total revenues
constituting 12% and 16% of consolidated total revenues for the years ended
December 31, 1998 and 1997, respectively. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for IRSC for 1998 and 1997, is based solely on
the report of such other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of DBT Online, Inc. and subsidiaries
as of December 31, 1999 and 1998, and the results of their 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 of
America.
Deloitte & Touche LLP
Certified Public Accountants
Fort Lauderdale, Florida
March 6, 2000
-26-
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
Board of Directors
I.R.S.C., Inc.
We have audited the consolidated balance sheets of I.R.S.C., Inc. and
subsidiaries ("IRSC") as of December 31, 1998, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the two
years in the period ended December 31, 1998 (not presented separately herein).
Those consolidated financial statements are the responsibility of IRSC's
management. Our responsibility is to express as opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of IRSC as of
December 31, 1998, and the results of their operations and their cash flows for
each of the two years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
Corbin & Wertz
Irvine, California
August 12, 1999
-27-
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DBT ONLINE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 33,016 $ 21,324
Accounts receivable, less allowance:
1999, $839; 1998, $399 12,675 9,409
Short-term investments 16,500 25,840
Prepaid expenses and other current assets 2,276 2,422
Prepaid income taxes 1,437
--------- ---------
Total current assets 65,904 58,995
Property and equipment, net 33,369 18,806
Patents, less accumulated amortization:
1999, $5,707; 1998, $4,012 8,135 9,830
Goodwill, less accumulated amortization:
1999, $2,765; 1998, $1,170 28,941 4,637
Other assets 139 103
--------- ---------
TOTAL ASSETS $ 136,488 $ 92,371
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 16,662 $ 3,273
Due to other patent interest holders 1,848 1,394
Income taxes payable 406
--------- ---------
Total current liabilities 18,510 5,073
DEFERRED INCOME TAXES 1,580 3,405
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value. 5,000,000 shares
authorized; no shares issued or outstanding
Common stock, $.10 par value. 100,000,000 shares
authorized; 20,135,964 shares and 18,905,762 shares
issued and outstanding at December 31, 1999
and 1998, respectively 2,013 1,890
Additional paid-in capital 99,388 69,559
Retained earnings 15,252 12,444
Accumulated other comprehensive loss (255)
--------- ---------
Total stockholders' equity 116,398 83,893
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 136,488 $ 92,371
========= =========
</TABLE>
See notes to consolidated financial statements.
-28-
<PAGE> 29
DBT ONLINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
---- ---- ----
Revenues $ 72,773 $ 54,103 $ 37,777
Patent royalties 6,219 6,636 6,670
----------- ----------- -----------
Total revenues and royalties 78,992 60,739 44,447
----------- ----------- -----------
Cost of revenues 32,298 26,152 17,957
Sales and marketing 13,234 6,508 4,367
Research and development 5,567 3,078 2,364
General and administrative (including
$1,268 of stock-based compensation
expense in 1999) 24,407 17,317 11,978
Merger and acquisition costs 817
----------- ----------- -----------
Total expenses 76,323 53,055 36,666
----------- ----------- -----------
Income from operations 2,669 7,684 7,781
Interest income, net 1,656 2,330 1,491
----------- ----------- -----------
Income before income taxes 4,325 10,014 9,272
Provision for income taxes 1,517 3,118 3,171
----------- ----------- -----------
Net income $ 2,808 $ 6,896 $ 6,101
=========== =========== ===========
Basic net income per common share $ 0.15 $ 0.36 $ 0.35
=========== =========== ===========
Basic weighted average shares
outstanding 19,221,400 18,900,500 17,577,900
=========== =========== ===========
Diluted net income per common share $ 0.14 $ 0.35 $ 0.33
=========== =========== ===========
Diluted weighted average shares
outstanding 20,198,700 19,612,400 18,495,200
=========== =========== ===========
See notes to consolidated financial statements.
-29-
<PAGE> 30
DBT ONLINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
-------------------------- ADDITIONAL RETAINED OTHER
NUMBER OF PAID-IN EARNINGS COMPREHENSIVE
SHARES PAR VALUE CAPITAL (DEFICIT) INCOME TOTAL
------------ --------- ----------- --------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE at January 1, 1997 15,879,958 $ 1,588 $ 17,897 $ (553) $ 18,932
Exercise of stock options 106,190 10 866 876
Issuance of common stock for cash 2,690,000 269 46,543 46,812
Stock issued for acquisition 144,824 15 3,474 3,489
Tax benefit of stock options 242 242
Stock options issued 131 131
Net income 6,101 6,101
---------- ------- -------- -------- ---------
BALANCE at December 31, 1997 18,820,972 1,882 69,153 5,548 76,583
Exercise of stock options 75,105 7 165 172
Issuance of common stock to employee
benefit plan 9,685 1 241 242
Net income 6,896 6,896
---------- ------- -------- -------- ---------
BALANCE at December 31, 1998 18,905,762 1,890 69,559 12,444 83,893
Exercise of stock options 220,217 22 3,416 3,438
Issuance of common stock to employee
benefit plan 9,985 1 306 307
Issuance of common stock for cash 1,000,000 100 23,981 24,081
Tax benefit of stock options 858 858
Stock-based compensation expense 1,268 1,268
Unrealized losses on short-term investments $ (255) (255)
Net income 2,808 2,808
---------- ------- -------- -------- ------ ---------
BALANCE at December 31, 1999 20,135,964 $ 2,013 $ 99,388 $ 15,252 $ (255) $ 116,398
========== ======= ======== ======== ====== =========
</TABLE>
See notes to consolidated financial statements.
-30-
<PAGE> 31
DBT ONLINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,808 $ 6,896 $ 6,101
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 9,812 8,022 5,802
Deferred income taxes (1,825) (750) (146)
Stock issued for employee benefit plan 307 242
Stock-based compensation expense 1,268
Stock options issued for services 131
Changes in operating assets and liabilities:
Accounts receivable (3,266) (4,220) (1,916)
Prepaid expenses and other current assets 146 (693) (1,177)
Accounts payable and accrued liabilities 13,389 (1,349) 1,813
Due to other patent interest holders 454 399 (416)
Income taxes (985) 623 (593)
-------- -------- -------
Net cash provided by operating activities 22,108 9,170 9,599
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment purchased (20,560) (14,537) (6,949)
Cash used in acquisitions (26,424) (2,488)
(Increase) decrease in other assets (36) 239 102
Proceeds from sales or maturities of investments 9,085 18,367
Purchases of short-term investments (44,207)
-------- -------- -------
Net cash (used in) provided by investing activities (37,935) 4,069 (53,542)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 24,081 46,812
Net change in bank line-of-credit (200)
Proceeds from exercise of stock options 3,438 172 876
Repayments on long-term debt (2,781)
-------- -------- -------
Net cash provided by financing activities 27,519 172 44,707
-------- -------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 11,692 13,411 764
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 21,324 7,913 7,149
-------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 33,016 $ 21,324 $ 7,913
======== ======== =======
</TABLE>
See notes to consolidated financial statements.
-31-
<PAGE> 32
DBT ONLINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
DBT Online, Inc., through its subsidiaries (collectively referred to as the
"Company"), is engaged in the electronic information retrieval industry, which
provides online, real-time access to public records. The Company, through its
Patlex Corporation ("Patlex") subsidiary, is involved in the patent enforcement
and exploitation business, whereby the Company collects royalty fees from a
group of laser patents.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of DBT Online, Inc. and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions are eliminated.
USE OF ESTIMATES. The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and the accompanying Notes. Actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments with a remaining original maturity at the date of purchase of three
months or less to be cash equivalents.
PROPERTY AND EQUIPMENT. Property and equipment is recorded at cost and
depreciated using accelerated methods over the estimated useful lives of the
assets. Useful lives range from 3 to 10 years. Expenditures for routine
maintenance and repairs are charged to expense as incurred.
PATENTS AND GOODWILL. The patent costs are amortized on a straight-line
basis over the remaining lives of the patents. Goodwill is amortized on a
straight-line basis over 7 to 10 years.
CARRYING VALUE OF LONG-LIVED ASSETS. Management reviews long-lived assets
for possible impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. If there is an indication of
impairment, management prepares an estimate of future cash flows (undiscounted
and without interest charges) expected to result from the use of the asset and
its eventual disposition. If these cash flows are less than the carrying amount
of the asset, an impairment loss is recognized to write down the asset to its
estimated fair value. Assets, if any, that management has committed to a plan to
dispose, whether by sale or abandonment, are reported at the lower of carrying
amount or fair value, less cost to sell. Preparation of estimated expected
future cash flows is inherently subjective and is based on management's best
estimate of assumptions concerning future conditions.
REVENUE RECOGNITION. The Company recognizes revenue at the time of customer
access. Accounts receivable are primarily with law enforcement agencies,
insurance companies, law firms, and other licensed investigation companies.
Patent royalties are recognized pursuant to license agreements that require the
licensees to periodically report activity to the Company.
CONCENTRATION OF CREDIT RISK. The Company's customers are numerous and
spread over a wide geographic area. As such, the Company believes that it does
not have an abnormal concentration of credit risk within any one market or any
one geographic area.
RESEARCH AND DEVELOPMENT COSTS. Costs for research and development
activities are expensed as incurred, and aggregated $5,567, $3,078, and $2,364
for years ended December 31, 1999, 1998, and 1997, respectively.
INCOME TAXES. The Company provides for deferred taxes under an asset and
liability approach for financial accounting and reporting of income taxes. The
objective of an asset and liability method is to establish deferred tax assets
and liabilities for the temporary differences between the financial reporting
basis and the tax basis of the Company's assets and liabilities at enacted tax
rates expected to be in effect when such amounts are realized or settled.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying amounts of cash and cash
equivalents, accounts receivable, and accounts payable approximate fair value
due to their short-term nature. Short-term investments are classified as
available-for-sale and are carried at fair value.
NET INCOME PER SHARE. Basic net income per share is determined by dividing
net income by the weighted-average shares outstanding. Diluted net income per
share is determined by dividing net income by the weighted-average shares
outstanding including the effect of stock options, if dilutive. The
weighted-average number of shares for stock options included in the diluted
weighted-average shares outstanding were 977,300, 711,900 and 917,300 in 1999,
1998, and 1997, respectively.
-32-
<PAGE> 33
2. COMPREHENSIVE INCOME
Comprehensive income for the years ended December 31, 1999, 1998 and 1997 is
as follows:
1999 1998 1997
---- ---- ----
Net income $2,808 $6,896 $6,101
Adjustment to reconcile net income
to total comprehensive income:
Unrealized loss on investments (255)
------ ------ ------
Comprehensive income $2,553 $6,896 $6,101
====== ====== ======
3. BUSINESS COMBINATIONS
On September 24, 1999, the Company acquired KnowX.com and Informed from
Information America, Inc. for $25,000 in cash and warrants to purchase 329,172
shares of common stock of the Company. The warrants, which had a total fair
value of $458 upon issuance, have an exercise price of $52.50 per share and
expire on March 24, 2001. KnowX.com is a leading Internet-based public record
research tool for consumers and small office users. The Informed product line
offers qualified users, including commercial lending and leasing companies,
access to public information through the Internet or dial-up modems. The
transaction was accounted for as a purchase and the Company's results of
operations include the results of KnowX.com and Informed since the date of
acquisition. Goodwill resulting from this transaction is approximately $24,709
and is being amortized on a straight-line basis over ten years.
Unaudited pro-forma results of operations, assuming the acquisition of
KnowX.com and Informed occurred as of the beginning of 1998, after giving effect
to certain adjustments such as interest and amortization of goodwill resulting
from the acquisition, are summarized as follows:
YEAR ENDED DECEMBER 31,
-------------------------
1999 1998
---- ----
Net revenue $ 88,803 $ 69,130
======== ========
Income before income taxes $ 2,179 $ 7,496
======== ========
Net income $ 1,392 $ 4,894
======== ========
Earnings per share (diluted) $ 0.07 $ 0.25
======== ========
On May 26, 1999, the Company acquired all of the common stock of WinSHAPES
for approximately $442 in cash plus the payment of liabilities in the amount of
$728. WinSHAPES is a company engaged in the development of software that
converts data into graphic illustrations that visualize interrelationships among
people, businesses, vehicles and other assets. The transaction was accounted for
as a purchase and the Company's results of operations include the results of
WinSHAPES since the date of acquisition. Goodwill resulting from this
transaction was $1,190, and is being amortized on a straight-line basis over
seven years. Pro forma operating information is not provided for this
acquisition because its effects on the results of operations are not material.
On May 6, 1999, the Company merged with I.R.S.C., Inc. ("IRSC"). IRSC is a
provider of court records and other public information used to conduct
pre-employment screening and other anti-fraud due diligence services for
business customers.
As a result of the IRSC merger, each share of IRSC common stock was
converted into the right to receive approximately 1.43 shares of Company common
stock, or 432,346 common shares of the Company in the aggregate. The IRSC merger
was accounted for as a pooling-of-interests and, accordingly, the Company's
financial statements for periods prior to the IRSC merger have been restated to
include the results of IRSC for all periods presented. Results of operations for
the separate companies prior to the combination are as follows:
-33-
<PAGE> 34
<TABLE>
<CAPTION>
PRIOR TO
YEAR ENDED DECEMBER 31: COMBINATION IRSC COMBINED
- ----------------------- ---------------- ----------------- -----------------
<S> <C> <C> <C>
1998:
Total revenues and royalties $ 53,549 $ 7,190 $ 60,739
Net income 6,702 194 6,896
1997:
Total revenues and royalties $ 37,546 $ 6,901 $ 4,447
Net income 5,998 103 6,101
</TABLE>
On August 1, 1997, the Company acquired all of the stock of The Information
Connectivity Group. The consideration paid included both cash of $2,500 and
common stock of the Company valued at approximately $3,500. For accounting
purposes, the transaction was treated as a purchase. The Company recorded
goodwill of approximately $5,800 in connection with this acquisition, which is
being amortized over seven years.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
AT DECEMBER 31,
------------------
1999 1998
----- ------
Computer equipment $ 42,015 $ 22,554
Office furniture and equipment 2,164 1,599
Leasehold improvements 8,625 7,588
-------- --------
Total cost 52,804 31,741
Less: accumulated depreciation (19,435) (12,935)
-------- --------
Property and equipment, net $ 33,369 $ 18,806
======== ========
Depreciation expense was $6,522, $5,501 and $3,763 for the years ended
December 31, 1999, 1998 and 1997, respectively.
5. SHORT-TERM INVESTMENTS
The Company has investments in state and municipal bonds that are classified
as available-for-sale and are carried at fair value. There were gross unrealized
gains of $5 and $52 and gross unrealized losses of $260 and $78 as of December
31, 1999 and 1998, respectively. There were $97 in realized losses during 1999,
and there were $276 in realized gains during 1998 on the sale of securities.
Cost is determined based on specific identification. At December 31, 1999, these
investments have contractual maturities as follows:
Within 1 year $6,505
After 1 through 5 years 8,602
After 5 through 10 years 547
After 10 years 1,101
-------
16,755
Less: Net unrealized losses (255)
-------
Total: short-term investments $16,500
=======
-34-
<PAGE> 35
Certain of the Company's state and municipal bonds are concentrated in
specific geographic regions. The states in which the components of these
investments resided at December 31, 1999 were as follows:
Florida $7,891
Texas 1,575
Nevada 1,047
Maine 1,028
Arizona 547
Massachusetts 537
Virginia 535
New York 530
Washington 529
Michigan 514
North Carolina 508
New Hampshire 506
Ohio 505
New Mexico 503
Less: net unrealized losses (255)
-------
Total: short-term investments $16,500
=======
6. PATENTS
Patlex owns a 64% income interest in Laser Patent revenue relating to
certain patents involving laser technology. The most commercially significant of
the Laser Patents is the Gas Discharge Laser Patent (U.S. Patent No. 4,704,583),
which covers gas discharge lasers. In addition, the Laser Patents consist of the
Brewster Angle Window Patent (U.S. Patent No. 4,746,201), which involves the use
of an optical system, including optical elements, to polarize light. The Gas
Discharge Laser Patent expires in November 2004 and the Brewster Angle Window
Patent expires in May 2005. Upon the expiration of the applicable patent, Patlex
loses its right to exclude others from exploiting the inventions claimed therein
and, accordingly, the obligation of third parties to make royalty payments to
Patlex will cease.
7. INCOME TAXES
Significant components of the provision for income taxes are as follows:
YEAR ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
----- ----- -------
Current
Federal $ 2,868 $ 3,541 $ 3,051
State 187 327 267
------ ------- -------
3,055 3,868 3,318
------ ------- -------
Deferred
Federal (1,423) (718) (127)
State (115) (32) (20)
------ ------- -------
(1,538) (750) (147)
------ ------- -------
Provision for income taxes $ 1,517 $ 3,118 $ 3,171
======= ======= =======
-35-
<PAGE> 36
Deferred income taxes reflect the net income tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes, and the amounts used for income tax purposes. Annual changes
in these temporary differences constitute the principal reconciling items
between pretax accounting income and taxable income. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1999 and
1998 are as follows:
AT DECEMBER 31,
-------------------------------
1999 1998
---- ----
Deferred tax liabilities
Patents $2,766 $3,609
Cash basis accounting 37
Purchased data 246 300
------ ------
3,012 3,946
------ ------
Deferred tax assets
Depreciation 29 62
IRB loss carry forward 358 308
Reserves and other 1,045 371
------ ------
1,432 741
Valuation allowance (200)
------ ------
1,432 541
------ ------
Net deferred income tax liability $1,580 $3,405
====== ======
The Company has a capital loss carry-over of approximately $1,050 for tax
purposes, which expires in 2000. The related deferred tax asset, as of December
31, 1998, had been partially offset by a valuation allowance. However, as the
Company has initiated certain tax-planning strategies that it believes will
result in utilizing this loss carry-over, no valuation allowance is recorded as
of December 31, 1999.
The reconciliation of income tax computed at the federal statutory rate to
income tax expense is as follows:
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
---- ---- ----
Federal statutory rate 34% 34% 34%
Tax-exempt investment income (7) (2) (1)
Non-deductible goodwill 7
Non-deductible compensation expense 10
Research and development credit (6) (1) (1)
State income taxes, net of federal income tax benefit 1 2 1
Adjustment to valuation allowance (5) (2)
Other 1 1
--- --- ---
35% 31% 34%
=== === ===
The Company paid income taxes of $4,224, $3,238 and $3,828 in 1999, 1998 and
1997, respectively.
8. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company may be involved in litigation from time to time in the ordinary
course of its business. The Company is not currently involved in any litigation,
or to its knowledge, is any litigation currently threatened that could have a
material effect on its financial position or results of operations.
The Company and the former chairman and principal shareholder of IRSC were
parties to a lawsuit against a group of eight companies that formerly conducted
business with IRSC. These eight companies alleged that IRSC was obligated to
enter into a merger agreement with them and that the former chairman of IRSC was
obligated to work for the company surviving the merger. The companies also
alleged that the Company interfered with the obligations of IRSC and its former
chairman by acquiring IRSC. When these companies threatened to sue, the Company
filed a lawsuit against them in state court in May 1999 to establish
jurisdiction of the action in Florida. Discovery was conducted from June 1999
until October 1999 at which time the parties entered into settlement
negotiations. A settlement agreement was entered into in January 2000. Pursuant
to a March 2, 2000 court order, the Company paid $250, which is included in
accounts payable and accrued liabilities as of December 31, 1999, as its portion
of the settlement.
-36-
<PAGE> 37
Due to the nature of Patlex's business, and especially its involvement in
the enforcement of patent rights, Patlex is from time to time involved in
litigation with alleged infringers of the Laser Patents. Patlex regards all such
lawsuits as occurring in the ordinary course of business. Furthermore, as a
result of the involvement of the United States Patent and Trademark Office in
granting and denying patent applications and in conducting reexaminations of
patents, Patlex has in the past been required to prosecute appeals to the United
States District Court from Patent and Trademark Office rulings adverse to
Patlex's interest. No such appeals are pending at this time, and Patlex does not
anticipate such appeals will be necessary in the future with regard to the Laser
Patents. In connection with suits filed against alleged patent infringers to
enforce a patent, defendants often file counterclaims seeking payment by the
plaintiffs of any damages suffered by the defendants on account of the lawsuit
and reimbursement by the plaintiffs of the defendant's costs and attorney's
fees. While such counterclaims have been filed against Patlex, to date Patlex
has not incurred liability with regard to such counterclaims. Patlex may also be
required to file suits to enforce collection and compliance under its patent
license agreements with its current licensees.
EMPLOYMENT AGREEMENTS
In April 1997, the Company entered into an employment agreement with its
chairman, Mr. Borman, which provided for an initial three-year term commencing
on April 1, 1997 with automatic one-year extensions on the anniversary of the
commencement date, unless either the Company or Mr. Borman gives notice to the
other that the term of the agreement will not be extended. The employment
agreement contains certain restrictive covenants, including provisions relating
to non-competition, non-solicitation and the non-disclosure of proprietary
information, during the term of the agreement and for specified periods
thereafter. The 1999 annual compensation rate for Mr. Borman under this
agreement was $160.
In August 1997, the Company entered into an employment agreement with its
then CEO, Mr. Lieppe, which provided for a four-year term commencing August 15,
1997 and ending on August 14, 2001, unless terminated earlier in accordance with
certain circumstances. The 1999 annual compensation rate for Mr. Lieppe under
this agreement was $250. In August 1999, the Company and Mr. Lieppe agreed to
the terms of a Separation of Employment Agreement and General Release and
Consulting Agreement. In connection with this agreement, the Company is to pay
$425 in cash to Mr. Lieppe or on his behalf through December 2000. As of
December 31, 1999, $340 of this amount, representing the remaining unpaid
portion, was included in accounts payable and accrued liabilities. The Company
also incurred stock-based compensation expense of $771 in 1999 resulting from
the Company's allowing Mr. Lieppe to vest in options after his termination date.
During the fourth quarter of 1999, the Company agreed to the terms of
Separation of Employment Agreements and General Release and Consulting
Agreements with three other executives. Under the terms of these agreements, the
Company will pay $799 in cash to these executives or on their behalf for ten to
twelve months. The future payments under these agreements have been included in
accounts payable and accrued liabilities as of December 31, 1999.
In March 1998, the Company entered into an employment agreement with its
Vice President, Human Resources, Mr. Barr, which provides for a two-year term.
In October 1999, the employment agreement was amended for an additional year and
included a change in control provision. The annual compensation rate in 1999 for
Mr. Barr under this agreement was $150.
In August 1999, the Company entered into an employment agreement with its
current CEO, Mr. Fournet, that provides for a four-year term, unless terminated
earlier in accordance with certain circumstances, and which includes a change in
control provision. The annual compensation rate in 1999 for Mr. Fournet under
this agreement was $250.
In February 2000, the Company entered into an employment agreement with its
Vice President, General Counsel and Secretary, Mr. Muetterties, having a
one-year term which renews each day. The agreement calls for a base salary of
$160 in 2000 and includes a change in control provision. The employment
agreement contains certain restrictive covenants, including provisions relating
to non-competition, non-solicitation and non-disclosure of confidential
information during the executive's employment with the Company and for specific
periods thereafter.
LEASES
The Company leases all of its office space under agreements expiring on
various dates through 2008. These leases contain renewal options ranging from
3 to 10 years.
Future minimum payments under operating leases that have non-cancelable
terms in excess of one year are as follows:
-37-
<PAGE> 38
YEARS ENDING DECEMBER 31,
- -------------------------
2000 $1,445
2001 1,466
2002 1,181
2003 1,134
2004 1,113
Thereafter through 2008 3,896
-------
Total $10,235
=======
Rent expense was $1,599, $1,054 and $730 respectively, for the years ended
December 31, 1999, 1998, and 1997.
9. STOCK OPTIONS AND BENEFIT PLAN
STOCK OPTIONS
The Company has incentive and non-qualified stock option plans for
directors, employees, and key advisors and has 6,000,000 shares of common stock
reserved for issuance under these plans. The incentive and non-qualified options
become exercisable as determined by the Board of Directors, and have a term of
10 years. As of December 31, 1999, option activity is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
---------- --------------
<S> <C> <C>
Outstanding at January 1, 1997 1,697,772 $12.30
Granted 1,364,000 22.92
Exercised (52,164) 16.79
Cancelled (186,333) 18.81
--------- ------
Outstanding at December 31, 1997 2,823,273 17.22
Granted 346,000 22.73
Exercised (72,605) 2.38
Cancelled (36,000) 20.00
--------- ------
Outstanding at December 31, 1998 3,060,668 18.16
Granted 1,036,250 28.60
Exercised (218,152) 19.93
Cancelled (464,960) 22.97
--------- ------
Outstanding at December 31, 1999 3,413,806 $20.55
========= ======
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------------------------------------------
NUMBER WEIGHTED-AVERAGE
OUTSTANDING REMAINING WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES AT DECEMBER 31, 1999 CONTRACTUAL LIFE (YEARS) EXERCISE PRICE
------------------------ ------------------- ------------------------ --------------
<S> <C> <C> <C>
$0.01- 1.99 47,772 6.5 $0.01
$2.00-15.99 557,895 5.8 2.38
$16.00-24.99 1,609,139 8.0 20.92
$25.00-39.88 1,199,000 9.3 29.33
---------
3,413,806 8.1 $20.55
=========
</TABLE>
-38-
<PAGE> 39
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
---------------------------------------------------------
NUMBER
EXERCISABLE WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES AT DECEMBER 31, 1999 EXERCISE PRICE
------------------------ --------------------- --------------
<S> <C> <C>
$ 0.01 - 1.99 47,772 $ 0.01
$ 2.00 - 15.99 557,895 2.38
$16.00 - 24.99 870,129 21.57
$25.00 - 39.88 123,791 28.82
---------
1,599,587 $14.79
=========
</TABLE>
The Company accounts for stock options issued to employees in accordance
with Accounting Principles Board Opinion No. 25 ("APB No. 25"), Accounting for
Stock Issued to Employees. The Company's employee stock options are issued with
exercise prices that equal the market price of the Company's common stock on the
date of grant and, consequently, no compensation expense is recognized.
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123")
requires entities that account for awards for stock-based compensation to
employees in accordance with APB No. 25 to present pro forma disclosures of net
income and earnings per share as if compensation cost was measured at the date
of grant based on the fair value of the award. 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>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate 6.5% 6.5% 6.5%
Dividend yield none none none
Volatility factors 51% 57% 43%
Weighted-average expected life 5 years 5 years 5 years
</TABLE>
The weighted-average fair value per option granted during 1999, 1998 and
1997 was $14.41, $10.90 and $7.93, respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option vesting period. The Company's
net income and net income per share (diluted) would have been reduced to the
following pro forma amounts for the years ended December 31, 1999, 1998, and
1997, as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income
As reported $ 2,808 $6,896 $6,101
Pro forma $(1,462) $3,629 $4,081
Net income per share (diluted)
As reported $ 0.14 $ 0.35 $ 0.33
Pro forma $ (0.07) $ 0.19 $ 0.22
</TABLE>
The above pro forma amounts reflect the effect of stock options granted
subsequent to January 1, 1996. Accordingly, the pro forma amounts may not be
representative of the future effects on reported net income and earnings per
share that will result from the future granting of stock options, since the pro
forma compensation expense is allocated over the periods in which options become
exercisable and new option awards are granted each year.
During July 1999, the Company extended the exercise period for a retiring
Director's stock options from 90 to 180 days. As a result, the Company incurred
$497 of stock-based compensation expense for the extension of these stock
options.
-39-
<PAGE> 40
BENEFIT PLAN
The Company has a 401(k) plan that is available to substantially all of its
employees. The Company provides a match of 66% of the employees' contribution,
with a maximum benefit of up to 4% of eligible compensation in the form of
Company common stock. Contribution expense was $333, $309 and $89 in 1999, 1998
and 1997, respectively.
10. RELATED PARTY TRANSACTIONS
IRSC had a consulting agreement with an affiliate which was terminated May
6, 1999. Pursuant to the agreement, IRSC paid the affiliate for consulting
services and reimbursed the affiliate for certain travel and administrative
expenses incurred on behalf of IRSC. During the years ended December 31, 1999,
1998 and 1997, IRSC paid the affiliate $63, $375 and $365, respectively.
Invemed Associates, Inc. ("Invemed"), from time to time, has provided
financial advisory services to the Company, for which customary compensation has
been paid. In connection with the Company's offering of 1,940,000 shares of
common stock in May 1997 and 5,669,758 shares in October 1999, Invemed performed
certain investment banking services for the Company for which Invemed received
fees of $2,706 and $3,975, respectively. The applicable portion of these fees
was offset against the capital funds received by the Company for the offerings.
Kenneth G. Langone, a director and a shareholder of the Company, is Chairman of
the Board, Chief Executive Officer and President of Invemed, and is the
principal shareholder of Invemed's parent.
On February 7, 1994, the Company entered into a debt and royalty agreement
with a consortium of seven individuals including Jack Hight. During 1995, Mr.
Hight became a shareholder and director of the Company. The agreement provided
the financing necessary for the Company to enter the Texas market, and provided
for a loan to the Company of $200, which was repaid in 1995. The agreement also
provided for the Company to grant to the consortium a royalty to share in the
revenues of the Texas expansion up to $800, computed as 10% of specified
revenues from Texas operations. For the years ended December 31, 1999, 1998 and
1997, the Company paid $149, $165 and $126, respectively, relating to such
royalties. Through December 31, 1999, the Company had paid a total of $500
relating to such royalties.
The Chief Executive Officer and President and the Vice President, Human
Resources have outstanding loans with the Company as of December 31, 1999 in the
amounts of $350 and $125, respectively.
-40-
<PAGE> 41
11. BUSINESS SEGMENTS
The Company's reportable segments, namely electronic information and patent
enforcement, are organized based on their products and services. Information
concerning the segments in which the Company operates is shown in the table
below. Operating profit is derived as total revenues less operating expenses;
interest expense and general corporate expenses have not been considered.
Identifiable assets by segment are those assets that are used in the Company's
operations in each segment. General corporate assets consist primarily of cash
and cash equivalents and short-term investments. Substantially all revenues are
derived from, and its assets located in, the United States of America.
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
---- ---- ----
Revenues:
Electronic information $ 72,773 $ 54,103 $ 37,777
Patent enforcement 6,219 6,636 6,670
--------- --------- ---------
Consolidated revenues $ 78,992 $ 60,739 $ 44,447
========= ========= =========
Operating Profit:
Electronic information $ 1,417 $ 5,252 $ 4,688
Patent enforcement 3,483 3,903 3,928
--------- --------- ---------
Segment operating profit 4,900 9,155 8,616
Interest income, net 1,656 2,330 1,491
General corporate expense (2,231) (1,471) (835)
--------- --------- ---------
Consolidated income before income taxes $ 4,325 $ 10,014 $ 9,272
========= ========= =========
Identifiable assets:
Electronic information $ 76,362 $ 33,572 $ 23,405
Patent enforcement 23,285 18,769 17,689
--------- --------- ---------
Total identifiable assets 99,647 52,341 41,094
General corporate assets 36,841 40,030 45,261
--------- --------- ---------
Consolidated assets $ 136,488 $ 92,371 $ 86,355
========= ========= =========
Capital expenditures:
Electronic information $ 20,557 $ 14,530 $ 6,942
Patent enforcement 3 7 7
--------- --------- ---------
Consolidated capital expenditures $ 20,560 $ 14,537 $ 6,949
========= ========= =========
Depreciation and amortization of
Identifiable assets:
Electronic information $ 8,105 $ 6,313 $ 4,107
Patent enforcement 1,707 1,709 1,695
--------- --------- ---------
Consolidated depreciation and
amortization $ 9,812 $ 8,022 $ 5,802
========= ========= =========
-41-
<PAGE> 42
12. SUBSEQUENT EVENT
On February 14, 2000, the Company signed a definitive agreement to merge
with ChoicePoint, Inc. Under the terms of this agreement, the Company's
shareholders will receive 0.525 shares of ChoicePoint, Inc. common stock for
each share of the Company's common stock. The transaction is expected to close
in the second quarter of 2000 and is subject to regulatory and shareholders'
approval.
13. QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, JUNE 30, MARCH 31,
------------ ------------- ------------- -------- ---------
(As restated) (As previously stated)
<S> <C> <C> <C> <C> <C>
Revenues:
1999 $ 21,783 $ 19,465 $ 19,465 $ 19,556 $ 18,188
1998 16,513 15,366 15,366 14,742 14,119
Gross profit
1999 $ 12,441 $ 11,690 $ 11,690 $ 11,807 $ 10,756
1998 8,952 9,221 9,221 8,494 7,922
Net (loss) income
1999 $ (760) $ (37) $ 1,533 $ 1,655 $ 1,950
1998 1,776 1,760 1,760 1,781 1,579
Net (loss) income per share (diluted)
1999 $ (0.04) $ (0.00) $ 0.08 $ 0.08 $ 0.10
1998 0.09 0.09 0.09 0.09 0.08
</TABLE>
Subsequent to the issuance of the Company's September 30, 1999 financial
statements, the Company's management determined that it had not recorded charges
that it had incurred during the third quarter of 1999 in connection with the
Separation of Employment Agreement and General Release and Consulting Agreement
related to the resignation of its former CEO (as described in Note 8), as well
as related stock compensation expense in connection with both the resignation of
the former CEO and a Director. As a result, the September 30, 1999 financial
statements have been restated from the amounts previously reported to reflect
these charges.
-42-
<PAGE> 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
-43-
<PAGE> 44
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As of March 1, 2000, our executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Frank Borman 72 Chairman of the Board of Directors(1)
Ronald A. Fournet 48 President and Chief Executive Officer
George A. Bruder, Jr. 44 Senior Vice President
J. Henry Muetterties 47 Vice President, General Counsel and Secretary
Kevin A. Barr 40 Vice President, Human Resources
C. Garry Betty 43 Director(2)(5)
Gary E. Erlbaum 55 Director(1)(4)
Jerold E. Glassman 64 Director(2)(3)
Kenneth G. Langone 64 Director(1)
Bernard Marcus 71 Director(3)
Andrall E. Pearson 74 Director(3)
Eugene L. Step 71 Director(2)(4)(5)
</TABLE>
- --------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Corporate Goverance Committee.
(5) Member of the Technology Committee.
FRANK BORMAN has been Chairman of the Company since August 1996. From September
1995 until August 1996, he also served as Chief Executive Officer and a director
of Patlex. He served as Chairman and Chief Executive Officer of Patlex from 1988
to December 1992, and as Chairman of AutoFinance Group, Inc. ("AFG") from
December 1992 to September 1995, during the period that Patlex was a subsidiary
of AFG. He served as Vice Chairman of the Board of Directors at Texas Air
Corporation from 1986 to 1991. From 1969 to 1986, he served in various
capacities for Eastern Airlines, including President, Chief Executive Officer
and Chairman of the Board of Directors. Mr. Borman served in the United States
Air Force from 1950 to 1970. Mr. Borman currently serves as a director of The
Home Depot, Inc., and American Superconductor Corporation.
RONALD FOURNET has been Chief Executive Officer and President of DBT Online
since August 1999. Mr. Fournet has served as Chief Information and Technology
Officer of DBT Online since December 1998. From 1996 to 1998, Mr. Fournet served
in various capacities for Equifax, Inc., most recently as Senior Vice President
and Chief Technology Officer of North American operations. Mr. Fournet held
various positions at US West, Inc. from 1986 to 1996. From 1980 to 1986, he
worked in various capacities with GTE Corporation. Mr. Fournet served in the
United States Army Special Forces Intelligence Operations from 1973 to 1980.
GEORGE A. BRUDER, JR. was elected Senior Vice President of Operations in
November, 1997. He has held various positions of the Company since August, 1994.
Prior to joining the Company, Mr. Bruder worked in various capacities at the
Broward Sherriff's office from June, 1982 to August, 1994.
J. HENRY MUETTERTIES was elected Vice President and Secretary on August 20, 1996
and elected General Counsel in January 2000. Beginning in May 1989, he was the
Vice President, General Counsel and Secretary of Patlex and was the Corporate
Licensing Counsel for Patlex since March 1988.
KEVIN A. BARR was elected Vice President, Human Resources in February 1998. From
1995 to 1997, Mr. Barr served in various capacities of Nabisco International,
most recently as Vice President, Human Resources of their Asia Pacific
operations in Singapore. From 1991 through 1995, Mr. Barr served in various
capacities for Dun & Bradstreet.
-44-
<PAGE> 45
C. GARRY BETTY became a director of the Company in August 1998. Mr. Betty is
President and Chief Executive Officer of EarthLink Network, Inc., a national
Internet service provider. Prior to joining EarthLink in 1996, Mr. Betty was
president and CEO of Digital Communications Associates, Inc. from 1989 to 1994.
Mr. Betty is also a director of Physician's Data Corporation and is a member of
the national advisory board of the Georgia Institute of Technology.
GARY E. ERLBAUM has been a director of the Company since August 1996, and was a
director of Patlex from September 1995 to August 1996. He has been involved with
Patlex since May 1972, serving as a Patlex director from 1983 to December 1992,
and as a director of AutoFinance Group, Inc. ("AFG") from December 1992 to
September 1995, during the period that Patlex was a subsidiary of AFG. Mr.
Erlbaum served as the Chairman of the Board of Directors of Patlex from
September 1977 to July 1981 and from October 1981 to February 1983, and served
as the President of Patlex from May 1972 to September 1977 and from December
1978 to July 1981. Since 1983, he has been the President of Greentree Properties
Corporation, which is engaged in real estate and business ventures. He is also a
director of David's Bridal, Inc., and several privately owned companies.
JEROLD E. GLASSMAN was elected a director in February, 1999. Since 1969 Mr.
Glassman has served as Chairman of the law firm of Grotta, Glassman & Hoffman,
P.A. which specializes in labor, employment and employee benefits law and
related litigation. Mr. Glassman also serves as Special Labor Counsel to the New
Jersey Sports and Exposition Authority, Special Labor Counsel to Governor
Christine Todd Whitman of New Jersey, and Director of the DiGiorgio Corporation
of Carteret, New Jersey, a large wholesale grocery distribution company.
KENNETH G. LANGONE has been a director of the Company since August 1996, and was
a director of Patlex from September 1995 to August 1996. He has been involved
with Patlex since 1979, serving as a Patlex director from 1979 to December 1992,
and as a director of AutoFinance Group, Inc. ("AFG") from December 1992 to
September 1995, during the period that Patlex was a subsidiary of AFG. Since
1974, Mr. Langone has been Chairman of the Board, Chief Executive Officer and
President of Invemed Associates, Inc. ("Invemed"), a New York Stock Exchange
member firm engaged in investment banking and brokerage. He is one of the
co-founders of The Home Depot, Inc. and has been a director of that company
since 1978. He also serves as a director of the New York Stock Exchange, Inc.,
General Electric Company, Unifi, Inc. and Tricon Global Restaurants, Inc. He is
also a director of several private corporations.
BERNARD MARCUS has been a director of the Company since October 1997. Mr. Marcus
is one of the co-founders of The Home Depot, Inc., and has been its Chairman of
the Board of Directors since its inception in 1978. He also served as The Home
Depot's Chief Executive Officer from 1978 to 1997. He also serves on the Board
of Directors of National Service Industries, Inc., and Westfield America, Inc.
Mr. Marcus also serves on the Board of the National Foundation for the Centers
for Disease Control and Prevention and is Chairman of the Board of The Marcus
Center, which provides support services for persons with developmental
disabilities and their families. In addition, he is a member of the Advisory
Board and Board of Directors of the Shepherd Center in Atlanta, Georgia and Vice
President and member of the Board of The City of Hope, a charitable organization
in Duarte, California.
ANDRALL E. PEARSON has been a director of the Company since June 1997. Since
June 1997, Mr. Pearson has been Chairman and Chief Executive Officer for Tricon
Global Restaurants, Inc. Prior to joining Tricon Global Restaurants he served as
Principal for Clayton, Dubilier & Rice, Inc., a management buy-out firm in New
York, specializing in leveraged acquisitions involving management participation
of large USA corporations. From 1985 until June 1993, he was the Class of 1958
Professor of Business Administration at Harvard Business School (HBS). Prior to
joining HBS, Mr. Pearson spent 15 years at PepsiCo, Inc., 14 years as President
and Chief Operating Officer. Mr. Pearson serves as a director of CitiGroup. Inc.
He is also a trustee of the New York University Medical Center and the Good
Samaritan Medical Center in Palm Beach, Florida.
EUGENE L. STEP has been a director of the Company since March 1997. From 1973 to
1992, Mr. Step served in various senior management positions with Eli Lilly &
Co., most recently as Executive Vice President, President of the Pharmaceutical
Division and a member of the Board of Directors and its Executive Committee. Mr.
Step is a past Chairman of the Board of the Pharmaceutical Manufacturers
Association and a past President of the International Federation of
Pharmaceutical Manufacturers Association. Mr. Step also serves as a director of
Cell Genesys, Inc., Scios, Inc., Medco, Inc., Pathogenesis, Inc. and Guidant
Corp.
-45-
<PAGE> 46
ELECTION OF DIRECTORS
The Board is divided into three classes of directors. The Bylaws of the
Company provide that at each annual meeting of shareholders, directors shall be
chosen by class for a term of three years, or for such shorter term as the
shareholders may specify, to preserve, as evenly as practicable, the division of
directors into classes.
The Directors and their current classification and terms are as follows:
CLASS OF
NAME DIRECTOR AGE
---- -------- ---
DIRECTORS WHOSE TERM EXPIRES IN 2000
Kenneth G. Langone........................... I 64
Eugene L. Step............................... I 71
Ronald Fournet............................... I 48
DIRECTORS WHOSE TERM EXPIRES IN 2001
Frank Borman................................. II 72
Jerold E. Glassman........................... II 64
Andrall E. Pearson........................... II 74
DIRECTORS WHOSE TERM EXPIRES IN 2002
C. Garry Betty............................... III 43
Gary E. Erlbaum.............................. III 55
Bernard Marcus............................... III 71
Directors who are employees of the Company receive no compensation for
serving on the Board of Directors. During 1999, non-employee directors of the
Company received annual compensation of $16,000, and an additional $1,000 for
each meeting of the Board of Directors attended, up to a maximum annual
compensation of $20,000. Pursuant to the Deferred Compensation Plan for Non
Employee Directors, each qualifying director may elect to receive their annual
compensation in Company common stock in lieu of cash. Messrs. Betty, Marcus,
Pearson and Step elected to participate in this plan. All directors are
reimbursed for expenses associated with the attendance of the Board of
Directors' meetings.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No interlocking relationship exists between the board of directors or
compensation committee and the board of directors or compensation committee of
any other company, with the exception that Mr. Marcus serves on the Compensation
Committee of the Company and Mr. Borman serves on the Compensation Committee of
Home Depot of which Mr. Marcus is Chairman.
SECTION 16(a) -- BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon the Company's review of Forms 3, 4 and 5 and on amendments
thereto furnished to the Company pursuant to Section 16 of the Exchange Act, all
such forms were filed on a timely basis by each reporting person except the Form
5 for Messrs. Betty, Marcus, Pearson and Step for the year ended December 31,
1999 which forms were filed late by the Company.
-46-
<PAGE> 47
11. EXECUTIVE COMPENSATION
The following table sets forth compensation information concerning the chief
executive officer and the four most highly compensated executive officers of the
Company for the fiscal year ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION OTHER SECURITIES
--------------------------------- ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
--------------------------- ---- ------ ----- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Ronald Fournet 1999 (3) $198,750 $107,950 * 115,000 $ 4,078
President & Chief 1998 0 0 * 85,000 0
Executive Officer
Charles A. Lieppe 1999 $250,000 0 * 0 $6,666
President & Chief 1998 $250,000 0 $112,297 0 $6,666
Executive Officer 1997 (4) 81,731 $14,000 * 600,000 0
Frank Borman 1999 $160,000 0 * 0 $11,953
Chairman of the Board 1998 $160,000 0 * 0 $8,836
1997 $160,000 0 * 0 $6,369
Kevin A. Barr 1999 $151,125 $24,433 30,000 $6,666
Vice President 1998 (5) $103,846 $75,962 $129,688 40,000 $1,688
Human Resources
Timothy M. Leonard 1999 (6) $154,481 0 * 30,000 $6,395
Vice President, Finance 1998 $137,308 0 * 0 $5,050
Treasurer and 1997 $115,782 $53,907 $32,675 95,000 $1,954
Chief Financial Officer
J. Henry Muetterties 1999 $133,051 $28,129 $24,177 30,000 $7,342
Vice President, and 1998 $127,374 $27,309 $23,202 0 $5,900
Secretary 1997 $120,720 $25,763 $38,898 0 $3,942
</TABLE>
- ----------
* Value of perquisites and other personal benefits paid does not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
the executive officer.
(1) Includes amounts for certain costs in connection with employment by DBT
Online Inc. and relocation to Florida for Mr. Fournet, Mr. Lieppe, Mr.
Leonard and Mr. Barr. For Mr. Muetterties, includes amounts contributed to
Patlex's Deferred Compensation Plan and in 1997 certain costs in connection
with his relocation to Las Vegas, Nevada.
(2) Includes amounts received as Company matching contributions under DBT
Online, Inc's 401(k) savings plan by Mr. Fournet ($4,078 - 1999); Mr.
Lieppe ($6,666 -- 1999, 1998); Mr. Borman ($6,666 -- 1999; 5,667 -- 1998;
$3,200 -- 1997); Mr. Barr ($6,666 -- 1999, $1,688 -- 1998); Mr. Leonard
($6,395--1999, 5,050 - 1998, and 1,954 - 1997); Mr. Muetterties ($6,666 -
1999, $5,371 -- 1998; $3,413 -- 1997); and amounts paid by Patlex for life
insurance premiums for Mr. Borman ($5,287 -- 1999, $3,169 -- 1998, 1997)
and Mr. Muetterties ($676 -- 1999, $529 -- 1998, 1997).
(3) Mr. Fournet joined the Company in December 1998 and was named President and
Chief Executive Officer in August 1999.
(4) Mr. Lieppe joined the Company in August 1997 and resigned in August 1999.
(5) Mr. Barr joined the Company in March 1998.
(6) Mr. Leonard resigned as an officer of the Company in February 2000.
-47-
<PAGE> 48
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table contains information concerning the exercise of stock
options during fiscal year 1999 for each of the executive officers named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER SECURITIES
UNDERLYING OPTIONS/SAR'S VALUE OF UNEXERCISED
SHARES HELD AT FISCAL YEAR END IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE (#) FISCAL YEAR END ($)
EXERCISE REALIZED ----------------------------- -------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------- ------------ --------- -------------- ------------------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Ronald Fournet -- -- 21,250 178,750 $100,938 $302,813
Charles A. Lieppe -- -- 350,000 0 240,625 --
Frank Borman -- -- 157,895 0 $3,463,822 --
Kevin Barr -- -- 20,000 50,000 -- --
J. Henry Muetterties -- -- 0 30,000 -- $73,125
Timothy M. Leonard -- -- 88,334 36,666 $649,273 $12,915
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning grants of stock options
made during fiscal year 1999 to each of the executive officers named in the
Summary Compensation Table. No stock appreciation rights were granted during
fiscal year 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
-------------------------- AT ASSUMED ANNUAL
PERCENT OF RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERMS(2)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
------------------- ------------- -------------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ronald Fournet 115,000 (1) 11.1% $29.94 08/10/09 $2,165,346 $5,487,414
Charles A. Lieppe -- -- -- -- -- --
Frank Borman -- -- -- -- -- --
Kevin Barr 30,000 (1) 2.9% $29.13 08/02/09 $549,591 $1,392,771
J. Henry Muetterties 30,000 (1) 2.9% $21.88 12/06/09 $412,806 $1,046,132
Timothy M. Leonard 30,000 (1) 2.9% $29.13 08/02/09 $549,591 $1,392,771
</TABLE>
- ----------
(1) These options vest as follows: one-fourth of the total amount on the first
anniversary of the grant date, and one-fourth of the total amount on each
of the next three anniversaries of the grant date.
(2) Amounts represent hypothetical gains that could be achieved for the options
granted if they were exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the option grant date to the expiration date. These
assumptions are not intended to forecast future stock price appreciation.
The potential reasonable value computation does not take into account
federal or state income tax consequences of option exercises or sales of
appreciated stock.
-48-
<PAGE> 49
EMPLOYMENT AGREEMENTS
In April 1997, the Company entered into an employment agreement with its
chairman, Mr. Borman, which provided for an initial three-year term commencing
on April 1, 1997 with automatic one-year extensions on the anniversary of the
commencement date, unless either the Company or Mr. Borman gives notice to the
other that the term of the agreement will not be extended. The employment
agreement contains certain restrictive covenants, including provisions relating
to non-competition, non-solicitation and the non-disclosure of proprietary
information, during the term of the agreement and for specified periods
thereafter. The 1999 annual compensation rate for Mr. Borman under this
agreement was $160,000.
In August 1997, the Company entered into an employment agreement with its
then CEO, Mr. Lieppe, which provided for a four-year term commencing August 15,
1997 and ending on August 14, 2001, unless terminated earlier in accordance with
certain circumstances. The 1999 annual compensation rate for Mr. Lieppe under
this agreement was $250,000. In August 1999, the Company and Mr. Lieppe agreed
to the terms of a Separation of Employment Agreement and General Release and
Consulting Agreement. In connection with this agreement, the Company is to pay
$425,000 in cash to Mr. Lieppe or on his behalf through December 2000. As of
December 31, 1999, $340,000 of this amount was included in accounts payable and
accrued liabilities for the remaining unpaid portion. The Company also incurred
stock-based compensation expense of $771,000 in 1999 resulting from the Company
extending the time in which certain stock options held by Mr. Lieppe were
allowed to vest.
In March 1998, the Company entered into an employment agreement with its
Vice President, Human Resources, Mr. Barr, which provides for a two-year term.
In October 1999, the employment agreement was amended for an additional year and
included a change in control provision. The annual compensation rate in 1999 for
Mr. Barr under this agreement was $150,000.
In August 1999, the Company entered into an employment agreement with its
current CEO, Mr. Fournet that provides for a four-year term, unless terminated
earlier in accordance with certain circumstances, and which includes a change in
control provision. The annual compensation rate for Mr. Fournet under this
agreement was $250,000.
In February 2000, the Company entered into an employment agreement with its
Vice President, General Counsel and Secretary, Mr. Muetterties having a one-year
term which renews itself each day. The agreement calls for a base salary of
$160,000 in 2000 and includes a change in control provision. The employment
agreement contains certain restrictive covenants, including provisions relating
to non-competition, non-solicitation and non-disclosure of confidential
information during the executive's employment with the Company and for specific
periods thereafter.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is responsible for implementing and
administering the Company's compensation policies and programs for its executive
officers. This includes setting the base salaries and the total compensation
levels of the Chief Executive Officer (the "CEO") and the other executive
officers of the Company. In addition, the Compensation Committee is responsible
for setting the performance criteria for bonus awards and determining the
achievement levels and payout for the executive officers.
COMPENSATION PHILOSOPHY
The Company's compensation policies for executive officers, as established
by the Compensation Committee, are designed to (a) provide competitive
compensation packages that will attract and retain talented executive officers,
(b) link compensation to financial and operating results, so as to reward
successful performance, and (c) provide long-term equity compensation, to
further align the interests of executive officers with those of shareholders and
further reward successful performance. The principal components of the Company's
executive officer compensation program are base salary, bonus awards and grants
of stock options.
-49-
<PAGE> 50
ANNUAL COMPENSATION
Annual cash compensation is comprised of base salary and bonus awards.
Salary determinations have not been based upon any specific criteria. The salary
levels of executive officers of the Company that were hired in 1999 were
established at the time the executives were hired. The Compensation Committee
approved the compensation levels of the newly hired executives taking into
consideration the Company's objective of attracting outstanding executives to
join a relatively young and growing corporation. The salary levels of certain
other executive officers of the Company for 1999 were based on established
levels set by employment contracts previously entered into by the executive
officers.
Bonus awards made to executive officers in 1999 were based in part on
established minimums set by their employment agreements and in part upon the
Company's achievement of performance targets. The Compensation Committee also
took into consideration the leadership provided by the Company's executive
officers in managing the Company's growth in 1999.
LONG-TERM COMPENSATION
The Compensation Committee believes that stock options are an important
component of compensation for executive officers of the Company because it
closely aligns the interests of management with those of the shareholders. Stock
options also provide an attractive compensation incentive in hiring new
executive officers. This policy of the Compensation Committee is carried out for
the Company by the Stock Option Plan Administration Committee, which has the
discretion to grant stock options to executive officers. The number of options
in each grant is not based on any specific criteria, but the Committee did
consider primarily the executive's position, skills and achievements.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Ronald Fournet was named President and Chief Executive Officer of the
Company on August 10, 1999. His salary level of $250,000 for 1999 was
established by the Board of the Company. He received a sign-on bonus of $85,000
in 1999. Mr. Fournet's compensation in 1999 was based upon the terms of the
employment agreement that was dated August 10, 1999.
DEDUCTIBILITY OF CERTAIN COMPENSATION
Section 162(m) of the Internal Revenue Code generally denies a federal
income tax deduction for certain compensation exceeding $1,000,000 paid to the
CEO or any of the four other highest paid executive officers, excluding (among
other things) certain performance-based compensation. Through December 31, 1999,
this provision has not affected the Company's tax deductions, but the
Compensation Committee will continue to monitor the potential impact of section
162(m) on the Company's ability to deduct executive compensation.
COMPENSATION COMMITTEE
Andrall E. Pearson, Chairman
Jerold Glassman, Esq.
Bernard Marcus
-50-
<PAGE> 51
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Company's common stock with the cumulative total shareholder return of (i) the
S&P Stock Market (U.S.) Index (the "S&P Index"); and (ii) a "peer group" index
assuming an investment of $100 on September 28, 1995 in each of the common stock
of the Company, the stocks comprising the S&P Index and the stocks comprising
the peer group, and further assuming reinvestment of dividends. The "peer group"
consists of ChoicePoint, American Business Information, Inc., Vista Information
Solutions, Inc. and Avert, Inc.
The graph commences on September 28, 1995, the date that the Patlex common
stock began trading publicly. From September 28, 1995 and until March 17, 1996,
the Patlex common stock was listed on the Nasdaq Small-Cap Market. From March
18, 1996 until August 19, 1996, the Patlex common stock was listed on the Nasdaq
National Market. The Company's common stock was traded on the Nasdaq National
Market from August 20, 1996 until it began trading on the New York Stock
Exchange on September 17, 1997.
COMPARISON OF CUMULATIVE RETURN
THE COMPANY, S&P INDEX AND PEER GROUP INDEX
(FROM SEPTEMBER 28, 1995 TO DECEMBER 31, 1999)
TOTAL SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
[GRAPH]
-51-
<PAGE> 52
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of the common stock as of March 1, 2000 (i) by each person who
beneficially owns more than 5% of the outstanding shares of the common stock,
(ii) by each of the Company's executive officers and directors, and (iii) by all
of the executive officers and directors of the Company as a group. Unless
otherwise noted, each person named in the table has sole voting and investment
power as to shares shown.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT
NAMES OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS (1)
------------------------- ------------------ ------------
<S> <C> <C>
AXA Financial, Inc. (2) 3,461,600 17.2%
FMR Corp. (3) 2,566,400 12.7%
Kenneth G. Langone (4) 2,561,094 12.6%
Gary Erlbaum (5) 417,962 2.1%
Frank Borman (6) 200,000 *
Bernard Marcus (7) 78,453 *
J. Henry Muetterties 49,820 *
Andrall E. Pearson (7) 30,538 *
Eugene L. Step (8) 30,436 *
Ronald Fournet (9) 21,250 *
Kevin A. Barr (7) 20,000 *
C. Garry Betty (10) 10,538 *
Jerold E. Glassman (10) 10,000 *
All Officer and Directors as a Group (11)
(12 persons) 3,468,425 16.6%
</TABLE>
- ----------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In general, a person who has voting power or investment power
with respect to securities is treated as a beneficial owner of those
securities. Shares of common stock subject to options or warrants currently
exercisable or exercisable within 60 days count as outstanding for
computing the percentage beneficially owned by the holder. Except as
otherwise indicated by footnote, we believe that the persons named in this
table have solve voting and investment power with respect to the share of
common stock shown.
(2) Based on our review of a Schedule 13G filed with the Commission on February
10, 2000, we believe these shares are held by AXA Financial, Inc. whose
address is 1290 Avenue of the Americas, New York, NY 10104.
(3) Based on our review of a Scheduled 13G filed with the Commission on
February 14, 2000, we believe these shares are held by FMR Corp. whose
address is 82 Devonshire Street, Boston, MA 02109.
(4) Includes (i) 900,000 shares owned by Invemed Associates, Inc., (ii) 200
shares owned by his spouse, (iii) 200,000 shares issuable upon exercise of
presently exercisable options and (iv) 660,894 shares owned by the Invemed
Catalyst Fund. Mr. Langone is Chairman of the Board, Chief Executive
Officer and President of Invemed and the principal shareholder of Invemed's
parent corporation. The address of this shareholder is 375 Park Ave., Suite
2205, New York, NY 10152.
(5) Includes (i) 29,420 shares owned by SPSP Corporation of which Mr. Erlbaum
is a director, President and 36.7% shareholder, (ii) 3,750 shares held by
trusts for which Mr. Erlbaum serves as trustee or co-trustee, (iii) 139,360
shares owned by Erlbaum Family L.P., of which Mr. Erlbaum is President of
the general partnership, (iv) 2,922 shares owned by Mr. Erlbaum's son, and
(v) 200,000 shares issuable upon exercise of presently exercisable options.
(6) Includes 157,895 shares issuable pursuant to currently exercisable stock
options.
(7) Includes 20,000 shares issuable pursuant to currently exercisable stock
options.
(8) Includes 30,000 shares issuable pursuant to currently exercisable stock
options.
(9) Includes 21,250 shares issuable pursuant to currently exercisable stock
options.
(10) Includes 10,000 shares issuable pursuant to currently exercisable stock
options.
(11) Includes 727,479 shares issuable pursuant to currently exercisable stock
options.
-52-
<PAGE> 53
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Invemed Associates, Inc. ("Invemed"), from time to time, has provided
financial advisory services to the Company, for which customary compensation has
been paid. In connection with the Company's offering of 1,940,000 shares of
common stock in May 1997 and 5,669,758 shares in October 1999, Invemed performed
certain investment banking services for the Company for which Invemed received
fees of approximately $2,706,000 and 3,975,000, respectively. Kenneth G.
Langone, a director and a shareholder of the Company, is Chairman of the Board,
Chief Executive Officer and President of Invemed, and is the principal
shareholder of Invemed's parent.
On February 7, 1994, Database Technologies, Inc. entered into a debt and
royalty agreement with a consortium of seven individuals including Jack Hight.
During 1995, Mr. Hight became a shareholder and director of DBT. The agreement
provided the financing necessary for Database Technologies, Inc. to enter the
Texas market. The agreement provided for a loan to Database Technologies, Inc.
of $200,000, which was repaid in 1995. The agreement also provided for Database
Technologies, Inc. to grant to the consortium a royalty to share in the revenues
of the Texas expansion up to $800,000, computed as 10% of specified revenues
from Texas operations. For the years ended December 31, 1999, 1998 and 1997,
Database Technologies, Inc. paid $149,267, $164,561 and $125,957, respectively,
relating to such royalties. Through December 31, 1999, Database Technologies,
Inc. had paid a total of $499,717 relating to such royalties.
Messrs. Fournet and Barr have outstanding loans with the Company in the
amounts of $350,000 and $125,000, respectively.
Mr. Muetterties was extended a loan on February 20, 2000 in the amount of
$342,928. This loan is a bridge loan provided in association with Mr.
Muetterties relocation to Boca Raton, Florida and is due May 31, 2000.
IRSC had a consulting agreement with an affiliate which was terminated May
6, 1999. Pursuant to the agreement, IRSC paid the affiliate for consulting
services and reimbursed the affiliate for certain travel and administrative
expenses incurred on behalf of IRSC. During the years ended December 31, 1999,
1998 and 1997, IRSC paid the affiliate $62,500, $375,000 and $365,000,
respectively.
-53-
<PAGE> 54
ITEM 14. EXHIBITS, FINANCIALS STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
SIGNATURES
<TABLE>
<CAPTION>
<S> <C>
3(i)** Amended and Restated Articles of Incorporation
3(ii)* Amended and Restated Bylaws
10(i)+ Employment Agreement dated March 11, 1990, between Patlex and Frank Borman
10(ii)++ Employment Agreement dated August 15, 1997, between DBT Online, Inc. and Charles A. Lieppe***
10(iii)* Employment Agreement dated February 14, 2000, between DBT Online, Inc. and J. Henry
Muetterties***
10(iv)+ Security and Escrow Agreement dated September 29, 1992, between Patlex and NGN Acquisition
Corporation
10(v)+ Standard Form of Licensing Agreement
10(vi)+ Purchase Agreement dated December 11, 1919, between Patlex and Gordon Gould
10(vii)+ Agreement dated January 31, 1982, among Patlex, Refac Technology Development Corporation, Refac
International Ltd., Gordon Gould, NGN Acquisition Corporation, and the partnership of
Lerner, David, Littenberg & Samuel
10(viii)+ Agreement dated October 1, 1984, among Patlex, Refac
Technology Development Corporation, East West Trade Services,
Ltd., and Refac International, Ltd.
10(ix)+ Agreement dated 1986 among Patlex and NGN Acquisition Corporation, Gordon Gould, and Apollo
Lasers, Inc.
10(x)+ Letter of Clarification dated January 31, 1990, among Patlex, Gordon Gould, and NGN Acquisition
Corporation
10(xi)**** Agreement and Plan of Merger By and Among ChoicePoint, Inc. ChoicePoint Acquisition Corporation
and DBT Online, Inc. dated February 14, 2000
10(xii)+++ Amended and Restated Stock Option Plan***
10(xiii)++++ Lease (For Boca Raton, Florida Location)
10(xiv)* Employment Agreement dated February 4, 1998, between DBT Online, Inc. and Kevin Barr as
amended***
10(xv)* Employment Agreement dated August 10, 1999 between DBT Online, Inc. and
Ronald Fournet***
10(xvi)* Separation of Employment Agreement and General Release and Consulting Agreement between
DBT Online, Inc. and Thomas J. Hoolihan dated January 12, 2000 and an Amendment thereto dated February
11, 2000***
10(xvii)* Separation of Employment Agreement and General Release and Consulting Agreement between DBT
Online, Inc. and Andrew J. Perlmutter dated January 7, 2000 and an Amendment thereto dated
February 13, 2000***
10(xviii)* Separation of Employment Agreement and General Release and Consulting Agreement between DBT
Online, Inc. and Timothy M. Leonard dated January 7, 2000 and an Amendment thereto dated
February 11, 2000***
10(xix)* Separation of Employment Agreement and General Release Consulting Agreement between DBT
Online, Inc. and Charles Lieppe dated January 3, 2000***
10(xx)* Agreement and Plan of Reorganization among DBT Online, Inc., DBT Acquisition, Inc.,
I.R.S.C., Inc., The Shareholders of I.R.S.C., Inc. and certain other parties dated May 6, 1999
21* Subsidiaries
23.1* Consent of Deloitte & Touche LLP
23.2* Consent of Corbin & Wertz
27* Financial Data Schedule (for Securities and Exchange Commission use only)
</TABLE>
- ----------------
* Filed herewith
** Incorporated by reference to the Company's Registration Statement on
Form S-4 (File No. 333-2000)
*** Management contract or compensatory plan
**** Incorporated by reference to the Company's Form 8-K filed February 15,
2000
+ Incorporated by reference to the Form 10-KSB of Patlex Corporation for
the year ended June 30, 1995
++ Incorporated by reference to the Company's Form 10-Q for the period
ended September 30, 1997
+++ Incorporated by reference to the Company's Registration Statement on
Form S-8 (File No. 333-41313) filed with the Securities and Exchange
Commission on December 1, 1997.
++++ Incorporated by reference to the Company's Form 10-K for the period
ended December 31, 1998
-54-
<PAGE> 55
DBT ONLINE, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
(In thousands)
<TABLE>
<CAPTION>
CHARGED TO WRITE-OFFS
BEGINNING STATEMENT OF OTHER AND OTHER ENDING
DESCRIPTION BALANCE OPERATIONS INCREASES ADJUSTMENTS BALANCE
- ------------------------------------------------------------ --------- ------------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
Year ending December 31, 1997
Allowances for uncollectible accounts $250 $115 $ 25(1) $ (40) $350
==== ==== ==== ===== ====
Year ended December 31, 1998
Allowance for uncollectible accounts $350 $159 $ 0 $(110) $399
==== ==== ==== ===== ====
Year ended December 31, 1999
Allowance for uncollectible accounts $399 $231 $388(2) $(179) $839
==== ==== ==== ===== ====
</TABLE>
- ---------------
(1) Represents the allowance established in connection with the acquisition of
The Information Connectivity Group, Inc.
(2) Represents the allowance established in connection with the acquisition of
KnowX.com and Informed.
(b) Reports on Form 8-K
Form 8-K dated October 8, 1999 reporting the Asset Purchase
Agreement Among West Publishing Company, Information America, Inc.
and DBT Online, Inc. dated as of August 20, 1999
-55-
<PAGE> 56
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 10, 2000 DBT Online, Inc.
By:/s/ Ronald Fournet
-----------------------------------
Ronald Fournet
President and Chief Executive Officer
Power of Attorney
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capabilities and on the
dates indicated. Each person whose signature appears below in so signing also
makes, constitutes, and appoints J. Henry Muetterties his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and his name, place and stead, in any and all capacities, to execute and
cause to be filed with the Securities and Exchange Commission any and all
amendments to this Report, and in each case to file the same, with all exhibits
thereto and other documents in connection therewith, and hereby ratifies and
confirms all that said attorney-in-fact or his substitute or substitutes may do
or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
- ---- -------- ----
<S> <C> <C>
/s/ Frank Borman Chairman of the Board of March 10, 2000
Frank Borman Directors
/s/Ronald Fournet President, Chief Executive March 10, 2000
Ronald Fournet Officer and Director
/s/Judith D. Brown Principal Accounting Officer March 10, 2000
Judith D. Brown
/s/ Charles G. Betty Director March 10, 2000
Charles G. Betty
/s/ Jerold E. Glassman Director March 10, 2000
Jerold E. Glassman
/s/ Gary E. Erlbaum Director March 10, 2000
Gary E. Erlbaum
/s/ Ken Langone Director March 10, 2000
Ken G. Langone
/s/ Bernard Marcus Director March 10, 2000
Bernard Marcus
/s/ Andrall E. Pearson Director March 10, 2000
Andrall E. Pearson
/s/ Eugene L. Step Director March 10, 2000
Eugene L. Step
</TABLE>
-56-
<PAGE> 57
ANNUAL RETURN PERCENTAGE
<TABLE>
<CAPTION>
COMPANY NAME/INDEX DEC 95 DEC 96 DEC 97 DEC 98 DEC 99
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DBT ONLINE INC 268.75 0.85 67.64 0.00 -2.51
S&P 500 INDEX 5.76 22.96 33.36 28.58 21.04
PEER GROUP -51.50 16.54 0.19 -0.53 51.60
</TABLE>
INDEXED RETURNS
<TABLE>
<CAPTION>
BASE
PERIOD
COMPANY NAME/INDEX 28-SEP-95 DEC 95 DEC 96 DEC 97 DEC 98 DEC 99
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DBT ONLINE INC 100 368.75 371.88 623.44 623.47 607.82
S&P 500 INDEX 100 105.76 130.04 173.43 222.99 269.91
PEER GROUP 100 48.50 56.52 56.63 56.33 85.40
</TABLE>
PEER GROUP COMPANIES
- --------------------------------------------------------------------------------
AVERT INC
CHOICEPOINT INC
INFOUSA INC (FORMERLY AMERICAN BUS INFO)
VISTA INFO SOLUTIONS INC
<PAGE> 1
Exhibit 3(ii)
AMENDED AND RESTATED BYLAWS
OF
DBT ONLINE, INC.
ARTICLE I
Name and Seal
Section 1.01. Name. The name of the corporation is DBT ONLINE,
INC.
Section 1.02. State of Incorporation. The corporation is
incorporated under the laws of the Commonwealth of Pennsylvania.
Section 1.03. Seal. The corporate seal of the corporation
shall have inscribed thereon the name of the corporation, the year of its
organization, the words "Corporate Seal," and the name of the State of
Incorporation. The seal may be used by any person authorized by the Board of
Directors of the corporation or by these Bylaws by causing the seal or a
facsimile thereof to be impressed or affixed, or in any manner reproduced.
ARTICLE II
Offices and Fiscal Year
Section 2.01. Registered Office. The registered office of the
corporation in the Commonwealth of Pennsylvania shall be at c/o CT Corporation,
1635 Market Street, Suite 1120, Philadelphia, PA 19103 until otherwise
established by an amendment of the articles of incorporation (the "articles") or
by the Board of Directors of the corporation (the "Board of Directors" or the
"Board") and a record of such change is filed with the Pennsylvania Department
of State in the manner provided by law.
Section 2.02. Other Offices. The corporation may also have
offices at such other places within or without the Commonwealth of Pennsylvania
as the Board of Directors may from time to time appoint or the business of the
corporation may require.
Section 2.03. Fiscal Year. The fiscal year of the corporation
shall begin on the first day of January in each year.
<PAGE> 2
ARTICLE III
Notice--Waivers--Meetings Generally
Section 3.01. Manner of Giving Notice.
(a) General Rule. Whenever written notice is required to be
given to any person under the provisions of the Business Corporation Law or by
the articles or these bylaws, it may be given to the person either personally or
by sending a copy thereof by first class or express mail, postage prepaid, or by
telegram (with messenger service specified), telex or TWX (with answerback
received) or courier service, charges prepaid, or by facsimile transmission, to
the address (or to the telex, TWX, facsimile or telephone number) of the person
appearing on the books of the corporation or, in the case of directors, supplied
by the director to the corporation for the purpose of notice. If the notice is
sent by mail, telegraph or courier service, it shall be deemed to have been
given to the person entitled thereto when deposited in the United States mail or
with a telegraph office or courier service for delivery to that person or, in
the case of telex or TWX, when dispatched or, in the case of facsimile
transmission, when received. A notice of meeting shall specify the place, day
and hour of the meeting and any other information required by any other
provision of the Business Corporation Law, the articles or these bylaws.
(b) Bulk Mail. If the corporation has more than 30
shareholders, notice of any regular or special meeting of the shareholders, or
any other notice required by the Business Corporation Law or by the articles or
these bylaws to be given to all shareholders or to all holders of a class or
series of shares, may be given by any class of postpaid mail if the notice is
deposited in the United States mail at least 20 days prior to the day named for
the meeting or any corporate or shareholder action specified in the notice.
(c) Adjourned Shareholder Meetings. When a meeting of
shareholders is adjourned, it shall not be necessary to give any notice of the
adjourned meeting or of the business to be transacted at an adjourned meeting,
other than by announcement at the meeting at which the adjournment is taken,
unless the Board fixes a new record date for the adjourned meeting in which
event notice shall be given in accordance with Section 3.03.
Section 3.02. Notice of Meetings of Board of Directors. Notice
of a regular meeting of the Board of Directors need not be given. Notice of
every special meeting of the Board of Directors shall be given to each director
by telephone or in writing at least 24 hours (in the case of notice by
telephone, telex, TWX or facsimile transmission) or 48 hours (in the case of
notice by telegraph, courier service or express mail) or five days (in the case
of notice by first class mail) before the time at which the meeting is to be
held. Every such notice shall state the time and place of the meeting. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board need be specified in a notice of the meeting.
2
<PAGE> 3
Section 3.03. Notice of Meetings of Shareholders.
(a) General Rule. Except as otherwise provided in Section
3.01(b), written notice of every meeting of the shareholders shall be given by,
or at the direction of, the secretary or other authorized person to each
shareholder of record entitled to vote at the meeting at least (1) ten days
prior to the day named for a meeting (and, in case of a meeting called to
consider a merger, consolidation, share exchange or division, to each
shareholder of record not entitled to vote at the meeting) called to consider a
fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day
named for the meeting in any other case. If the secretary neglects or refuses to
give notice of a meeting, the person or persons calling the meeting may do so.
In the case of a special meeting of shareholders, the notice shall specify the
general nature of the business to be transacted.
(b) Notice of Action by Shareholders on Bylaws. In the case of
a meeting of shareholders that has as one of its purposes action on the bylaws,
written notice shall be given to each shareholder that the purpose, or one of
the purposes, of the meeting is to consider the adoption, amendment or repeal of
the bylaws. There shall be included in, or enclosed with, the notice a copy of
the proposed amendment or a summary of the changes to be effected thereby.
(c) Notice of Action by Shareholders on Fundamental Change. In
the case of a meeting of the shareholders that has as one of its purposes action
with respect to any fundamental change under 15 Pa.C.S. Chapter 19, each
shareholder shall be given, together with written notice of the meeting, a copy
or summary of the amendment or plan to be considered at the meeting in
compliance with the provisions of Chapter 19.
(d) Notice of Action by Shareholders Giving Rise to Dissenters
Rights. In the case of a meeting of the shareholders that has as one of its
purposes action that would give rise to dissenters rights under the provisions
of 15 Pa.C.S. Subchapter 15D, each shareholder shall be given, together with
written notice of the meeting:
(1) statement that the shareholders have a right to
dissent and obtain payment of the fair value of their shares
by complying with the provisions of Subchapter 15D (relating
to dissenters rights); and
(2) copy of Subchapter 15D.
3
<PAGE> 4
Section 3.04. Waiver of Notice.
(a) Written Waiver. Whenever any written notice is required to
be given under the provisions of the Business Corporation Law, the articles or
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of the notice. Neither the business to be
transacted at, nor the purpose of, a meeting need be specified in the waiver of
notice of the meeting.
(b) Waiver by Attendance. Attendance of a person at any
meeting shall constitute a waiver of notice of the meeting except where a person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting was not lawfully
called or convened.
Section 3.05. Modification of Proposal Contained in Notice.
Whenever the language of a proposed resolution is included in a written notice
of a meeting required to be given under the provisions of the Business
Corporation Law or the articles or these bylaws, the meeting considering the
resolution may without further notice adopt it with such clarifying or other
amendments as do not enlarge its original purpose.
Section 3.06. Exception to Requirement of Notice.
(a) General Rule. Whenever any notice or communication is
required to be given to any person under the provisions of the Business
Corporation Law or by the articles or these bylaws or by the terms of any
agreement or other instrument or as a condition precedent to taking any
corporate action and communication with that person is then unlawful, the giving
of the notice or communication to that person shall not be required.
(b) Shareholders Without Forwarding Addresses. Notice or other
communications need not be sent to any shareholder with whom the corporation has
been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder has
otherwise failed to provide the corporation with a current address. Whenever the
shareholder provides the corporation with a current address, the corporation
shall commence sending notices and other communications to the shareholder in
the same manner as to other shareholders.
4
<PAGE> 5
Section 3.07. Use of Conference Telephone and Similar
Equipment. Any director may participate in any meeting of the Board of
Directors, and the Board of Directors may provide by resolution with respect to
a specific meeting or with respect to a class of meetings that one or more
persons may participate in a meeting of the shareholders of the corporation, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this section shall constitute presence in
person at the meeting.
ARTICLE IV
Shareholders
Section 4.01. Place of Meeting. All meetings of the
shareholders of the corporation shall be held at such place, within or without
the State of Incorporation, as shall be determined by the Board of Directors
from time to time.
Section 4.02. Annual Meeting. The Board of Directors may fix
and designate the date and time of the annual meeting of the shareholders, but
if no such date and time is fixed and designated by the Board, the meeting for
any calendar year shall be held on the first Thursday in June in such year, if
not a legal holiday under the laws of Pennsylvania, and, if a legal holiday,
then on the next succeeding business day, not a Saturday, at 10 o'clock A.M. and
at said meeting the shareholders then entitled to vote shall elect directors and
shall transact such other business as may properly be brought before the
meeting. If the annual meeting shall not have been called and held within six
months after the designated time, any shareholder may call the meeting at any
time thereafter.
Section 4.03. Special Meetings. Special meetings of the
shareholders may be called at any time by the President or by resolution of the
Board of Directors, which may fix the date, time and place of the meeting. If
the Board does not fix the date, time or place of the meeting, it shall be the
duty of the secretary to do so. A date fixed by the secretary shall not be more
than 60 days after the date of the adoption of the resolution of the Board
calling the special meeting.
Section 4.04. Quorum and Adjournment.
(a) General Rule. A meeting of shareholders of the corporation
duly called shall not be organized for the transaction of business unless a
quorum is present. The presence of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a particular
matter to be acted upon at the meeting shall constitute a quorum for the
purposes of consideration and action on the matter. Shares of the corporation
owned, directly or indirectly, by it and controlled, directly or indirectly, by
the Board of Directors of this corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes at any
given time.
(b) Withdrawal of a Quorum. The shareholders present at a duly
organized meeting can continue to do business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum.
5
<PAGE> 6
(c) Adjournments Generally. Any regular or special meeting of
the shareholders, including one at which directors are to be elected and one
which cannot be organized because a quorum has not attended, may be adjourned
for such period and to such place as the shareholders present and entitled to
vote shall direct.
(d) Electing Directors at Adjourned Meeting. Those
shareholders entitled to vote who attend a meeting called for the election of
directors that has been previously adjourned for lack of a quorum, although less
than a quorum as fixed in this section, shall nevertheless constitute a quorum
for the purpose of electing directors.
(e) Other Action in Absence of Quorum. Those shareholders
entitled to vote who attend a meeting of shareholders that has been previously
adjourned for one or more periods aggregating at least 15 days because of an
absence of a quorum, although less than a quorum as fixed in this section, shall
nevertheless constitute a quorum for the purpose of acting upon any matter set
forth in the notice of the meeting if the notice states that those shareholders
who attend the adjourned meeting shall nevertheless constitute a quorum for the
purpose of acting upon the matter.
Section 4.05. Action by Shareholders. Except as otherwise
provided in the Business Corporation Law or the articles or these bylaws,
whenever any corporate action is to be taken by vote of the shareholders of the
corporation, it shall be authorized upon receiving the affirmative vote of a
majority of the votes cast by all shareholders entitled to vote thereon and, if
any shareholders are entitled to vote thereon as a class, upon receiving the
affirmative vote of a majority of the votes cast by the shareholders entitled to
vote as a class.
Section 4.06. Organization. At every meeting of the
shareholders, the chairman of the Board, if there be one, or, in the case of
vacancy in office or absence of the chairman of the Board, one of the following
persons present in the order stated: the vice chairman of the Board, if there be
one, the president, the vice presidents in their order of rank and seniority, or
a person chosen by vote of the shareholders present, shall act as chairman of
the meeting. The secretary or, in the absence of the secretary, an assistant
secretary, or, in the absence of both the secretary and assistant secretaries, a
person appointed by the chairman of the meeting, shall act as secretary of the
meeting.
Section 4.07. Voting Rights of Shareholders. Unless otherwise
provided in the articles, every shareholder of the corporation shall be entitled
to one vote for each full share having voting power standing in the name of the
shareholder on the books of the corporation.
Section 4.08. Voting and Other Action by Proxy.
(a) General Rule.
6
<PAGE> 7
(1) every shareholder entitled to vote at a meeting
of shareholders may authorize another person to act for the
shareholder by proxy.
(2) The presence of, or vote or other action at a
meeting of shareholders by a proxy of a shareholder shall
constitute the presence of, or vote or action by the
shareholder.
(3) Where two or more proxies of a shareholder are
present, the corporation shall, unless otherwise expressly
provided in the proxy, accept as the vote of all shares
represented thereby the vote cast by a majority of them and,
if a majority of the proxies cannot agree whether the shares
represented shall be voted or upon the manner of voting the
shares, the voting of the shares shall be divided equally
among those persons.
(b) Execution and Filing. Every proxy shall be executed in
writing by the shareholder or by the duly authorized attorney-in-fact of the
shareholder and filed with the secretary of the corporation. A telegram, telex,
cablegram, datagram or similar transmission from a shareholder or
attorney-in-fact, or a photographic, facsimile or similar reproduction of a
writing executed by a shareholder or attorney-in-fact:
(1) may be treated as properly executed for purposes
of this subsection; and
(2) shall be so treated if it sets forth a
confidential and unique identification number or other mark
furnished by the corporation to the shareholder for the
purposes of a particular meeting or transaction.
(c) Revocation. A proxy, unless coupled with an interest,
shall be revocable at will, notwithstanding any other agreement or any provision
in the proxy to the contrary, but the revocation of a proxy shall not be
effective until written notice thereof has been given to the secretary of the
corporation. An unrevoked proxy shall not be valid after three years from the
date of its execution unless a longer time is expressly provided therein. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of the
death or incapacity is given to the secretary of the corporation.
(d) Expenses. The corporation shall pay the reasonable
expenses of solicitation of votes, proxies or consents of shareholders by or on
behalf of the Board of Directors or its nominees for election to the Board,
including solicitation by professional proxy solicitors and otherwise.
7
<PAGE> 8
Section 4.09. Voting by Fiduciaries and Pledgees. Shares of
the corporation standing in the name of a trustee or other fiduciary and shares
held by an assignee for the benefit of creditors or by a receiver may be voted
by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are
pledged shall be entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the pledgee, but
nothing in this section shall affect the validity of a proxy given to a pledgee
or nominee.
Section 4.10. Voting by Joint Holders of Shares.
(a) General Rule. Where shares of the corporation are held
jointly or as tenants in common by two or more persons, as fiduciaries or
otherwise:
(1) if only one or more of such persons is present in
person or by proxy, all of the shares standing in the names of
such persons shall be deemed to be represented for the purpose
of determining a quorum and the corporation shall accept as
the vote of all the shares the vote cast by a joint owner or a
majority of them; and
(2) if the persons are equally divided upon whether
the shares held by them shall be voted or upon the manner of
voting the shares, the voting of the shares shall be divided
equally among the persons without prejudice to the rights of
the joint owners or the beneficial owners thereof among
themselves.
(b) Exception. If there has been filed with the secretary of
the corporation a copy, certified by an attorney at law to be correct, of the
relevant portions of the agreement under which the shares are held or the
instrument by which the trust or estate was created or the order of court
appointing them or of an order of court directing the voting of the shares, the
persons specified as having such voting power in the document latest in date of
operative effect so filed, and only those persons, shall be entitled to vote the
shares but only in accordance therewith.
Section 4.11. Voting by Corporations.
(a) Voting by Corporate Shareholders. Any corporation that is
a shareholder of this corporation may vote at meetings of shareholders of this
corporation by any of its officers or agents, or by proxy appointed by any
officer or agent, unless some other person, by resolution of the Board of
Directors of the other corporation or a provision of its articles or bylaws, a
copy of which resolution or provision certified to be correct by one of its
officers has been filed with the secretary of this corporation, is appointed its
general or special proxy in which case that person shall be entitled to vote the
shares.
(b) Controlled Shares. Shares of this corporation owned,
directly or indirectly, by it and controlled, directly or indirectly, by the
Board of Directors of this
8
<PAGE> 9
corporation, as such, shall not be voted at any meeting and shall not be counted
in determining the total number of outstanding shares for voting purposes at any
given time.
Section 4.12. Determination of Shareholders of Record.
(a) Fixing Record Date. The Board of Directors may fix a time
prior to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled notwithstanding
any transfer of shares on the books of the corporation after any record date
fixed as provided in this subsection. The Board of Directors may similarly fix a
record date for the determination of shareholders of record for any other
purpose. When a determination of shareholders of record has been made as
provided in this section for purposes of a meeting, the determination shall
apply to any adjournment thereof unless the Board fixes a new record date for
the adjourned meeting.
(b) Determination When a Record Date is Not Fixed. If a record
date is not fixed:
(1) The record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders
shall be at the close of business on the day next preceding
the day on which notice is given.
(2) The record date for determining shareholders for
any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating
thereto.
(c) Certification by Nominee. The Board of Directors may adopt
a procedure whereby a shareholder of the corporation may certify in writing to
the corporation that all or a portion of the shares registered in the name of
the shareholder are held for the account of a specified person or persons. Upon
receipt by the corporation of a certification complying with the procedure, the
persons specified in the certification shall be deemed, for the purposes set
forth in the certification, to be the holders of record of the number of shares
specified in place of the shareholder making the certification.
Section 4.13. Voting Lists.
(a) General Rule. The officer or agent having charge of the
transfer books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the
9
<PAGE> 10
meeting for the purposes thereof except that, if the corporation has 5,000 or
more shareholders, in lieu of the making of the list the corporation may make
the information therein available at the meeting by any other means.
(b) Effect of List. Failure to comply with the requirements of
this section shall not affect the validity of any action taken at a meeting
prior to a demand at the meeting by any shareholder entitled to vote thereat to
examine the list. The original share register or transfer book, or a duplicate
thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence
as to who are the shareholders entitled to examine the list or share register or
transfer book or to vote at any meeting of shareholders.
Section 4.14. Judges of Election.
(a) Appointment. In advance of any meeting of shareholders of
the corporation, the Board of Directors may appoint judges of election, who need
not be shareholders, to act at the meeting or any adjournment thereof. If judges
of election are not so appointed, the presiding officer of the meeting may, and
on the request of any shareholder shall, appoint judges of election at the
meeting. The number of judges shall be one or three. A person who is a candidate
for an office to be filled at the meeting shall not act as a judge.
(b) Vacancies. In case any person appointed as a judge fails
to appear or fails or refuses to act, the vacancy may be filled by appointment
made by the Board of Directors in advance of the convening of the meeting or at
the meeting by the presiding officer thereof.
(c) Duties. The judges of election shall determine the number
of shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum, and the authenticity, validity and
effect of proxies, receive votes or ballots, hear and determine all challenges
and questions in any way arising in connection with nominations by shareholders
or the right to vote, count and tabulate all votes, determine the result and do
such acts as may be proper to conduct the election or vote with fairness to all
shareholders. The judges of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three judges of election, the decision, act or certificate of a
majority shall be effective in all respects as the decision, act or certificate
of all.
(d) Report. On request of the presiding officer of the meeting
or of any shareholder, the judges shall make a report in writing of any
challenge or question or matter determined by them, and execute a certificate of
any fact found by them. Any report or certificate made by them shall be prima
facie evidence of the facts stated therein.
Section 4.15. Minors as Security Holders. The corporation may
treat a minor who holds shares or obligations of the corporation as having
capacity to receive and to empower others to receive dividends, interest,
principal and other payments or distributions, to vote or
10
<PAGE> 11
express consent or dissent and to make elections and exercise rights relating to
such shares or obligations unless, in the case of payments or distributions on
shares, the corporate officer responsible for maintaining the list of
shareholders or the transfer agent of the corporation or, in the case of
payments or distributions on obligations, the treasurer or paying officer or
agent has received written notice that the holder is a minor.
ARTICLE V
Board of Directors
Section 5.01. Powers; Personal Liability.
(a) General Rule. Unless otherwise provided by statute, all
powers vested by law in the corporation shall be exercised by or under the
authority of, and the business and affairs of the corporation shall be managed
under the direction of, the Board of Directors.
(b) Personal Liability of Directors.
(1) A director shall not be personally liable, as
such, for monetary damages (including, without limitation, any
judgment, amount paid in settlement, penalty, punitive damages
or expense of any nature (including, without limitation,
attorneys' fees and disbursements)) for any action taken, or
any failure to take any action, unless:
(i) the director has breached or failed to
perform the duties of his or her office under
Subchapter 17B of the Business Corporation Law or any
successor provision; and
(ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or
recklessness.
(2) The provisions of paragraph (1) shall not apply
to the responsibility or liability of a director pursuant to
any criminal statute, or the liability of a director for the
payment of taxes pursuant to local, State or Federal law.
(c) Notation of Dissent. A director of the corporation who is
present at a meeting of the Board of Directors, or of a committee of the Board,
at which action on any corporate matter is taken on which the director is
generally competent to act, shall be presumed to have assented to the action
taken unless his or her dissent is entered in the minutes of the meeting or
unless the director files his or her written dissent to the action with the
secretary of the meeting before the adjournment thereof or transmits the dissent
in writing to the secretary of
11
<PAGE> 12
the corporation immediately after the adjournment of the meeting. The right to
dissent shall not apply to a director who voted in favor of the action. Nothing
in this section shall bar a director from asserting that minutes of the meeting
incorrectly omitted his or her dissent if, promptly upon receipt of a copy of
such minutes, the director notifies the secretary, in writing, of the asserted
omission or inaccuracy.
Section 5.02. Qualifications and Selection of Directors.
(a) Qualifications. Each director of the corporation shall be
a natural person of full age who need not be a resident of the Commonwealth of
Pennsylvania or a shareholder of the corporation.
(b) Election of Directors. In elections for directors, voting
need not be by ballot, unless required by vote of the shareholders before the
voting for the election of directors begins. The candidates receiving the
highest number of votes from each class or group of classes, if any, entitled to
elect directors separately up to the number of directors to be elected by the
class or group of classes shall be elected. If at any meeting of shareholders,
directors of more than one class are to be elected, each class of directors
shall be elected in a separate election.
Section 5.03. Number and Term of Office.
(a) Number. The Board of Directors shall consist of not less
than three (3) Directors nor more than nine (9) Directors, such number to be
determined from time to time by resolution of the Board of Directors.
(b) Term of Office. Each director shall hold office until the
expiration of the term for which he or she was selected and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal. A decrease in the number of directors shall not have the effect of
shortening the term of any incumbent director.
(c) Resignation. Any director may resign at any time upon
written notice to the corporation. The resignation shall be effective upon
receipt thereof by the corporation or at such subsequent time as shall be
specified in the notice of resignation.
(d) Classified Board of Directors. The directors shall be
divided into three classes, Class I, Class II and Class III with respect to
their terms of office. All classes shall be as nearly equal in number as
reasonably possible. Subject to such limitations, when the number of Directors
is changed, any newly-created directorship or any decrease in directorships
shall be apportioned among the classes by action of the Board of Directors. The
terms of office of the Directors shall be as follows:
12
<PAGE> 13
(1) Class I shall expire at the annual meeting of
shareholders to be held in 1997;
(2) Class II shall expire at the annual meeting of
shareholders to be held in 1998; and
(3) Class III shall expire at the annual meeting of
shareholders to be held in 1999;
At each annual meeting of shareholders, commencing with the annual meeting to be
held in 1997, the successors of the class of Directors whose term expires at
such meeting shall be elected to hold office for a term expiring at the annual
meeting of shareholders held in the third year of their elections.
Section 5.04. Vacancies.
(a) General Rule. Vacancies in the Board of Directors,
including vacancies resulting from an increase in the number of directors, may
be filled by a majority vote of the remaining members of the Board though less
than a quorum, or by a sole remaining director, and each person so selected
shall be a director to serve until the next selection of the class for which
such director has been chosen, and until a successor has been selected and
qualified or until his or her earlier death, resignation or removal.
(b) Action by Resigned Directors. When one or more directors
resign from the Board effective at a future date, the directors then in office,
including those who have so resigned, shall have power by the applicable vote to
fill the vacancies, the vote thereon to take effect when the resignations become
effective.
Section 5.05. Removal of Directors.
(a) Removal by the Shareholders. The entire Board of
Directors, or any class of the Board, or any individual director may be removed
from office only for cause by vote of a majority of the shareholders entitled to
vote thereon. In case the Board, or a class of the Board or any one or more
directors are so removed, new directors may be elected at the same meeting. The
repeal of a provision of the articles or bylaws prohibiting, or the addition of
a provision to the articles or bylaws permitting, the removal by the
shareholders of the Board, a class of the Board or any individual director
without assigning any cause shall not apply to any incumbent director during the
balance of the term for which the director was selected.
(b) Removal by the Board. The Board of Directors may declare
vacant the office of a director who has been judicially declared of unsound mind
or who has been convicted of an offense punishable by imprisonment for a term of
more than one year or if, within 60 days
13
<PAGE> 14
after notice of his or her selection, the director does not accept the office
either in writing or by attending a meeting of the Board of Directors.
Section 5.06. Place of Meetings. Meetings of the Board of
Directors may be held at such place within or without the Commonwealth of
Pennsylvania as the Board of Directors may from time to time appoint or as may
be designated in the notice of the meeting.
Section 5.07. Organization of Meetings. At every meeting of
the Board of Directors, the chairman of the Board, if there be one, or, in the
case of a vacancy in the office or absence of the chairman of the Board, one of
the following officers present in the order stated: the vice chairman of the
Board, if there be one, the president, the vice presidents in their order of
rank and seniority, or a person chosen by a majority of the directors present,
shall act as chairman of the meeting. The secretary or, in the absence of the
secretary, an assistant secretary, or, in the absence of the secretary and the
assistant secretaries, any person appointed by the chairman of the meeting,
shall act as secretary of the meeting.
Section 5.08. Regular Meetings. Regular meetings of the Board
of Directors shall be held at such time and place as shall be designated from
time to time by resolution of the Board of Directors.
Section 5.09. Special Meetings. Special meetings of the Board
of Directors shall be held whenever called by the chairman or by two or more of
the directors.
Section 5.10. Quorum of and Action by Directors.
(a) General Rule. A majority of the directors in office of the
corporation shall be necessary to constitute a quorum for the transaction of
business and the acts of a majority of the directors present and voting at a
meeting at which a quorum is present shall be the acts of the Board of
Directors.
(b) Action by Written Consent. Any action required or
permitted to be taken at a meeting of the directors may be taken without a
meeting if, prior or subsequent to the action, a consent or consents thereto by
all of the directors in office is filed with the secretary of the corporation.
Section 5.11. Executive and Other Committees.
(a) Establishment and Powers. The Board of Directors may, by
resolution adopted by a majority of the directors in office, establish one or
more committees to consist of one or more directors of the corporation. Any
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all of the powers and authority of the
14
<PAGE> 15
Board of Directors except that a committee shall not have any power or authority
as to the following:
(1) The submission to shareholders of any action
requiring approval of shareholders under the Business
Corporation Law.
(2) The creation or filling of vacancies in the Board
of Directors.
(3) The adoption, amendment or repeal of these
bylaws.
(4) The amendment or repeal of any resolution of the
Board that by its terms is amendable or repealable only by the
Board.
(5) Action on matters committed by a resolution of
the Board of Directors to another committee of the Board.
(b) Alternate Committee Members. The Board may designate one
or more directors as alternate members of any committee who may replace any
absent or disqualified member at any meeting of the committee or for the
purposes of any written action by the committee. In the absence or
disqualification of a member and alternate member or members of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
director to act at the meeting in the place of the absent or disqualified
member.
(c) Term. Each committee of the Board shall serve at the
pleasure of the Board.
(d) Committee Procedures. The term "Board of Directors" or
"Board," when used in any provision of these bylaws relating to the organization
or procedures of or the manner of taking action by the Board of Directors, shall
be construed to include and refer to any executive or other committee of the
Board.
Section 5.12. Compensation. The Board of Directors shall have
the authority to fix the compensation of directors for their services as
directors and a director may be a salaried officer of the corporation.
15
<PAGE> 16
ARTICLE VI
Officers
Section 6.01. Officers Generally.
(a) Number, Qualifications and Designation. The officers of
the corporation shall be a president, one or more vice presidents, a secretary,
a treasurer, and such other officers as may be elected in accordance with the
provisions of Section 6.03. Officers may but need not be directors or
shareholders of the corporation. The president and secretary shall be natural
persons of full age. The treasurer may be a corporation, but if a natural person
shall be of full age. The Board of Directors may elect from among the members of
the Board a chairman of the Board and a vice chairman of the Board who shall be
officers of the corporation. Any number of offices may be held by the same
person.
(b) Bonding. The corporation may secure the fidelity of any or
all of its officers by bond or otherwise.
(c) Standard of Care. In lieu of the standards of conduct
otherwise provided by law, officers of the corporation shall be subject to the
same standards of conduct, including standards of care and loyalty and rights of
justifiable reliance, as shall at the time be applicable to directors of the
corporation. An officer of the corporation shall not be personally liable, as
such, to the corporation or its shareholders for monetary damages (including,
without limitation, any judgment, amount paid in settlement, penalty, punitive
damages or expense of any nature (including, without limitation, attorneys' fees
and disbursements)) for any action taken, or any failure to take any action,
unless the officer has breached or failed to perform the duties of his or her
office under the articles, these bylaws, or the applicable provisions of law and
the breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness. The provisions of this subsection shall not apply to the
responsibility or liability of an officer pursuant to any criminal statute or
for the payment of taxes pursuant to local, state or federal law.
Section 6.02. Election, Term of Office and Resignations.
(a) Election and Term of Office. The officers of the
corporation, except those elected by delegated authority pursuant to Section
6.03, shall be elected annually by the Board of Directors, and each such officer
shall hold office for a term of one year and until a successor has been selected
and qualified or until his or her earlier death, resignation or removal.
(b) Resignations. Any officer may resign at any time upon
written notice to the corporation. The resignation shall be effective upon
receipt thereof by the corporation or at such subsequent time as may be
specified in the notice of resignation.
16
<PAGE> 17
Section 6.03. Subordinate Officers, Committees and Agents. The
Board of Directors may from time to time elect such other officers and appoint
such committees, employees or other agents as the business of the corporation
may require, including one or more assistant secretaries, and one or more
assistant treasurers, each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in these bylaws, or as the
Board of Directors may from time to time determine. The Board of Directors may
delegate to any officer or committee the power to elect subordinate officers and
to retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
Section 6.04. Removal of Officers and Agents. Any officer or
agent of the corporation may be removed by the Board of Directors with or
without cause. The removal shall be without prejudice to the contract rights, if
any, of any person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
Section 6.05. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification, or any other cause, may be filled
by the Board of Directors or by the officer or committee to which the power to
fill such office has been delegated pursuant to Section 6.03, as the case may
be, and if the office is one for which these bylaws prescribe a term, shall be
filled for the unexpired portion of the term.
Section 6.06. Authority. All officers of the corporation, as
between themselves and the corporation, shall have such authority and perform
such duties in the management of the corporation as may be provided by or
pursuant to resolutions or orders of the Board of Directors or, in the absence
of controlling provisions in the resolutions or orders of the Board of
Directors, as may be determined by or pursuant to these bylaws.
Section 6.07. The Chairman and Vice Chairman of the Board. The
chairman of the Board or in the absence of the chairman, the vice chairman of
the Board, shall preside at all meetings of the shareholders and of the Board of
Directors, and shall perform such other duties as may from time to time be
requested by the Board of Directors.
Section 6.08. The President. The president shall be the chief
executive officer of the corporation. The president shall have general
supervision over the business and operations of the corporation, subject
however, to the control of the Board of Directors. The president shall sign,
execute, and acknowledge, in the name of the corporation, deeds, mortgages,
bonds, contracts or other instruments, authorized by the Board of Directors,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors, or by these bylaws, to some other officer
or agent of the corporation; and, in general, shall perform all duties incident
to the office of president and such other duties as from time to time may be
assigned by the Board of Directors. The president shall from time to time make
such reports of the affairs of
17
<PAGE> 18
the corporation as the Board may require and shall annually present to the
annual meeting of the shareholders a report of the business of the corporation
for the preceding fiscal year.
Section 6.09. The Vice Presidents. The vice presidents shall
perform the duties of the president in the absence of the president and such
other duties as may from time to time be assigned to them by the Board of
Directors or the president. If there is more than one vice president, their
seniority in performing such duties and exercising such powers shall be
determined by the order in which they were first elected or appointed, or as
determined by the Board.
Section 6.10. The Secretary. The secretary or an assistant
secretary shall attend all meetings of the shareholders and of the Board of
Directors and all committees thereof and shall record all the votes of the
shareholders and of the directors and the minutes of the meetings of the
shareholders and of the Board of Directors and of committees of the Board in a
book or books to be kept for that purpose; shall see that notices are given and
records and reports properly kept and filed by the corporation as required by
law; shall be the custodian of the seal of the corporation and see that it is
affixed to all documents to be executed on behalf of the corporation under its
seal; and, in general, shall perform all duties incident to the office of
secretary, and such other duties as may from time to time be assigned by the
Board of Directors or the president.
Section 6.11. The Treasurer. The treasurer shall be the chief
financial officer and shall have or provide for the custody of the funds or
other property of the corporation; shall collect and receive or provide for the
collection and receipt of moneys earned by or in any manner due to or received
by the corporation; shall deposit all funds in his or her custody as treasurer
in such banks or other places of deposit as the Board of Directors may from time
to time designate; shall, whenever so required by the Board of Directors, render
an account showing all transactions as treasurer, and the financial condition of
the corporation; and, in general, shall discharge such other duties as may from
time to time be assigned by the Board of Directors or the president.
Section 6.12. Salaries. The salaries of the officers elected
by the Board of Directors shall be fixed from time to time by the Board of
Directors or by such officer as may be designated by resolution of the Board.
The salaries or other compensation of any other officers, employees and other
agents shall be fixed from time to time by the Board, or by the officer or
committee to which the power to elect such officers or to retain or appoint such
employees or other agents has been delegated pursuant to Section 6.03. No
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that the officer is also a director of the corporation.
18
<PAGE> 19
ARTICLE VII
Certificates of Stock, Transfer, Etc.
Section 7.01. Share Certificates.
(a) Form of Certificates. Certificates for shares of the
corporation shall be in such form as approved by the Board of Directors, and
shall state that the corporation is incorporated under the laws of the
Commonwealth of Pennsylvania, the name of the person to whom issued, and the
number and class of shares and the designation of the series (if any) that the
certificate represents. If the corporation is authorized to issue shares of more
than one class or series, certificates for shares of the corporation shall set
forth upon the face or back of the certificate (or shall state on the face or
back of the certificate that the corporation will furnish to any shareholder
upon request and without charge), a full or summary statement of the
designations, voting rights, preferences, limitations and special rights of the
shares of each class or series authorized to be issued so far as they have been
fixed and determined and the authority of the Board of Directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the classes and series of shares of the corporation.
(b) Share Register. The share register or transfer books and
blank share certificates shall be kept by the secretary or by any transfer agent
or registrar designated by the Board of Directors for that purpose.
Section 7.02. Issuance. The share certificates of the
corporation shall be numbered and registered in the share register or transfer
books of the corporation as they are issued. They shall be executed in such
manner as the Board of Directors shall determine. In case any officer, transfer
agent or registrar who has signed or authenticated, or whose facsimile signature
or authentication has been placed upon, any share certificate shall have ceased
to be such officer, transfer agent or registrar because of death, resignation or
otherwise, before the certificate is issued, the certificate may be issued with
the same effect as if the officer, transfer agent or registrar had not ceased to
be such at the date of its issue. The provisions of this Section 7.02 shall be
subject to any inconsistent or contrary agreement in effect at the time between
the corporation and any transfer agent or registrar.
Section 7.03. Transfer. Transfers of shares shall be made on
the share register or transfer books of the corporation upon surrender of the
certificate therefor, endorsed by the person named in the certificate or by an
attorney lawfully constituted in writing. No transfer shall be made inconsistent
with the provisions of the Uniform Commercial Code, 13 Pa.C.S.
ss.ss. 8101 et seq., and its amendments and supplements.
Section 7.04. Record Holder of Shares. The corporation shall
be entitled to treat the person in whose name any share or shares of the
corporation stand on the books of the
19
<PAGE> 20
corporation as the absolute owner thereof, and shall not be bound to recognize
any equitable or other claim to, or interest in, such share or shares on the
part of any other person.
Section 7.05. Lost, Destroyed or Mutilated Certificates. The
holder of any shares of the corporation shall immediately notify the corporation
of any loss, destruction or mutilation of the certificate therefor, and the
Board of Directors may, in its discretion, cause a new certificate or
certificates to be issued to such holder, in case of mutilation of the
certificate, upon the surrender of the mutilated certificate or, in case of loss
or destruction of the certificate, upon satisfactory proof of such loss or
destruction and, if the Board of Directors shall so determine, the deposit of a
bond in such form and in such sum, and with such surety or sureties, as it may
direct.
Section 7.06. Agreements Restricting Transfer of Shares. The
Board of Directors may authorize the corporation to become party to agreements
with shareholders and others relating to transfer, repurchase and issuance of
shares of stock of the corporation; provided, however, that such agreement must
be filed with the corporation and all share certificates affected thereby shall
have clearly imprinted thereon a legend containing such agreement or referring
thereto.
ARTICLE VIII
Indemnification of Directors, Officers and
Other Authorized Representatives
Section 8.01. Scope of Indemnification.
(a) General Rule. The corporation shall indemnify an
indemnified representative against any liability incurred in connection with any
proceeding in which the indemnified representative may be involved as a party or
otherwise by reason of the fact that such person is or was serving in an
indemnified capacity, including, without limitation, liabilities resulting from
any actual or alleged breach or neglect of duty, error, misstatement or
misleading statement, negligence, gross negligence or act giving rise to strict
or products liability, except:
(1) where such indemnification is expressly
prohibited by applicable law;
(2) where the conduct of the indemnified
representative has been finally determined pursuant to Section
8.06 or otherwise:
(i) to constitute willful misconduct or
recklessness within the meaning of 15 Pa.C.S. ss.
1746(b) or any superseding provision of law
sufficient in the circumstances to bar
indemnification against liabilities arising from the
conduct; or
20
<PAGE> 21
(ii) to be based upon or attributable to the
receipt by the indemnified representative from the
corporation of a personal benefit to which the
indemnified representative is not legally entitled;
or
(3) to the extent such indemnification has been
finally determined in a final adjudication pursuant to Section
8.06 to be otherwise unlawful.
(b) Partial Payment. If an indemnified representative is
entitled to indemnification in respect of a portion, but not all, of any
liabilities to which such person may be subject, the corporation shall indemnify
such indemnified representative to the maximum extent for such portion of the
liabilities.
(c) Presumption. 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 create a presumption that the indemnified
representative is not entitled to indemnification.
(d) Definitions. For purposes of this Article:
(1) "indemnified capacity" means any and all past,
present and future service by an indemnified representative in
one or more capacities as a director, officer, employee or
agent of the corporation, or, at the request of the
corporation, as a director, officer, employee, agent,
fiduciary or trustee of another corporation, partnership,
joint venture, trust, employee benefit plan or other entity or
enterprise;
(2) "indemnified representative" means any and all
directors and officers of the corporation and any other person
designated as an indemnified representative by the Board of
Directors of the corporation (which may, but need not, include
any person serving at the request of the corporation, as a
director, officer, employee, agent, fiduciary or trustee of
another corporation, partnership, joint venture, trust,
employee benefit plan or other entity or enterprise);
(3) "liability" means any damage, judgment, amount
paid in settlement, fine, penalty, punitive damages, excise
tax assessed with respect to an employee benefit plan, or cost
or expense of any nature (including, without limitation,
attorneys' fees and disbursements); and
(4) "proceeding" means any threatened, pending or
completed action, suit, appeal or other proceeding of any
nature, whether civil, criminal, administrative or
investigative, whether formal or informal, and whether brought
by or in the right of the corporation, a class of its security
holders or otherwise.
21
<PAGE> 22
Section 8.02. Proceedings Initiated by Indemnified
Representatives. Notwithstanding any other provision of this Article, the
corporation shall not indemnify under this Article an indemnified representative
for any liability incurred in a proceeding initiated (which shall not be deemed
to include counter claims or affirmative defenses) or participated in as an
intervenor or amicus curiae by the person seeking indemnification unless such
initiation of or participation in the proceeding is authorized, either before or
after its commencement, by the affirmative vote of a majority of the directors
in office. This section does not apply to reimbursement of expenses incurred in
successfully prosecuting or defending an arbitration under Section 8.06 or
otherwise successfully prosecuting or defending the rights of an indemnified
representative granted by or pursuant to this Article.
Section 8.03. Advancing Expenses. The corporation shall pay
the expenses (including attorneys' fees and disbursements) incurred in good
faith by an indemnified representative in advance of the final disposition of a
proceeding described in Section 8.01 or the initiation of or participation in
which is authorized pursuant to Section 8.02 upon receipt of an undertaking by
or on behalf of the indemnified representative to repay the amount if it is
ultimately determined pursuant to Section 8.06 that such person is not entitled
to be indemnified by the corporation pursuant to this Article. The financial
ability of an indemnified representative to repay an advance shall not be a
prerequisite to the making of such advance.
Section 8.04. Securing of Indemnification Obligations. To
further effect, satisfy or secure the indemnification obligations provided
herein or otherwise, the corporation may maintain insurance, obtain a letter of
credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or
other fund or account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the corporation, or use any
other mechanism or arrangement whatsoever in such amounts, at such costs, and
upon such other terms and conditions as the Board of Directors shall deem
appropriate. Absent fraud, the determination of the Board of Directors with
respect to such amounts, costs, terms and conditions shall be conclusive against
all security holders, officers and directors and shall not be subject to
voidability.
Section 8.05. Payment of Indemnification. An indemnified
representative shall be entitled to indemnification within 30 days after a
written request for indemnification has been delivered to the secretary of the
corporation.
Section 8.06. Arbitration.
(a) General Rule. Any dispute related to the right to
indemnification, contribution or advancement of expenses as provided under this
Article, except with respect to indemnification for liabilities arising under
the Securities Act of 1933 that the corporation has undertaken to submit to a
court for adjudication, shall be decided only by arbitration in the metropolitan
area in which the principal executive offices of the corporation are located at
the
22
<PAGE> 23
time, in accordance with the commercial arbitration rules then in effect of the
American Arbitration Association, before a panel of three arbitrators, one of
whom shall be selected by the corporation, the second of whom shall be selected
by the indemnified representative and the third of whom shall be selected by the
other two arbitrators. In the absence of the American Arbitration Association,
or if for any reason arbitration under the arbitration rules of the American
Arbitration Association cannot be initiated, and if one of the parties fails or
refuses to select an arbitrator or the arbitrators selected by the corporation
and the indemnified representative cannot agree on the selection of the third
arbitrator within 30 days after such time as the corporation and the indemnified
representative have each been notified of the selection of the other's
arbitrator, the necessary arbitrator or arbitrators shall be selected by the
presiding judge of the court of general jurisdiction in such metropolitan area.
(b) Qualifications of Arbitrators. Each arbitrator selected as
provided herein is required to be or have been a director or executive officer
of a corporation whose shares of common stock were listed during at least one
year of such service on the New York Stock Exchange or the American Stock
Exchange or quoted on the National Association of Securities Dealers Automated
Quotations System.
(c) Burden of Proof. The party or parties challenging the
right of an indemnified representative to the benefits of this Article shall
have the burden of proof.
(d) Expenses. The corporation shall reimburse an indemnified
representative for the expenses (including attorneys' fees and disbursements)
incurred in successfully prosecuting or defending such arbitration.
(e) Effect. Any award entered by the arbitrators shall be
final, binding and nonappealable and judgment may be entered thereon by any
party in accordance with applicable law in any court of competent jurisdiction,
except that the corporation shall be entitled to interpose as a defense in any
such judicial enforcement proceeding any prior final judicial determination
adverse to the indemnified representative under Section 8.01(a)(2) in a
proceeding not directly involving indemnification under this Article. This
arbitration provision shall be specifically enforceable.
Section 8.07. Contribution. If the indemnification provided
for in this Article or otherwise is unavailable for any reason in respect of any
liability or portion thereof, the corporation shall contribute to the
liabilities to which the indemnified representative may be subject in such
proportion as is appropriate to reflect the intent of this Article or otherwise.
Section 8.08. Mandatory Indemnification of Directors,
Officers, etc. To the extent that an authorized representative of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1741 or 1742 of the Business
Corporation Law or in defense of any claim, issue or matter therein, such person
shall
23
<PAGE> 24
be indemnified against expenses (including attorneys' fees and disbursements)
actually and reasonably incurred by such person in connection therewith.
Section 8.09. Contract Rights; Amendment or Repeal. All rights
under this Article shall be deemed a contract between the corporation and the
indemnified representative pursuant to which the corporation and each
indemnified representative intend to be legally bound. Any repeal, amendment or
modification hereof shall be prospective only and shall not affect any rights or
obligations then existing.
Section 8.10. Scope of Article. The rights granted by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an indemnified capacity and as to action in any
other capacity. The indemnification, contribution and advancement of expenses
provided by or granted pursuant to this Article shall continue as to a person
who has ceased to be an indemnified representative in respect of matters arising
prior to such time, and shall inure to the benefit of the heirs, executors,
administrators and personal representatives of such a person.
Section 8.11. Reliance on Provisions. Each person who shall
act as an indemnified representative of the corporation shall be deemed to be
doing so in reliance upon the rights of indemnification, contribution and
advancement of expenses provided by this Article.
Section 8.12. Interpretation. The provisions of this Article
are intended to constitute bylaws authorized by 15 Pa.C.S.ss. 1746.
Section 8.13. Changes in Pennsylvania Law. References in this
Article VIII to Pennsylvania law or to any provision thereof shall be to such
law (including without limitation to the Directors' Liability Act) as it existed
on the date this Article VIII was adopted or as such law thereafter may be
changed; provided that (a) in the case of any change which expands the liability
of Directors or limits the indemnification rights or the rights to advancement
of expenses which the corporation may provide, the rights to limited liability,
to indemnification and to the advancement of expenses provided in this Article
shall continue as theretofore to the extent permitted by law; and (b) if such
change permits the corporation without the requirement of any further action by
shareholders or Directors to limit further the liability of Directors (or limit
the liability of Officers) or to provide broader indemnification rights or
rights to the advancement of expenses than the corporation was permitted to
provide prior to such change, then liability thereupon shall be so limited and
the rights to indemnification and the advancement of expenses shall be so
broadened to the extent permitted by law.
ARTICLE IX
Dividends and Other Distributions to Shareholders
24
<PAGE> 25
Section 9.01. Dividends. Subject to applicable law of the
State of Incorporation, and in accordance with the provisions thereof at the
pertinent applicable time, the Board of Directors of the corporation may from
time to time declare, and the corporation may pay, dividends on its outstanding
shares in cash or property other than its own shares, except when the
corporation is insolvent, or when the payment thereof would render the
corporation insolvent, or when the declaration or payment thereof would be
contrary to any restriction contained in the articles, but:
(1) Dividends may be declared and paid in cash or
property only out of unreserved and unrestricted earned
surplus of the corporation, except as otherwise provided by
statute; and
(2) No dividends shall be paid which would reduce the
remaining net assets of the corporation below the aggregate
preferential amount payable in the event of voluntary
liquidation to the holders of shares having preferential
rights to the assets of the corporation in the event of
liquidation. The Board of Directors may also, from time to
time, distribute to the holders of the corporation's
outstanding shares having a cumulative preferential right to
receive dividends in discharge of their cumulative dividend
rights, dividends payable in cash out of the unrestricted
capital surplus of the corporation, if at the time the
corporation has no earned surplus and is not insolvent and
would not thereby be rendered insolvent. Each such
distribution, when made, shall be identified as a payment of
cumulative dividends out of capital surplus.
Section 9.02 Distributions of Shares of the Corporation. The
Board of Directors of the corporation may, from time to time, distribute pro
rata to holders of any class or classes of its issued shares, treasury shares
and authorized but unissued shares, but
(1) If distribution is made, in the corporation's
authorized but unissued shares having a par value, there shall
be transferred to stated capital at the time of such
distribution an amount of surplus at least equal to the
aggregate par value of the shares so issued;
(2) If a distribution is made in the corporation's
authorized but unissued shares without par value, the Board of
Directors may fix a stated value for the shares so issued, and
there shall be transferred to stated capital, at the time of
such distribution, an amount of surplus equal to the aggregate
stated value, if any, so fixed;
(3) The amount per share so transferred to stated
capital, or the fact that there was no such transfer, shall be
disclosed to the shareholders receiving such distribution
concurrently with the distribution thereof;
25
<PAGE> 26
(4) No distribution of shares of any class shall be
made to holders of shares of any other class unless the
articles so provide or such distribution is authorized by the
affirmative vote or written consent of the holders of a
majority of the outstanding shares of the class in which the
distribution is to be made.
In lieu of issuing fractional shares in any such distribution,
the corporation may pay in cash the fair value thereof, as determined by the
Board of Directors, to shareholders entitled thereto.
Section 9.03. Reserves. There may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
Directors, from time to time, in their absolute discretion determine as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for the purchase of
additional property, or for such other purpose as the Board of Directors shall
think conducive to the interests of the corporation.
The Board of Directors may abolish or modify any such reserve.
Section 9.04 Distributions in Partial Liquidation. The Board
of Directors of the corporation may, from time to time, distribute to the
shareholders in partial liquidation, out of unrestricted capital surplus of the
corporation, a portion of its assets in cash or property, subject to the
following conditions:
(1) No such distribution shall be made at a time when
the corporation is insolvent or when such distribution would
render the corporation insolvent;
(2) No such distribution shall be made unless such
distribution shall have been authorized by the prior
affirmative vote, obtained within one (1) year of such
distribution, of the holders of at least a majority of the
outstanding shares of each class, whether or not entitled to
vote thereon by the provisions of the articles;
(3) No such distribution shall be made to the holders
of any class of shares unless all cumulative dividends accrued
on all classes of shares entitled to preferential dividends,
prior to dividends on the shares to the holders of which such
distribution is to be made, shall have been fully paid;
(4) No such distribution shall be made to the holders
of any class of shares which would reduce the remaining net
assets of the corporation below the aggregate preferential
amount payable in the event of voluntary liquidation to the
holders of shares having preferential rights to the assets of
the corporation in the event of liquidation;
26
<PAGE> 27
(5) Each such distribution, when made, shall be
identified as a distribution in partial liquidation and the
amount per share disclosed to the shareholders receiving the
same concurrently with the distribution thereof.
ARTICLE X
Miscellaneous
Section 10.01. Checks. All checks, notes, bills of exchange or
other similar orders in writing shall be signed by such one or more officers or
employees of the corporation as the Board of Directors may from time to time
designate.
Section 10.02. Contracts.
(a) General Rule. Except as otherwise provided in the Business
Corporation Law in the case of transactions that require action by the
shareholders, the Board of Directors may authorize any officer or agent to enter
into any contract or to execute or deliver any instrument on behalf of the
corporation, and such authority may be general or confined to specific
instances.
(b) Statutory Form of Execution of Instruments. Any note,
mortgage, evidence of indebtedness, contract or other document, or any
assignment or endorsement thereof, executed or entered into between the
corporation and any other person, when signed by one or more officers or agents
having actual or apparent authority to sign it, or by the president or vice
president and secretary or assistant secretary or treasurer or assistant
treasurer of the corporation, shall be held to have been properly executed for
and in behalf of the corporation, without prejudice to the rights of the
corporation against any person who shall have executed the instrument in excess
of his or her actual authority.
Section 10.03. Interested Directors or Officers; Quorum.
(a) General Rule. A contract or transaction between the
corporation and one or more of its directors or officers or between the
corporation and another corporation, partnership, joint venture, trust or other
enterprise in which one or more of its directors or officers are directors or
officers or have a financial or other interest, shall not be void or voidable
solely for that reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors that authorizes the
contract or transaction, or solely because his, her or their votes are counted
for that purpose, if:
(1) the material facts as to the relationship or
interest and as to the contract or transaction are disclosed
or are known to the Board of Directors and
27
<PAGE> 28
the Board authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors
even though the disinterested directors are less than a
quorum;
(2) the material facts as to his or her relationship
or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote
thereon and the contract or transaction is specifically
approved in good faith by vote of those shareholders; or
(3) the contract or transaction is fair as to the
corporation as of the time it is authorized, approved or
ratified by the Board of Directors or the shareholders.
(b) Quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board which authorizes
a contract or transaction specified in subsection (a).
Section 10.04. Deposits. All funds of the corporation shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositaries as the Board of Directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by such
one or more officers or employees of the corporation as the Board of Directors
shall from time to time designate.
Section 10.05. Corporate Records.
(a) Required Records. The corporation shall keep complete and
accurate books and records of account, minutes of the proceedings of the
incorporators, shareholders and directors and a share register giving the names
and addresses of all shareholders and the number and class of shares held by
each. The share register shall be kept at either the registered office of the
corporation in the Commonwealth of Pennsylvania or at its principal place of
business wherever situated or at the office of its registrar or transfer agent.
Any books, minutes or other records may be in written form or any other form
capable of being converted into written form within a reasonable time.
(b) Right of Inspection. Every shareholder shall, upon written
verified demand stating the purpose thereof, have a right to examine, in person
or by agent or attorney, during the usual hours for business for any proper
purpose, the share register, books and records of account, and records of the
proceedings of the incorporators, shareholders and directors and to make copies
or extracts therefrom. A proper purpose shall mean a purpose reasonably related
to the interest of the person as a shareholder. In every instance where an
attorney or other agent is the person who seeks the right of inspection, the
demand shall be accompanied by a verified power of attorney or other writing
that authorizes the attorney or other agent to so act on behalf
28
<PAGE> 29
of the shareholder. The demand shall be directed to the corporation at its
registered office in the Commonwealth of Pennsylvania or at its principal place
of business wherever situated.
Section 10.06. Amendment of Bylaws. These bylaws may be
amended or repealed, or new bylaws may be adopted, either (i) by vote of the
shareholders at any duly organized annual or special meeting of shareholders, or
(ii) with respect to those matters that are not by statute committed expressly
to the shareholders and regardless of whether the shareholders have previously
adopted or approved the bylaw being amended or repealed, by vote of a majority
of the Board of Directors of the corporation in office at any regular or special
meeting of directors. Any change in these bylaws shall take effect when adopted
unless otherwise provided in the resolution effecting the change. See Section
3.03(b) (relating to notice of action by shareholders on bylaws).
Section 10.07. Exemption From Certain Statutory Provisions.
Subchapters E, F, G, H, I and J of Chapter 25 of the Business Corporation Law
shall not be applicable to the corporation.
ARTICLE XI
Amendments
Section 11.01. Amendment by Shareholders. These bylaws may be
altered, amended or repealed by a majority vote of all of the shares of stock of
the corporation issued and outstanding and entitled to vote at any annual or
special meetings of the shareholders duly convened after appropriate notice to
the shareholders of such proposed alteration, amendment or repeal.
Section 11.02. Amendment by the Board of Directors. These
bylaws may be altered, amended or repealed by the affirmative vote of a majority
of the Board of Directors at any regular or special meeting of the Board duly
convened after appropriate notice to the Directors of such proposed alteration,
amendment or repeal.
Section 11.03. Recording Amendments and Alterations. The text
of all amendments and alterations to these bylaws shall be attached to the
bylaws with a notation of the date of each such amendment or alteration and a
notation of whether such amendment or alteration was adopted by the shareholders
or the Board of Directors.
29
<PAGE> 30
ARTICLE XII
Adoption of Bylaws - Record of Amendment
Section 12.1. Adoption. These Amended and Restated Bylaws have
been adopted and filed with the undersigned on the 28th day of June, 1996, and
shall be effective as of this date.
30
<PAGE> 31
Section 12.2. Amendments to Bylaws.
SECTION AMENDED DATE AMENDED ADOPTED BY
--------------- ------------ ----------
1.01 08/20/96 Board Resolution
2.03 08/20/96 Board Resolution
5.03(a) 10/28/96 Board Resolution
4.02 02/18/97 Board Resolution
5.03(a) 03/13/97 Unanimous Consent
5.03(a) 06/10/97 Unanimous Consent
5.03(a) 08/20/97 Unanimous Consent
5.03(a) 10/09/97 Unanimous Consent
5.03(a) 11/24/97 Unanimous Consent
5.03(a) 08/10/98 Board Resolution
5.03(a) 02/17/99 Board Resolution
5.03(a) 11/16/99 Board Resolution
/s/ J. Henry Muetterties
------------------------------------
J. Henry Muetterties
Secretary
December 1, 1999 (Updated)
31
<PAGE> 1
Exhibit 10(iii)
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered by and between
DATABASE TECHNOLOGIES, INC., a Florida corporation (the "Company"), and J. HENRY
MUETTERTIES ("Employee"). The Company is a wholly owned subsidiary of DBT
Online, Inc., a Pennsylvania corporation ("DBT"). The parties to this Agreement
agree as follows:
1. EMPLOYMENT. This Agreement will be effective as of January
1, 2000 ("Effective Date"). The Company agrees to employ Employee as Vice
President, General Counsel and Secretary of the Company, and Employee accepts
and agrees to such employment, as of the Effective Date, in the capacity and for
the term of employment specified herein (the "Term"). Employee will at all times
be subject to the general supervision, control and guidance of the President and
Chief Executive Officer and board of directors of DBT (the "Board" as used
herein shall mean the DBT Board, for so long as DBT is a parent, and otherwise
the Company's board). During the Term, Employee will render such services,
perform such duties and exercise such supervision and powers, to, for and with
respect to the Company and its present and future parents, subsidiaries and
divisions, as may be established from time to time by the President and Chief
Executive Officer and the Board. Employee will report to the President and Chief
Executive Officer and the Board and its Chairman. Employee will devote his
fulltime business efforts to the performance of his duties hereunder.
2. TERM. The Term will consist of a one year term beginning on
the Effective Date and shall automatically renew for another like term each day.
However, the Term may terminate earlier under Sections 6 or 10 of this
Agreement.
3. SALARY; REIMBURSABLE EXPENSES.
(a) The basic annual rate of compensation of
Employee's employment services is $160,000 (the "Salary"). The Company will pay
the Salary to Employee in equal installments according to the Company's payroll
payment schedule in effect from time to time. The salary shall be subject to
review on an annual basis by the Compensation Committee of the Board which in
its sole discretion may increase the Salary.
(b) Employee will be reimbursed for all reasonable
"out-of-pocket" professional fees, business expenses for business travel and
business entertainment incurred in connection with the performance of Employee's
duties under this Agreement (i) so long as such expenses constitute deductions
from taxable income for the Company and are excludable from taxable income to
the Employee under the governing laws and regulations of the Internal Revenue
Code; and (ii) to the extent such expenses are consistent with the DBT Travel
Expense Policy as such Policy may be amended from time to time. The
reimbursement of Employee's business expenses will
<PAGE> 2
be upon monthly presentation to and approval by the DBT Chief Financial Officer
of valid receipts and other appropriate documentation for such expenses.
(c) Employee will be entitled to receive both (i) an
allowance of $500 per month to pay for the costs associated with leasing an
automobile of Employee's choice and (ii) reimbursement for the costs of
maintenance, operation and insurance, and gasoline used for business purposes of
the Company for such automobile.
4. BONUS.
Employee may receive an incentive bonus of up to 40%
of Employee's Salary for each fiscal year beginning with the fiscal year ending
December 31, 2000, based upon the criteria, and payable at such times, as may be
determined by the Board, upon the advice and with the consent of the Board or
the Compensation Committee of the Board. This amount may, in the sole and
absolute discretion of the Board or the Compensation Committee of the Board,
exceed 40% based on overachievement of targets set by the Compensation
Committee. The amount, manner of payment, and form of consideration, if any,
will be determined by the Board, in its sole and absolute discretion, and such
determination will be binding and final. Employee will be eligible to receive
the incentive bonus if Employee is employed with the Company on the date the
incentive bonus is paid. The bonus will generally be paid on or before March 1
of each year beginning March 1, 2001.
5. VACATION. During the term hereof, Employee will be entitled
to four (4) weeks of paid vacation a year.
6. CHANGE OF CONTROL.
6.1 CHANGE OF CONTROL DEFINITION. As used herein, a
"Change of Control" shall be deemed to have occurred if:
(a) The merger or consolidation of the Company with
another corporation where (i) the stockholders of the
Company, immediately prior to the merger or
consolidation, would not beneficially own,
immediately after the merger or consolidation, shares
entitling such stockholders to 50% or more of all
votes (without consideration of the rights of any
class of stock to elect directors by a separate class
vote) to which all stockholders of the surviving
corporation would be entitled in the election of
directors, and (ii) the members of the Board,
immediately prior to the merger or consolidation, do
not, immediately after the merger or consolidation,
constitute a majority of the board of directors of
the surviving corporation; or
2
<PAGE> 3
(b) The sale or other disposition of all or
substantially all the assets of the Company, or a
liquidation, dissolution or statutory exchange of the
Company.
6.2 EFFECT OF A CHANGE OF CONTROL. If a Change of
Control occurs during the Employment Term, Employee's Employment Term shall
terminate 30 days after the Change of Control and it will be treated as a
Termination without Cause under Section 10 (c)(i) and (ii) of this Agreement and
he will be entitled only to those payments and benefits under that Section.
7. COVENANT NOT TO COMPETE. For so long as Employee is
employed by the Company and for a period of eighteen (18) months following the
date Employee ceases to be employed by the Company, to the fullest extent
authorized by law, Employee will not engage in, directly or indirectly, or have
any interest in any person, firm, corporation or business (whether as an
employee, officer, director, agent, security holder, creditor, consultant
shareholder or otherwise) in the United States of America that engages in any
business competitive with the business of the Company; PROVIDED, HOWEVER, that
Employee may own, solely as an investment, not more than one percent (1%) of any
class of securities of any publicly held corporation in competition with the
Company, whose securities are traded on any national securities exchange in the
United States, and may retain ownership interest in such entities. The covenants
in this Section 8 are severable and separate, and the unenforceability of any
specific covenant will not affect the provisions of any other covenant.
8. AGREEMENT NOT TO DIVULGE CONFIDENTIAL INFORMATION. Employee
recognizes that by reason of Employee's interest in the Company and its
affiliates and employment or engagement (as an agent, independent contractor,
consultant, director or otherwise) by the Company or its affiliates, Employee
has acquired and will acquire Confidential Information concerning the operations
and business of the Company and its affiliates, the use or disclosure of which
would cause substantial loss and damages that could not be readily calculated
and for which no remedy at law would be adequate. Employee acknowledges and
agrees that any such Confidential Information acquired was and will be received
in confidence from the Company and its respective affiliates, and that all of
such information is the property of the Company and its affiliates. Accordingly,
Employee covenants and agrees with the Company and its affiliates that except in
performance of the Employee's obligations to the Company, or its affiliates or
with the prior written consent of the Company, Employee will not, at any time,
directly or indirectly, (i) disclose any Confidential Information learned by
reason of Employee's past affiliation with the Company or its affiliates or
employment or engagement (as an agent, independent contractor, consultant,
director or otherwise) by the Company or its affiliates; or (ii) use such
information in a manner detrimental to the interest of the Company or its
affiliates unless (x) such information becomes known to the public generally
through no fault of Employee, (y) disclosure is required by law or the order of
any governmental authority or (z) Employee must disclose such information
pursuant to court order in connection with the defense of a lawsuit against the
Employee.
3
<PAGE> 4
Notwithstanding the foregoing, prior to disclosing any information pursuant to
clauses (x), (y) or (z) above, Employee will give prior written notice thereof
to the Company and provide the Company with the opportunity to contest such
disclosure and will cooperate with its efforts to prevent such disclosure. The
term "Confidential Information" includes, without limitation, information not
previously disclosed to the public or to the trade by the Company or its
respective affiliates with respect to their businesses or any products, product
elements, data sources, facilities, trade dress, methods, software, source code,
systems, procedures, manuals, confidential reports, product price list, supplier
arrangement or lists, marketing information, financial information, business
plans, prospects or opportunities or other trade secrets or intellectual
property of any kind or nature.
9. AGREEMENT NOT TO SOLICIT OR INTERFERE WITH EMPLOYEES,
SUPPLIERS, AND CUSTOMERS. During the term of Employees' employment with the
Company and for a period of eighteen (18) months thereafter, to the fullest
extent authorized by law, Employee will not, directly or indirectly, or by
acting in concert with others, hire, solicit to hire, or induce or influence any
person who is engaged as an employee, agent, independent contractor, supplier,
consultant, director or otherwise by the Company or any of its affiliates to
leave the employ of the Company or its affiliates (including, without limitation
Company and its subsidiaries) or modify, in any manner adverse to the Company or
any of its affiliates, or to terminate his engagement with the Company or any of
its affiliates or to induce or influence any customer of the Company or any of
its affiliates to terminate or modify his, her or its relationship as a customer
of the Company or any of its affiliates; PROVIDED, HOWEVER, that if requested by
any employee or former employee of the Company or any of its subsidiaries,
Employee may, following written notice to the Vice President of Human Resources
of DBT, provide a reference with respect to such employee.
10. TERMINATION OF TERM.
(a) DISABILITY. If Employee becomes totally disabled
(as defined below), the Company may terminate the Term and the Company will have
no further liability or obligation to Employee under this Agreement except the
Employee will receive (i) any unpaid Salary that has accrued through the date of
termination and (ii) a pro rata portion of any bonus otherwise payable in
accordance with the provisions of Section 4 for the calendar year in which the
Employee becomes totally disabled. Employee will be deemed to be "totally
disabled" if Employee is considered totally disabled under the Company's group
disability plan in effect at that time, if any, or in the absence of any such
plan, under applicable Social Security regulations.
(b) DEATH. If Employee dies during the Term, this
Agreement will automatically terminate, and thereafter the Company will not have
any further liability or obligation under this Agreement to Employee, his
executors, administrators, heirs, assigns or any other person claiming under or
through him except that Employee's estate shall receive any unpaid Salary that
has accrued through the date of termination.
4
<PAGE> 5
(c) TERMINATION BY THE COMPANY AND EFFECT OF SUCH
TERMINATION. The Company may terminate this Agreement at any time upon delivery
of written notice to Employee, with the following effects:
(i) If Employee's employment hereunder has been
terminated without Cause, as hereafter defined, then Employee
shall receive 100% of one year's Salary and medical and dental
benefits as are accorded to executive officers of the Company.
Additionally, Company will fulfill its obligation under the
then current car lease as set forth in Section 3, (c) and pay
moving expenses, if any, for relocating household goods,
automobiles and airfare for Employee and Family from Boca
Raton, Florida.
(ii) If Employee's employment hereunder is terminated
without Cause prior to January 1, 2002, Employer shall
guarantee Employee receives at least the $360,000 purchase
price upon the sale of his home in Boca Raton, Florida, such
sale to be approved by the Employer.
(iii) In the event that Employee's employment
hereunder is terminated for Cause, as hereafter defined, this
Agreement and rights of Employee shall be terminated
immediately. For these purposes, "Cause" shall mean
dishonesty, willful insubordination, habitual absence from
work, habitual insobriety or drug addiction, failure to
perform Employee's duties, or material breach of this
Agreement.
11. FRINGE BENEFITS. During the term hereof, the Company will
provide to Employee such fringe benefits, including medical and dental benefits,
as are accorded to other executive officers of the Company.
12. BRIDGE LOAN PAYMENT. Employee agrees to pay by May 31,
2000, the outstanding bridge loan in the amount of $342,928.43 in connection
with the purchase of his home in South Florida.
13. GOVERNING LAW. The terms of this Agreement will be
governed by the laws of the State of Florida, without reference to its
principles of conflicts of law.
14. WAIVER. No waiver of any of the provisions of this
Agreement will be deemed, or will constitute a waiver of any other provision,
whether or not similar, nor will any waiver constitute a continuing waiver. No
waiver will be binding unless executed in writing by the party making the
waiver.
15. NOTICES. Any notices to be given hereunder by either party
to the other will be in writing and may be given either by personal delivery or
by certified mail, postage prepaid with return receipt requested, or by
documented overnight courier service such as FedEx to the following addresses:
5
<PAGE> 6
If to the Company:
DBT Online, Inc.
4530 Blue Lake Drive
Boca Raton, FL 33431
Attention: Kevin Barr
If to Employee:
or such other address as either party may specify in writing to the other, in
accordance with this Section 15 Notices delivered personally will be deemed
received as of actual receipt; mailed notices will be deemed received as of five
(5) days after mailing; notices sent by overnight courier service will be deemed
received on the business day following the date of delivery to the courier
service.
16. ARBITRATION. Employee and the Company agree that all
disputes concerning the terms of this Agreement or Employee's employment with
the Company will be subject solely to binding arbitration. The arbitrator
selection and conduct of the arbitration will be pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The place of the
arbitration will be Palm Beach County, Florida.
17. NO PRIOR AGREEMENT. Employee hereby represents and
warrants to the Company that Employee's execution of this Agreement, employment
by the Company, and performance of duties under this Agreement will not violate
or be a breach of any agreement with a former employer, client, or any other
person or entity, and Employee will indemnify, defend and hold the Company and
its officers and directors harmless from and against any claim to the contrary.
18. ENTIRE AGREEMENT. This Agreement, and its referenced
attachments, constitute the entire agreement of the parties hereto with respect
to the subject matter hereof and supersedes any prior oral or written agreement.
This Agreement may not be modified or amended in any way except in writing by
the parties hereto.
6
<PAGE> 7
19. DURATION AND SURVIVAL. Notwithstanding the termination of
the Term and of the Employee's employment by the Company, this Agreement will
continue to bind the parties for so long as any obligations (including, without
limitation, Employee's obligations under Sections 7, 8, 9, and 12) remain to be
performed under the terms of this Agreement.
20. SEVERABILITY. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision will be in addition to, and not in place of, the
provisions of Section 6 above.
IN WITNESS WHEREOF, the parties have caused this Employment
Agreement to be executed as of the date first set forth above.
DATABASE TECHNOLOGIES, INC. EMPLOYEE
By: By: /s/ J. Henry Muetterties
-------------------------------- --------------------------------
J. HENRY MUETTERTIES
Name: CEO
------------------------------
Title: February 14, 2000
-----------------------------
7
<PAGE> 1
EXHIBIT 10(xiv)
[DBT ONLINE LETTERHEAD]
February 4, 1998
Kevin Barr
#9 Ash Grove
Republic of Singapore
289790
Dear Kevin,
I am really very pleased to confirm our offer of employment as a Vice
President, Human Resources of DBT Online, Inc., reporting to me. Consistent
with our prior discussions, I'm anticipating you would start on or about March
1, 1998, and the details of our offer are:
1. SALARY -- Your base salary will be $135,000.00 per annum, reviewed
annually, with increases for 1999 and 2000 estimated per the attached
spreadsheet.
2. BONUS -- You will participate in a management incentive plan which is
based upon financial results of the Corporation for 1998. At certain
target levels, that have not yet been approved by the Company's Board,
you will have the opportunity to earn a bonus of 40% of your salary.
At maximum performance levels, you will have the opportunity to double
your bonus potential. For 1998, 25% of your bonus, or $33,750.00 is
guaranteed and will be paid to you ratably throughout the year.
3. SIGN ON BONUS -- You will receive a $50,000.00 sign on bonus.
4. STOCK OPTIONS -- You will receive an option grant for 40,000 shares of
the Company's common stock. This option will be granted by the Board
of Directors at their February 24, 1998 meeting and be priced at the
closing price of the company's stock on that day. The options will
vest over four years, at the rate of 25% per annum beginning on the
first anniversary of the option grant.
<PAGE> 2
Kevin Barr
February 4, 1998
Page 2
5. BENEFITS -- You are entitled to all benefits provided to Database
employees. The Company's 401(k) Plan provides a match of two-thirds on
a dollar basis up to 6% of your salary. You will also be entitled to
three weeks vacation in calendar 1998. You will participate in a
"first dollar" health care plan where you will be fully compensated
for all medical expenses for you and your family, with no deductible.
6. CAR ALLOWANCE -- You will be entitled to up to a $500.00 per month
lease payment for a Company car. We estimate this translates to a car
value of $27,000.00 - $29,000.00.
7. INTEREST FREE LOAN -- You can borrow up to $125,000.00 from the
Company on an interest free basis, for purposes of assisting in your
relocation to South Florida. The foregone interest cost will be
included as imputed taxable income to you.
8. MOVING COSTS -- The Company will reimburse you for your moving costs
to South Florida.
9. SEVERANCE -- If you are terminated without cause during your first two
years of employment with the Company, you will receive severance equal
to one year's base salary. At the time that a policy is proposed and
approved by the board relative to severance for the executive group,
you will fall under the policy.
Kevin, we are all excited that you are joining our team. We look forward to
working with you and your help in continuing to accelerate DBT's growth. Please
feel free to call me if you have any questions on this. If you agree that the
above accurately summarizes our previous discussions, please indicate your
acceptance by signing in the space below and returning it to me. My fax number
is 954-283-1047.
Very truly yours,
/s/ Charles A. Lieppe
- --------------------------
Charles A. Lieppe
Chief Executive Officer
/s/ Kevin Barr
- --------------------------
Accepted, Kevin Barr
<PAGE> 3
Anticipated Compensation Program for Kevin Barr
1998 1999E 2000E
Annualized
------------- -------- ---------
Salary $ 135,000 $160,000 $162,000
Bonus @40% Target 54,000 64,000 64,800
@80% Max 108,000 118,400 129,600
Bonus Guarantee @25% 33,750 @11% (17,600) @15% 24,300
+ Salary 135,000 160,000 162,000
Total Guaranteed Cash $ 168,750 $ 177,600 $186,300
Balance Bonus - @ 100%
Target 20,250 46,400 40,500
Total Est. Cash @
Target Bonus Level* $ 189,000 $ 224,000 $226,800
Sign on Bonus: $50,000
Options: 40,000 shares granted at 2/24/98 Board meeting. Vesting 25%
per year over 4 years.
Car: $27,000 - 29,000 value: up to $500/mo. lease payment
Health Care: 1st Dollar coverage - doctors of your choice
401K Plan: Yes
* 1997 Estimated Payment will be 110-120% of basic level.
<PAGE> 1
Exhibit 10(xv)
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered by and between DATABASE
TECHNOLOGIES, INC., a Florida corporation (the "Company"), and RON FOURNET
("Employee"). The Company is a wholly owned subsidiary of DBT Online, Inc., a
Pennsylvania corporation ("DBT"). The parties to this Agreement agree as
follows:
1. EMPLOYMENT. This Agreement will be effective as of August 10, 1999
("Effective Date"). The Company agrees to employ Employee as President and Chief
Executive Officer of the Company, and Employee accepts and agrees to such
employment, as of the Effective Date, in the capacity and for the term of
employment specified herein (the "Term"). Employee will at all times be subject
to the general supervision, control and guidance of the board of directors of
DBT (the "Board" as used herein shall mean the DBT Board, for so long as DBT is
a parent, and otherwise the Company's board). During the Term, Employee will
render such services, perform such Company duties and exercise such supervision
and powers, to, for and with respect to the Company and its present and future
parents, subsidiaries and divisions, as may be established from time to time by
the Board. Employee will report to the Board and its Chairman. Employee will
devote his fulltime business efforts to the performance of his duties hereunder.
2. TERM. The Term will consist of a four year term beginning on the
Effective Date and ending on the date following the third anniversary of the
Effective Date, but may terminate earlier under Section 11 of this Agreement.
3. SALARY; REIMBURSABLE EXPENSES.
(a) The basic annual rate of compensation of Employee's employment
services is $250,000 (the "Salary"). The Company will pay the Salary to Employee
in equal installments according to the Company's payroll payment schedule in
effect from to time. The salary shall be subject to review on an annual basis by
the Compensation Committee of the Board which in its sole discretion may
increase the Salary.
(b) Employee will be reimbursed for all reasonable "out-of-pocket
expenses for business travel and business entertainment incurred in connection
with the performance of Employee's duties under this Agreement (i) so long as
such expenses constitute deductions from taxable income for the Company and are
excludable from taxable income to the Employee under the governing laws and
regulations of the Internal Revenue Code; and (ii) to the extent such expenses
are consistent with the DBT Travel Expense Policy as such Policy may be amended
from time to time. The reimbursement of Employee's business expenses will be
upon monthly
<PAGE> 2
presentation to and approval by the DBT Chief Financial Officer of valid
receipts and other appropriate documentation for such expenses.
(c) Employee will be entitled to receive both (i) an allowance of
$700 per month to pay for the costs associated with leasing an automobile of
Employee's choice and (ii) reimbursement for the costs of maintenance,
operation and insurance, and gasoline used for business purposes of the Company
for such automobile.
4. BONUS.
Employee may receive an incentive bonus of up to 50% of Employee's
Salary for each fiscal year beginning with fiscal year ending December 31,
1999, based upon the criteria, and payable at such times, as may be determined
by the Board, upon the advice and with the consent of the Board or the
Compensation Committee of the Board. This amount may, in the sole and absolute
discretion of the Board or the Compensation Committee of the Board, exceed 50%
based on overachievement of targets set by the Compensation Committee. The
amount, manner of payment, and form of consideration, if any, will be
determined by the Board, in its sole and absolute discretion, and such
determination will be binding and final. Employee will be eligible to receive
the incentive bonus if Employee is employed with the Company on the date the
incentive bonus is paid. The bonus will generally be paid on or before March 1
or each year beginning March 1, 2000.
5. VACATION. During the term hereof, Employee will be entitled to four
(4) weeks of paid vacation a year.
6. OPTIONS. Employee has been granted stock options to purchase 115,000
shares of DBT common stock under the terms of DBT's stock option plan with
vesting and other terms as described in the option grant letter delivered to
Employee.
7. CHANGE OF CONTROL.
7.1 CHANGE OF CONTROL DEFINITION. As used herein, a "Change of
Control" shall be deemed to have occurred if:
(a) The merger or consolidation of the Company with another
corporation where (i) the stockholders of the Company,
immediately prior to the merger or consolidation, would not
beneficially own, immediately after the merger or consolidation,
shares entitling such stockholders to 50% or more of all votes
(without consideration of the rights of any class of stock to
elect directors by a separate class vote) to which all
stockholders of the surviving corporation would be entitled in
the election of directors, and (ii) the members of the Board,
immediately prior to the merger or consolidation, do not,
immediately after the merger or
2
<PAGE> 3
consolidation, constitute a majority of the board of directors
of the surviving corporation; or
(b) The sale or other disposition of all or substantially all
the assets of the Company, or a liquidation, dissolution or
statutory exchange of the Company.
7.2 EFFECT OF A CHANGE OF Control. If a Change of Control
occurs during the final year of the Employment Term, this Section 7.2 will have
no effect on the Agreement. Notwithstanding any other provision of this
Agreement, if a Change of Control occurs before the final year of the Employment
Tenn, then the Executive shall have the right during the 30 days following the
Change of Control to elect either (i) to continue under the terms of the
Agreement, or (ii) to convert the Agreement into a one year agreement, with an
Employment Term commencing upon the date of the Change of Control and ending on
the day before the one year anniversary of the Change of Control, and the
Executive's Annual Salary under this Agreement shall be equal to the Annual
Salary in effect immediately prior to the Change of Control multiplied by two
for such Employment Term, and all other provisions of this Agreement shall
remain in effect for such Employment Term. The Executive's election under this
Section 7.2 shall be made by written notice to the Company under Section 15.
8. COVENANT NOT TO COMPETE. For so long as Employee is employed by the
Company and for a period of eighteen (18) months following the date Employee
ceases to be employed by the Company, to the fullest extent authorized by law,
Employee will not engage in, directly or indirectly, or have any interest in any
person, firm, corporation or business (whether as an employee, officer,
director, agent, security holder, creditor, consultant shareholder or otherwise)
in the United States of America that engages in any business competitive with
the business of the Company; PROVIDED, HOWEVER, that Employee may own, solely as
an investment, not more than one percent (1%) of any class of securities of any
publicly held corporation in competition with the Company, whose securities are
traded on any national securities exchange in the United States, and may retain
ownership interest in such entities. The covenants in this Section 8 are
severable and separate, and the unenforceability of any specific covenant will
not affect the provisions of any other covenant.
9. AGREEMENT NOT TO DIVULGE CONFIDENTIAL INFORMATION. Employee
recognizes that by reason of Employee's interest in the Company and its
affiliates and employment or engagement (as an agent, independent contractor,
consultant, director or otherwise) by the Company or its affiliates, Employee
has acquired and will acquire Confidential Information concerning the operations
and business of the Company and its affiliates, the use or disclosure of which
would cause substantial loss and damages that could not be readily calculated
and for which no remedy at law would be adequate. Employee acknowledges and
agrees that any such Confidential Information acquired was and will be received
in confidence from the Company and its respective affiliates, and that all of
such information is the property of the Company and its affiliates.
3
<PAGE> 4
Accordingly, Employee covenants and agrees with the Company and its affiliates
that except in performance of the Employee's obligations to the Company, or its
affiliates or with the prior written consent of the Company, Employee will not,
at any time, directly or indirectly, (i) disclose any Confidential Information
learned by reason of Employee's past affiliation with the Company or its
affiliates or employment or engagement (as an agent, independent contractor,
consultant, director or otherwise) by the Company or its affiliates; or (ii) use
such information in a manner detrimental to the interest of the Company or its
affiliates unless (x) such information becomes known to the public generally
through no fault of Employee, (y) disclosure is required by law or the order of
any governmental authority or (z) Employee must disclose such information
pursuant to court order in connection with the defense of a lawsuit against the
Employee. Notwithstanding the foregoing, prior to disclosing any information
pursuant to clauses (x), (y) or (z) above, Employee will give prior written
notice thereof to the Company and provide the Company with the opportunity to
contest such disclosure and will cooperate with its efforts to prevent such
disclosure. The term "Confidential Information" includes, without limitation,
information not previously disclosed to the public or to the trade by the
Company or its respective affiliates with respect to their businesses or any
products, product elements, data sources, facilities, trade dress, methods,
software, source code, systems, procedures, manuals, confidential reports,
product price list, supplier arrangement or lists, marketing information,
financial information, business plans, prospects or opportunities or other trade
secrets or intellectual property of any kind or nature.
10. AGREEMENT NOT TO SOLICIT OR INTERFERE WITH EMPLOYEES, SUPPLIERS,
AND Customers. During the term of Employees' employment with the Company and for
a period of eighteen (18) months thereafter, to the fullest extent authorized by
law, Employee will not, directly or indirectly, or by acting in concert with
others, hire, solicit to hire, or induce or influence any person who is engaged
as an employee, agent, independent contractor, supplier, consultant, director or
otherwise by the Company or any of its affiliates to leave the employ of the
Company or its affiliates (including, without limitation Company and its
subsidiaries) or modify, in any manner adverse to the Company or any of its
affiliates, or to terminate his engagement with the Company or any of its
affiliates or to induce or influence any customer of the Company or any of its
affiliates to terminate or modify his, her or its relationship as a customer of
the Company or any of its affiliates; PROVIDED, HOWEVER, that if requested by
any employee or former employee of the Company or any of its subsidiaries,
Employee may, following written notice to the Vice President of Human Resources
of DBT, provide a reference with respect to such employee.
11. TERMINATION OF TERM.
(a) DISABILITY. If Employee becomes totally disabled (as
defined below), the Company may terminate the Term and the Company will have no
further liability or obligation to Employee under this Agreement except the
Employee will receive (i) any unpaid Salary that has accrued through the date of
termination and (ii)
4
<PAGE> 5
a pro rata portion of any bonus otherwise payable in accordance with the
provisions of Section 4 for the calendar year in which the Employee becomes
totally disabled. Employee will be deemed to be "totally disabled" if Employee
is considered totally disabled under the Company's group disability plan in
effect at that time, if any, or in the absence of any such plan, under
applicable Social Security regulations.
(b) Death. If Employee dies during the Term, this Agreement
will automatically terminate, and thereafter the Company will not have any
further liability or obligation under this Agreement to Employee, his executors,
administrators, heirs, assigns or any other person claiming under or through him
except that Employee's estate shall receive any unpaid Salary that has accrued
through the date of termination.
(c) TERMINATION BY THE COMPANY AND EFFECT OF SUCH TERMINATION.
The Company may terminate this Agreement at any time upon delivery of written
notice to Employee, with the following effects:
(i) If Employee's employment hereunder has been
terminated without Cause, as hereafter defined, then Employee
shall receive the severance amount set forth below (the
"Severance Amount"):
Termination Date Severance Amount
- ---------------- ----------------
From August 10, 1999 to August 9, 2002 100% of one year's Salary
From August 10, 2002 to August 9, 2003 Remainder of Salary for the
Term.
(ii) In the event that Employee's employment
hereunder is terminated for Cause, as hereafter defined, this
Agreement and rights of Employee shall be terminated
immediately. For these purposes, "Cause" shall mean
dishonesty, willful insubordination, habitual absence from
work, habitual insobriety or drug addiction, failure to
perform Employee's duties, or material breach of this
Agreement.
12. FRINGE BENEFITS. During the term hereof, the Company will provide
to Employee such fringe benefits, including medical and dental benefits, as are
accorded to other executive officers of the Company.
13. GOVERNING Law. The terms of this Agreement will be governed by the
laws of the State of Florida, without reference to its principles of conflicts
of law.
14. WAIVER. No waiver of any of the provisions of this Agreement will
be deemed, or will constitute a waiver of any other provision, whether or not
similar, nor will any waiver constitute a continuing waiver. No waiver will be
binding unless executed in writing by the party making the waiver.
5
<PAGE> 6
15. NOTICES. Any notices to be given hereunder by either party to the
other will be in writing and may be given either by personal delivery or by
certified mail, postage prepaid with return receipt requested, or by documented
overnight courier service such as FedEx to the following addresses:
If to the Company:
DBT Online, Inc.
4530 Blue Lake Drive
Boca Raton, FL 33431
Attention: Thomas J. Hoolihan, Esq.
If to Employee:
1035 Vista Del Mar North
Delray Beach, FL 33483
or such other address as either party may specify in writing to the other, in
accordance with this Section 15. Notices delivered personally will be deemed
received as of actual receipt; mailed notices will be deemed received as of five
(5) days after mailing; notices sent by overnight courier service will be deemed
received on the business day following the date of delivery to the courier
service.
16. ARBITRATION. Employee and the Company agree that all disputes
concerning the terms of this Agreement or Employee's employment with the Company
will be subject solely to binding arbitration. The arbitrator selection and
conduct of the arbitration will be pursuant to the Commercial Arbitration Rules
of the American Arbitration Association. The place of the arbitration will be
Palm Beach County, Florida.
17. NO PRIOR AGREEMENT. Employee hereby represents and warrants to the
Company that Employee's execution of this Agreement, employment by the Company,
and performance of duties under this Agreement will not violate or be a breach
of any agreement with a former employer, client, or any other person or entity,
and Employee will indemnify, defend and hold the Company and its officers and
directors harmless from and against any claim to the contrary.
18. ENTIRE AGREEMENT. This Agreement, and its referenced
attachments, constitute the entire agreement of the parties hereto with respect
to the subject matter hereof and supersedes any prior oral or written agreement.
This Agreement may not be modified or amended in any way except in writing by
the parties hereto.
19. DURATION AND SURVIVAL. Notwithstanding the termination of
the Term and of the Employee's employment by the Company, this Agreement will
continue to bind the parties for so long as any obligations (including, without
limitation,
6
<PAGE> 7
Employee's obligations under Sections 8, 9, and 10 remain to be performed under
the terms of this Agreement.
20. SEVERABILITY. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. This
severability provision will be in addition to, and not in place of, the
provisions of Section 8 above.
IN WITNESS WHEREOF, the parties have caused this Employment Agreement
to be executed as of the date first set forth above.
DATABASE TECHNOLOGIES, INC. EMPLOYEE
By: /s/ Frank Borman By: /s/ Ron Fournet
------------------------------ ------------------------------
Ron Fournet
Name: Frank Borman
-----------------------------
Title: Chairman
----------------------------
7
<PAGE> 1
EXHIBIT 10(xvi)
SEPARATION OF EMPLOYMENT AGREEMENT AND
GENERAL RELEASE AND CONSULTING AGREEMENT
WHEREAS Thomas J. Hoolihan (hereinafter "Hoolihan") has been employed
by DBT Online, Inc., a Pennsylvania corporation (hereinafter the "Company").
WHEREAS, the parties hereto desire to set forth their agreements with
respect to the termination of Hoolihan's employment and desire to assure the
continued service of Hoolihan upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the covenants, conditions,
representations and acknowledgments, and in reliance upon the agreements and
releases of each of the parties as set forth in this Agreement, the parties,
intending to be legally bound, agree as follows:
1 TERMINATION OF EMPLOYMENT. Hoolihan shall be employed by the
Company from the date hereof until March 1, 2000, upon which Hoolihan's
employment with the Company shall be terminated (the "Termination Date").
Through the Termination Date Hoolihan agrees to perform his assignment in a
professional manner and in the best interests of the Company. The Company and
Hoolihan acknowledge that the employment of Hoolihan by the Company, and all
rights and obligations of any nature of the Company and Hoolihan with respect to
such employment, will be duly terminated effective the Termination Date.
Hoolihan further acknowledges and agrees that payments made or to be made and
benefits provided or to be provided hereunder are in lieu of any and all
compensation and benefits of any nature whatsoever due to Hoolihan under any
other agreement or arrangement (whether written or oral) between or binding upon
the Company and Hoolihan.
2. CONSULTING ARRANGEMENT. In consideration of Hoolihan's
execution of this Agreement and his agreement to be legally bound by its terms,
the
<PAGE> 2
Company desires to enter into a consulting relationship with Hoolihan, in
accordance with the terms and conditions hereinafter set forth.
2.1 CONSULTING TERM. Hoolihan shall perform consulting services
for the Company for the term beginning on the Termination Date and ending on
December 31, 2000. In addition, provided Hoolihan has performed his employment
and consulting duties in a professional manner and comported himself in the best
interest of the Company, Hoolihan will perform consulting services for an
additional nine month consulting term, on such terms and conditions as the Chief
Executive Officer and the Board of Directors shall determine. If Hoolihan is not
so performing or comporting, the Company shall provide him with written notice
thereof and reasonable time to cure. The aforementioned consulting terms shall
collectively be referred to as the "Consulting Term." During the Consulting
Tenn, Hoolihan will be considered a "Key Advisor," as defined under the
Company's Stock Option Plan, for purposes of determining the time during which
vested stock options granted pursuant to the Stock Option Plan continue to be
exercisable.
2.2 DUTIES AND RESPONSIBILITIES. During the Consulting Term,
Hoolihan shall provide consulting services to the Company as an independent
contractor and not as an employee of the Company. Hoolihan shall at all times
during the Consulting Term act as an independent contractor and during such
period nothing hereunder shall create or imply a relationship of
employer-employee between the Company and Hoolihan. Hoolihan shall provide
consultation as requested by the Company, at the times and on the occasions
reasonably requested by the Company and reasonably convenient to Hoolihan.
During the Consulting Term, Hoolihan shall at all times comply with all
reasonable policies and procedures adopted by the Company, including without
limitation the procedures and policies adopted by the Company regarding
conflicts of interest and confidentiality of the Company's business information.
2
<PAGE> 3
2.3 EXTENT OF SERVICE. During the Consulting Term, Hoolihan agrees
to devote such time, attention and energy as is necessary to fulfill his duties
and responsibilities as a consultant under Section 2.2 hereof.
3. CONSIDERATION. In full consideration of and in exchange for
Hoolihan's execution of this Separation of Employment Agreement and General
Release and Consulting Agreement, and his agreement to be legally bound by its
terms, Company will provide Hoolihan with the following payments or
consideration, to which he would not otherwise be entitled:
(a) From the date hereof until the Termination Date, the Company
shall compensate Hoolihan on the same basis as Hoolihan is
compensated on the date hereof.
(b) For all services rendered by Hoolihan as a consultant to the
Company during the Consulting Term, the Company shall pay
Hoolihan $12,500.00 per month for the period beginning on the
Termination Date and ending on December 31, 2000, payable on
the first of each month beginning on March 1, 2000 (until a
total of $125,000 is paid), and for any period after December
31, 2000 such compensation in such form as the Chief Executive
Officer and the Board of Directors shall determine.
(c) Hoolihan will receive his bonus for 1999 payable in 2000,
provided that the Board authorizes a bonus for any officer of
the Company. Hoolihan will receive no bonus paid for any years
after
3
<PAGE> 4
1999. He will also receive a special $10,000.00 net transition
payment, on or before February 18, 2000.
(d) During the Consulting Term, Hoolihan shall be solely
responsible for the payment of all federal, state and local
taxes or contributions imposed or required under unemployment
insurance, social security and income tax laws that pertain to
the compensation paid or benefits provided to Hoolihan for his
performance of consulting services.
(e) Hoolihan agrees that, to the extent there are any taxes to
Hoolihan or DBT arising from the payments made by the Company
pursuant to this section, he shall be exclusively responsible
for any payment of federal and state taxes on the payments set
forth above.
(f) The Company agrees to provide extended family coverage under
its insured health and dental plan to Hoolihan to the extent
that he does not have coverage under another plan from the
Termination Date through December 31, 2000, at which time
Hoolihan will be offered standard COBRA coverage on the same
basis and for the same period as other participants and
beneficiaries. Hoolihan will notify the Company at the
commencement of any coverage under another health and/or
dental insurance plan. To the extent that Hoolihan does not
have coverage under another plan, and remains covered under
the Company's medical and dental plan, the Company further
agrees to reimburse Hoolihan for medical
4
<PAGE> 5
expense accrued from the Termination Date through December 31,
2000, that are not covered by the Company's insured health and
dental plan, including participant premium costs, co-payments
and deductibles, on the same basis and to the same extent such
reimbursements are provided to senior executives of the
Company.
(g) As of the Termination Date, the Company will assume the
obligations under Hoolihan's automobile lease at Company's
expense, including Hoolihan's personal guarantee of the lease,
but Hoolihan will have use of this automobile through July 31,
2000, and the Company will pay for all insurance, maintenance,
and repairs in this period. At Hoolihan's option, Hoolihan
will either return the automobile to the Company at the end of
that period or assume the obligations under the lease through
the end of the lease period in February 2001.
(h) With respect to stock options granted to Hoolihan on November
24, 1997, the parties agree that, provided Hoolihan has
performed his employment and consulting duties in a
satisfactory manner and has comported himself in the best
interest of the Company (subject to the notice and right to
cure provision provided in Section 2.1 hereof), Hoolihan will
vest on the vesting dates in those options that are first
exercisable on or before November 24, 2000, and the remainder
of such stock options shall be forfeited and terminated as of
the date of this Agreement. If Hoolihan is not so performing
5
<PAGE> 6
or competing the Company shall provide him with written
notice and reasonable time to cure. The terms governing these
options are set forth in the Amended Nonqualified Stock Option
Grant letters executed contemporaneously with this Agreement
and attached hereto as Exhibit 1. The parties futher agree
that Hoolihan will not be entitled to exercise or vest in any
further options (including any options that might have been
exercisable on November 24, 2001) as this Agreement terminates
those options as of the date of this Agreement.
(i) The Company shall provide Hoolihan a relocation allowance for
all reasonable out-of-pocket moving expenses and expenses of
selling his primary residence in Parkland, Florida, including
any brokerage commissions and any loss on the sale, that are
not reimbursed from another source, in a total amount not to
exceed $35,000.00.
(j) The Company shall pay Hoolihan's Florida Bar application fee
and the cost of a Florida Bar preparation course, in a total
amount not to exceed $3,500.00.
(k) The Company will provide executive level outplacement services
of the Company's choice to Hoolihan. Ron Fournet and Kevin
Barr or their respective successors will, upon request,
provide positive recommendations to prospective employers on
behalf of Hoolihan.
6
<PAGE> 7
(l) Hoolihan agrees that he is still subject to and continues to
be governed by the Key Person Employment Agreement
Confidentiality Agreement and Covenant Against Competition
that he originally signed on November 1997, to the extent that
those terms are not inconsistent with this Agreement. Hoolihan
further agrees he will not solicit employees of the Company
through the end of the Consulting Term.
Except as set forth in this Agreement, it is expressly agreed and
understood that after the Termination Date the Company does not have, and will
not have, any obligation to provide Hoolihan at any time in the future with any
payments, bonuses, benefits or considerations other than those recited in
paragraph 3.
4. DEFINITION OF COMPANY. For purposes of this Agreement, the
term "Company" shall include DBT Online, Inc., and its parents, subsidiaries,
affiliates, and its and their officers, directors, shareholders, employees,
agents, successors, assigns, heirs, executors, and administrators and any
individual or organization related to DBT Online, Inc., and against whom or
which Hoolihan could maintain a claim.
5. RELEASE. In consideration of and in exchange for the
promises of Company set forth above, Hoolihan on behalf of himself and his
heirs, executors and administrators, intending to be legally bound, hereby
permanently and irrevocably accepts termination by the Company according to the
terms set forth in this Agreement, and releases and discharges Company from any
and all causes of actions, suits, debts, claims and demands whatsoever, which
Hoolihan had, has, or may have had up to and including the effective date of
this Agreement, and will as of the Termination Date provide the Company as well
a similar release and discharge up to and including the
7
<PAGE> 8
Termination Date, including those which are based on or are in any way related
to his former employment with Company or the termination of that employment,
excepting disputes relating to the Company's independently administered 401(k)
plan. Hoolihan's release of claims and actions includes, but is not limited to,
actions arising under the Age Discrimination in Employment Act (ADEA); Title VII
of the Civil Rights Act of 1964, as amended; the Americans with Disabilities Act
(ADA); the Fair Labor Standards Act (FLSA); the Employee Retirement Income
Security Act, as amended (ERISA); the Family and Medical Leave Act (FMLA); the
Florida Civil Rights Act of 1992, as amended (FCRA); Florida Statutes Chapter
448.101, ET SEQ., commonly known as the Florida Private Whistleblower Act; and
the common law, such as actions in tort or contract. Hoolihan also promises not
to seek any personal relief whether legal or equitable in any proceeding brought
by any agency or any other person.
6. RETURN OF PROPERTY. In addition to the Stipulation of
Paragraph 5, Hoolihan agrees to promptly return all Company property, excluding
the property contained on the itemized list attached hereto as Exhibit 2, to
Kevin Barr, Human Resources Director of DBT Online, Inc.
7. PERFORMANCE. The parties acknowledge that the performance
of the promises of each are expressly contingent upon the fulfillment and
satisfaction of the obligations of the other party as set forth in this
Agreement.
8. ACKNOWLEDGMENT OF SEPARATION. Hoolihan hereby agrees and
recognizes that as of the Termination Date his employment relationship with
Company will be permanently and irrevocably severed and that Company will have
no obligation to re-employ him in the future.
9. NON-ADMISSION. Hoolihan agrees and acknowledges that this
agreement is not and shall not be construed to be an admission of any violation
of any federal, state or local statute or regulation, or of any duty owed by
Company.
8
<PAGE> 9
10. CERTIFICATION. Hoolihan hereby certifies that he has read
the terms of this Separation of Employment Agreement and General Release and
Consulting Agreement, that he has been advised by Company to consult with an
attorney prior to executing this Agreement, that he has had an opportunity to do
so, and that he understands this Agreement's terms and effects. Hoolihan further
certifies that Company has not made any representations to Hoolihan concerning
this Separation of Employment Agreement and General Release and Consulting
Agreement other than those contained in this Agreement.
11. NON-DISPARAGEMENT. Hoolihan will not issue any communication
or statement, written or otherwise, that disparages, criticizes or otherwise
reflects adversely upon the Company, except if testifying truthfully under oath
pursuant to subpoena or other legal process. In the event Hoolihan is compelled
by subpoena process to testify, he will provide, to the extent possible, written
notice to the Company in time to permit the Company to seek an appropriate
protective order or such other relief as may be necessary to enforce the
Company's rights under this Agreement.
12. EXECUTION. Hoolihan acknowledges that he is informed that
prior to entering into this Agreement, he has a period of 21 days to consider
this Agreement. He also understands that he has the right to revoke this
Agreement for a period of 7 days following the signing (execution) of this
Agreement by giving written notice to DBT Online, Inc., c/o Human Resources
Director, Kevin Barr at 4530 Blue Lake Drive, Boca Raton, Florida 33431.
13. SEVERABILITY. If any provision of this Separation of
Employment Agreement and General Release and Consulting Agreement is deemed
invalid, the remaining provisions shall not be affected.
14. ENTIRE AGREEMENT. This Agreement, including its referenced
attachments, contains the entire agreement between the parties and its terms are
contractual and are not a mere recital. The parties expressly acknowledge that
there exist
9
<PAGE> 10
no oral agreements or understandings that vary the terms or meaning of this
Agreement. This Agreement supersedes and annuls any and all other agreements,
contracts, promises, representations, whether oral or written, made by or on
behalf of the parties, their personal representatives and/or their successors
and assigns unless they are expressly incorporated herein.
15. ARBITRATION. Hoolihan and the Company agree that all disputes
concerning the terms of this Agreement will be subject solely to binding
arbitration. The arbitrator selection and conduct of the arbitration will be
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association. The place of the arbitration will be Palm Beach County, Florida.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have
executed the foregoing Separation of Employment Agreement and General Release
and Consulting Agreement this 12th day of January, 2000.
DBT ONLINE, INC.
/s/ Thomas J. Hoolihan By: /s/
- ------------------------- -----------------------
Thomas J. Hoolihan
10
<PAGE> 11
EXHIBIT 2
1. Laptop computer
2. Cellular phone
<PAGE> 12
DBT ONLINE, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
AMENDED STOCK OPTION GRANT LETTER
DATE OF GRANT: NOVEMBER 24,1997
This Agreement made this 12th day of January, 2000 constitutes an amendment to
the Incentive Stock Option Agreement (the "Grant Letter") between DBT Online,
Inc. (the "Company") and Thomas J. Hoolihan (the "Optionee") evidencing the
grant made to the Optionee on November 24, 1997 under the terms of the DBT
Online, Inc. Amended and Restated Stock Option Plan (the "Plan"). All
capitalized terms not defined herein shall have the meaning as defined in the
Grant Letter or the Plan, as the case may be.
The Company and the Optionee, intending to be legally bound hereby, agree as
follows:
1. Section 3 of the Grant Letter is hereby amended by adding the
following new paragraph at the end thereof:
Anything contained herein to the contrary notwithstanding, the Optionee
acknowledges that the Option will cease to be treated as an "incentive
stock option" under section 422 of the Code if it is not exercised
within 90 days of the Termination Date, as such term is defined in the
agreement between the Company and the Optionee entered into on the date
first above written (the "Consulting Agreement").
2. Section 4 of the Grant Letter is hereby amended by adding the
following sentence at the end thereof:
Anything contained herein to the contrary notwithstanding: (i) the
Option shall vest on 11/24/2000 in the number of shares provided above
with respect to such date, if on such vesting date the Optionee
continues to be either an employee of, or Key Advisor to, the Company;
and (ii) the Option shall terminate and be forfeited immediately with
respect to the number of shares that first become exercisable, in
accordance with the above schedule, after 11/24/2000.
3. Section 6 of the Grant Letter is hereby amended by adding the
following sentence, flush to the margin, at the end thereof:
Anything contained herein to the contrary notwithstanding, the Optionee
shall be considered a Key Advisor during the Consulting Term, as such
term is defined in the Consulting Agreement.
12
<PAGE> 13
4. Except as expressly amended hereby, the terms of the Grant letter
shall continue in full force and effect.
5. This Agreement shall be effective and the Option shall be amended as
provided herein as of the date first above written.
DBT Online, Inc.
By: /s/
--------------------------------
Title: President & CEO
------------------------------
PARTICIPANT
/s/ Thomas J. Hoolihan
-------------------------------------
Thomas J. Hoolihan
13
<PAGE> 14
AMENDMENT
TO
SEPARATION OF EMPLOYMENT AGREEMENT AND
GENERAL RELEASE AND CONSULTING AGREEMENT
WHEREAS, Thomas J. Hoolihan (hereinafter "Hoolihan") and DBT Online,
Inc., a Pennsylvania Corporation (hereinafter the "Company") entered into a
Separation of Employment Agreement and General Release and Consulting Agreement,
dated January 12, 2000 (the "Agreement");
WHEREAS, the Company's advisors have determined that certain provisions
of the Agreement could be detrimental to the Company's ability to obtain pooling
of interest accounting treatment in connection with a contemplated business
combination;
WHEREAS, the parties hereto now desire to amend the Agreement to
address the pooling of interest concerns;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties, intending to be legally bound, agree as follows:
1. The last sentence of Section 2.1 of the Agreement is hereby amended,
in its entirely, to read as follows:
"During the Consulting Term, Hoolihan shall be considered a
"Key Advisor", as defined under the Company's Stock Option Plan, for
purposes of determining the time during which stock options granted
under the Stock Option Plan become and continue to be exercisable."
2. Subsection (h) of Section 3 of the Agreement is hereby amended, in
its entirety, to read as follows:
"With respect to stock options granted to Hoolihan on November
24, 1997, the parties agree that such stock options shall become and
continue to be exercisable in accordance with their terms".
3. Exhibit 1 to the Agreement is deleted in its entirety.
4. Except as expressly amended hereby, the terms of the Agreement shall
continue in full force and effect.
<PAGE> 15
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties have executed this Amendment to the Agreement this 11th day of February,
2000.
DBT ONLINE, INC.
/s/ Thomas J. Hoolihan
- ----------------------------------
Thomas J. Hoolihan
By:
--------------------------------------
<PAGE> 1
EXHIBIT 10(xvii)
SEPARATION OF EMPLOYMENT AGREEMENT AND
GENERAL RELEASE AND CONSULTING AGREEMENT
WHEREAS Andrew J. Perlmutter (hereinafter "Perlmutter") has been
employed by DBT Online, Inc., a Pennsylvania corporation (hereinafter the
"Company").
WHEREAS, the parties hereto desire to set forth their agreements with
respect to the termination of Perlmutter's employment and desire to assure the
continued service of Perlmutter upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the covenants, conditions,
representations and acknowledgments, and in reliance upon the agreements and
releases of each of the parties as set forth in this Agreement, the parties,
intending to be legally bound, agree as follows:
1. TERMINATION OF EMPLOYMENT. Perlmutter's employment with
the Company shall be terminated on December 31, 1999 (the "Termination Date").
The Company and Perlmutter acknowledge that the employment of Perlmutter by the
Company, and all rights and obligations of any nature of the Company and
Perlmutter with respect to such employment, will be duly terminated effective
the Termination Date, except as otherwise specifically provided herein.
Perlmutter further acknowledges and agrees that payments made or to be made and
benefits provided or to be provided hereunder are in lieu of any and all
compensation and benefits of any nature whatsoever due to Perlmutter under any
other agreement or arrangement (whether written or oral) between or binding upon
the Company and Perlmutter existing as of the date hereof.
2. CONSULTING ARRANGEMENT. In consideration of Perlmutter's
execution of this Agreement and his agreement to be legally bound by its terms,
the Company desires to enter into a consulting relationship with Perlmutter, in
accordance with the terms and conditions hereinafter set forth.
2.1 CONSULTING TERM. Perlmutter shall perform consulting services
for the Company for the term beginning on the Termination Date and ending on
<PAGE> 2
October 31, 2000. Perlmutter agrees to perform up to one day per month of
satisfactory service as required by the Company during this term. In addition,
provided Perlmutter has performed his consulting duties in a professional manner
and comported himself in the best interest of the Company, he may, at his
option, perform consulting services for an additional nine month consulting
term, on such terms and conditions as the Chief Executive Officer of the Company
and Perlmutter agree. If Perlmutter is not so performing or comporting the
Company shall provide him with notice and ten days to cure. The aforementioned
consulting terms shall collectively be referred to as the "Consulting Term."
During the Consulting Term, Perlmutter shall be considered a "Key Advisor," as
defined under the Company's Stock Option Plan, for purposes of determining the
time during which vested stock options granted pursuant to the Stock Option Plan
continue to be exercisable, and an "indemnified representative" for purposes of
Article VIII of the Company's Amended Bylaws.
2.2 DUTIES AND RESPONSIBILITIES. During the Consulting Term,
Perlmutter shall provide consulting services to the Company as an independent
contractor and not as an employee of the Company. Perlmutter shall at all times
during the Consulting Term act as an independent contractor and during such
period nothing hereunder shall create or imply a relationship of
employer-employee between the Company and Perlmutter. Perhmutter shall provide
consultation as requested by the Company, at the times and on the occasions
reasonably requested by the Company and reasonably convenient to Perlmutter.
During the Consulting Term, Perlmutter shall at all times comply with all
reasonable policies and procedures adopted by the Company, including without
limitation the procedures and policies adopted by the Company regarding
conflicts of interest and confidentiality of the Company's business information.
Perlmutter shall be reimbursed for the reasonable business expenses incurred by
him in connection with activities performed on behalf of the Company.
2
<PAGE> 3
2.3 EXTENT OF SERVICE. During the Consulting Term, Perlmutter
agrees to devote such time, attention and energy as is necessary to fulfill his
duties and responsibilities as a consultant under Section 2.2 hereof.
3. CONSIDERATION. In full consideration of and in exchange for
Perlmutter's execution of this Separation of Employment Agreement and General
Release and Consulting Agreement, and his agreement to be legally bound by its
terms, Company will provide Perlmutter with the following payments or
consideration, to which he would not otherwise be entitled:
(a) For all services rendered by Perlmutter as a consultant to the
Company during the Consulting Term, the Company shall pay
Perlmutter $11,250.00 per month for the period beginning on
the Termination Date and ending on October 31, 2000, in
accordance with the Company's regular payroll schedule, and
for any period after October 31, 2000, such compensation in
such form, if any, as the Chief Executive Officer and
Perlmutter shall agree.
(b) Perlmutter will receive his bonus for 1999 payable in 2000,
provided that the Board authorizes a bonus for any officer of
the Company, and on the schedule approved by the Board.
Perlmutter will receive no bonus for any years after 1999.
(c) During the Consulting Term, Perlmutter shall be solely
responsible for the payment of all federal, state and local
taxes or contributions imposed or required under unemployment
insurance, social security and income tax laws that pertain to
the compensation paid
3
<PAGE> 4
or benefits provided to Perlmutter for his performance of
consulting services.
(d) Perlmutter agrees that, to the extent there are any tax
consequences arising from the payments made by the Company
pursuant to this section, he shall be exclusively responsible
for any payment of federal and state taxes on the payments set
forth above.
(e) The Company agrees to provide Perlmutter with extended family
coverage under its insured health and dental plan to the
extent that he does not have coverage under another plan from
the Termination Date through October 31, 2000, at which time
Perlmutter will be offered standard COBRA coverage on the same
basis and for the same period as other participants and
beneficiaries. Perlmutter will notify the Company at the
commencement of any coverage under another insurance health
and/or dental plan. To the extent that Perlmutter does not
have coverage under another plan, and remains covered under
the Company's medical and dental plan, the Company further
agrees to reimburse Perlmutter for medical expenses accrued
from the Termination Date through October 31, 2000, that are
not covered by the Company's insured health and dental plan,
including participant premium costs, co-payments and
deductibles, on the same basis and to the same extent such
reimbursements are provided to senior executives of the
Company.
4
<PAGE> 5
With respect to stock options granted to Perlmutter on August
4, 1997, October 6, 1997, July 22, 1998, and August 2, 1999,
the parties agree that Perlmutter will vest on the vesting
date in those options that are first exercisable on or before
August 4, 2000, October 6, 2000, July 22, 2000, and August 2,
2000, respectively, and the remainder of such stock options
shall be forfeited and terminated as of the date of this
Agreement. The terms governing these options are set forth in
the Amended Stock Option Grant Letters executed
contemporaneously with this Agreement and attached hereto as
Exhibit 1. The parties further agree that Perlmutter will not
be entitled to any stock options with vesting dates after
October 6, 2000, as this Agreement terminates those options as
of the date of this Agreement.
(g) As consideration for Perlmutter's release in paragraph 5, the
Company shall pay Perlmutter, on the eighth day after his
execution of this Agreement, the net sum of $94,470.00 (i.e.,
net of all withholdings, whether for federal, state or local
tax, Social Security, Medicare, unemployment or otherwise).
(h) Perlmutter agrees that he is still subject to and continues to
be governed by Section 13 of the Reorganization Agreement and
Plan of Merger dated August 4, 1997, entitled COMPETITION AND
CONFIDENTIALITY BY PERLMUTTER. Perlmutter further agrees he
will not
5
<PAGE> 6
solicit employees of the Company, with the exception of Seth
Perlmutter, through the end of the Consulting Term.
Except as set forth in this agreement, it is expressly agreed and
understood that after the Termination Date the Company does not have, and will
not have, any obligation to provide Perlmutter at any time in the future with
any payments, bonuses, benefits or considerations other than those recited in
paragraph 3.
4. DEFINITION OF COMPANY. For purposes of this Agreement, the
term "Company" shall include DBT Online, Inc., and its parents, subsidiaries,
affiliates, and its and their officers, directors, shareholders, employees,
agents, successors, assigns, heirs, executors, and administrators and any
individual or organization related to DBT Online, Inc., and against whom or
which Perlmutter could maintain a claim.
5. RELEASE. In consideration of and in exchange for the
promises of Company set forth above, Perlmutter on behalf of himself and his
heirs, executors and administrators, intending to be legally bound, hereby
permanently and irrevocably accepts termination by the Company according to the
terms set forth in this Agreement, and releases and discharges Company from any
and all causes of actions, suits, debts, claims and demands whatsoever, which
Perlmutter had, has, or may have had up to and including the effective date of
this Agreement, including those which are based on or are in any way related to
his former employment with Company or the termination of that employment,
excepting disputes relating to the Company's independently administered 401(k)
plan and health plan, any right Perlmutter has to be indemnified by the Company
under Article VIII of the Company's Amended Bylaws, or disputes concerning the
terms of this Agreement, including Exhibits. Perlmutter's release of claims and
actions includes, but is not limited to, actions arising under the Age
Discrimination in Employment Act (ADEA); Title VII of the Civil Rights Act of
1964, as amended; the Americans with Disabilities Act (ADA); the Fair Labor
Standards Act (FLSA); the
6
<PAGE> 7
Employee Retirement Income Security Act, as amended (ERISA); the Family and
Medical Leave Act (FMLA); the Florida Civil Rights Act of 1992, as amended
(FCRA); Florida Statutes Chapter 448.101, ET SEQ., commonly known as the
Florida Private Whistleblower Act; and the common law, such as actions in tort
or contract. Perlmutter also promises not to seek any personal relief whether
legal or equitable in any proceeding brought by any agency or any other person.
6. RETURN OF PROPERTY. In addition to the Stipulation of
Paragraph 5, Perlmutter agrees to immediately return all Company property,
excluding the property contained on the itemized list attached hereto as Exhibit
2, to Kevin Barr, Human Resources Director of DBT Online, Inc.
7. INVENTIONS, DESIGNS AND PRODUCT DEVELOPMENTS. All
inventions, innovations, designs, ideas and product developments (collectively,
the "Developments"), developed or conceived by Perlmutter, solely or jointly
with others, whether or not patentable or copyrightable, at any time that he
provided services to the Company as an employee, independent contractor or
otherwise, and that directly relate to the actual or planned business activities
of the Company and all of Perlmutter's right, title and interest therein, shall
be the exclusive property of the Company. Perlmutter hereby assigns, transfers
and conveys to the Company all of his right, title and interest in and to any
and all such Developments. Perlmutter shall disclose fully, as soon as
practicable and in writing, all developments to the Board. At any time and from
time to time, upon the request of the Company, Perlmutter shall execute and
deliver to the Company any and all instruments, documents and papers, give
evidence and do any and all other acts that, in the opinion of counsel for the
Company, are or may be necessary or desirable to document such transfer or to
enable the Company to file and prosecute applications for and to acquire,
maintain and enforce any and all patents, trademark registrations or copyrights
under United States or foreign law with respect to any such Developments or to
obtain any extension, validation, re-issuance, continuance or renewal of any
such
7
<PAGE> 8
patent, trademark or copyright. The Company will be responsible for the
preparation of any such instruments, documents and papers and for the
prosecution of any such proceedings and will reimburse Perlmutter for all
reasonable expenses incurred by him in compliance with the provisions of this
Section.
8. CONFIDENTIAL INFORMATION.
(a) Perlmutter has had and will have possession of or
access to confidential information relating to the business of the Company,
including writings, equipment, processes, drawings, reports, manuals, invention
records, financial information, business plans, customer lists, the identity of,
or other facts relating to, prospective customers, inventory lists, arrangements
with suppliers and customers, computer programs, or other material embodying
trade secrets, customer or product information or technical or business
information of the Company. All such information, other than any information
that is in the public domain through no act or omission of Perlmutter or which
he is authorized to disclose, is referred to collectively as the "Company
Information." During and after the time that he provided services to the Company
as an employee, independent contractor or otherwise, Perlmutter shall not (i)
use or exploit in any manner the Company Information for himself or any person,
partnership, association, corporation or other entity other than the Company,
(ii) remove any Company Information, or any reproduction thereof, from the
possession or control of the Company or (iii) treat Company Information
otherwise than in a confidential manner, without the consent of the Company.
(b) All Company Information developed, created or
maintained by Perlmutter, alone or with others while employed by the Company or
during any other period that he provided services to the Company as an employee,
independent contractor or otherwise, and all Company Information maintained by
Perlmutter thereafter, shall remain at all times the exclusive property of the
Company. Perlmutter shall return to the Company all Company Information, and
reproductions thereof, whether prepared by him
8
<PAGE> 9
or others, that are in his possession immediately upon the completion of his
employment by the Company, except to the extent such Information is required to
perform the duties outlined in Section 2.2 of this Agreement.
9. PERFORMANCE. The parties acknowledge that the performance
of the promises of each are expressly contingent upon the fulfillment and
satisfaction of the obligations of the other party as set forth in this
Agreement.
10. ACKNOWLEDGMENT OF SEPARATION. Perlmutter hereby agrees and
recognizes that as of the Termination Date his employment relationship with
Company will be permanently and irrevocably severed and that Company will have
no obligation to re-employ him in the future.
11. NON-ADMISSION. Perlmutter agrees and acknowledges that
this Agreement is not and shall not be construed to be an admission of any
violation of any federal, state or local statute or regulation, or of any duty
owed by Company.
12. CERTIFICATION. Perlmutter hereby certifies that he has
read the terms of this Separation of Employment Agreement and General Release
and Consulting Agreement, that he has been advised by Company to consult with an
attorney prior to executing this Agreement, that he has had an opportunity to do
so, and that he understands this Agreement's terms and effects. Perlmutter
further certifies that Company has not made any representations to Perlmutter
concerning this Separation of Employment Agreement and General Release and
Consulting Agreement other than those contained in this Agreement.
13. NON-DISPARAGEMENT. Perlmutter will not issue any communication
or statement, written or otherwise, that disparages, criticizes or otherwise
reflects adversely upon the Company, except if testifying truthfully under oath
pursuant to subpoena or other legal process. In the event Perlmutter is
compelled by subpoena process to testify, he will provide, to the extent
possible, written notice to the Company in
9
<PAGE> 10
time to permit the Company to seek an appropriate protective order or such other
relief as may be necessary to enforce the Company's rights under this Agreement.
14. EXECUTION. Perlmutter acknowledges that he is informed
that prior to entering into this Agreement, he has a period of 21 days to
consider this Agreement. He also understands that he has the right to revoke
this Agreement for a period of 7 days following the signing (execution) of this
Agreement by giving written notice to DBT Online, Inc., c/o Human Resources
Director, Kevin Barr at 4530 Blue Lake Drive, Boca Raton, Florida 33431.
15. SEVERABILITY. If any provision of this Separation of
Employment Agreement and General Release and Consulting Agreement is deemed
invalid, the remaining provisions shall not be affected.
16. ENTIRE AGREEMENT. This Agreement, including its referenced
attachments, contains the entire agreement between the parties and its terms are
contractual and are not a mere recital. The parties expressly acknowledge that
there exist no oral agreements or understandings that vary the terms or meaning
of this Agreement. This Agreement supersedes and annuls any and all other
agreements, contracts, promises, representations, whether oral or written, made
by or on behalf of the parties, their personal representatives and/or their
successors and assigns, including but not limited to his Employment Agreement
dated August 4, 1997 and Kevin A. Barr's letter of understanding to Perlmutter
dated May 18, 1998, and all amendments thereto, unless they are expressly
incorporated herein. However, Sections 11, 12, and 13 of the Reorganization
Agreement and Plan of Merger dated August 4, 1997, remain in full force and
effect.
17. ARBITRATION. Perlmutter and the Company agree that all
disputes concerning the terms of this Agreement will be subject solely to
binding arbitration except as otherwise specifically provided. The arbitrator
selection and conduct of the
10
<PAGE> 11
arbitration will be pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. The place of the arbitration will be Palm Beach County,
Florida.
IN WITNESS WHEREOF, and intending to be legally bound hereby, parties
have executed the foregoing Separation of Employment Agreement and General
Release and Consulting Agreement this 7th day of January, 2000.
DBT ONLINE, INC.
/s/ Andrew J. Perlmutter By: /s/ Kevin Barr
- --------------------------- -------------------------
Andrew J. Perlmutter
11
<PAGE> 12
EXHIBIT 2
1. Laptop computer during the Consulting Term
2. Use of pager during the Consulting Term
<PAGE> 13
AMENDMENT
TO
SEPARATION OF EMPLOYMENT AGREEMENT AND
GENERAL RELEASE AND CONSULTING AGREEMENT
WHEREAS, Andrew J. Perlmutter (hereinafter "Perlmutter" and DBT Online,
Inc., a Pennsylvania Corporation (hereinafter the "Company") entered into a
Separation of Employment Agreement and General Release and Consulting Agreement,
dated January 7, 2000 (the Agreement);
WHEREAS, the Company's advisors have determined that certain provisions
of the Agreement could be detrimental to the Company's ability to obtain pooling
of interest accounting treatment in connection with a contemplated business
combination;
WHEREAS, the parties hereto now desire to amend the Agreement to
address the pooling of interest concerns;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties, intending to be legally bound, agree as follows:
1. The last sentence of Section 2.1 of the Agreement is hereby amended,
in its entirely, to read as follows:
"During the Consulting Term, Perlmutter shall be considered a
Key Advisor, as defined under the Company's Stock Option Plan, for
purposes of determining the time during which stock options granted
under the Stock Option Plan become and continue to be exercisable, and
an "indemnified representative" for purposes of Article VIII of the
Company's Amended Bylaws."
2. Subsection (f) of Section 3 of the Agreement is hereby amended, in
its entirety, to read as follows:
"With respect to stock options granted to Perlmutter on August
4, 1997, October 6, 1997, July 22, 1998, and August 2, 1999, the
parties agree that such stock options shall become and continue to be
exercisable in accordance with their terms."
3. Exhibit 1 to the Agreement is deleted in its entirety.
4. Except as expressly amended hereby, the terms of the Agreement shall
continue in full force and effect.
<PAGE> 14
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties have executed this Amendment to the Agreement this 13th day of February,
2000.
DBT ONLINE, INC.
/s/ Andrew J. Perlmutter
- --------------------------------
Andrew J. Perlmutter
By:
-----------------------------------
<PAGE> 1
Exhibit 10(xviii)
SEPARATION OF EMPLOYMENT AGREEMENT AND
GENERAL RELEASE AND CONSULTING AGREEMENT
WHEREAS Timothy M. Leonard (hereinafter "Leonard") has been employed by
DBT Online, Inc., a Pennsylvania corporation (hereinafter the "Company").
WHEREAS, the parties hereto desire to set forth their agreements with
respect to the termination of Leonard's employment and desire to assure the
continued service of Leonard upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the covenants, conditions,
representations and acknowledgments, and in reliance upon the agreements and
releases of each of the parties as set forth in this Agreement, the parties,
intending to be legally bound, agree as follows:
1. TERMINATION OF EMPLOYMENT Leonard shall be employed by the Company
from the date hereof until February 15, 2000, unless another date is mutually
agreed upon by the parties, upon which Leonard's employment with the Company
shall be terminated (the "Termination Date"). Through the Termination Date
Leonard agrees to perform his assignment in a professional manner and in the
best interests of the Company, understanding that he may take some time off for
reasonable job search. Specifically, Leonard will be responsible for closing the
1999 books, overseeing the year end audit and otherwise performing customary and
normal duties of the Chief Financial Officer. The Company and Leonard
acknowledge that the employment of Leonard by the Company, and all rights and
obligations of any nature of the Company and Leonard with respect to such
employment, will be duly terminated effective the Termination Date. Leonard
further acknowledges and agrees that payments made or to be made and benefits
provided or to be provided hereunder are in lieu of any and all compensation and
benefits of any nature whatsoever due to Leonard under any other agreement or
arrangement (whether written or oral) between or binding upon the Company and
Leonard.
<PAGE> 2
2. CONSULTING ARRANGEMENT. In consideration of Leonard's execution of
this Agreement and his agreement to be legally bound by its terms, the Company
desires to enter into a consulting relationship with Leonard, in accordance with
the terms and conditions hereinafter set forth.
2.1 CONSULTING TERM. Leonard shall perform consulting services
for the Company for the term beginning on the Termination Date and ending on the
one year anniversary of the Termination Date and, provided Leonard has performed
his employment and consulting duties in a professional manner and has comported
himself in the best interest of the Company, for an additional twelve month
consulting term, on such terms and conditions as the Chief Executive Officer and
the Board of Directors shall determine (collectively the "Consulting Term"). If
Leonard is not so performing or comporting, the Company shall provide him with
written notice thereof and reasonable time to cure. During the Consulting Term,
Leonard will be considered a "Key Advisor," as defined under the Company's Stock
Option Plan, for purposes of determining the time during which vested stock
options granted pursuant to the Stock Option Plan continue to be exercisable.
2.2 DUTIES AND RESPONSIBILITIES. During the Consulting Term,
Leonard shall provide consulting services to the Company as an independent
contractor and not as an employee of the Company. Leonard shall at all times
during the Consulting Term act as an independent contractor and during such
period nothing hereunder shall create or imply a relationship of
employer-employee between the Company and Leonard. Leonard shall provide
consultation as requested by the Company, at the times and on the occasions
reasonably requested by the Company and reasonably convenient to Leonard. During
the Consulting Term, Leonard shall at all times comply with all reasonable
policies and procedures adopted by the Company, including without limitation the
procedures and policies adopted by the Company regarding conflicts of interest
and confidentiality of the Company's business information.
2
<PAGE> 3
2.3 EXTENT OF SERVICE. During the Consulting Term, Leonard
agrees to devote such time, attention and energy as is necessary to fulfill his
duties and responsibilities as a consultant under Section 2.2 hereof.
3. CONSIDERATION. In full consideration of and in exchange for
Leonard's execution of this Separation of Employment Agreement and General
Release and Consulting Agreement, and his agreement to be legally bound by its
terms, Company will provide Leonard with the following payments or
consideration, to which he would not otherwise be entitled:
(a) From the date hereof until the Termination Date, the Company
shall compensate Leonard on the same basis as Leonard is
compensated on the date hereof.
(b) For all services rendered by Leonard as a consultant to the
Company during the Consulting Term, the Company shall pay
Leonard $12,916.66 per month for the period beginning on the
Termination Date and ending on the one year anniversary of the
Termination Date (the "First Anniversary Date") payable on the
15th of each month beginning February 15, 2000 (until a total
of $155,000 is paid), and for any period after the First
Anniversary Date such compensation in such form as the Chief
Executive Officer and the Board of Directors shall determine.
(c) Leonard will receive his bonus for 1999 payable in 2000,
provided that the Board authorizes a bonus for any officer of
the Company. Leonard will receive no bonus for any years after
1999. He will
3
<PAGE> 4
also receive a special $15,000 net transition payment payable
February 4, 2000.
(d) During the Consulting Term, Leonard shall be solely
responsible for the payment of all federal, state and local
taxes or contributions imposed or required under unemployment
insurance, social security and income tax laws that pertain to
the compensation paid or benefits provided to Leonard for his
performance of consulting services.
(e) Leonard agrees that, to the extent there are any taxes to
Leonard or the Company arising from the payments made by the
Company pursuant to this section, he shall be exclusively
responsible for any payment of federal and state taxes on the
payments set forth above.
(f) The Company agrees to provide extended family coverage under
its insured health and dental plan to Leonard to the extent
that he does not have coverage under another plan from the
Termination Date through the First Anniversary Date, at which
time Leonard will be offered standard COBRA coverage on the
same basis and for the same period as other participants and
beneficiaries. Leonard will notify the Company at the
commencement of any coverage under another health and/or
dental insurance plan. To the extent that Leonard does not
have coverage under another plan, and remains covered under
the Company's medical and dental plan, the Company further
agrees to reimburse Leonard for medical
4
<PAGE> 5
expenses accrued from the Termination Date through the First
Anniversary Date that are not covered by the Company's insured
health and/or dental plan, including participant premium
costs, copayments and deductibles, on the same basis and to
the same extent such reimbursements are provided to senior
executives of the Company.
(g) As of the Termination Date, the Company will assume the
obligations under Leonard's automobile lease at Company's
expense, including Leonard's personal guarantee of the lease,
but Leonard will have use of this automobile through up to
July 24, 2000. Additionally, the Company will pay for all
insurance, maintenance, and repairs in this period. Leonard
will return the automobile to the Company by the end of that
period.
(h) With respect to stock options granted to Leonard on January
13, 1997, the parties agree that Leonard will vest on the
vesting date in those options that are first exercisable on or
before January 13, 2000. With respect to stock options granted
to Leonard on June 4, 1997, the parties agree that, provided
Leonard has performed his employment and consulting duties in
a satisfactory manner and has comported himself in the best
interest of the Company (subject to the notice and right to
cure provisions provided in Section 2.1 hereof), Leonard will
vest on the vesting date in those options that are first
exercisable on or before June 4, 2000. Any of such stock
5
<PAGE> 6
options that are first exercisable on June 4, 2000 and that do
not vest in accordance with the preceding sentence shall be
forfeited and terminate prior to June 4, 2000. If Leonard is
not so performing or comporting the Company shall provide him
with written notice and reasonable time to cure. The terms
governing these options are set forth in the Amended Stock
Option Grant Letters executed contemporaneously with this
Agreement and attached hereto as Exhibit 1. The parties
further agree that Leonard will not be entitled to exercise or
vest in any further stock options (including those granted to
Leonard on August 2, 1999) as this Agreement terminates those
options as of the date of this Agreement.
(i) The Company shall promptly reimburse Leonard, as expended, for
all reasonable out-of-pocket expenses of selling his primary
residence in Parkland, Florida, including any brokerage
commission on the sale; provided that the Company will not
reimburse Leonard for any loss on the sale of his residence or
moving expenses.
(j) Leonard agrees that he is still subject to and continues to be
governed by the Key Person Employment Agreement,
Confidentiality Agreement and Covenant Against Competition
that he originally signed on January , 1997, to the extent
that those terms are not inconsistent with this Agreement.
Leonard further
6
<PAGE> 7
agrees he will not solicit employees of the Company through
the end of the Consulting Term.
Except as set forth in this Agreement, it is expressly agreed and
understood that after the Termination Date the Company does not have, and will
not have, any obligation to provide Leonard at any time in the future with any
payments, bonuses, benefits or considerations other than those recited in
paragraph 3.
4. DEFINITION OF COMPANY. For purposes of this Agreement, the term
"Company" shall include DBT Online, Inc., and its parents, subsidiaries,
affiliates, and its and their officers, directors, shareholders, employees,
agents, successors, assigns, heirs, executors, and administrators and any
individual or organization related to DBT Online, Inc., and against whom or
which Leonard could maintain a claim.
5. RELEASE. In consideration of and in exchange for the promises of
Company set forth above, Leonard on behalf of himself and his heirs, executors
and administrators, intending to be legally bound, hereby permanently and
irrevocably accepts termination by the Company according to the terms set forth
in this Agreement, and releases and discharges Company from any and all causes
of actions, suits, debts, claims and demands whatsoever, which Leonard had, has,
or may have had up to and including the effective date of this Agreement, and
will as of the Termination Date provide the Company as well a similar release
and discharge up to and including the Termination Date, including those which
are based on or are in any way related to his former employment with Company or
the termination of that employment, excepting disputes relating to the Company's
independently administered 401(k) plan. Leonard's release of claims and actions
includes, but is not limited to, actions arising under the Age Discrimination in
Employment Act (ADEA); Title VII of the Civil Rights Act of 1964, as
7
<PAGE> 8
amended; the Americans with Disabilities Act (ADA); the Fair Labor Standards Act
(FLSA); the Employee Retirement Income Security Act, as amended (ERISA); the
Family and Medical Leave Act (FMLA); the Florida Civil Rights Act of 1992, as
amended (FCRA); Florida Statutes Chapter 448.101, ET SEQ., commonly known as the
Florida Private Whistleblower Act; and the common law, such as actions in tort
or contract. Leonard also promises not to seek any personal relief whether legal
or equitable in any proceeding brought by any agency or any other person.
6. RETURN OF PROPERTY. Leonard agrees to promptly return all Company
property, excluding the property contained on the itemized list attached hereto
as Exhibit 2, to Kevin Barr, Human Resources Director of DBT Online, Inc.
7. PERFORMANCE. The parties acknowledge that the performance of the
promises of each are expressly contingent upon the fulfillment and satisfaction
of the obligations of the other party as set forth in this Agreement.
8. ACKNOWLEDGMENT OF SEPARATION. Leonard hereby agrees and recognizes
that as of the Termination Date his employment relationship with Company will be
permanently and irrevocably severed and that Company will have no obligation to
re-employ him in the future.
9. NON-ADMISSION. Leonard agrees and acknowledges that this Agreement
is not and shall not be construed to be an admission of any violation of any
federal, state or local statute or regulation, or of any duty owed by Company.
10. CERTIFICATION. Leonard hereby certifies that he has read the terms
of this Separation of Employment Agreement and General Release and Consulting
Agreement, that he has been advised by Company to consult with an attorney prior
to executing this Agreement, that he has had an opportunity to do so, and that
he understands this Agreement's terms and effects. Leonard further certifies
that Company has not made any representations to Leonard concerning this
Separation of Employment
8
<PAGE> 9
Agreement and General Release and Consulting Agreement other than those
contained in this Agreement.
11. NON-DISPARAGEMENT. Leonard will not issue any communication or
statement, written or otherwise, that disparages, criticizes or otherwise
reflects adversely upon the Company, except if testifying truthfully under oath
pursuant to subpoena or other legal process. In the event Leonard is compelled
by subpoena process to testify, he will provide, to the extent possible, written
notice to the Company in time to permit the Company to seek an appropriate
protective order or such other relief as may be necessary to enforce the
Company's rights under this Agreement.
12. EXECUTION. Leonard acknowledges that he is informed that prior to
entering into this Agreement, he has a period of 21 days to consider this
Agreement. He also understands that he has the right to revoke this Agreement
for a period of 7 days following the signing (execution) of this Agreement by
giving written notice to DBT Online, Inc., c/o Human Resources Director, Kevin
Barr at 4530 Blue Lake Drive, Boca Raton, Florida 33431.
13. SEVERABILITY. If any provision of this Separation of Employment
Agreement and General Release and Consulting Agreement is deemed invalid, the
remaining provisions shall not be affected.
14. ENTIRE AGREEMENT. This Agreement, including its referenced
attachments, contains the entire agreement between the parties and its terms are
contractual and are not a mere recital. The parties expressly acknowledge that
there exist no oral agreements or understandings that vary the terms or meaning
of this Agreement. This Agreement supersedes and annuls any and all other
agreements, contracts, promises, representations, whether oral or written, made
by or on behalf of the parties, their personal representatives and/or their
successors and assigns unless they are expressly incorporated herein.
9
<PAGE> 10
15. ARBITRATION. Leonard and the Company agree that all disputes
concerning the terms of this Agreement will be subject solely to binding
arbitration. The arbitrator selection and conduct of the arbitration will be
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association. The place of the arbitration will be Palm Beach County, Florida.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties have executed the foregoing Separation of Employment Agreement and
General Release and Consulting Agreement this 12th day of January, 2000.
DBT ONLINE, INC.
/s/ Timothy M. Leonard By:
- ---------------------------------- -------------------------------------
Timothy M. Leonard
10
<PAGE> 11
EXHIBIT 2
1. Desktop computer
2. Printer
3. Monitor
4. Fax machine
5. Laptop computer
<PAGE> 12
DBT ONLINE, INC.
STOCK OPTION PLAN
AMENDED STOCK OPTION GRANT LETTER
DATE OF GRANT: JANUARY 13, 1997
This Agreement made this 12th day of January, 2000 constitutes an amendment to
the Incentive Stock Option Agreement (the "Grant Letter") between DBT Online,
Inc. (the "Company") and Timothy M. Leonard (the "Optionee") evidencing the
grant made to the Optionee on January 13, 1997 under the terms of the DBT
Online, Inc. Stock Option Plan (the "Plan"). All capitalized terms not defined
herein shall have the meaning as defined in the Grant Letter or the Plan, as the
case may be.
The Company and the Optionee, intending to be legally bound hereby, agree as
follows:
1 . Section 3 of the Grant Letter is hereby amended by adding the following
sentence at the end the thereof:
Anything contained herein to the contrary notwithstanding, the Optionee
acknowledges that the Option will cease to be treated as an "incentive
stock option" under section 422 of the Code if it is not exercised
within 90 days of the Termination Date, as such term is defined in the
agreement between the Company and the Optionee entered into on the date
first above written (the "Consulting Agreement")
2. Section 4 of the Grant Letter is hereby amended by adding the following
sentence, flush to the margin, at the end thereof:
Anything contained herein to the contrary notwithstanding, the Optionee
shall be considered a Key Advisor during the Consulting Term, as such
term is defined in the Consulting Agreement, and as such, the
references in subsections (b) and (c) above to the termination of the
Optionee's employment with the Company shall be read instead to mean
the termination of the Optionee's services as a Key Advisor to the
Company.
3. Except as expressly amended hereby, the terms of the Grant letter shall
continue in full force and effect.
<PAGE> 13
4. This Agreement shall be effective and the Option shall be amended as provided
herein as of the date first above written.
DBT Online Inc.
By: /s/
-------------------------------
Title: President & CEO
PARTICIPANT
/s/ Timothy M. Leonard
-----------------------------------
Timothy M. Leonard
2
<PAGE> 14
DBT ONLINE, INC.
STOCK OPTION PLAN
AMENDED STOCK OPTION GRANT LETTER
DATE OF GRANT: JUNE 4, 1997
This Agreement made this 12th day of January, 2000 constitutes an amendment to
the Incentive Stock Option Agreement (the "Grant Letter") between DBT Online,
Inc. (the "Company") and Timothy M. Leonard (the "Optionee") evidencing the
grant made to the Optionee on June 4, 1997 under the terms of the DBT Online,
Inc. Stock Option Plan (the "Plan"). All capitalized terms not defined herein
shall have the meaning as defined in the Grant Letter or the Plan, as the case
may be.
The Company and the Optionee, intending to be legally bound hereby, agree as
follows:
1 . Section 3 of the Grant Letter is hereby amended by adding the following
sentence at the end the thereof:
Anything contained herein to the contrary notwithstanding, the Optionee
acknowledges that the Option will cease to be treated as an "incentive
stock option" under section 422 of the Code if it is not exercised
within 90 days of the Termination Date, as such term is defined in the
agreement between the Company and the Optionee entered into on the date
first above written (the "Consulting Agreement").
2. Section 4 of the Grant Letter is hereby amended by adding the following
sentence, flush to the margin, at the end thereof:
Anything contained herein to the contrary notwithstanding, the Optionee
shall be considered a Key Advisor during the Consulting Term, as such
term is defined in the Consulting Agreement, and as such, the
references in subsections (b) and (c) above to the termination of the
Optionee's employment with the Company shall be read instead to mean
the termination of the Optionee's services as a Key Advisor to the
Company.
3. Section 5 of the Grant Letter is hereby amended by adding the following
sentence, flush to the margin, at the end thereof:
Anything contained herein to the contrary notwithstanding, the Option
shall vest as provided above if on the applicable vesting date the
Optionee continues to be either an employee of, or Key Advisor to, the
Company.
<PAGE> 15
4. Except as expressly amended hereby, the terms of the Grant letter shall
continue in full force and effect.
5. This Agreement shall be effective and the Option shall be amended as provided
herein as of the date first above written.
DBT Online Inc.
By: /s/
-------------------------------
Title: President & CEO
PARTICIPANT
/s/ Timothy M. Leonard
-----------------------------------
Timothy M. Leonard
2
<PAGE> 16
AMENDMENT
TO
SEPARATION OF EMPLOYMENT AGREEMENT AND
GENERAL RELEASE AND CONSULTING AGREEMENT
WHEREAS, Timothy M. Leonard (hereinafter "Leonard") and DBT Online,
Inc., a Pennsylvania Corporation (hereinafter the "company") entered into a
Separation of Employment Agreement and General Release and Consulting Agreement,
dated January 7, 2000 (the "agreement");
WHEREAS, the parties hereto now desire to amend the;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties, intending to be legally bound, agree as follows:
1. The last sentence of Section 2.1 of the Agreement is hereby
amended, in its entirely, to read as follows:
"During the Consulting Term, Leonard shall be considered a
"Key Advisor", as defined under the Company's Stock Option Plan, for
purposes of determining the time during which stock options granted
under the Stock Option Plan become and continue to be exercisable."
2. Subsection (h) of Section 3 of the Agreement is hereby amended, in
its entirety, to read as follows:
"With respect to stock options granted to Leonard on January
13, 1997, June 4, 1997, and August 2, 1999, the parties agree that such
stock options shall become and continue to be exercisable in accordance
with their terms".
3. Exhibit 1 to the Agreement is deleted in its entirety.
4. Except as expressly amended hereby, the terms of the Agreement shall
continue in full force and effect.
<PAGE> 17
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties have executed this Amendment to the Agreement this 11th day of
February, 2000.
/s/ Timothy M. Leonard DBT ONLINE, INC.
- --------------------------------
Timothy M. Leonard
By: /s/ J. Henry
--------------------------------
2
<PAGE> 1
EXHIBIT 10(xix)
SEPARATION OF EMPLOYMENT AGREEMENT AND
GENERAL RELEASE AND CONSULTING AGREEMENT
WHEREAS Charles A. Lieppe (hereinafter the "Consultant") has been employed
by DBT Online, Inc., a Pennsylvania Corporation (hereinafter the "Company"),
and Consultant's former position as President, CEO, and Director with Company
has ceased effective August 10, 1999.
WHEREAS, the parties hereto desire to set forth their agreements with
respect to the termination of Consultant's employment and desire to assure the
continued service of Consultant upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the covenants, conditions,
representations and acknowledgements, and in reliance upon the agreements and
releases of each of the parties as set forth in this Agreement, the parties,
intending to be legally bound, agree as follows:
1. TERMINATION OF EMPLOYMENT. The Company and Consultant
acknowledge that the employment of Consultant by the Company, and all rights
and obligations of any nature of the Company and Consultant with respect to
such employment, were and are duly terminated effective August 10, 1999.
Consultant further acknowledges and agrees that payments made or to be made and
benefits provided or to be provided hereunder are in lieu of any and all
compensation and benefits of any nature whatsoever due to Consultant under any
other agreement or arrangement (whether written or oral) between or binding
upon the Company and Consultant.
<PAGE> 2
2. CONSULTING ARRANGEMENT. In consideration of Consultant's
execution of this Agreement and his agreement to be legally bound by its terms,
the Company desires to enter into a consulting relationship with Consultant, in
accordance with the terms and conditions hereinafter set forth.
2.1 TERM. Consultant shall perform consulting services for the
Company for the term beginning on August 11, 1999 and ending on April 10, 2001
(the "Consulting Term").
2.2 DUTIES AND RESPONSIBILITIES. During the Consulting Term,
Consultant shall provide consulting services to the Company as an independent
contractor and not as an employee of the Company. Consultant shall at all times
during the Consulting Term act as an independent contractor and during such
period nothing hereunder shall create or imply a relationship of
Company-employee between the Company and Consultant. Consultant shall provide
consultation as requested by the Company, at the times and on the occasions
reasonably requested by the Company and reasonably convenient to Consultant.
During the Consulting Term, Consultant shall at all times comply with all
reasonable policies and procedures adopted by the Company, including without
limitation the procedures and policies adopted by the Company regarding
conflicts of interest and confidentiality of the Company's business information.
2.3 EXTENT OF SERVICE. During the Consulting Term, Consultant agrees
to devote such time, attention and energy as is necessary to fulfill his duties
and responsibilities as a consultant under Section 2.2 hereof.
2
<PAGE> 3
3. CONSIDERATION. In full consideration of and in exchange for
Consultant's execution of this Separation of Employment Agreement and General
Release and Consulting Agreement, and his agreement to be legally bound by its
terms, Company will provide Consultant with the following payment or
consideration to which he would not otherwise be entitled:
(a) For all services rendered by Consultant as a consultant to the
Company during the Consulting Term, the Company shall pay
Consultant $20,833.33 per month through December 31, 2000 in
accordance with the Company's regular payroll schedule.
(b) Consultant will receive his bonus for all of 1999, provided that
the Board authorizes a bonus for senior management. Consultant
will receive no bonus for any years after 1999.
(c) During the Consulting Term, Consultant shall be solely
responsible for the payment of all federal, state and local taxes
or contributions imposed or required under unemployment
insurance, social security and income tax laws that pertain to
the compensation paid or benefits provided to Consultant for his
performance of consulting services.
(d) Consultant agrees that, to the extent there are any tax
consequences arising from the payments made by the Company
pursuant to this section, he shall be exclusively responsible for
any payment of federal and state taxes on the payments set forth
above.
3
<PAGE> 4
(e) The Company agrees to provide extended family coverage under its
insured health plan to Consultant through December 31, 2000, at
which time Consultant will be offered standard COBRA coverage on
the same basis and for the same period as other participants and
beneficiaries. The Company further agrees to reimburse Consultant
for medical expenses accrued through December 31, 2000 that are
not covered by the insured health plan, including participant
premium costs, co-payments and deductibles, on the same basis and
to the same extent such reimbursements are provided to senior
executives of the Company.
(f) Consultant will be provided an automobile lease at Company's
expense for up to $700.00 per month until December 31, 1999.
Consultant's entitlement to an automobile lease will terminate
beginning January 1, 2000. If consultant elects, Company will
assign the lease to Consultant effective January 1, 2000.
(g) With respect to stock options granted to Consultant on August 15,
1997, the parties agree that Consultant has vested in those
options that were first exercisable on or before August 15, 1999.
The parties further agree that Consultant will not be entitled to
any stock options with vesting dates after August 15, 1999 as
this agreement terminates those options. The terms governing
these options are set forth in the Amended Nonqualified Stock
Option Grant Letter executed contemporaneously with this
Agreement and attached hereto as Exhibit 1.
4
<PAGE> 5
(h) Consultant agrees that he is still subject to and continues to be
governed by the Key Person Employment Agreement, Confidentiality
Agreement and Covenant Against Competition that he originally
signed on August 20, 19997 to the extent that those terms are not
inconsistent with this Agreement. A true and correct copy is
attached hereto as Exhibit 2. In addition, Consultant agrees not
to induce any employee of DBT Online, Inc., its parents,
subsidiaries, and affiliates to terminate his or her employment
with the Company or its affiliated entities.
Except as set forth in this agreement, it is expressly agreed and
understood that Company does not have, and will not have, any obligation to
provide Consultant at any time in the future with any payments, bonuses,
benefits or considerations other than those recited in paragraph 3.
4. DEFINITION OF COMPANY. For purposes of this Agreement, the term
"Company" shall include DBT Online, Inc., and its parents, subsidiaries,
affiliates, and its and their officers, directors, shareholders, employees,
agents, successors, assigns, heirs, executors, and administrators and any
individual or organization related to DBT Online, Inc., and against whom or
which Consultant could maintain a claim.
5. RELEASE. In consideration of and in exchange for the promises of
Company set forth above, Consultant on behalf of himself and his heirs,
executors and administrators, intending to be legally bound, hereby permanently
and irrevocably accepts termination by the Company according to the terms set
forth in this Agreement, and releases and discharges Company from any and all
causes of actions, suits, debts, claims and demands
5
<PAGE> 6
whatsoever, which Consultant had, has, or may have had up to and including the
effective date of this Agreement, including those which are based on or are in
any way related to his former employment with Company or the termination of
that employment, excepting disputes relating to the Company's independently
administered 401(k) plan. Consultant's release of claims and actions includes,
but is not limited to, actions arising under the Age Discrimination in
Employment Act (ADEA); Title VII of the Civil Rights Act of 1964, as amended;
the Americans with Disabilities Act (ADA); the Fair Labor Standards Act (FLSA);
the Employee Retirement Income Security Act, as amended (ERISA); the Family and
Medical Leave Act (FMLA); the Florida Civil Rights Act of 1992, as amended
(FCRA); Florida Statutes Chapter 448.101, ET SEQ., commonly known as the
Florida Private Whistleblower Act; and the common law, such as actions in tort
or contract. Consultant also promises not to seek any personal relief whether
legal or equitable in any proceeding brought by any agency or any other person.
6. RETURN OF PROPERTY. In addition to the Stipulation of Paragraph 5,
Consultant agrees to immediately return all Company property, including but not
limited to the property contained on the itemized list attached hereto as
Exhibit 3, to Kevin Barr, Human Resources Director of DBT Online, Inc.
7. PERFORMANCE. The parties acknowledge that the performance of the
promises of each are expressly contingent upon the fulfillment and satisfaction
of the obligations of the other party as set forth in this Agreement.
8. ACKNOWLEDGEMENT OF SEPARATION. Consultant hereby agrees and
recognizes that as of August 10, 1999 his employment relationship with Company
was permanently and irrevocably severed and that Company has no obligation to
re-employ him in the future.
6
<PAGE> 7
9. NON-ADMISSION. Consultant agrees and acknowledges that this agreement
is not and shall not be construed to be an admission of any violation of any
federal, state or local statute or regulation, or of any duty owned by Company.
10. CERTIFICATION. Consultant hereby certifies that he has read the terms
of this Separation of Employment Agreement and General Release and Consulting
Agreement, that he has been advised by Company to consult with an attorney
prior to executing this Agreement, that he has had an opportunity to do so, and
that he understands this Agreement's terms and effects. Consultant further
certifies that Company has not made any representations to Consultant
concerning this Separation of Employment Agreement and General Release and
Consulting Agreement other than those contained in this Agreement.
11. EXECUTION. Consultant acknowledges that he is informed that prior to
entering into this Agreement, he has a period of 21 days to consider this
Agreement. He also understands that he has the right to revoke this Agreement
for a period of 7 days following the signing (execution) of this Agreement by
giving written notice to the DBT Online, Inc., c/o Human Resources Director,
Kevin Barr at 4530 Blue Lake Drive, Boca Raton, Florida 33431.
12. SEVERABILITY. If any provision of this Separation of Employment
Agreement and General Release and Consulting Agreement is deemed invalid, the
remaining provisions shall not be affected.
13. ENTIRE AGREEMENT. This Agreement, including its referenced
attachments, contains the entire agreement between the parties and its terms
are contractual and are not a mere recital. The parties expressly acknowledge
that there exist no oral agreements or understandings that vary the terms or
meaning of this Agreement. This Agreement supersedes and annuls any
7
<PAGE> 8
and all other agreements, contracts, promises, representations, whether oral or
written, made by or on behalf of the parties, their personal representatives
and/or their successors and assigns unless they are expressly incorporated
herein.
14. ENFORCEMENT. In the event that any party to this Agreement is forced
to institute legal proceedings for breach of the terms of this Agreement, it is
agreed that any trial shall be held in Miami-Dade County, Florida. This
Agreement shall be interpreted in accordance with the laws of the State of
Florida, except that no effect shall be given to any choice-of-law principle
that would require application of the substantive law of a state other than
Florida. The prevailing party in any action regarding the breach of the terms
of this Agreement shall be entitled to its costs and reasonable attorney's fees,
up to and including any appeals.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have executed the foregoing Separation of Employment Agreement and General
Release and Consulting Agreement this 3rd day of January, 2000.
DBT ONLINE, INC.
/s/ Charles A. Lieppe By: /s/ Kevin Barr
- ------------------------ -----------------------
Charles A. Lieppe
8
<PAGE> 9
EXHIBIT 1
DBT ONLINE, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
AMENDED NONQUALIFIED STOCK OPTION GRANT LETTER
Date of Grant: August 15, 1997
DBT Online, Inc., a Pennsylvania corporation (the "Company"), has adopted
the DBT Online, Inc. Amended and Restated Stock Option Plan (the "Plan") for
officers, directors and employees of the Company and its subsidiaries and Key
Advisors designated by the committee to administer the Plan (the "Committee").
This Nonqualified Stock Option Grant Letter evidences the grant made to Charles
A. Lieppe (the "Optionee") on August 15, 1997 as amended to reflect a stock
split on September 16, 1997 and consistent with certain terms of the Separation
of Employment Agreement and General Release and Consulting Agreement. All
capitalized terms not defined herein shall have the meaning as defined under
the Plan.
The Company and the Optionee, intending to be legally bound hereby, agree
as follows:
1. OPTION GRANT. The Company has granted to the Optionee effective as of
the date of grant first stated above (the "Date of Grant"), the right and
option (the "Option") to purchase 350,000 shares of its common stock, $.10 par
value (the "Shares").
2. OPTION PURCHASE PRICE. The purchase price of each of the Shares
covered by the Option (the "Option Purchase Price") shall be $23.625.
3. OPTION TERM. The Option, to the extent that it as not theretofore
been exercised, shall automatically expire on the earliest to occur of the
following events:
(a) except as provided in subsection (b) below, upon the completion of a
period of ninety (90) days following the expiration of the Consulting Term
on April 10, 2001;
(b) upon the first anniversary of the date of death or disability of the
Optionee (while he was an employee or otherwise within the permissible
period of exercise in subsection (a) above), the Option to be exercisable
during such period by the Optionee or the Optionee's executor or personal
representative, as applicable.
4. EXERCISABILITY OF OPTION. Subject to the terms, conditions and
limitations expressed herein, except as provided below, the Option shall be
exercisable as follows:
<PAGE> 10
Date Option Number of
First Exercisable Additional Shares
----------------- -----------------
August 15, 1997 100,000 Shares
February 15, 1998 62,500 Shares
August 15, 1998 62,500 Shares
February 15, 1999 62,500 Shares
August 15, 1999 62,500 Shares
The right to purchase Shares under the Option as provided above may be
exercised in a cumulative fashion; any right to purchase Shares becoming
exercisable on a given date shall remain exercisable until the expiration date
of the Option under Section 3.
5. TIME AND METHOD OF EXERCISE. Subject to the terms of Section 4
hereof, the Option may be exercised at a time, or from time to time, prior to
expiration (as defined in Section 3 hereof), by written notice to the Company
in the form prescribed by the Committee, stating the number of Shares with
respect to which the Option is being exercised. Such notice may instruct the
Company to deliver shares due upon the exercise to any registered broker or
dealer designated by the Company ("Designated Broker") in lieu of delivery to
the Optionee. Such instructions must designate the account into which the
Shares are to be deposited. Such written notice shall be accompanied by a
check, or the equivalent thereof acceptable to the Company, for the full Option
Purchase Price of the number of Shares being purchased.
6. ISSUANCE OF SHARES. The Company has registered on Form S-8 the shares
of stock issuable upon exercise of Optionee's stock options. The Company shall
not be required to sell or issue any Shares under any outstanding Option if, in
the opinion of the Committee, (a) the issuance of such Shares would constitute
a violation by the Optionee or the Company of any applicable law or regulation
of any governmental authority, or (b) the consent or approval of any
governmental body is necessary or desirable as a condition of, or in accordance
with, the issuance of such Shares.
7. CHANGE OF CONTROL. Upon a "Change of Control" (as defined in the
Plan), (i) the Company shall provide Optionee written notice of such Change of
Control and (ii) the Option shall automatically accelerate and become fully
exercisable. In addition, upon a Change of Control described in Section 7(b)(i)
of the Plan where the Company is not the surviving corporation (or survives
only as a subsidiary of another corporation), the Option shall be assumed or
replaced with a comparable option or right by the surviving corporation.
8. ADJUSTMENTS. If there is any change in the number or kind of shares of
the Company's common stock through the declaration of stock dividends, or
through a recapitalization, stock splits, or combinations or exchanges of such
shares, or merger,
-2-
<PAGE> 11
reorganization or consolidation of the Company, reclassification or change in
par value or by reason of any other extraordinary or unusual events, the number
of the shares subject to purchase hereunder and the price per share shall be
proportionately adjusted by the Committee to reflect any increase or decrease in
the number or kind of issued shares of the Company's common stock; provided,
however, that any fractional shares resulted from such adjustment shall be
eliminated.
9. NONASSIGNABILITY OF OPTION RIGHTS. This Option shall not be assigned or
transferred by the Optionee, except (i) by will or by the laws of descent or
distribution, (ii) to the Optionee's spouse or lineal descendant or to one or
more trusts for the benefit of such family members or to partnerships in which
such family members are the only partners provided that the Optionee receives no
consideration for such transfer and the terms of this Grant Letter immediately
prior to such transfer continue to apply without modification, and (iii) to the
extent permitted in any specific case by the Committee, in its sole discretion.
Any attempt to assign, transfer, pledge or dispose of the Option contrary to the
provision hereof, and the levy or any execution, attachment or similar process
upon the Option, shall be null and void and without effect.
10. NO RIGHTS OF SHAREHOLDERS. Neither the Optionee nor any personal
representative shall be, or have any of the rights and privileges of a
shareholder of the Company with respect to any Shares purchasable upon the
exercise of this Option, in whole or in part, prior to the date of exercise of
the Option.
11. NO OBLIGATION REGARDING CONSULTANT STATUS. Nothing contained in this
Agreement shall be deemed to require the Company to continue the Optionee's
relationship as a Key Advisor/consultant to the Company or to modify any
agreement between the Optionee and the Company relating thereto.
12. WITHHOLDING OF TAX. Whenever shares of stock are to be delivered upon
the exercise of an Option, the Company shall be entitled to require as a
condition of such delivery that the Optionee remit to the Optionee's employer
or, in appropriate cases, agree to remit to such employer when due, an amount
sufficient to satisfy any and all federal, state and local withholding tax
requirements relating thereto.
13. AMENDMENT OF OPTION. Options granted under the Plan may be amended by
the Committee at any time (i) if it determines, in its sole discretion, that
amendment is necessary or advisable in the light of any addition to or change in
the Code or regulations issued thereunder, or any federal or state securities
law or other law or regulation, which addition or change occurs after the grant
of the Option and applies to the Option; or (ii) with the consent of the
Optionee. Any such amendment shall be in writing and signed by the Company and
the Optionee.
14. BINDING EFFECT. Optionee hereby acknowledges receipt of a copy of the
Plan and agrees to be bound by all the terms and provisions thereof. The terms
of the Plan as it
3
<PAGE> 12
presently exists, and as it may hereafter be amended, are deemed incorporated
herein by reference, and any conflict between the terms of this Agreement and
the provisions of the Plan shall be resolved by the Committee, whose
determination shall be final and binding on all parties. In general, and except
as otherwise determined by the Committee, the provisions of the Separation of
Employment Agreement and General Release and Consulting Agreement shall be
deemed to supersede both the provisions of the Plan and this Amended Agreement
to the extent of any conflict between them.
15. GOVERNING LAW. The validity, construction, interpretation and effect of
this instrument shall exclusively be governed by and determined in accordance
with the law of the Commonwealth of Pennsylvania.
Attest: DBT ONLINE, INC.
/s/ By: /s/ Kevin Barr
- -------------------------------- ---------------------------------
Secretary Title: Vice President, Human Resources
-------------------------------
OPTIONEE
/s/ Charles A. Lieppe
-------------------------------------
Charles A. Lieppe
4
<PAGE> 13
EXHIBIT 2
Name: CHARLES A. LIEPPE
-------------------
KEY PERSON EMPLOYMENT AGREEMENT,
CONFIDENTIALITY AGREEMENT,
AND COVENANT AGAINST COMPETITION
I: INTRODUCTION
1. This Key Person Employment Agreement, Confidentiality Agreement, and
Covenant Against Competition are entered into between Database
Technologies, Inc. ("DBT") of Pompano Beach, Florida, and the undersigned
key employee effective on the date noted below.
2. The parties to this agreement understand that their hoped-for long-term
relationship requires the preservation of proprietary interests of DBT, its
confidential viability, and his ability to secure the financing necessary
for viability and growth. Both parties to this agreement acknowledge the
need for this protection of DBT's proprietary interests and confidential
information.
3. The key employee recognizes that DBT is engaged in developing and providing
computer data services. The purpose of this agreement is to protect
confidential information connected with DBT and its present and future
business opportunities.
II: KEY PERSON EMPLOYMENT AGREEMENT
1. The key employee and DBT hereby agree that the key employee is offered, and
now accepts, employment with DBT in such capacity and with such duties and
responsibilities as DBT hereafter may direct, and at a rate of compensation
to be periodically agreed upon by the parties.
2. The key employee agrees not to maintain any outside full-time or part-time
employment during his or her employment with DBT unless advance approval is
obtained from the key employee's supervisor.
EMPLOYEE INITIALS ____ Page 1
<PAGE> 14
III: CONFIDENTIALITY AGREEMENT
1. The term "confidential information" means any information or material
(whether or not owned or developed by DBT and whether or not developed by
the key employee) which is not generally known other than by DBT and
knowledge of which the key employee may obtain through any direct or
indirect contact with DBT. Confidential Information includes, but is not
limited to, any information relating to research, development, operating
system and application software, software and system methodology, hardware
platforms, business records and plans, financial statements, customer lists
and records, trade secrets, technical information, products, inventions,
product design information, pricing structure, discounts, cost computer
programs and listings, source codes, object codes, marketing plans,
marketing techniques, copyrights and other intellectual property, and any
proprietary information belonging to DBT.
2. Confidential Information does not include any information that both parties
specifically agree in writing not to be confidential and specifically state
in writing not to be subject to this Confidentiality Agreement. No such
writing is effective unless it specifically refers to this Confidentiality
Agreement by titles, name of parties, and date of effectiveness.
3. The key employee understands and acknowledges that all Confidential
Information has been developed or obtained by DBT by the investment of
significant time, effort and expense, and that Confidential Information is
a valuable, special, and unique asset of DBT.
4. Therefore, for good and valuable consideration including the mutual
opportunities attendant to DBT's continued employment of the key employee,
the key employee agrees to hold in confidence and to not disclose any
Confidential Information to any person or entity without the prior written
consent of the Board of Directors of DBT. This agreement applies to all
Confidential Information regardless of when the key employee learned of it
or will learn of it. It applies to Confidential Information now known to
the key employee and later to become known to the key employee.
5. Upon request of DBT, the key employee agrees to return to DBT all written
or other materials containing any Confidential Information and to certify
in writing that all such materials have been returned within five (5) days
of any such request.
6. The key employee agrees that during and after employment with DBT he/she
will not disclose or use any Confidential Information for any purpose
except for performing work assigned to him/her by DBT. The key employee
also agrees to abide by DBT's present and future policies protecting its
Confidential Information.
Employee Initials ____ Page 2
<PAGE> 15
7. The key employee agrees not to copy or modify any Confidential Information
without the prior written consent of DBT.
IV: COVENANT NOT TO COMPETE
1. The key employee agrees that he/she will not, during employment by DBT and
for a period of three (3) years thereafter, engage in any "prohibited
activity" in the "geographic territory" noted here. For the purposes of
this agreement, "prohibited activity" means involvement in any capacity,
directly or indirectly, whether as a proprietor, officer, director,
trustee, employee, agent, consultant, or advisor, in a business or activity
competitive in any way with the business of DBT. For the purposes of this
agreement, "geographic territory" means the entire United States and any
geographic area DBT may hereafter conduct or plan to conduct its business
while the key employee is employed by DBT and for three (3) years following
the conclusion of his/her work as an employee at DBT.
2. If any court finds that the key employee has violated any of the
restrictions of this agreement, then the three (3)-year period of
restriction shall automatically be extended. by the number of days that
he/she has been in violation of the restriction, or for three (3) full
years following the last date of any violation on his/her part, whichever
is longer.
V: REMEDIES AND ENFORCEMENT
1. The parties both recognize that any violation of this agreement will cause
irreparable harm and immeasurable damage to DBT. Therefore, upon any breach
of this agreement, DBT shall, in addition to its other remedies, be
entitled to injunctive relief. DBT would also be permitted in such an event
to seek all other available remedies including a claim for losses and
damages, including but not limited to all consequential damages and
punitive damages. It is agreed that should DBT prevail on any claim for a
breach of this agreement, it shall also be entitled to reasonable attorney
fees and costs. DBT shall also be entitled to an accounting and payment of
any gross compensation, commissions, enumerations, gross profits, and
benefits gained as a result of any breach of this agreement.
2. It is agreed that the laws of the State of Florida shall govern the
enforceability of agreement and all other factual and legal questions under
it. The key employee agrees to submit to jurisdiction before any state or
federal court of record either in the State of Florida or in the location
where any breach may occur at the election of DBT. The key employee waives
any right to raise questions of jurisdiction and venue in any action.
Employee Initials ____ Page 3
<PAGE> 16
3. This agreement sets forth the entire understanding of the parties regarding
confidentiality and the key employee's covenant not to compete. Any
amendments must be in writing and signed by both parties.
4. Should any position of this agreement be deemed unenforceable for any
reason, the enforceability and validity of the remainder of the agreement
shall not be affected. Should any particular covenant, restriction, or
promise be held to be unreasonable or unenforceable for any reason, then it
shall nonetheless be given effect and enforced to whatever maximum extent
would be reasonable and enforceable under the law.
In agreement hereto, the parties have executed this agreement as of the dates
noted below.
/s/ Charles A. Lieppe
- --------------------------------
Employee Name (printed)
/s/ Charles A. Lieppe
- --------------------------------
Employee Signature
/s/ Karen L. Kline
- --------------------------------
Witness to Employee Signature
8-20-97
- --------------------------------
Date
DATABASE TECHNOLOGIES, INC.
By: /s/
-----------------------------
Title: President
--------------------------
Date: 5-20-97
---------------------------
Employee Initials ____ Page 4
<PAGE> 17
EXHIBIT 3
1. a Toshiba Protege 7020 desktop computer
2. a HP Vectra VL400 printer
3. an Eizo 18.1 LCM monitor
<PAGE> 1
Exhibit 10(xx)
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
DBT ONLINE, INC.
DBT ACQUISITION, INC.
I.R.S.C., INC.
THE SHAREHOLDERS OF I.R.S.C., INC.
AND
CERTAIN OTHER PARTIES
DATED AS OF MAY 6, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1
THE MERGER...............................................................................................1
SECTION 1.1 THE MERGER.................................................................................1
SECTION 1.2 THE MERGER CONSIDERATION...................................................................2
SECTION 1.3 PLEDGED ASSETS.............................................................................2
SECTION 1.4 STOCK OPTIONS..............................................................................3
SECTION 1.5 CLOSING....................................................................................4
SECTION 1.6 EFFECT.....................................................................................4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.......................................................5
SECTION 2.1 CORPORATE EXISTENCE........................................................................5
SECTION 2.2 CAPITALIZATION; SHARE OWNERSHIP............................................................5
SECTION 2.3 SUBSIDIARIES; NO INTEREST IN OTHER ENTITIES................................................6
SECTION 2.4 AUTHORITY..................................................................................7
SECTION 2.5 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC.................................................7
SECTION 2.6 FINANCIAL STATEMENTS; BOOKS OF ACCOUNT.....................................................7
SECTION 2.7 ACCOUNTS RECEIVABLE........................................................................8
SECTION 2.8 EQUIPMENT..................................................................................8
SECTION 2.9 ABSENCE OF UNDISCLOSED LIABILITIES.........................................................8
SECTION 2.10 EXISTING CONDITION.........................................................................9
SECTION 2.11 PERSONAL PROPERTY.........................................................................10
SECTION 2.12 REAL PROPERTY.............................................................................10
SECTION 2.13 TAXES AND TAX RETURNS AND REPORTS.........................................................11
SECTION 2.14 LEGAL PROCEEDINGS; ETC....................................................................13
SECTION 2.15 COMPLIANCE WITH LAW.......................................................................13
SECTION 2.16 INSURANCE.................................................................................13
SECTION 2.17 CONTRACTS AND COMMITMENTS.................................................................14
SECTION 2.18 ADDITIONAL INFORMATION....................................................................15
SECTION 2.19 EMPLOYEE BENEFIT PLANS....................................................................16
SECTION 2.20 ENVIRONMENTAL MATTERS....................................................................19
SECTION 2.21 INTELLECTUAL PROPERTY MATTERS..............................................................20
SECTION 2.22 NO THIRD PARTY OPTIONS....................................................................21
SECTION 2.23 NO BROKERS OR FINDERS.....................................................................21
SECTION 2.24 SCHEDULES; DELIVERY OF DOCUMENTS; CORPORATE RECORDS.......................................21
SECTION 2.25 ECONOMIC RISK; SOPHISTICATION.............................................................22
SECTION 2.26 POOLING MATTERS...........................................................................23
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 2.27 COMPLIANCE WITH THE FAIR CREDIT REPORTING ACT AND FEDERAL TRADE
COMMISSION CONSENT ORDER..................................................................23
SECTION 2.28 CERTAIN AGREEMENTS AFFECTED BY MERGER.....................................................23
SECTION 2.29 COPIES OF DOCUMENTS.......................................................................23
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DBT...................................................................23
SECTION 3.1 CORPORATE EXISTENCE.......................................................................24
SECTION 3.2 CAPITALIZATION; SHARES....................................................................24
SECTION 3.3 AUTHORITY.................................................................................24
SECTION 3.4 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC................................................24
SECTION 3.5 SEC FILINGS...............................................................................24
SECTION 3.6 NO BROKERS OR FINDERS.....................................................................25
ARTICLE 4
CONDITIONS TO THE MERGER................................................................................25
SECTION 4.1 EXAMINATION OF FINANCIAL STATEMENTS.......................................................25
SECTION 4.2 NO MATERIAL ADVERSE CHANGE................................................................25
SECTION 4.3 CONSENTS AND APPROVALS....................................................................25
SECTION 4.4 POOLING AFFILIATES........................................................................25
SECTION 4.5 EMPLOYMENT AGREEMENTS.....................................................................25
SECTION 4.6 OPINIONS OF COUNSEL.......................................................................26
SECTION 4.7 POOLING MATTERS...........................................................................26
SECTION 4.8 TERMINATION OF CONSULTING AGREEMENT.......................................................26
SECTION 4.9 TERMINATION OF EMPLOYMENT AGREEMENT.......................................................26
ARTICLE 5
INDEMNIFICATION.........................................................................................26
SECTION 5.1 INDEMNIFICATION BY THE SHAREHOLDERS.......................................................26
SECTION 5.2 INDEMNIFICATION BY DBT....................................................................28
SECTION 5.3 SURVIVAL..................................................................................29
SECTION 5.4 INDEMNIFICATION PROCEDURE.................................................................29
SECTION 5.5 EXCEPTIONS TO LIMITATIONS.................................................................31
SECTION 5.6 PAYMENT OF INDEMNIFICATION OBLIGATIONS, RIGHT TO SET OFF..................................31
ARTICLE 6........................................................................................................31
SECTION 6.1 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE...........................................31
SECTION 6.2 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING DATE.............................32
SECTION 6.3 COOPERATION ON TAX MATTERS.................................................................32
SECTION 6.4 CERTAIN TAXES..............................................................................33
ARTICLE 7
COVENANT NOT TO COMPETE.................................................................................33
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 7.1 NONCOMPETITION.............................................................................33
SECTION 7.2 REMEDIES...................................................................................33
SECTION 7.3 JURISDICTION...............................................................................34
ARTICLE 8
DEMAND REGISTRATION RIGHT...............................................................................34
SECTION 8.1 REQUEST FOR REGISTRATION...................................................................34
SECTION 8.2 REGISTRATION OBLIGATION....................................................................35
SECTION 8.3 FURNISH INFORMATION........................................................................36
SECTION 8.4 EXPENSES OF REGISTRATION...................................................................36
SECTION 8.5 FURTHER ASSURANCES.........................................................................36
ARTICLE 9 MISCELLANEOUS..........................................................................................37
SECTION 9.1 NOTICES....................................................................................37
SECTION 9.2 COOPERATION................................................................................38
SECTION 9.3 EXPENSES...................................................................................38
SECTION 9.4 GOVERNING LAW: CONSENT TO JURISDICTION AND VENUE..........................................38
SECTION 9.5 COUNTERPARTS; EFFECTIVENESS................................................................39
SECTION 9.6 SEVERABILITY...............................................................................39
SECTION 9.7 ENTIRE AGREEMENT...........................................................................39
SECTION 9.8 MISCELLANEOUS..............................................................................39
EXHIBITS
Exhibit A Agreement of Merger
Exhibit B Form of Pledge of Stock and Security Agreement
Exhibit C Form of Affiliates' Agreement
Exhibit D Form of Employment Agreement with Jack H. Reed
Exhibit E Form of Employment Agreement with Robin L.Teincuff
Exhibit F Form of Termination Agreement of Consultant Agreement re: Marjak
Consulting, Inc.
Exhibit G Form of Termination Agreement of Employment Agreement re: Robin
L. Teincuff
Exhibit H Form of Termination Agreement of Employment Agreement re: Jack H.
Reed
</TABLE>
iii
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of May 6, 1999
(the "Agreement"), among DBT Online, Inc., a Pennsylvania corporation ("DBT"),
DBT Acquisition, Inc., a Florida corporation and a wholly-owned subsidiary of
DBT organized for the sole purpose of consummating the transactions contemplated
by this Agreement ("Newco"), I.R.S.C., Inc., a California corporation (the
"Company"), RFT Capital Ventures Limited Partnership and Sharon L. Guenther as
trustee of the Sharon L. Guenther Revocable Living Trust, being all of the
shareholders of the Company (each a "Shareholder", collectively referred to
herein as the "Shareholders"), and each of Jack H. Reed, Mary R. Reed and Sharon
L. Guenther, in their individual capacity, for purposes of Article 5 and Article
7 of the Agreement.
WHEREAS, the respective boards of directors of DBT, Newco and
the Company have each approved the acquisition of the Company by DBT through a
merger (the "Merger") of Newco with and into the Company in accordance with this
Agreement and the Agreement of Merger attached hereto as Exhibit A (the "Merger
Agreement");
WHEREAS, it is intended that the Merger will be a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, it is intended that the Merger will be a
"pooling-of-interests" for financial accounting purposes, in accordance with APB
Opinion No. 16 and the related interpretations of the American Institute of
Certified Public Accountants, consensuses of the Financial Accounting Standards
Board's Emerging Issues Task Force and the Rules and Regulations of the
Securities and Exchange Commission, (the "Pooling Rules").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 THE MERGER. On the Closing Date (hereinafter defined),
Newco shall be merged with and into the Company pursuant to the Merger Agreement
and the separate corporate existence of Newco shall cease. Upon consummation of
the Merger, the Company will be a wholly-owned subsidiary of DBT. The Company,
as it exists from and after the Effective Time (hereinafter defined), is
sometimes referred to as the "Surviving Corporation".
1
<PAGE> 6
SECTION 1.2 THE MERGER CONSIDERATION.
(a) For purposes of this Agreement, the "Merger Consideration"
shall have a fair market value (determined in accordance with the following
sentence) of $12,000,000. The Merger Consideration shall be paid in shares of
DBT common stock, par value $.10 per share (the "DBT Common Stock") based on the
average closing price per share of DBT Common Stock on the New York Stock
Exchange (the "NYSE") as reported on the NYSE composite tape during the twenty
(20) consecutive NYSE trading days immediately preceding the two NYSE trading
days prior to the Closing Date (as defined herein). In the Merger, each issued
and outstanding share of Company common stock, no par value ("Company Common
Stock"), shall be converted into the right to receive 1.4331766 shares of DBT
Common Stock (the "Exchange Ratio").
SECTION 1.3 PLEDGED ASSETS.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Shareholders pursuant to Article 5, the
Shareholders shall enter into a pledge of stock and security agreement in the
form attached hereto as Exhibit B (the "Pledge of Stock and Security
Agreement"), to transfer, pledge and assign to DBT, for the benefit of DBT, a
security interest in the following assets (the "Pledged Assets"):
(i) for purposes of Article 5 (other than Section
5.1(a)(vii)) such number of shares of DBT Common Stock received in the Merger by
the Shareholders which shall equal the product of (x) $800,000, and (y) the
ownership percentage set forth beside each Shareholder's name on Schedule 2.2(b)
hereto (the "Shares") and, for purposes of Section 5.1(a)(vii) only, such
additional number of shares of DBT Common Stock received in the Merger by the
Shareholders which shall equal the product of (x) $1,600,000, and (y) the
ownership percentage set forth beside each Shareholder's name on Schedule 2.2(b)
hereto (the "Additional Shares"), all in accordance with the Pledge of Stock and
Security Agreement, and the certificates and instruments, if any, representing
or evidencing each such Shareholder's Pledged Assets;
(ii) all securities hereafter delivered to such
Shareholder with respect to or in substitution for such Shareholder's Pledged
Assets, all certificates and instruments representing or evidencing such
securities, and all cash and non-cash dividends and other property at any time
received, receivable or otherwise distributed in respect of or in exchange for
any or all thereof; and in the event such Shareholder receives any such
property, such Shareholder shall hold such property in trust for DBT and shall
immediately deliver such property to DBT to be held hereunder as Pledged Assets;
and
(iii) all non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property.
2
<PAGE> 7
(b) Each certificate, if any, evidencing a Shareholder's
Pledged Assets issued in his or her name in the Merger, shall be delivered to
DBT directly by the transfer agent, such certificate bearing no restrictive or
cautionary legend other than those imprinted by the transfer agent at DBT's
request. Each Shareholder shall, at the Closing, deliver to DBT, for each such
certificate, a stock power duly signed in blank by him or her. Any cash that
comprises a Shareholder's Pledged Assets shall be withheld by DBT from
distribution to such Shareholder.
(c) Unless the Pledged Assets are applied to satisfy any
indemnification obligation of the Shareholders pursuant to Article 5, the
Shareholders shall be entitled to retain cash proceeds from, and exercise any
voting powers incident to, the Pledged Assets.
(d) The Pledged Assets (other than the Additional Shares)
shall be available to satisfy any indemnification obligations of the
Shareholders pursuant to Article 5 (other than Section 5.1(a)(vii)) until the
date which is earlier of (x) one (1) year after the Closing Date or (y) thirty
(30) days after the date of filing with the Securities and Exchange Commission
of DBT's annual report on Form 10-K for the fiscal year ended December 31, 1999,
(the "Release Date"). The Additional Shares shall be available to satisfy any
indemnification obligations of the Shareholders pursuant to Section 5.1(a)(vii)
which shall survive the Closing Date and Release Date as set forth in the Pledge
of Stock and Security Agreement. Promptly following the Release Date, DBT shall
return or cause to be returned to the Shareholders the Pledged Assets (other
than the Additional Shares), less Pledged Assets having an aggregate value equal
to the amount of (i) any pending claim for indemnification made by any
Indemnified Party (as defined in Article 5), and (ii) any satisfied
indemnification obligations of the Shareholders pursuant to Article 5. For
purposes of the preceding sentence and Article 5, the DBT Common Stock held as
Pledged Assets shall be valued at $27.91 per share.
SECTION 1.4 STOCK OPTIONS.
(a) Prior to the Effective Time, the Board of Directors of the
Company (or, if appropriate, any committee thereof) and the Board of Directors
of DBT (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to provide that effective at
the Effective Time all the outstanding stock options available under the First
Amended Non-Qualified Stock Option Plan of the Company (the "Stock Plan"), being
all of the outstanding stock options, stock appreciation right, limited stock
appreciation rights, performance units and stock purchase rights (the "Common
Stock Rights") heretofore granted under any stock option, performance unit or
similar plan, agreement or arrangement of the Company and the Subsidiaries,
shall be assumed by DBT and converted automatically into options to purchase DBT
Common Shares (collectively, "New Stock Rights") in an amount and, if
applicable, at an exercise price determined as provided below:
(A) The number of DBT Common Shares to be subject to
each New Stock Right shall be equal to the product of (x) the number of Company
Common Shares remaining subject (as of immediately prior to the Effective Time)
to the original Company Stock
3
<PAGE> 8
Right and (y) the Exchange Ratio, provided that any fractional DBT Common Shares
resulting from such multiplication shall be rounded up to the nearest share; and
(B) The exercise price per DBT Common Share under
each New Stock Right shall be equal to the exercise price per Company Common
Share under the original Company Stock Right divided by the Exchange Ratio.
After the Effective Time, each New Stock Right shall be exercisable and shall
vest upon the same terms and conditions as were applicable to the related
Company Stock Right immediately prior to the Effective Time (except that with
regard to such New Stock Right, any references to the Company shall be deemed,
as appropriate, to include DBT).
(b) The Company shall take all actions so that following the
Effective Time no holder of a Company Stock Right shall have any right
thereunder to acquire capital stock of the Company or the Surviving Corporation.
The Company will take all actions so that, as of the Effective Time, neither the
Company nor the Surviving Corporation or any of their respective Subsidiaries is
or will be bound by any Company Stock Rights which would entitle any person,
other than Newco or its affiliates, to own any capital stock of the Company, the
Surviving Corporation or any of their respective subsidiaries or to receive any
payment in respect thereof, except as otherwise provided herein.
(c) DBT agrees that it shall take all action necessary, on or
prior to the Effective Time, to authorize and reserve a number of DBT Common
Shares sufficient for issuance upon exercise of options as contemplated by this
Section 1.4.
(d) Following the Effective Time, but prior to April 1, 2000,
DBT shall prepare and file with the SEC a registration statement on Form S-8 (or
another appropriate form) registering the resale of a number of DBT Common
Shares equal to the number of shares subject to the New Stock Rights. Any such
registration statement shall be kept effective (and the current status of the
initial offering prospectus or prospectuses required thereby shall be
maintained) for at least as long as any New Stock Right remains outstanding.
SECTION 1.5 CLOSING. The parties shall hold a closing (the "Closing")
on the date hereof (the "Closing Date"), at 10:00 A.M. (local time) at the
offices of Morgan, Lewis & Bockius LLP, 300 South Grand Avenue, 22nd Floor, Los
Angeles, California, or at such other date, time or place as the parties hereto
may agree.
SECTION 1.6 EFFECT. On the Closing Date, each of the Company and Newco
shall cause appropriate agreements or certificates of merger as required by
applicable law to be executed and delivered to the Secretary of the State of the
states of incorporation of the Company and Newco, respectively. Subject to each
of the conditions set forth in Article IV having been satisfied or waived by the
appropriate party, the Merger shall become effective upon such filings or at
such later time as may be specified in such filings or by applicable law (the
"Effective
4
<PAGE> 9
Time"). From and after the Effective Time, the Merger shall have the effects
provided for in Section 1107 of the California Corporations Code.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS AND THE COMPANY
To induce DBT and Newco to enter into this Agreement and consummate the
transactions contemplated hereby, the Shareholders and the Company, jointly and
severally, hereby represent and warrant to, and agree with, DBT and Newco as
follows:
SECTION 2.1 CORPORATE EXISTENCE. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and it has all requisite power and authority and all necessary
licenses, permits and authorizations to carry on its business as it has been and
is now being conducted and to own, lease and operate the properties used in
connection therewith. The Company is qualified as a foreign corporation
authorized to do business and is in good standing in each jurisdiction in which
such qualification is required, except jurisdictions where the failure to obtain
such qualification would not result in a material adverse effect on the
operations or financial condition of the Company, all of which jurisdictions are
listed on Schedule 2.1 hereto.
SECTION 2.2 CAPITALIZATION; SHARE OWNERSHIP.
(a) The total authorized capital stock of the Company consists
of (i) 500,000 shares of common stock, no par value (all such authorized common
stock having been previously defined as Company Common Stock), of which 300,000
of such shares are issued and outstanding. All of the issued and outstanding
shares of Company Common Stock have been duly authorized and validly issued, are
fully paid and non-assessable, were not issued in violation of the terms of any
agreement or other understanding binding upon the Company and were issued in
compliance with all applicable charter documents of the Company and all
applicable federal, state and foreign securities laws, rules and regulations.
Except as set forth on Schedule 2.2(a) hereto, there are no outstanding
subscriptions, options, warrants, convertible securities, calls, commitments,
agreements or rights (contingent or otherwise) of any character to purchase or
otherwise acquire from the Company any shares of, or any securities convertible
into, the capital stock of the Company. There are, and have been, no preemptive
rights with respect to any capital stock of the Company.
(b) Each Shareholder is the lawful owner of record and
beneficially of the number of issued and outstanding shares of Company Common
Stock set beside his name on Schedule 2.2(b) hereto, free and clear of all
pledges, liens, encumbrances, claims and other charges and restrictions thereon
of every kind, including without limitation any subscriptions, options,
warrants, convertible securities, calls, commitments or rights (contingent or
otherwise)
5
<PAGE> 10
of any character granting to any person any interest in or right to acquire from
such Shareholder at any time, or upon the happening of any stated event, any
shares of Company Common Stock.
SECTION 2.3 SUBSIDIARIES; NO INTEREST IN OTHER ENTITIES.
(a) Advanced Resource Concepts, Inc. and National Court
Runners, Inc. (each a "Subsidiary", and collectively the "Subsidiaries") are the
only subsidiaries of the Company. Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and each has all requisite power and authority
and all necessary licenses, permits and authorizations to carry on its business
as it has been and is now being conducted and to own, lease and operate the
properties used in connection therewith. Each Subsidiary is qualified as a
foreign corporation authorized to do business and is in good standing in each
jurisdiction in which such qualification is required, except where the failure
to obtain such qualification would not result in a material adverse effect on
the operations or financial conditions of either of the Subsidiaries, all of
which jurisdictions are listed on Schedule 2.3(a) hereto.
(b) The authorized, issued and outstanding capital stock of
each Subsidiary is listed on Schedule 2.3(b) hereto. All of such issued and
outstanding shares of capital stock have been duly authorized and validly
issued, are fully paid and non-assessable, were not issued in violation of the
terms of any agreement or other understanding binding upon the Subsidiary and
were issued in compliance with all applicable charter documents of the
Subsidiary and all applicable federal, state and foreign securities laws, rules
and regulations, and except as set forth on Schedule 2.3(b), all such shares are
owned beneficially and of record by the Company. Except as set forth in Schedule
2.3(b), there are no outstanding subscriptions, options, warrants, convertible
securities, calls, commitments, agreements or rights (contingent or otherwise)
of any character to purchase or otherwise acquire from any Subsidiary any shares
of, or any securities convertible into, the capital stock of any Subsidiary.
There are, and have been, no preemptive rights with respect to the issuance of
the capital stock of any Subsidiary.
(c) Except as set forth in Schedule 2.3(c) hereto, the Company
is the lawful owner of record and beneficially of all of the issued and
outstanding shares of capital stock of each Subsidiary, free and clear of all
pledges, liens, encumbrances, claims and other charges and restrictions thereon
of every kind, including without limitation any subscriptions, options,
warrants, convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any character granting to any person any interest
in or right to acquire from the Company at any time, or upon the happening of
any stated event, any shares of capital stock of such Subsidiary.
(d) The Company owns no shares of any corporation other than
the Subsidiaries and has no other ownership or other investment interest, either
of record, beneficially or equitably, in any association, partnership, joint
venture, limited liability company
6
<PAGE> 11
or other legal entity, except for bank, checking and money market accounts and
other cash equivalent investments.
SECTION 2.4 AUTHORITY. The Company has the corporate power to execute,
deliver and perform this Agreement and all other agreements, certificates and
documents contemplated hereby to be executed and delivered by it and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance hereof by the Company have been duly authorized by all
necessary corporate and shareholder action. This Agreement is a legal, valid and
binding obligation of the Company and each Shareholder and is enforceable
against the Company and each Shareholder in accordance with its terms.
SECTION 2.5 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. Except as
disclosed on Schedule 2.5 hereof, the execution, delivery and performance hereof
by the Company and the Shareholders will not contravene or violate (a) any law,
rule or regulation to which the Company, any Subsidiary or any of the
Shareholders is subject, (b) any judgment, order, writ, injunction or decree of
any court, arbitrator or governmental or regulatory official, body or authority
which is applicable to the Company, any Subsidiary or any of the Shareholders or
(c) the charter documents of the Company or any Subsidiary; nor will such
execution, delivery or performance violate, be in conflict with or result in the
breach (with or without the giving of notice or lapse of time, or both) of any
term, condition or provision of, or require the consent of any other party to
any contract, commitment, agreement, lease, license, permit, authorization,
document or other understanding, oral or written, to or by which the Company,
any Subsidiary or any of the Shareholders is a party or otherwise bound or
affected or by which any of the assets or properties of the Company, any
Subsidiary or any of the Shareholders may be bound or affected or give any party
with rights thereunder the right to terminate, modify, accelerate, renegotiate
or otherwise change the existing rights or obligations of the Company, any
Subsidiary or any of the Shareholders thereunder.
SECTION 2.6 FINANCIAL STATEMENTS; BOOKS OF ACCOUNT. The Company has
delivered to DBT prior to the date hereof (a) the audited consolidated financial
statements of the Company as of and for the year ended December 31, 1997 and all
notes related thereto (the "1997 Financial Statements") reported on without
qualification by Corbin & Wertz, independent certified public accountants, and
(b) the audited consolidated financial statements of the Company as of and for
the year ended December 31, 1998 and all notes related thereto (the "1998
Financial Statements") reported on without qualification by Corbin & Wertz,
independent certified public accountants. The 1997 Financial Statements and the
1998 Financial Statements (including without limitation all notes, comments,
schedules and supplemental data contained in or annexed to such statements), all
of which are attached hereto as Schedule 2.6, are accurate, complete and in
accordance with the books and records of the Company and its Subsidiaries and
present fairly in all material respects the consolidated financial position and
assets and liabilities of the Company and its Subsidiaries as of their
respective dates and the results of their consolidated operations for the
periods then ended, in conformity with generally accepted accounting
7
<PAGE> 12
principles applied on a consistent basis. The books of account of the Company
and its Subsidiaries reflect all of their items of income and expense, and all
of their assets and liabilities, required to be reflected therein in accordance
with generally accepted accounting principles.
SECTION 2.7 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
and its Subsidiaries (a) are valid and genuine, (b) arise out of bona fide sales
and deliveries of goods, performance of services or other business transactions,
(c) will be collected in full, to the extent consistent with past business
practice in collecting such accounts receivable, less an allowance for doubtful
accounts equal to $36,000, within 120 days after the Closing Date, (d) are not
subject to valid defenses, set-offs or counterclaims other than normal returns
and allowances and (e) were generated only in the ordinary course of business.
SECTION 2.8 EQUIPMENT. All equipment of the Company and its
Subsidiaries reflected in the 1998 Financial Statements and all equipment owned
by the Company or any Subsidiary, was acquired and has been maintained in
accordance with the regular business practices of the Company and its
Subsidiaries, consists of items of a quality and quantity useable in the
ordinary course of their businesses consistent with past practice, and is valued
in conformity with generally accepted accounting principles applied on a
consistent basis; no significant amount of such equipment is obsolete.
SECTION 2.9 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Neither the Company nor any Subsidiary is liable for or
subject to any liability except for:
(i) those liabilities and obligations adequately and
specifically disclosed in the 1998 Financial Statements and
not heretofore paid or discharged;
(ii) those liabilities and obligations arising in
the ordinary course of its business consistent with past
practice under any contract, commitment or agreement
specifically disclosed on Schedule 2.9 or any other Schedule
to this Agreement or not required to be disclosed thereon
because of the term or amount involved or otherwise; and
(iii) those liabilities and obligations incurred,
consistent with its past practice, in the ordinary course of
its business and either not required to be shown in the 1998
Financial Statements or arising since December 31, 1998, which
liabilities and obligations in the aggregate are of a
character and magnitude consistent with its past practice.
8
<PAGE> 13
For purposes of this Section 2.9 and Section 5.1 hereof, the term "liabilities"
shall include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent or otherwise
and whether known or unknown, fixed or unfixed, choate or inchoate, liquidated
or unliquidated, secured or unsecured.
(b) Except as provided in Section 2.19 hereof, the Company and
its Subsidiaries do not provide or maintain, and are not required under
applicable law to provide or maintain, for their employees any pension,
retirement, profit-sharing or other plan or policy for the benefit of employees
which is required to comply with, and the Company and its Subsidiaries have no
liabilities with respect to themselves or any other person under, the federal
Employees Retirement Income Security Act of 1974 ("ERISA"). Furthermore, the
Company has no liability for any dividends or distributions to any Shareholder
and since January 1, 1994 has not paid or delivered or become committed to pay
or deliver any dividend, or made or become committed to make any distribution or
payment, to any shareholder in respect of its capital stock or redeemed,
purchased or otherwise acquired any of its capital stock.
SECTION 2.10 EXISTING CONDITION. Except as disclosed on Schedule 2.10
hereto, since December 31, 1998, the Company and its Subsidiaries have not:
(a) sold, assigned or transferred any of their assets or
properties except in the ordinary course of their businesses consistent with
past practice;
(b) created, incurred, assumed or guaranteed any indebtedness
for money borrowed or incurred any other liabilities exceeding $100,000 in the
aggregate except for current liabilities incurred in the ordinary course of
their businesses consistent with past practice;
(c) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting their businesses,
operations, assets, properties or prospects or (ii) of any item carried on the
Company's consolidated books of account at more than $25,000;
(d) suffered any material adverse change in their businesses,
operations, assets, properties, prospects or condition (financial or otherwise);
(e) made any capital expenditure or capital addition or
betterment except as may be involved in the ordinary repair, maintenance and
replacement of their assets or any capital expenditure in excess of $25,000;
(f) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of their directors, officers or employees, or to any Shareholder,
or made any increase in, or any addition
9
<PAGE> 14
to, other benefits to which any of their directors, officers or employees or any
Shareholder may be entitled; or
(g) entered into any transaction other than in the ordinary
course of their businesses consistent with past practice.
Except as disclosed on Schedule 2.10 hereto, since December 31, 1998, the
Company and its Subsidiaries have not made or suffered any amendment to or
termination of any material contract or commitment to which they are or were a
party or by which they or any of their properties are or were bound.
SECTION 2.11 PERSONAL PROPERTY.
(a) The Company and its Subsidiaries own outright and have
good, valid title to all of their personal properties and assets, including
without limitation all of the properties and assets reflected in the 1998
Financial Statements and those acquired since December 31, 1998 (except in each
case for properties and assets sold or otherwise disposed of since December 31,
1998 in the ordinary course of their businesses consistent with past practice),
free and clear of all mortgages, liens, pledges, security interests, charges,
claims, restrictions and other encumbrances and defects of title of any nature
whatsoever (collectively, "Encumbrances"), except liens for current taxes not
yet due and payable ("Permitted Encumbrances") and items disclosed on Schedule
2.11 hereto. All leases, licenses, permits and authorizations in any manner
related to the personal assets, properties or businesses of the Company and its
Subsidiaries and all other instruments, documents and agreements pursuant to
which the Company or any Subsidiary has obtained the right to use any personal
property are in good standing, valid and effective in accordance with their
respective terms, and there is not under any of such leases, licenses, permits,
authorizations, instruments, documents or agreements any existing default or
event which with the giving of notice or lapse of time, or both, would
constitute a default.
(b) All facilities, buildings, vehicles, equipment, furniture
and fixtures, leasehold improvements and other material items of tangible
personal property owned or used by the Company and its Subsidiaries are in good
operating condition and repair, subject to normal wear and maintenance, are
useable in the regular and ordinary course of their businesses and conform to
all applicable laws, ordinances, codes, rules and regulations relating thereto
and to the construction, use, operation and maintenance thereof.
SECTION 2.12 REAL PROPERTY.
Each of the Company and the Subsidiaries do not own (directly or
indirectly) any real property whatsoever. Schedule 2.12(a) hereto is a true and
complete list of all agreements (together with any amendments thereof,
collectively, the "Real Property Leases") pursuant to which the Company and the
Subsidiaries lease, sublease or otherwise occupy (whether as landlord, tenant,
subtenant or other occupancy arrangement) any real property (collectively, the
10
<PAGE> 15
"Leased Real Property"), and true and complete copies of the Real Property
Leases have previously been delivered or made available to DBT. With respect to
each Real Property Lease, the Company and the Subsidiaries have, and immediately
after the Closing Date will continue to have, good and valid title to the
leasehold estate in the Leased Real Property, free and clear of any Encumbrances
(except Permitted Encumbrances). Each of The Company and the Subsidiaries has
obtained all easements and rights of way required from all governmental
jurisdictions or from private parties for the normal use and operation of the
business of the Company and the Subsidiaries on the Leased Real Property which
are material to the operation of the business of the Company and the
Subsidiaries. Each of the Company and the Subsidiaries has not received any
written notice of any pending or threatened condemnation, expropriation, eminent
domain or similar proceeding affecting all or any material part of the Leased
Real Property. Each Leased Real Property and all buildings, structures, fixtures
and improvements on each Leased Real Property, and all use of any thereof by the
Company and the Subsidiaries, conform with all applicable building, zoning,
subdivision, land use, fire and other laws pertaining to or affecting real
property. There are no written, or to the knowledge of the Company, after due
inquiry, oral undertakings between the parties to the Real Property Lease which
in any manner vary the obligations or rights of either parties from those set
forth in the Real Property Lease, and no rent or additional rent under the Real
Property Lease has been paid for more than 30 days in advance of its due date.
SECTION 2.13 TAXES AND TAX RETURNS AND REPORTS.
(a) With respect to the Company and each Subsidiary (each
referred to in this Section 2.13(a) as a "Company"), (i) all reports, returns,
statements (including without limitation estimated reports, returns or
statements), and other similar filings required to be filed on or before the
Closing Date by any Company (the "Tax Returns") with respect to any Taxes (as
defined in this Section 2.13) have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such Tax Returns were
required to be filed copies of which have been delivered to DBT and which are
attached hereto as Schedule 2.13(a)(i), and all such Tax Returns were true,
correct and complete in all respects for the periods, properties or events
covered thereby, (ii) all Taxes payable with respect to the Tax Returns, and all
Taxes accruable with respect to events occurring prior to April 30, 1999,
whether disputed or not, and whether or not shown on any Tax Return, will have
been paid in full prior to the Closing Date, or an adequate accrual in
accordance with generally accepted accounting principles is provided with
respect thereto on the 1998 Financial Statements, and do not exceed that reserve
as adjusted for the passage of time through the Closing Date in accordance with
past custom and practice of any Company in filing their Tax Returns (iii) no
deficiency in respect of any Taxes which has been assessed against any Company
remains unpaid and no Company or any of the Shareholders, directors, officers or
any employee responsible for Tax matters has any knowledge of any unassessed Tax
deficiencies or, except as disclosed on Schedule 2.13, of any audits or
investigations pending or threatened against any Company with respect to any
Taxes, (iv) there is in effect no extension for the filing of any Tax Return and
no Company has extended or waived the application of any statute of limitations
of any jurisdiction regarding the assessment or
11
<PAGE> 16
collection of any Tax, (v) no claim has ever been made by any Tax authority in a
jurisdiction in which any Company does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction, (vi) there are no liens for Taxes upon
any asset of any Company except for liens for current Taxes not yet due, (vii)
no issues have been raised in any examination by any Tax authority with respect
to any Company which, by application of similar principles, reasonably could be
expected to result in a proposed deficiency for any other period not so
examined, (viii) no Company is a party to any Tax allocation or sharing
agreement or otherwise under any obligation to indemnify any person with respect
to any Taxes, or under Income Tax Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor or
otherwise, (ix) no Company is a party to any joint venture, partnership or other
arrangement that is treated as a partnership for federal income tax purposes,
(x) there are no accounting method changes or proposed accounting method changes
of any Company that could give rise to an adjustment under Section 481 of the
Internal Revenue Code of 1986, as amended (the "Code"), for periods after the
Closing Date, (xi) there are no requests for rulings in respect of any Tax
pending between any Company and any Taxing authority, (xii) since the date of
its ownership by the Shareholders (or the Company), no Company has been a member
of any affiliated group filing a federal consolidated income Tax Return other
than the affiliated group of which I.R.S.C., Inc. is the common parent, (xiii)
each Company has withheld all Taxes required to have been withheld in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party and, if required prior to the Closing Date,
has timely made all deposits required by law to be made with respect to such
withholdings and other employment taxes, (xiv) no Company has filed a consent
under Section 341(f) concerning collapsible corporations, (xv) no Company has
made any payments, is obligated to make any payments, or is a party to any
agreement that would obligate it to make any payments that will not be
deductible under Section 280G of the Code, and (xvi) no Company has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, and (xvii) each Company has disclosed on its
federal income Tax Returns all positions taken therein that would give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code.
(b) Schedule 2.13(b) sets forth the following information with
respect to each of the Company and the Subsidiaries as of December 31, 1998: (i)
the basis of the Company and the Subsidiaries in its assets (including the basis
of the Company in its stock of each of the Subsidiaries); (ii) the basis of the
Shareholders in their stock of the Company; (iii) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign Tax credit, or excess charitable contribution allocable to the each of
the Company and the Subsidiaries; and (iv) the amount of any deferred gain or
loss allocable to each of the Company and the Subsidiaries arising out of any
intercompany transaction not yet taken into account under Section 1.1502-13 of
the Income Tax Regulations (or any similar provision of state, local, or foreign
law).
12
<PAGE> 17
For purposes of this Agreement, "Taxes" means any taxes,
duties, assessments, fees, levies or similar governmental charges, together with
any interest, penalties and additions to tax, imposed by any taxing authority,
wherever located (I.E. whether federal, state, local, municipal or foreign),
including without limitation all net income, gross income, gross receipts, net
receipts, sales, use, transfer, franchise, privilege, profits, social security,
disability, withholding, payroll, unemployment, employment, excise, severance,
property, windfall profits, value added, AD VALOREM, occupation or any other
similar governmental charge or imposition.
SECTION 2.14 LEGAL PROCEEDINGS; ETC. Except as disclosed on Schedule
2.14 hereto, there are no disputes, claims, actions, suits or proceedings
(including without limitation local zoning or building ordinance proceedings),
arbitrations or investigations, either administrative or judicial, pending, or
to the knowledge of the Company or any Shareholder threatened or contemplated,
by or against or affecting the Company or any Subsidiary or their assets or
business, before or by any court or governmental or regulatory official, body or
authority, or before an arbitrator of any kind. Except as disclosed on Schedule
2.14 hereto, neither the Company nor any Shareholder has any knowledge of any
condition or state of facts or the occurrence of any event that might reasonably
form the basis of any claim, liability or litigation against the Company or any
Subsidiary. Neither the Company nor any Subsidiary is a party to or otherwise
bound or affected by the provisions of any judgment, order, writ, injunction or
decree of any court, arbitrator or governmental or regulatory official, body or
authority.
SECTION 2.15 COMPLIANCE WITH LAW. The Company and its Subsidiaries have
complied with each, and are not in violation of any laws, rules and regulations
to which they or their businesses are, or their operations, assets or properties
are, subject and have not failed to obtain or adhere to the requirements of any
governmental license, permit, franchise, approval or other authorization
necessary to the ownership or lease of their assets and properties or to the
conduct of their respective businesses. Except as disclosed on Schedule 2.15
hereof, no jurisdiction has demanded or requested that the Company or any of the
Subsidiaries become licensed as a foreign corporation.
SECTION 2.16 INSURANCE. Schedule 2.16 contains a true and complete
description of the insurance coverage in effect now or at any time during the
past three years with respect to the Company and each Subsidiary and their
businesses and properties, together with a description of all insurance claims
in any one case in excess of $25,000 made by the Company or any Subsidiary
during the past three years. The Company and each Subsidiary have at all times
during the past three years maintained insurance coverage substantially similar
to the insurance coverage currently in effect. There is no default under any
such current coverage, nor has there been any failure to give any notice or
present any claim under any such coverage in a timely fashion or in the manner
or detail required by the policy or binder. There are no outstanding unpaid
premiums, and there are no provisions in any insurance coverage of the Company
or any Subsidiary for retroactive or retrospective premium adjustments. No
notice of cancellation or nonrenewal with respect to, or disallowance of any
claim under, any such coverage has been received by the Company or any
Subsidiary. All products liability and general liability insurance
13
<PAGE> 18
policies maintained by the Company or any Subsidiary are and historically have
been occurrence policies and not claims made policies. There are no outstanding
performance bonds or other surety arrangements covering or issued for the
benefit of the Company or any Subsidiary or their businesses or as to which the
Company or any Subsidiary has or may incur any liability.
SECTION 2.17 CONTRACTS AND COMMITMENTS. Except as listed and described
on Schedule 2.17 hereto or, in the case of benefit plans and arrangements,
Schedule 2.19 hereto, neither the Company nor any Subsidiary is a party to or
otherwise bound or affected by any written or oral:
(a) agreement, contract or commitment with any present or
former shareholder, director, officer, employee or consultant or for the
employment of any person, including without limitation any consultant;
(b) agreement, contract, commitment or arrangement with any
labor union or other representative of employees;
(c) agreement, contract or commitment for the purchase of, or
payment for, supplies or products, or for the performance of services by a third
party, involving in any one case $25,000 or more;
(d) agreement, contract or commitment to sell or supply
products or to perform services, involving in any one case $25,000 or more;
(e) agreement, contract or commitment not otherwise listed on
Schedule 2.17 hereto and continuing over a period of more than six months from
the date hereof or exceeding $25,000 in value;
(f) representative or sales agency agreement, contract or
commitment;
(g) lease under which it is either lessor or lessee;
(h) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit agreement, loan agreement or other
agreement or contract, commitment or arrangement for the borrowing or lending of
money (including without limitation loans to or from employees, officers,
directors, any Shareholder or any member of any of their immediate families),
agreement, contract, commitment or arrangement for a line of credit or
guarantee, pledge or undertaking in any manner whatsoever of the indebtedness of
any other person;
(i) agreement, contract or commitment for any charitable or
political contribution;
14
<PAGE> 19
(j) agreement, contract or commitment for any capital
expenditure in excess of $25,000;
(k) agreement, contract or commitment limiting or restraining
it from engaging or competing in any lines of business with any person, nor is
any officer or employee of the Company or any Subsidiary subject to any such
agreement;
(l) license, franchise, distributorship or other similar
agreement, contract or commitment, including without limitation those which
relate in whole or in part to any patent, trademark, trade name, service mark or
copyright or to any ideas, technical assistance or other know-how of or used by
the Company or any Subsidiary; or
(m) material agreement, contract or commitment not made in the
ordinary course of business consistent with past practice.
Except as may be disclosed on Schedule 2.17 hereto, each of
the agreements, contracts, commitments, arrangements, leases and other
instruments, documents and undertakings listed on Schedule 2.17 hereto is valid
and enforceable in accordance with its terms, and the parties thereto are in
compliance with the provisions thereof, no party is in default in the
performance, observance or fulfillment of any material obligation, covenant or
condition contained therein, and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default
thereunder; furthermore, except as may be disclosed on Schedule 2.17 hereto, no
such agreement, contract, commitment, arrangement, lease or other instrument,
document or undertaking, in the reasonable opinion of the Company or any
Shareholder, contains any contractual requirement with which there is a
reasonable likelihood the Company, any Subsidiary or any other party thereto
will be unable to comply.
SECTION 2.18 ADDITIONAL INFORMATION. Schedule 2.18 hereto contains, to
the extent not included in another Schedule hereto, accurate lists and summary
descriptions of the following:
(a) all vehicles, equipment, furniture and fixtures, leasehold
improvements and other material items of personal property owned or leased by
the Company or any Subsidiary, specifying which are owned and which are leased
and, with respect to leased property, specifying the identity of the lessor, the
rental rate and the unexpired term of the lease, and also specifying serial
numbers (where appropriate) and location;
(b) the names of all present directors of the Company and each
Subsidiary;
(c) the names and current annual salary or hourly rates of all
present officers and employees of the Company and each Subsidiary together with
a statement of the full amount of any bonuses, profit sharing or other
remuneration paid to each such person and to any director during the current or
the last fiscal year or payable to each such person in the future and the basis
therefor;
15
<PAGE> 20
(d) the names and addresses of each bank and other financial
institution or fund in which the Company or any Subsidiary maintains an account
(whether checking, savings, money market or otherwise), lock box or safe deposit
box, and the account numbers and names of persons having signing authority or
other access with respect thereto;
(e) a listing and description of all cash equivalent items
held by the Company and each Subsidiary;
(f) a list of all licenses, permits and authorizations of the
Company and each Subsidiary;
(g) the names of all persons authorized to borrow money or
incur or guarantee indebtedness on behalf of the Company or any Subsidiary;
(h) the names of all persons holding powers of attorney from
the Company or any Subsidiary and a summary statement of the terms thereof; and
(i) a listing of all current liabilities of the Company or any
Subsidiary in excess of $5,000.
SECTION 2.19 EMPLOYEE BENEFIT PLANS.
(a) Except for the plans set forth in Schedule 2.19(a) hereto,
the Company does not sponsor or maintain any plan, fund, program, policy,
arrangement, contract or commitment, whether or not qualified for federal income
tax purposes, whether or not funded, whether formal or informal, whether written
or oral, and whether for the benefit of a single individual or more than one
individual, which is in the nature of (i) an employee pension benefit plan (as
defined in section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), (ii) an employee welfare benefit plan (as defined in
section 3(1) of ERISA), (iii) an incentive current or deferred compensation, or
other benefit or compensation arrangement for employees, former employees, their
dependents and/or their beneficiaries, or (iv) an arrangement that could be
characterized as providing bonus compensation, compensation associated with a
change of control, severance benefits, or fringe benefits. For purposes of this
Section 2.19 the term the Company shall include any enterprise which, with the
Company, forms or formed at any time since September 2, 1974 a controlled group
of corporations within the meaning of section 414(b) of the Code, a group of
trades or businesses under common control within the meaning of section 414(c)
of the Code, or any affiliated service group within the meaning of section
414(m) of the Code.
(b) The Company does not sponsor or maintain, and is not a
contributing employer or otherwise a party to, or has any obligation or
liability under or with respect to, any defined benefit plan within the meaning
of section 3(35) of ERISA, whether or not such plan has been terminated, or any
annuity contract related thereto.
16
<PAGE> 21
(c) The term "Designated Plan" shall include all of the
employee benefit plans and arrangements set forth in the Schedule 2.19(a)
hereto, and any other employee benefit plan of the Company (as defined in
section 3(3) of ERISA), whether terminated (within the past ten years) or
currently in effect. With respect to any Designated Plans, the Company has
delivered to DBT true and complete copies of (i) all documents governing such
Designated Plan, and all amendments thereto, (ii) the last three annual reports
relating to such Designated Plans other than any terminated Designated Plan
filed by the Company or any of its subsidiaries or officials of any Designated
Plan with the United States Department of Labor, the Internal Revenue Service,
or any other federal or state regulatory agency, (iii) all summary plan
descriptions, notices and other reporting and disclosure material furnished to
participants in any such Designated Plans, (iv) all accounting and financial
reports prepared with respect to any of such Designated Plans, and (v) all
Internal Revenue Service ruling or determination letters on any of such
Designated Plans. Each financial or other report delivered to DBT pursuant
hereto is complete and accurate in all material respects, and there have been no
material adverse changes in the financial status of any Designated Plan since
the date of the most recent report provided with respect thereto.
(d) The Company has operated, and has caused its appointees
and nominees to operate, each Designated Plan in a manner which is in material
compliance with the terms thereof and with all applicable law, regulations and
administrative agency rulings and requirements applicable thereto. Each
employee, former employee and every dependent of the foregoing entitled to
continuation of benefit coverage under any employee welfare benefit plan
sponsored by the Company has been accorded all the rights to which such person
is entitled as a matter of law or regulation.
(e) Full payment has been made of all amounts which the
Company is required, under applicable law or under any Designated Plan or any
agreement related to any Designated Plan to which the Company is a party, to
have paid as contributions thereto as of the last day of the most recent fiscal
year of each Designated Plan ended prior to the date hereof. The Company has
made adequate provision for reserves to meet contributions that have not been
made because they are not yet due under the terms of any Designated Plan or
related agreements. Benefits under all Designated Plans are as represented and
have not been increased subsequent to the date as of which documents have been
provided.
(f) Each Designated Plan intended to be qualified under
sections 401(a), 401(k) and 501(a) of the Code is either a standardized
prototype plan covered by an opinion letter issued by the Internal Revenue
Service or an individually designed plan covered by a determination letter
issued by the Internal Revenue Service and nothing has occurred since the date
of such opinion letter or determination letter which resulted or is likely to
result in the Company's inability to rely on such letter.
17
<PAGE> 22
(g) Neither the Company nor any Shareholder has engaged in any
conduct that could result in the imposition upon the Company of any excise tax
under section 4971 through 4980B of the Code or civil liability under section
502(i) of ERISA.
(h) There is no action, claim or demand of any kind (other
than routine claims for benefits) that has been brought or threatened against
any Designated Plan, or the assets thereof, against any fiduciary of such
Designated Plan, or against the Company with respect to any Designated Plan, and
the Company and each Shareholder have no knowledge of any investigation or
administrative review that could result in the imposition on the Company of any
penalty or assessment in connection with any Designated Plan.
(i) The Company is not presently or potentially liable with
respect to any employee benefit plan (as defined in section 3(3) of ERISA),
whether terminated or currently in effect, sponsored or maintained by any
controlled company, whether such plan is a single employer plan, a multiple
employer plan, or a multiemployer plan. Liability to which reference is made
herein includes, but is not limited to, penalties, late payment fees or taxes
with respect to any plan or the administration of any plan; and liability with
respect to fiduciary conduct in connection with any such plan.
(j) The Company does not maintain or participate in, and is
not obligated to contribute to, or has ever maintained or participated in, or
been obligated to contribute to, any "multiemployer plan" within the meaning of
section 3(37) of ERISA.
(k) Except as set forth in Schedule 2.19 hereto, no Designated
Plan provides any health, life or other welfare coverage to employees of the
Company beyond termination of their employment with the Company by reason of
retirement or otherwise, other than coverage as may be required under section
4980B of the Code or part 6 of ERISA, or under the continuation of coverage
provisions of the laws of any state or locality.
(l) The Company has filed or caused to be filed on a timely
basis all returns, reports, statements, notices, declarations, and other
documents required by any federal, state, local or foreign governmental agency,
(including without limitation, the Internal Revenue Service, the Department of
Labor, the Pension Benefit Guaranty Corporation and the Securities and Exchange
Commission) with respect to each Designated Plan sponsored by or maintained by
the Company or with which the Company has or had any filing obligation. The
Company has delivered or caused to be delivered to every participant,
beneficiary and every other party entitled to such material all plan
descriptions, returns, reports, schedules, notices, statements and similar
materials, including without limitation, summary Plan descriptions and reports
as are required under title I of ERISA and/or the Code.
(m) The Company has not made any commitment regarding the
continuation of any Designated Plan after the Closing Date and DBT may, without
penalty, amend, cancel, terminate or otherwise modify in any and all respects
any such Plan on or after the Closing Date.
18
<PAGE> 23
(n) Except as set forth in Schedule 2.19(n), each of the
Company and the Subsidiaries has written contracts with all persons whom each of
the Company and the Subsidiaries has treated as independent contractors
("Independent Contractors") who currently render services in an amount in excess
of $5,000 for each of the Company and the Subsidiaries or have rendered services
in the last two years prior to the Closing Date to each of the Company and the
Subsidiaries. Copies of each such contract have been made available to DBT. Each
of the Company and the Subsidiaries has no liability for taxes or benefits with
respect to any such Independent Contractor and no Independent Contractors are
eligible to participate in any of the Designated Plans nor would they be
eligible to participate even if such persons were recharacterized by any
governmental agency as employees within the meaning of section 3121(d) of the
Code.
SECTION 2.20 ENVIRONMENTAL MATTERS. In addition to the representations
and warranties in Sections 2.14 and 2.15 hereof and not in limitation thereof,
and except as disclosed in that certain Phase I Environmental Assessment Report
dated as of April 30, 1999 regarding certain Leased Real Property made by
Waterstone Environmental, Inc. (a) no releases of Hazardous Materials (as
defined in this Section 2.20) have occurred at or from any property which is the
subject of this transaction or which was otherwise owned or used at any time by
the Company or any Subsidiary or any of their predecessors, (b) there are no
past, pending, or threatened Environmental Claims (as defined in this Section
2.20) against the Company or any Subsidiary, (c) there are no underground
storage tanks owned by the Company or any Subsidiary, or located at any facility
owned or operated at any time by the Company or any Subsidiary, (d) the Company
and each Subsidiary are in compliance with all Environmental Laws (as defined in
this Section 2.20) and (e) there are no facts, circumstances, or conditions that
could reasonably be expected to restrict, under any Environmental Law or
Environmental Permit (as defined in this Section 2.20) in effect prior to or at
the Closing Date, the ownership, occupancy, use or transferability of any
property owned, operated, leased or otherwise used by the Company or any
Subsidiary. As used in this Section 2.20:
(i) "Environmental Claims" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices, violations or
proceedings related to any applicable Environmental Law or any
Environmental Permit brought, issued or asserted by: (A) a governmental
authority for compliance, damages, penalties, removal, response,
remedial or other action pursuant to any applicable Environmental Law
or (B) a third party seeking damages for personal injury or property
damage resulting from the release of or exposure to a Hazardous
Material at, to or from any facility of the Company or any Subsidiary,
including without limitation the Company or Subsidiary employees
seeking damages for exposure to Hazardous Materials;
(ii) "Environmental Laws" means all federal, state and local
laws, statutes, ordinances, codes, rules and regulations related to
protection of the environment or the handling, use, generation,
treatment, storage, transportation or disposal of Hazardous Materials;
19
<PAGE> 24
(iii) "Environmental Permit" means all permits, licenses,
approvals, authorizations or consents required by any governmental
authority under any applicable Environmental Law and includes any and
all orders, consent orders or binding agreements issued or entered into
by a governmental authority under any applicable Environmental Law; and
(iv) "Hazardous Material" means any hazardous or toxic
substance, material or waste which is regulated as of the Closing Date
by any state or local governmental authority or the United States of
America, including without limitation any material or substance that
is: (A) defined as a "hazardous substance" under applicable state law,
(B) petroleum, (C) asbestos, (D) polychlorinated bi-phenyls, (E)
designated as a "hazardous substance" pursuant to section 311 of the
Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251 ET
SEQ. (33 U.S.C. ss. 1321), (F) defined as a "hazardous waste" pursuant
to section 1004 of the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. ss.6901 ET SEQ. (42 U.S.C. ss.6903), (G) defined as
a "hazardous substance" pursuant to section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42
U.S.C. ss.9601 ET SEQ. (42 U.S.C. ss.9601), (H) defined as a "regulated
substance" pursuant to section 9001 of the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. ss.6901 ET SEQ. (42 U.S.C. ss.6991)
or (I) otherwise regulated under the Toxic Substances Control Act, 15
U.S.C. ss.2601, ET SEQ., the Clean Air Act, as amended, 42 U.S.C.
ss.7401, ET SEQ., the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. ss.1801, ET SEQ., or the Federal Insecticide,
Fungicide and Rodenticide Act, as amended, 7 U.S.C. ss.136, ET SEQ.
SECTION 2.21 INTELLECTUAL PROPERTY MATTERS.
(a) Neither the Company nor any Subsidiary has utilized or
currently utilizes any patent, trademark, trade name, service mark, copyright,
software, trade secret or know-how EXCEPT for those listed on SCHEDULE 2.21 (the
"INTELLECTUAL PROPERTY"), all of which are owned by such Company or the
Subsidiary free and clear of any liens, claims, charges or encumbrances. The
Intellectual Property constitutes all such assets, properties and rights which
are used or held for use in, or are necessary for, the conduct of the business
of the Company and the Subsidiaries.
(b) There are no royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements, pertaining to any of the
Intellectual Property or products or services of the Companies.
(c) Neither the Company nor any Subsidiary infringes upon or
unlawfully or wrongfully uses any patent, trademark, trade name, service mark,
copyright or trade secret owned or claimed by another. No action, suit,
proceeding or investigation has been instituted or, to the knowledge of the
Company and the Shareholders, threatened relating to any, patent, trademark,
trade name, service mark, copyright or trade secret formerly or currently used
by the Company or any Subsidiary. None of the Intellectual Property is subject
to any outstanding order, decree or
20
<PAGE> 25
judgment. Neither the Company nor any Subsidiary has agreed to indemnify any
person or entity for or against any infringement of or by the Intellectual
Property.
(d) No present or former employee of the Company or any
Subsidiary and no other person or entity owns or has any proprietary, financial
or other interest, direct or indirect, in whole or in part, in any patent,
trademark, trade name, service mark or copyright, or in any application
therefor, or in any trade secret, which the Company or any Subsidiary owns,
possesses or uses in its operations as now or heretofore conducted. SCHEDULE
2.21 lists all confidentiality or non-disclosure agreements to which the Company
or any Subsidiary or any of its employees is a party.
(e) All registrable items of Intellectual Property have been
duly registered in, filed in or issued by the United States Copyright Office or
the United States Patent and Trademark Office, the appropriate offices in the
various states of the United States and the appropriate offices of the
jurisdictions indicated on SCHEDULE 2.21.
(f) All rights of the Company or any Subsidiary in the
Intellectual Property shall vest in the Surviving Corporation pursuant to the
transactions contemplated hereby without any consent or other approval.
(g) All Intellectual Property in the form of computer software
that is utilized by the Company or any Subsidiary in the operations of its
business is capable of processing date data between the year 1999 and the year
2000 and between and within the twentieth and twenty- first centuries.
SECTION 2.22 NO THIRD PARTY OPTIONS. Except as set forth in Schedule
2.22 hereto, there are no existing agreements, options, commitments or rights
with, to or in any third person to acquire any of the assets or properties of
the Company or any Subsidiary or any interest therein, except for those
contracts entered into in the ordinary course of business consistent with past
practice for the sale of the Company's and its Subsidiaries' products and
services.
SECTION 2.23 NO BROKERS OR FINDERS. All negotiations by the Company and
the Shareholders relative to this Agreement have been carried on by the Company
and the Shareholders directly without the intervention of any person who may be
entitled to any brokerage or finder's fee or other commission or compensation in
respect hereof or the consummation of the transactions contemplated hereby.
SECTION 2.24 SCHEDULES; DELIVERY OF DOCUMENTS; CORPORATE RECORDS. The
Company has delivered to DBT the originals or true and complete copies of all
documents, including without limitation all amendments, supplements or
modifications thereof or waivers currently in effect thereunder, requested by
DBT, referred to in the Schedules hereto or otherwise material to the
representations and warranties in this Agreement and have also delivered to DBT
copies of the Certificates of Incorporation and all amendments and restatements
thereto and the By-Laws,
21
<PAGE> 26
as amended and restated, of the Company and each Subsidiary. The minute and
stock record books of the Company and its Subsidiaries, which have been made
available to DBT for its inspection, contain complete and correct copies of all
charter documents and the records of all meetings and consents in lieu of
meeting of the Boards of Directors (and any committees thereof) and shareholders
of the Company and its Subsidiaries since the dates of their incorporation.
Neither the Company nor any of the Subsidiaries will, as a result of the
consummation of the Merger, cease to have access to those records, systems,
controls, data or information that are necessary to continue the business and
operations of the Company and the Subsidiaries as such business and operations
exist on the date hereof.
SECTION 2.25 ECONOMIC RISK; SOPHISTICATION.
(a) None of the Shareholders has relied on any purchaser
representative, or on the Company or on any of the other Shareholders, in
connection with the acquisition of shares of DBT Common Stock hereunder. Each
Shareholder (i) has such knowledge, sophistication and experience in business
and financial matters that he is capable of evaluating the merits and risks of
an investment in the shares of DBT Common Stock, (ii) fully understands the
nature, scope and duration of the limitations on transfer described in this
Agreement and (iii) can bear the economic risk of an investment in the shares of
DBT Common Stock and can afford a complete loss of such investment. Each
Shareholder has had an adequate opportunity to ask questions and receive answers
from the officers of DBT concerning any and all matters relating to the
transactions described herein including without limitation the background and
experience of the officers and directors of DBT, the plans for the operations of
the business of DBT, the business, operations and financial condition of DBT,
and any plans for additional acquisitions and the like. Each Shareholder has
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to his satisfaction.
(b) Each Shareholder (i) is acquiring the shares of DBT Common
Stock under this Agreement for his own account, as principal and not on behalf
of other persons, and for investment and not with a view to the resale or
distribution of all or any part of such shares, (ii) will not sell or otherwise
transfer such shares unless, in the opinion of counsel who is satisfactory to
DBT, the transfer can be made without violating the registration provisions of
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "1933 Act"), unless such sale or transfer is under an effective
registration statement.
(c) No Shareholder has any contract, undertaking, agreement or
arrangement, written or oral, with any other person to sell, transfer or grant
participations in any shares of DBT Common Stock
22
<PAGE> 27
SECTION 2.26 POOLING MATTERS. Schedule 2.26 hereto lists all officers
and directors and any other persons who are "affiliates" of the Company for
pooling-of-interests accounting purposes (each, a "Pooling Affiliate"). Neither
the Company nor any of the Subsidiaries or, to the knowledge of the Company
after due inquiry, any of their respective directors, officers and shareholders
has taken any action, nor to the knowledge of the Company after due inquiry,
does any fact or circumstance exist, which would interfere with the Company's
ability to account for the Merger as a pooling of interest under the Pooling
Rules.
SECTION 2.27 COMPLIANCE WITH THE FAIR CREDIT REPORTING ACT AND FEDERAL
TRADE COMMISSION CONSENT ORDER. Each of the Company and Jack H. Reed is in
compliance in all material respects with the Fair Credit Reporting Act ("FCRA"),
the Federal Trade Commission's ("FTC") Commentary on the FCRA and FTC staff
opinion letters on the FCRA, and the FTC's Consent Order in the Matter of
I.R.S.C., Inc., et al., issued April 14, 1993 (the "FTC Consent Order"). No
event has occurred or circumstances exist that (with or without notice or lapse
of time) constitutes a violation by either of the Company and Jack H. Reed of,
or a failure on the part of either of the Company and Jack H. Reed to comply
with, any requirement of the FCRA or the FTC Consent Order. Neither of the
Company nor Jack H. Reed has knowledge after due inquiry or, or has received any
written notice of, any failure of either of the Company and Jack H. Reed to
comply therewith. There is no pending, or to the Company's or Jack H. Reed's
knowledge after due inquiry, threatened litigation or administrative or
governmental proceedings that allege a violation of the FCRA or of the FTC
Consent Order.
SECTION 2.28 CERTAIN AGREEMENTS AFFECTED BY MERGER. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, including, without limitation, the Merger will
(a) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, hours or otherwise) becoming due to
any director or employee of the Company or any of the Subsidiaries, (b)
materially increase any benefits otherwise payable by the Company or any of the
Subsidiaries' or (c) result in the acceleration of the type of payment or
vesting of any such benefits.
SECTION 2.29 COPIES OF DOCUMENTS. All documents made available by, or
on behalf of, the Company or any of the Subsidiaries for DBT's or its advisers'
inspection to date, are true, complete and correct.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DBT AND NEWCO
To induce the Shareholders to enter into this Agreement and consummate
the transactions contemplated hereby, DBT and Newco hereby represent and warrant
to the Company and the Shareholders as follows:
23
<PAGE> 28
SECTION 3.1 CORPORATE EXISTENCE. Each of DBT and Newco is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and the State of Florida, respectively.
SECTION 3.2 CAPITALIZATION; SHARES. The total authorized capital stock
of DBT consists of (i) 100,000,000 shares of common stock, par value $.10 per
share (previously defined as DBT Common Stock), of which 18,992,070 of such
shares were issued and outstanding on May 5, 1999, and (ii) 5,000,000 shares of
preferred stock, par value $.10 per share, none of which are issued and
outstanding. All of the DBT Common Stock to be issued to the Shareholders in the
Merger will be duly authorized and validly issued, fully paid and
non-assessable. Except for options granted under DBT's stock option plans there
are no outstanding options, warrants, convertible securities or other securities
or rights issued or granted by DBT which entitled the holder thereof to purchase
or acquire DBT Common Shares and none of the foregoing will arise as a result of
the execution or performance of this Agreement or the transactions contemplated
herein. No person has any demand or piggyback registration rights in respect of
their DBT Common Shares.
SECTION 3.3 AUTHORITY. Each of DBT and Newco has the corporate power to
execute, deliver and perform this Agreement and all other agreements,
certificates and documents contemplated hereby to be executed and delivered by
each of DBT and Newco and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance hereof by each of DBT and Newco
have been duly authorized by all necessary corporate and shareholder action,
where applicable. This Agreement is a legal, valid and binding obligation of
each of DBT and Newco and is enforceable against each of DBT and Newco in
accordance with its terms.
SECTION 3.4 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. The execution,
delivery and performance hereof by each of DBT and Newco will not contravene or
violate (a) any law, rule or regulation to which each of DBT and Newco is
subject, (b) any judgment, order, writ, injunction or decree of any court,
arbitrator or governmental or regulatory official, body or authority which is
applicable to either of DBT or Newco or (c) the Articles of Incorporation or
By-Laws of each of DBT and Newco; nor will such execution, delivery or
performance violate, be in conflict with or result in the breach (with or
without the giving of notice or lapse of time, or both) of any term, condition
or provision of, or require the consent which has not been obtained of any other
party to, any contract, commitment or agreement, oral or written, to or by which
each of DBT and Newco is a party or otherwise bound or affected or by which any
of DBT's or Newco's assets or properties may be bound or affected. No
authorization, approval or consent, and no registration or filing with, any
governmental or regulatory official, body or authority is required in connection
with the execution, delivery and performance hereof by each of DBT and Newco.
SECTION 3.5 SEC FILINGS. DBT has filed in a timely manner all required
filings with the SEC, including without limitation all Form 10-K, 10-Q and 8-K
Reports, and all such filings
24
<PAGE> 29
were complete and accurate in all material respects as of the dates of the
filings, and there were no material misstatements or omissions therein as of
such dates.
SECTION 3.6 NO BROKERS OR FINDERS. All negotiations by DBT relative to
this Agreement have been carried on by DBT directly without the intervention of
any person who may be entitled to any brokerage or finder's fee or other
commission or compensation in respect hereof or the consummation of the
transactions contemplated hereby.
ARTICLE 4
CONDITIONS TO THE MERGER
The obligations of each party under this Agreement are subject to the
fulfillment prior to or at the Closing of each of the following conditions:
SECTION 4.1 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing
Date, DBT shall have had sufficient time to review the unaudited balance sheets
of the Company and its Subsidiaries as of [MARCH 31], 1999, and the unaudited
statements of income, cash flows and shareholders' equity of the Company for the
3-month period then ended, which statements shall have disclosed no material
adverse change in the financial condition of the Company and the Subsidiaries or
the results of its operations from the 1998 Financial Statements originally
furnished by the Company as set forth in SCHEDULE 2.6.
SECTION 4.2 NO MATERIAL ADVERSE CHANGE. Since December 31, 1998, no
material adverse change in the business, operations, assets, properties,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries taken as a whole shall have occurred, and neither the Company nor
the Subsidiaries shall have suffered any material loss or damage to any of its
properties or assets, whether or not covered by insurance, since December 31,
1998, which change, loss or damage materially affects or impairs the ability of
the Company to conduct its business as now conducted or as proposed to be
conducted; and DBT shall have received on the Closing Date a certificate signed
by the Shareholders and the Company and dated the Closing Date to such effect,
EXCEPT for matters expressly disclosed in such certificate or a schedule
thereto.
SECTION 4.3 CONSENTS AND APPROVALS. All necessary consents and
approvals of and filings with any governmental agency or body or other third
party relating to the consummation of the Merger shall have been obtained or
made on terms reasonably satisfactory to DBT.
SECTION 4.4 POOLING AFFILIATES. Each Pooling Affiliate shall have
executed and delivered to DBT an affiliates' agreement in the form of Exhibit C
hereto.
SECTION 4.5 EMPLOYMENT AGREEMENTS. Database Technologies, Inc. and Jack
H. Reed shall have entered into an employment agreement in the form of Exhibit D
hereto. The Company
25
<PAGE> 30
and Robin L. Teincuff shall have entered into an employment agreement in the
form of Exhibit E hereto.
SECTION 4.6 OPINIONS OF COUNSEL. DBT shall have received the written
opinion of Jeffers, Wilson, Shaff & Falk LLP, counsel for the Company and the
Shareholders, dated the Closing Date and in form and substance reasonably
satisfactory to DBT. The Shareholders shall have received the written opinion of
Morgan, Lewis & Bockius LLP, counsel for DBT, dated the Closing Date and in form
and substance reasonably satisfactory to the Shareholders. The Company shall
have received the written opinion of Jeffers, Wilson, Shaff & Falk LLP, counsel
to the Company, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code.
SECTION 4.7 POOLING MATTERS. DBT shall have received the advice in
writing by Deloitte & Touche LLP that, in accordance with generally accepted
accounting principles and applicable rules and regulations of the SEC, the
Merger will be treated as a "pooling-of-interests" for accounting purposes in
accordance with the Pooling Rules.
SECTION 4.8 TERMINATION OF CONSULTING AGREEMENT. The Company and
Marjack Consulting, Inc. shall have executed and delivered to DBT a termination
of consulting agreement in the form of Exhibit F hereto.
SECTION 4.9 TERMINATION OF EMPLOYMENT AGREEMENT. The Company and each
of Jack H. Reed and Robin L. Teincuff shall have executed and delivered to DBT a
termination of employment agreement in the form attached hereto as Exhibit G and
Exhibit H, respectively.
ARTICLE 5
INDEMNIFICATION
SECTION 5.1 INDEMNIFICATION BY THE SHAREHOLDERS. The Shareholders
(which shall include for purposes of this Article 5, Jack H. Reed, Mary R. Reed
and Sharon L. Guenther), jointly and severally, covenant and agree to indemnify,
defend, protect and hold harmless DBT, the Surviving Corporation and each
Subsidiary (and each of their officers, directors and employees) from, against
and in respect of:
(a) all liabilities, losses, claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, settlement payments,
deficiencies, diminution in value, costs and expenses (including without
limitation reasonable attorneys' fees and expenses) (collectively, "Claims")
suffered, sustained, incurred or paid by DBT, the Surviving Corporation or any
Subsidiary (or any of their officers, directors and employees) in connection
with, resulting from or arising out of:
26
<PAGE> 31
(i) any breach of any representation or warranty of
a Shareholder or the Company set forth in this Agreement or
any certificate or other writing delivered by a Shareholder or
the Company in connection herewith;
(ii) any nonfulfillment or breach of any covenant or
agreement on the part of a Shareholder or the Company set
forth in this Agreement;
(iii) the matters disclosed on Schedules 2.13 (Taxes
and Tax Returns and Reports), 2.14 (Legal Proceedings, Etc.),
and 2.15 (Compliance with Law);
(iv) the assertion against DBT, the Surviving
Corporation, the Company or any Subsidiary of any liability or
obligation relating to or arising out of the business,
operations or assets of the Company or any Subsidiary prior to
or at the Closing (except to the extent such liabilities and
obligations are reflected in the 1998 Financial Statements),
or out of the actions or omissions of the Company's or any
Subsidiary's directors, officers, shareholders, employees or
agents prior to or at the Closing;
(v) any liability or obligation which relates to, or
which involves a claim, liability or obligation which arises
out of or is based upon, any Environmental Law to the extent
that such liability or obligation relates to or arises out of,
in whole or in part, any activity occurring, condition
existing, omission to act or other matter existing at or prior
to the Closing;
(vi) any liability or obligation (including all
taxes, penalties and interest) which relates to, or which
involves a claim, liability or obligation against the Company
arising out of or based upon any (1) compensation made to Jack
H. Reed pursuant to that certain consulting agreement dated
January 1, 1994, as amended and (2) lease payments made to J&R
Investments, a California General Partnership, by the Company
pursuant to that certain standard industrial lease dated
January 1, 1999, as amended; or
(vii) any liability or obligation of any kind or
nature whatsoever (including, without limitation, any award,
judgment or settlement) which relates to, or which involves a
claim, action, liability or obligation (whether or not such
claim, action, liability or obligation has been asserted or is
known prior to the date hereof) against any of the Company,
DBT or Jack H. Reed arising out of or based upon any demands
or claims (including, without limitation, such demands made
pursuant to that certain letter dated April 14, 1999) made by,
or litigation or action brought by or
27
<PAGE> 32
on behalf of Confidential Business Resources, Inc., a Delaware
corporation, its constituent entities and its successors and
assigns (the "CBR Demands") against any of, or all of, the
Company, DBT and Jack H. Reed, as the case may be, including
any cause of action, claim or counterclaim or cross complaint
therefrom or any claim arising from or relating to the factual
matters underlying the CBR Demands, including, without
limitation attorneys' fees, interest, expenses, fines,
damages, costs, settlement, judgments, debts, or any similar
liabilities arising therefrom; it being understood and agreed
upon by the parties hereto for purposes of this Section 5.1
(a) (vii) only, that the Shareholders shall be, jointly and
severally, responsible and liable for 75% of any such
liability or obligation (other than legal fees and expenses in
connection therewith as to which they shall be jointly and
severally liable for 25%) and DBT shall be responsible for 25%
of any such liability or obligation (other than legal fees and
expenses in connection therewith as to which DBT shall be
responsible and liable for 75%); and
(b) any and all actions, suits, claims, proceedings,
investigations, allegations, demands, assessments, audits, fines, judgments,
costs and other expenses (including without limitation reasonable attorneys'
fees and expenses) incident to any of the foregoing or to the enforcement of
this Section 5.1; provided, that, except as otherwise provided in Section 5.5
hereof and except for Claims in connection with Section 2.7 hereof, (A) the
Shareholders shall not have any liability under Section 5.1(a)(i) hereof unless,
and solely to the extent that, the amount of the aggregate indemnification
obligations under such Section 5.1(a)(i) exceeds 1% (one percent) of the Merger
Consideration (the "Indemnification Threshold") and (B) the aggregate amount of
the Shareholders' liability under this Section 5.1 shall not exceed the Merger
Consideration.
SECTION 5.2 INDEMNIFICATION BY DBT. DBT covenants and agrees to
indemnify, defend, protect and hold harmless each Shareholder from, against and
in respect of:
(a) all Claims suffered, sustained, incurred or paid by the
Shareholder in connection with, resulting from or arising out of (i) any breach
of any representation or warranty of DBT or Newco set forth in this Agreement or
any certificate or other writing delivered by DBT in connection herewith or (ii)
any nonfulfillment of any covenant or agreement on the part of DBT set forth in
this Agreement; and
(b) any and all actions, suits, claims, proceedings,
investigations, allegations, demands, assessments, audits, fines, judgments,
costs and other expenses (including without limitation reasonable attorneys'
fees and expenses) incident to any of the foregoing or to the enforcement of
this Section 5.2;
28
<PAGE> 33
provided, that, except as otherwise provided in Section 5.5 hereof, (A) DBT
shall not have any liability under clause 5.2(a)(i) hereof unless, and solely to
the extent that, the amount of the aggregate indemnification obligations under
such clause 5.2(a)(i) exceeds the Indemnification Threshold and (B) the
aggregate amount of DBT's liability under this Section 5.2 shall not exceed the
Merger Consideration.
SECTION 5.3 SURVIVAL. Except (a) for claims arising under Section 2.13,
Section 2.20 and Sections 5.1(a) (iii),(v) and (vi) hereof, which shall survive
the Closing Date and continue in full force and effect until all applicable
statutory periods of limitation have expired in the case of claims arising under
Section 2.13, Section 2.20 and Sections 5.1(a)(iii),(v) and (vi) and (b) for
claims arising under Section 5.1(a)(vii) which shall survive the Closing Date
and the Release Date and continue in full force and effect until such claims
have been finally resolved or settled pursuant to (i) a final, non-appealable
verdict of a court (or similar entity), (ii) the expiry of all applicable
statutory periods of limitation, or (iii) a final binding written agreement
settling all outstanding claims arising under Section 5.1(a)(vii), and (c) as
otherwise provided in Section 5.5 hereof; the representations and warranties
given or made by the Shareholders and the Company or DBT and Newco in this
Agreement or in any certificate or other writing furnished in connection
herewith, and all rights to assert an indemnification claim under Sections
5.1(a)(i),(ii), and (iv) or clause 5.2(a)(i) hereof, shall survive the Closing
Date until the Release Date and shall thereafter terminate and be of no further
force or effect except that any representation or warranty as to which, and all
rights under Sections 5.1(a) (i),(ii) and (iv) and clause 5.2(a)(i) hereof
pursuant to which a claim (including without limitation a contingent claim)
shall have been asserted during the survival period shall continue in effect
with respect to such claim until such claim shall have been finally resolved or
settled. Each party shall be entitled to rely upon the representations and
warranties of the other party or parties set forth herein regardless of any
investigation or audit conducted before or after the Closing Date or the
decision of any party to complete the Closing.
SECTION 5.4 INDEMNIFICATION PROCEDURE. All claims for indemnification
under Sections 5.1 and 5.2 hereof shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which a party
(the "Indemnifying Party") would be liable to another party (the "Indemnified
Party") hereunder is asserted against an Indemnified Party by a third party, the
Indemnified Party shall with reasonable promptness notify the Indemnifying Party
of such claim or demand (the "Claim Notice"), specifying the nature of such
claim or demand and the amount or the estimated amount thereof to the extent
then feasible (which estimate shall not be conclusive of the final amount of
such claim or demand). The Indemnifying Party shall have 20 days from the
receipt of the Claim Notice (the "Notice Period") to notify the Indemnified
Party (i) whether or not the Indemnifying Party disputes the Indemnifying
Party's liability to the Indemnified Party hereunder with respect to such claim
or demand and (ii) if the Indemnifying Party does not dispute such liability,
whether or not the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend against such claim or demand, provided that
the Indemnified Party is hereby
29
<PAGE> 34
authorized (but not obligated) prior to and during the Notice Period to file any
motion, answer or other pleading and to take any other action which the
Indemnified Party shall deem necessary or appropriate to protect the Indemnified
Party's interests. In the event that the Indemnifying Party notifies the
Indemnified Party within the Notice Period that the Indemnifying Party does not
dispute the Indemnifying Party's obligation to indemnify hereunder and desires
to defend the Indemnified Party against such claim or demand and except as
hereinafter provided, the Indemnifying Party shall have the right to defend
(with counsel reasonably satisfactory to the Indemnified Party) by appropriate
proceedings, which proceedings shall be promptly settled or prosecuted by the
Indemnifying Party to a final conclusion; PROVIDED that, unless the Indemnified
Party otherwise agrees in writing, the Indemnifying Party may not settle any
matter (in whole or in part) unless such settlement includes a complete and
unconditional release of the Indemnified Party. If the Indemnified Party desires
to participate in, but not control, any such defense or settlement the
Indemnified Party may do so at its sole cost and expense. If the Indemnifying
Party elects not to defend the Indemnified Party against such claim or demand,
whether by not giving the Indemnified Party timely notice as provided above or
otherwise, then the Indemnified Party, without waiving any rights against the
Indemnifying Party, may settle or defend against any such claim in the
Indemnified Party's sole discretion and, if it is ultimately determined that the
Indemnifying Party is responsible therefor under this Article 5, then the
Indemnified Party shall be entitled to recover from the Indemnifying Party the
amount of any settlement or judgment and all indemnifiable costs and expenses of
the Indemnified Party with respect thereto, including interest from the date
such costs and expenses were incurred.
(b) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the Indemnifying
Party, any such claim or demand seeks material prospective relief which could
have a materially adverse effect on the businesses, operations, assets,
properties, prospects or condition (financial or otherwise) of any Indemnified
Party, the Indemnified Party shall have the right to control or assume (as the
case may be) the defense of any such claim or demand and the amount of any
judgment or settlement and the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the Indemnifying Party
hereunder. If the Indemnified Party should elect to exercise such right, the
Indemnifying Party shall have the right to participate in, but not control, the
defense of such claim or demand at the sole cost and expense of the Indemnifying
Party.
(c) In the event the Indemnified Party should have a claim
against the Indemnifying Party hereunder which does not involve a claim or
demand being asserted against or sought to be collected by a third party, the
Indemnified Party shall with reasonable promptness send a Claim Notice with
respect to such claim to the Indemnifying Party. If the Indemnifying Party does
not notify the Indemnified Party within the Notice Period that the Indemnifying
Party disputes such claim, the amount of such claim shall be conclusively deemed
a liability of the Indemnifying Party hereunder.
(d) Nothing herein shall be deemed to prevent the Indemnified
Party from making (and an Indemnified Party may make) a claim hereunder for
potential or contingent
30
<PAGE> 35
claims or demands provided the Claim Notice sets forth the specific basis for
any such potential or contingent claim or demand to the extent then feasible and
the Indemnified Party has reasonable grounds to believe that such a claim or
demand may be made. The Indemnified Party's failure to give reasonably prompt
notice to the Indemnifying Party of any actual, threatened or possible claim or
demand which may give rise to a right of indemnification hereunder shall not
relieve the Indemnifying Party of any liability which the Indemnifying Party may
have to the Indemnified Party unless the failure to give such notice materially
and adversely prejudiced the Indemnifying Party. The procedures set forth in
this Article 5 shall not apply to claims or demands which in the reasonable
opinion of the Indemnified Party may be covered by the Indemnification
Threshold.
SECTION 5.5 EXCEPTIONS TO LIMITATIONS. Nothing herein shall be deemed
to limit or restrict in any manner any rights or remedies that any party has, or
might have, at law, in equity or otherwise, against any other party hereto,
based on any willful misrepresentation, willful breach of warranty or willful
failure to fulfill any agreement or covenant.
SECTION 5.6 PAYMENT OF INDEMNIFICATION OBLIGATIONS, RIGHT TO SET OFF.
In the event that any Indemnifying Party is required to make any payment under
this Article 5, such party shall promptly pay the Indemnified Party the amount
of such indemnity obligation which shall first be satisfied in DBT Common Stock
held as Pledged Assets (before any cash payment) to the extent required under
the Pooling Rules. If there should be a dispute as to such amount, such
Indemnifying Party shall nevertheless pay when due such portion, if any, of the
obligation as shall not be subject to dispute. The difference, if any, between
the amount of the obligation ultimately determined as properly payable under
this Article 5 and the portion, if any, theretofore paid shall bear interest for
the period from the date the amount was demanded by the Indemnified Party until
payment in full, payable on demand, at the fluctuating "prime rate" per annum
which is publicly announced from time to time by the Bank of America or its
successor. DBT shall have the right, but not the obligation, to set off, in
whole or in part, against the Pledged Assets, amounts finally determined under
this Article 5 to be owed DBT by the Shareholders.
ARTICLE 6
CERTAIN TAX MATTERS
The following provisions shall govern the allocation of
responsibility as between DBT and the Shareholders for certain Tax matters
following the Closing Date.
SECTION 6.1 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. DBT shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and the Subsidiaries for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. Each such Tax Return shall
be prepared within sixty (60) days after the Closing Date. DBT shall permit the
Shareholders to review and comment on each such Tax Return (including work
papers used to prepare such Tax Returns) described in the preceding sentence
prior to filing.
31
<PAGE> 36
SECTION 6.2 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING
DATE. DBT shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the Company and the Subsidiaries for Tax periods, which begin
before the Closing Date and end after the Closing Date. For purposes of this
Section, in the case of any Taxes that are imposed on a periodic basis and are
payable for a Tax period that includes (but does not end on) the Closing Date,
the portion of such Tax which relates to the period which ends on the Closing
Date shall (a) in the case of any Taxes other than Taxes based upon or related
to income or receipts, be deemed to be the amount of such Tax for the entire
Taxable period multiplied by a fraction the numerator of which is the number of
days in the Taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire Taxable period, (b) in the case of any
Tax based upon or related to income on receipts, be deemed equal to the amount
which would be payable if the relevant Taxable period ended on the Closing Date.
Any credits relating to a Taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant Taxable period
ended on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with the prior
practice of the Company and the Subsidiaries.
SECTION 6.3 COOPERATION ON TAX MATTERS
(a) DBT and the Shareholders shall cooperate fully, as and to
the extent reasonably requested by any other party to this Agreement (a
"Party"), in connection with the filing of Tax returns pursuant to this Section
and any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other Party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Shareholders agree (i) to retain all books
and records with respect to Tax matters pertinent to each of the Company and the
Subsidiaries relating to any Taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by any person, any extensions thereof) of the respective Taxable periods, and to
abide by all record retention agreements entered into with any Taxing authority,
and (ii) to give the other Party reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if the
other Party so requests, the Shareholders shall allow the other Party to take
possession of such books and records.
(b) DBT and the Shareholders further agree, upon request, to
use their best efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby). The requesting party
shall pay the reasonable costs incurred by the other party in responding to such
request.
32
<PAGE> 37
(c) DBT and the Shareholders further agree, upon request, to
provide the other party with all information in the possession of the requested
party that either Party may be required to report pursuant to Section 6043 of
the Code and all Treasury Department Regulations promulgated thereunder.
SECTION 6.4 CERTAIN TAXES. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (except for any intangible
personal property tax that may be imposed on DBT or Newco pursuant to Florida
Taxation and Finance Code Section 199.032), shall be paid by the Shareholders
when due, and the Shareholders will at their own expense, file all necessary Tax
returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable law, DBT will, and will cause its affiliates to, join in the
execution of any such Tax returns and other documentation.
ARTICLE 7
COVENANT NOT TO COMPETE
SECTION 7.1 NONCOMPETITION. Until five years after the termination of
all of their affiliation with DBT either as an employee, consultant, director or
shareholder thereof (including without limitation the Company and its
Subsidiaries), each of the Shareholders (which shall include for purposes of
this Article 7, Jack H. Reed, Mary R. Reed and Sharon L. Guenther) agrees that
he or she will not, anywhere in the United States of America, unless acting for
DBT or its affiliates (including without limitation the Company and its
Subsidiaries) or in accordance with DBT's prior written consent, (a) (directly
or indirectly) own, manage, operate, join, control, finance or participate in
the ownership, management, operation, control or financing of, or be connected
as an officer, director, employee, principal, agent, representative, consultant,
investor, owner, partner, manager, joint venturer or otherwise with, or permit
his name to be used by or in connection with, any business or enterprise engaged
anywhere in the United States of America in any of the businesses engaged in by
DBT or its affiliates (including without limitation the Company or any
Subsidiary) either during his affiliation or at the time of its termination, (b)
call on or solicit any person who or which during such affiliation is, or at the
time of such termination was, or within two years prior thereto had been, a
customer of DBT or its affiliates (including without limitation the Company or
any Subsidiary) with respect to any business of DBT or its affiliates (including
without limitation the Company or any Subsidiary) covered by clause (a) above or
(c) solicit the employment of, or hire, any person who during such affiliation,
or who at the time of such termination or within two years thereafter, is
employed by DBT or its affiliates (including without limitation the Company or
any Subsidiary) on a full or part-time basis.
SECTION 7.2 REMEDIES. Each of the Shareholders (as defined in this
Article 7) acknowledges that (a) the provisions of this Article 7 are reasonable
and necessary to protect the legitimate interests of DBT and its affiliates
(including without limitation the Company and its Subsidiaries), (b) any
violation of this Article 7 will result in irreparable injury to DBT and its
affiliates (including without limitation the Company and its Subsidiaries) and
that damages at
33
<PAGE> 38
law would not be reasonable or adequate compensation to DBT and its affiliates
(including without limitation the Company and its Subsidiaries) for a violation
of this Article 7 and (c) DBT and its affiliates (including without limitation
the Company and its Subsidiaries) shall be entitled to have the provisions of
this Section 7 specifically enforced by preliminary and permanent injunctive
relief without the necessity of proving actual damages and without posting a
bond or other security as well as to an equitable accounting of all earnings,
profits and other benefits arising out of any violation of this Section 7,
including without limitation estimated future earnings. In the event that the
provisions of this Section 7 should ever be deemed to exceed the time,
geographic, product or any other limitations permitted by applicable law, then
such provisions shall be deemed reformed to the maximum permitted by applicable
law.
SECTION 7.3 JURISDICTION. DBT and each Shareholder (as defined in this
Article 7) intend to and do hereby confer jurisdiction to enforce the covenants
set forth in this Article 7 upon the courts of Florida. In addition to Section
9.6 hereof and not in limitation thereof, if the courts of any one or more
jurisdictions hold such covenants unenforceable in whole or in part, it is the
intention of DBT and each Shareholder (as defined in this Article 7) that such
determination not bar or in any way adversely affect the right of DBT and its
affiliates (including without limitation the Company and its Subsidiaries) to
equitable relief and remedies hereunder in courts of any other jurisdiction as
to breaches or violations of this Article 7, such covenants being, for this
purpose, severable into diverse and independent covenants.
ARTICLE 8
DEMAND REGISTRATION RIGHT
SECTION 8.1 REQUEST FOR REGISTRATION.
(a) After the Closing Date DBT shall use reasonable commercial
efforts to prepare and file a registration statement under the 1933 Act on or
before August 31, 1999, covering the resale of 30% of the DBT Common Stock to be
received by the Shareholders in the Merger for resale by the Shareholders;
provided, however, that DBT shall not be required to file and shall not file any
such registration statement until such time as such filing will not jeopardize
the treatment of the Merger as a pooling of interests under the Pooling Rules.
(b) If DBT shall receive on or at any time after the second
anniversary of the Closing Date but prior to the fifth anniversary of the
Closing Date a written request from the Shareholders (the "Requesting
Shareholders") owning at least 70% of the DBT Common Stock received by the
Shareholders in the Merger that DBT file a registration statement under the 1933
Act covering the registration of at least 80% of such DBT Common Stock then held
for resale by the Requesting Shareholders, then DBT shall effect in accordance
with this Article 8 the registration under the 1933 Act of all shares of DBT
Common Stock which the Shareholders request be registered. DBT shall only be
obligated to effect one registration pursuant to this Section 8.1(b), PROVIDED,
HOWEVER, that DBT shall not be obligated to effect such registration in
34
<PAGE> 39
the event the Shareholders have sold the DBT Common Stock received by the
Shareholders in the Merger in accordance with the requirements of Rule 144 under
the 1933 Act.
(c) Notwithstanding the foregoing, if DBT shall furnish to the
Shareholders a certificate signed by the President of DBT stating that in the
good faith judgment of the board of directors of DBT it would be detrimental to
DBT's best interests for such registration statement to be filed or declared
effective and DBT therefore desires to defer the filing or effectiveness of such
registration statement, DBT shall have the right to defer such filing or
effectiveness for a period of not more than 180 days.
(d) DBT's registration obligations under this Article 8 shall
(i) be limited to a registration in conformity with the requirements of the 1933
Act, and shall be suspended during such time as such form may not be available
for use by the shareholders of DBT Common Stock and (ii) shall be suspended
during the pendency of a default by any Shareholder under this Agreement and
such suspension shall continue until such time as all of the Shareholders have
fully satisfied their obligations hereunder relating to such default.
SECTION 8.2 REGISTRATION OBLIGATION. When required under Section 8.1
hereof to effect a registration under the 1933 Act covering the registration of
the DBT Common Stock to be received by the Shareholders in the Merger for resale
by the Shareholders, DBT shall:
(a) use its reasonable commercial efforts to cause such
registration statement to become effective and keep such registration statement
effective for one year (or such shorter period after which DBT Common Stock may
be sold by the Shareholders in accordance with the requirements of Rule 144
under the 1933 Act);
(b) use its reasonable commercial efforts to prepare and file
with the SEC such amendments and supplements to such registration statement as
may be necessary to comply with the provisions of the 1933 Act;
(c) furnish to the Shareholders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of the DBT Common Stock to be
received by them in the Merger;
(d) use its reasonable commercial efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such states or jurisdictions as shall be
reasonably requested by the Shareholders, provided that DBT shall not be
required to become subject to taxation, to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions;
(e) use its reasonable commercial efforts to maintain the
listing of the securities covered by such registration statement on NYSE;
35
<PAGE> 40
(f) notify each Shareholder at any time when the Shareholders
must suspend offers or sales of DBT Common Stock under the registration
statement, either because the prospectus included in such registration statement
is required to be amended for any reason, such as an amendment under the 1933
Act to provide current information, or because the prospectus includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, or because underwriters of DBT Common
Stock have insisted on suspension of such offerings and sales in connection with
a public offering by DBT of its shares of common stock. DBT shall not be
required to inform any Shareholder of the reason for the suspension but shall
use its best efforts to enable the Shareholders to recommence offers and sales
under the registration statement. Notwithstanding the foregoing and anything to
the contrary set forth in this Article 8, each Shareholder acknowledges that
there may occasionally be times when DBT must suspend the use of the prospectus
included in such registration statement until such time as an amendment to the
registration statement has been filed by DBT and declared effective by the SEC,
or until such time as DBT has filed an appropriate report with the SEC pursuant
to the Securities Exchange Act of 1934, as amended, or until the suspension
period may be terminated under the provisions of an underwriting agreement. Each
Shareholder hereby covenants that he will not offer or sell any shares of DBT
Common Stock pursuant to such prospectus during the period commencing when DBT
notifies the Shareholder of the suspension of the use of such prospectus and
ending when DBT notifies the Shareholder that he may thereafter effect offers
and sales pursuant to such prospectus.
SECTION 8.3 FURNISH INFORMATION. It is a condition precedent to the
obligations of DBT to take any action pursuant to Section 8.1 hereof with
respect to the DBT Common Stock of any Shareholder that such Shareholder shall
furnish to DBT such information regarding himself, the DBT Common Stock held by
him and the intended method of disposition of such securities as shall be
required to effect the registration of such Shareholder's DBT Common Stock and
as may be required from time to time to keep such registration current.
SECTION 8.4 EXPENSES OF REGISTRATION. All expenses incurred by or on
behalf of DBT in connection with registrations, filings or qualifications
pursuant to Section 8.1 hereof, including without limitation all registration,
filing and qualification fees, printers' and accounting fees, and fees and
disbursements of counsel for DBT, shall be borne by DBT. In no event shall DBT
be obligated to bear underwriting, brokerage or related fees, discounts or
commissions or the fees or expenses of counsel to the Shareholders.
SECTION 8.5 FURTHER ASSURANCES. DBT and the Shareholders shall agree to
such other reasonable and customary arrangements, undertakings and
indemnifications with respect to the registration of the DBT Common Stock to be
received by the Shareholders in the Merger as may be requested by any of them,
but shall not be obligated to enter into any underwriting arrangements.
36
<PAGE> 41
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given upon (a) personal delivery, (b)
transmitter's confirmation of a receipt of a telefax, (c) confirmed delivery by
a standard overnight carrier or when delivered by hand or (d) when mailed in the
United States by certified mail, postage prepaid, addressed as follows:
If to DBT or the Surviving Corporation, to:
DBT Online, Inc.
4530 Blue Lake Drive
Boca Raton, FL 33431
Attention: Vice-President and Chief Financial Officer
Facsimile No.: (561) 982-5805
with a required copy to:
DBT Online, Inc.
4530 Blue Lake Drive
Boca Raton, FL 33431
Attention: Vice President and General Counsel
Facsimile No.: (561) 982-5232
If to the Shareholders, to:
RFT Capital Ventures Limited Partnership
P.O. Box 50401
Henderson, NV 89016
and to:
Sharon L. Guenther, as
Trustee of the Sharon L. Guenther Revocable Living Trust
23800 North 73rd Place
Scottsdale, AZ 85255
37
<PAGE> 42
with a required copy to:
Jeffers, Wilson, Shaff & Falk
18881 Von Karman Ave.
Suite 1400
Irvine, CA 92612
Attention: Barry Falk
Facsimile No.: (949) 660-7799
or such other address as shall be furnished in writing by any party to the
others prior to the giving of the applicable notice or other communication.
SECTION 9.2 COOPERATION. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, such action, to execute and deliver, or cause to be
executed and delivered, such governmental notifications and additional documents
and instruments and to do, or cause to be done, all things necessary, proper or
advisable under the provisions of this Agreement and under applicable law to
consummate and make effective the transactions contemplated by this Agreement.
SECTION 9.3 EXPENSES. DBT has and will pay the fees, expenses and
disbursements of DBT and Newco and their agents, representatives, accountants
and counsel incurred in connection with the subject matter of this Agreement,
and the Shareholders (and neither the Company nor any Subsidiary) have and will
pay the fees, expenses and disbursements of the Shareholders, the Company, the
Subsidiaries and their agents, representatives, financial advisors, accountants
and counsel incurred in connection with the subject matter of this Agreement.
SECTION 9.4 GOVERNING LAW: CONSENT TO JURISDICTION AND VENUE. Except as
otherwise expressly provided in this agreement or related agreements, in all
respects, including all matters of construction, validity and performance, this
agreement and the obligations set forth hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the state of Florida
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. Except as otherwise provided in this agreement, and to
the extent permitted by law, the parties hereto agree that all actions or
proceedings arising in connection with this agreement, shall be tried and
litigated only in the State and Federal courts located in the County of Palm
Beach, State of Florida. The parties, to the extent they may legally do so,
waive any right each may have to assert the doctrine of FORUM NON CONVENIENS or
to object to venue to the extent any proceeding is brought in accordance with
this section and stipulate that the State and Federal Courts located in the
County of Palm Beach, State of Florida shall have IN PERSONAM jurisdiction and
venue over such party for the purpose of litigating any such dispute,
controversy, or proceeding arising out of related to this agreement. To the
extent permitted by law, service of process, sufficient for personal
jurisdiction in any action against the shareholder may be made by registered or
certified mail, return receipt requested, to its address indicated in this
agreement. Each Shareholder
38
<PAGE> 43
agrees that any final judgment rendered against him in any action or proceeding
shall be conclusive as to the subject of such final judgment and may be enforced
in other jurisdictions in any manner provided by law.
SECTION 9.5 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed
in any number of counterparts, each of which shall be deemed an original, with
the same effect as if the signatures hereto and thereto were upon the same
instrument.
SECTION 9.6 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstance in any other jurisdiction or to
other persons or circumstances in any jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
SECTION 9.7 ENTIRE AGREEMENT. This Agreement, which includes the
Schedules and the Exhibits hereto, constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties, with respect to the subject matter of this Agreement.
SECTION 9.8 MISCELLANEOUS. Nothing in this Agreement express or implied
is intended to confer upon any other person any rights or remedies under or by
reason of this Agreement. Neither this Agreement, nor any of the rights,
interests or obligations hereunder may be assigned, directly or indirectly,
including without limitation by operation of law, by any of the Shareholders
without the prior written consent of DBT. Subject to the foregoing, this
Agreement and all of the provisions hereof shall be binding upon and shall inure
to the benefit of the parties hereto and their respective permitted successors
and assigns.
39
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
DBT ONLINE, INC.
By: /s/ Thomas J. Hoolihan
--------------------------------------
Name: Thomas J. Hoolihan
Title: Vice President
DBT ACQUISITION, INC.
By: /s/ Timothy M. Leonard
--------------------------------------
Name: Timothy M. Leonard
Title: President
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
I.R.S.C., INC.
By: /s/ Jack H. Reed
--------------------------------------
Name: Jack H. Reed
Title: Chairman
RFT CAPITAL VENTURES LIMITED
PARTNERSHIP
By: /s/ Jack H. Reed
--------------------------------------
Name: Jack H. Reed, as co-trustee of
the Reed Family Trust, and in his
individual capacity
By: /s/ Mary Reed
--------------------------------------
Name: Mary Reed, as co-trustee of the
Reed Family Trust, and in her
individual capacity
By: /s/ Jack H. Reed
--------------------------------------
Name: Jack H. Reed, as President of
Marjak Consulting, Inc., a Nevada
Corporation
SHARON L. GUENTHER, AS TRUSTEE OF THE
SHARON L. GUENTHER REVOCABLE LIVING TRUST
By:
--------------------------------------
Name: Sharon L. Guenther, and in her
individual capacity
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
I.R.S.C., INC.
By:
--------------------------------------
Name: Jack H. Reed
Title: Chairman
RFT CAPITAL VENTURES LIMITED
PARTNERSHIP
By:
--------------------------------------
Name: Jack H. Reed, as co-trustee of
the Reed Family Trust, and in his
individual capacity
By:
--------------------------------------
Name: Mary Reed, as co-trustee of the
Reed Family Trust, and in her
individual capacity
By:
--------------------------------------
Name: Jack H. Reed, as President of
Marjak Consulting, Inc., a Nevada
Corporation
SHARON L. GUENTHER, AS TRUSTEE OF THE
SHARON L. GUENTHER REVOCABLE LIVING TRUST
By: /s/ Sharon L. Guenther
--------------------------------------
Name: Sharon L. Guenther, and in her
individual capacity
<PAGE> 1
Exhibit 21
DBT ONLINE SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C>
0 Database Technologies, Inc. (A Florida Corporation)
0 DBT Online Investment Company, Inc. (A Nevada Corporation)
0 General Partner Acquisition, Inc. (A Florida Corporation)
0 Information America, Inc. d/b/a KnowX.com (A Nevada Corporation)
0 I.R.S.C., Inc. (A California Corporation)
0 J&R GP Acquisitions, Inc. (A Florida Corporation)
0 Patlex Corporation (A Pennsylvania Corporation)
0 The Information Connectivity Group, Inc. (ICON) (A Nevada Corporation)
0 WinShapes, Inc. (A Washington Corporation)
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
To the Board of Directors and Stockholders of
DBT Online, Inc. and subsidiaries
Boca Raton, Florida
We consent to the incorporation by reference in Registration Statement No's.
333-11235 and 333-41313 of DBT Online, Inc. and subsidiaries (the "Company") on
Forms S-8 of our report dated March 6, 2000, appearing in this Annual Report on
Form 10-K of the Company for the year ended December 31, 1999.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedules of the Company, listed in Item
14. These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedules, when considered in relation to
the basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
Deloitte & Touche LLP
Certified Public Accountants
Fort Lauderdale, Florida
March 9, 2000
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
To The Board of Directors of
DBT Online, Inc.
We have issued our reports dated August 12, 1999 regarding the consolidated
financial statements of I.R.S.C., Inc. and subsidiaries for each of the two
years in the period ended December 31, 1998, appearing in the Annual Report on
Form 10-K of DBT Online, Inc. for the year ended December 31, 1999. We consent
to the incorporation by reference of said reports in the Registration
Statements of DBT Online, Inc. on Form S-8 (Registration Nos. 333-11235 and
333-41313).
CORBIN & WERTZ
Irvine, California
March 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 33,016
<SECURITIES> 16,500
<RECEIVABLES> 13,520
<ALLOWANCES> 845
<INVENTORY> 0
<CURRENT-ASSETS> 65,904
<PP&E> 52,804
<DEPRECIATION> (19,435)
<TOTAL-ASSETS> 136,488
<CURRENT-LIABILITIES> 18,510
<BONDS> 0
0
0
<COMMON> 2,013
<OTHER-SE> 114,385
<TOTAL-LIABILITY-AND-EQUITY> 136,488
<SALES> 72,773
<TOTAL-REVENUES> 78,992
<CGS> 32,298
<TOTAL-COSTS> 32,298
<OTHER-EXPENSES> 76,323
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,656)
<INCOME-PRETAX> 4,325
<INCOME-TAX> 1,517
<INCOME-CONTINUING> 2,808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,808
<EPS-BASIC> 0.15
<EPS-DILUTED> 0.14
</TABLE>
